<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CARESIDE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3841 23-2863507
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
6100 BRISTOL PARKWAY, CULVER CITY, CA 90230
(310) 338-6767
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
W. VICKERY STOUGHTON
CHAIRMAN OF THE BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER
CARESIDE, INC.
6100 BRISTOL PARKWAY
CULVER CITY, CA 90230
(310) 338-6767
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
WITH COPIES TO:
BARRY M. ABELSON, ESQ. JONATHAN L. KRAVETZ, ESQ.
JULIA D. CORELLI, ESQ. MINTZ, LEVIN, COHN, FERRIS,
PEPPER HAMILTON LLP GLOVSKY AND POPEO, P.C.
3000 TWO LOGAN SQUARE ONE FINANCIAL CENTER
PHILADELPHIA, PA 19103 BOSTON, MA 02111
(215) 981-4000 (617) 542-6000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $.01 per
share........................... $31,625,000 $8,896
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of determining the amount of the
registration fee in accordance with Rule 457(o) under the Securities Act
of 1933, as amended.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE +
+SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 18, 1998
PROSPECTUS
SHARES
[CARESIDE LOGO]
CARESIDE, INC.
COMMON STOCK
-----------
This is an initial public offering of shares of Common Stock of Careside,
Inc. Careside is offering all of the shares to be sold in the offering.
Careside will receive all of the proceeds of the offering, less the
underwriting discount.
There is currently no public market for the shares. Careside expects that the
offering price will be between $ and $ per share. The market price of the
shares after the offering may be higher or lower than the offering price.
Careside has applied to have the shares listed for quotation on the Nasdaq
National Market under the symbol "CARE."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 TO READ ABOUT CERTAIN FACTORS YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF THE COMMON STOCK.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Offering Price.................................................. $ $
Underwriting Discount........................................... $ $
Proceeds to the Company......................................... $ $
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this Prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Careside has granted the Underwriters a 30-day option to purchase up to
additional shares of Common Stock to cover over-allotments.
The Underwriters are offering the shares of Careside's Common Stock subject
to various conditions and may reject all or part of any order. Fahnestock & Co.
Inc. expects to deliver the shares of Common Stock to purchasers on , 1999.
-----------
FAHNESTOCK & CO. INC.
WEDBUSH MORGAN SECURITIES
SOUTHEAST RESEARCH PARTNERS, INC.
The date of this Prospectus is , 1999.
<PAGE>
[INSIDE FRONT COVER]
[CARESIDE LOGO] THE CARESIDE SYSTEM IS A PROPRIETARY IN VITRO BLOOD
DIAGNOSTIC SYSTEM DESIGNED TO PROVIDE SUPERIOR
PATIENT CARE, SAFETY, LOWER COSTS, SIMPLICITY, AND
SAVINGS AND REVENUE OPPORTUNITIES FOR HEALTHCARE
PROVIDERS
CARESIDE ANALYZER [Photo of CareSide
Analyzer and
Cartridges] (A) CHEMISTRY
Compact, robust and (B) ELECTROCHEMISTRY
lightweight, the (C) IMMUNOCHEMISTRY
CareSide Analyzer (D) COAGULATION
combines multiple
testing methodologies
utilizing sophisticated
software in a single
instrument.
[Photo Close-up of [Photo of Different
Cartridge] Cartridges]
THE CARESIDE CARTRIDGE
The proprietary test cartridges have a unique
design which incorporates specimen preparation,
calibration, test performance and multi-testing
capability in a single cartridge.
COMPREHENSIVE MENU LOW COST EASE OF USE
At launch, Careside The benefit of the The CareSide
expects to offer more Careside System's low Analyzer(TM) has
than 50 tests in the cost extends throughout been designed to
disciplines of the testing process-- operate within the
chemistry, from the CareSide parameters of CLIA.
electrochemistry, Analyzer and the A non-technical
immunochemistry and cartridges, to the individual with
coagulation--the most capture/retrieval of simple training can
comprehensive menu for a data and comprehensive easily operate the
single point-of-care QA/QC program. The CareSide
device. Careside plans Careside System's Analyzer(TM),
to provide hematology approach to testing is including its easy
testing through a designed to produce a to use on-board
separate device rapid test result at a QA/QC system, to
manufactured by a third competitive price, produce accurate and
party. thereby improving the precise results.
diagnostic process for
the benefit of the
patient and the
physician.
----------------
We have not yet commercialized the Careside System. We currently have 19
tests FDA cleared or exempt for licensed laboratory use. We plan to complete
development and seek to obtain FDA clearance or exemption for additional tests
prior to commercial introduction.
Careside(TM), CareSide Analyzer(TM) and the Company's logo are trademarks of
the Company for which registration applications have been filed with the United
States Patent and Trademark Office. All other tradenames, trademarks or
servicemarks appearing in this Prospectus are the property of their respective
owners and are not the property of the Company.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary highlights information from this Prospectus. Because
this is a summary, it does not contain all of the information that you should
consider before investing in the Common Stock. You should read the entire
Prospectus carefully, including the "Risk Factors" section, the financial
statements and the notes to those financial statements.
As used in this prospectus ("Prospectus"), unless the context requires
otherwise: (i) "we," the "Company" or "Careside" means Careside, Inc.; (ii)
"Common Stock" means the common stock, par value $.01 per share, of Careside;
(iii) "Offering" means the offering of Common Stock contemplated by this
Prospectus; (iv) "Underwriters" means the underwriters of the Offering, set
forth in "Underwriting" on page 66; (v) "Representatives" means Fahnestock &
Co. Inc., Wedbush Morgan Securities and Southeast Research Partners, Inc., as
representatives of the several Underwriters; and (vi) "Securities Act" means
the Securities Act of 1933, as amended.
THE COMPANY
Careside is developing and commercializing a proprietary point-of-care blood
testing system that we call the "Careside System." The Careside System provides
cost-effective, accurate test results within 10 to 15 minutes at the "point-of-
care," or near the patient, for a broad menu of routine blood tests. Because it
provides rapid test results, the Careside System can also perform blood tests
required on a "stat" or immediate basis. The Careside System performs tests in
four different test categories (chemistry, electrochemistry, coagulation and
immunochemistry) within a single testing instrument. No other point-of-care
product currently in the market offers as broad a menu of tests or combines all
four test categories. Our goal is to make the Careside System the standard of
care in routine and stat blood testing. If we are successful, diagnostic
information will travel more rapidly and healthcare costs for physicians, other
providers and payers will be reduced.
THE CARESIDE SYSTEM
The Careside System consists of the CareSide Analyzer, disposable test
cartridges and a separate hematology testing device to be manufactured by a
third party. The Careside System is easy to use and can be operated by a non-
technical person. Its software will enable the user to capture all data
required to comply with the Clinical Laboratory Improvement Amendments of 1988
("CLIA"). CLIA governs quality assurance and quality control ("QA/QC")
processes and reporting for healthcare providers.
The United States Food and Drug Administration ("FDA") has already granted
pre-market clearance for the CareSide Analyzer and pre-market clearance or
exemption for 19 blood tests for laboratory use. Prior to our planned product
launch in the third quarter of 1999, we will conduct pilot site marketing
studies in certain market segments. We expect the pilot studies to demonstrate
how potential customers will use the Careside System and its cost-
effectiveness. At product launch, we expect to have the CareSide Analyzer and
over 50 tests (including nine hematology tests) cleared or exempt for
laboratory use. As we expand our marketing efforts in the fourth quarter of
1999, we expect to have all of our tests cleared for point-of-care use as well.
We believe that the Careside System's planned menu represents over 80% of all
blood tests ordered on an out-patient basis, including all of the most commonly
ordered out-patient blood tests.
MARKET OVERVIEW
According to industry data and estimates, the worldwide market for in vitro
testing (which includes testing of all body tissues and fluids) was $18.3
billion in 1997 and is expected to grow to $20 billion in 2000. The United
States and Canadian market for in vitro testing is approximately 40% of the
worldwide market. We will seek to convert a reasonable portion of the United
States and Canadian blood testing market to point-of-care testing and then to
expand into the larger worldwide market.
3
<PAGE>
Most routine blood tests are sent to a centralized location, either a
commercial or hospital laboratory, for processing. In these centralized
laboratories, large blood analyzers reduce individual test costs by producing
high volumes of test results. Commercial laboratories provide approximately 27%
of all in vitro diagnostic testing services, hospital laboratories provide
approximately 63%, and the balance is provided in physicians' offices.
Commercial laboratories are currently the low cost provider of blood testing
services due primarily to economies of scale in testing multiple samples in
large analyzers, thereby producing low direct costs per test. However,
administrative and logistical issues limit their ability to provide test
results in less than 24 hours without incurring increased costs. These higher
costs necessitate a pricing premium. Hospital laboratories typically provide
same day test results but are not as cost-efficient as commercial laboratories.
They must remain open 24 hours per day regardless of actual use in order to
respond to critical patient needs. With insufficient testing volume to absorb
laboratory operating expenses and capital costs, tests performed in hospital
laboratories are more expensive.
The limitations of these centralized laboratories have given rise to a
growing point-of-care market. However, current point-of-care testing devices
offer only a limited menu of tests. Consequently, they are redundant to the
large testing devices used in centralized laboratories and have added costs to
the healthcare system. With the Careside System's broad menu of blood tests, we
believe that healthcare providers will be able to shift centralized laboratory
services to the point-of-care and outsource other tests as necessary.
THE CARESIDE SOLUTION
We believe that the Careside System provides the solution to the limitations
of central laboratories and existing point-of-care blood testing devices. In
addition, we expect the features of the Careside System to enable healthcare
providers not currently conducting blood tests to start providing this service.
Here are the reasons why:
. COMPREHENSIVE TEST MENU--The Careside System will offer a broad menu of
blood tests in four testing categories (chemistry, electrochemistry,
coagulation and immunochemistry) within a single instrument. It will
also include a hematology device capable of performing nine hematology
tests.
. COST-EFFECTIVE RESULTS--The Careside System is designed to provide test
results that are cost competitive with commercial laboratories, the
lowest cost alternative currently available.
. RAPID TEST RESULTS--The Careside System furnishes test results within 10
to 15 minutes from the time the blood is drawn from the patient. The
Careside System will analyze up to six test cartridges simultaneously.
. EQUIVALENT TECHNOLOGY--The Careside System uses test methods that are
the same as those used in many centralized laboratories.
. EMBEDDED QA/QC--The Careside System has operating software designed to
assist in meeting QA/QC documentation requirements of CLIA.
. EASE OF USE--Non-technical personnel can easily operate and maintain the
Careside System.
. PRACTICE ENHANCEMENT--The Careside System's rapid test results enable a
provider to make clinical decisions more quickly, see more patients,
eliminate time spent reviewing records and making follow-up calls, and
improve patient satisfaction and quality of care. Healthcare providers
can also increase their revenues by performing and billing for tests
themselves.
THE CARESIDE STRATEGY
Our goal is to make point-of-care testing with the Careside System the
standard of care in all blood testing by implementing the following key
strategies:
4
<PAGE>
PROVIDE THE UNIQUE POINT-OF-CARE SOLUTION. Most point-of-care companies have
focused solely on the stat testing market with a limited number of tests. Our
unique menu will combine four different test categories (chemistry,
electrochemistry, coagulation and immunochemistry) into a single testing
instrument. After product launch, we intend to continue to build our test menu
so as to have the broadest test menu of any point-of-care system on the market.
SATISFY HEALTHCARE SYSTEM NEEDS. The Careside System is designed to meet the
various needs of each of our targeted customer markets. We will market the
Careside System to hospitals by demonstrating the benefits of decentralized
testing such as improved patient care and reduced costs. For other healthcare
providers including physician group practices, nursing homes and home care, we
will position the Careside System as a profitable, cost-effective, easy to use
alternative to centralized laboratory testing.
LEVERAGE EXPERTISE OF STRATEGIC PARTNERS. We expect to continue to work with
our strategic partners, such as Fuji Photo Film Co., Ltd. ("Fuji") and UMM
Electronics, Inc. ("UMM"), who have already developed specific expertise and
state-of-the-art technology. Fuji supplies chemistry and electrochemistry test
reagents for our proprietary test cartridges. We have contracted with UMM for
software development and device manufacturing. With these and our other
strategic partners, we expect to be able to develop new tests on a rapid, cost-
effective basis.
SYSTEMATIC COMMERCIAL ROLLOUT. The CareSide Analyzer and 19 tests are cleared
or exempt for marketing in the United States for use in licensed laboratories.
At our planned product launch in the third quarter of 1999, we plan to have
over 50 tests cleared or exempt. Prior to that time, we will conduct pilot site
marketing studies in targeted market segments. The purpose of these studies is
to demonstrate the Careside System's cost-effectiveness and to determine how
potential customers in different healthcare environments will use the Careside
System. Pilot study results will also be used to obtain FDA designation of the
Careside System for point-of-care use by non-technical personnel. To date, we
have arranged for APRIA Healthcare (one of the largest United States providers
of home care services), three hospitals through Child Health Corporation of
America, and a physician group practice, to serve as pilot sites. We plan to
market and distribute the Careside System in the United States through our own
sales force and through SmithKline Beecham Clinical Laboratories, Inc.
("SBCL"). We believe our systematic commercial rollout strategy improves our
chances of having a successful product launch.
EARLY DEVELOPMENT AT SMITHKLINE BEECHAM
SBCL conducted extensive surveys of the point-of-care market during 1993 and
1994. Based on its findings, SBCL began developing the technology used in the
CareSide Analyzer and our test cartridges and started the Company's predecessor
business (the "Predecessor Business"). In November 1996, we acquired the
Predecessor Business from SBCL and another affiliate of SmithKline Beecham
Corporation to continue the development and commercialization effort. Several
senior members of SBCL's management team worked on this point-of-care project
at SBCL, including Careside's Chief Executive Officer. They are now part of the
executive management team of Careside. We continue to have a business
relationship with SBCL through a distribution and supply agreement. This
agreement gives SBCL, as a commercial laboratory, exclusive distribution rights
within the commercial laboratory industry in the United States and certain
foreign countries. It also gives SBCL other non-exclusive distribution rights,
including the right to use the Careside System in its patient service centers
where blood is drawn.
Careside was incorporated in Delaware in July 1996 under the name Exigent
Diagnostics, Inc. In May 1998, we changed our name to Careside, Inc. Our
principal executive offices are located at 6100 Bristol Parkway, Culver City,
California 90230 and our telephone number is (310) 338-6767.
5
<PAGE>
THE OFFERING
Except as otherwise indicated, all information in this Prospectus (i) assumes
no exercise of the Underwriters' over-allotment option, and (ii) has been
adjusted to give effect to a 1-for-5.2 reverse stock split to be effected
immediately prior to the completion of the Offering.
<TABLE>
<C> <S>
Common Stock Offered by the Company.............. shares
Common Stock Outstanding after the Offering (1).. shares
Dividend Policy.................................. We do not plan to pay cash
dividends in the foreseeable
future. See "Dividend
Policy" on page 18.
Use of Proceeds.................................. We expect to use (i)
approximately million to
complete product
development, launch our
product and for related
expenses; (ii) approximately
$ million to purchase
manufacturing equipment and
expand our facilities; (iii)
approximately $ million
to build an inventory and
provide working capital; and
(iv) approximately $
million to repay the
outstanding balance under a
bridge financing. See "Risk
Factors" on page 8, "Use of
Proceeds" on page 18 and
"Certain Transactions" on
page 57.
Risk Factors..................................... An investment in the Common
Stock involves substantial
risks. See "Risk Factors" on
page 8 to read about certain
factors you should consider
before buying shares of the
Common Stock.
Proposed Nasdaq National Market Symbol........... CARE
</TABLE>
- --------
(1) The Common Stock outstanding after the Offering does not include the
following shares of Common Stock:
. Up to 1,184,210 shares issuable upon exercise of options previously
awarded or which may be awarded in the future. Currently, options to
purchase 410,721 shares (exercisable at a weighted-average exercise
price of $5.80) are outstanding.
. Up to 724,853 shares issuable upon exercise of warrants issued prior to
the Offering.
. Up to shares issuable upon exercise of the warrants to be issued to
the Representatives upon the closing of the Offering ("Representatives'
Warrants").
. Shares issuable upon exercise of a warrant (the "Bridge Warrant") issued
in connection with the Company's December 1998 loan from S.R. One,
Limited, a business trust affiliated with SmithKline Beecham Corporation
(the "Bridge Financing"). The Bridge Warrant is exercisable for a number
of shares equal to $750,000 divided by 85% of the initial public
offering price per share.
For more information about these potential future issuances of shares of
Common Stock, see "Management--Stock Option Plans" beginning on page 50,
"Description of Capital Stock--Warrants" on page 60, "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" on page 23 and "Underwriting" on page 66.
6
<PAGE>
SUMMARY FINANCIAL DATA
The following table presents summary financial information of Careside (and
its predecessor operations at SBCL):
. for the year ended December 31, 1994 (unaudited)
. for the year ended December 31, 1995 and for the ten months ended
October 31, 1996 (audited)
. for the period from inception (July 10, 1996) through December 31, 1996
and for the year ended December 31, 1997 (audited)
. for the nine months ended September 30, 1997 and 1998 and for the period
from inception (July 10, 1996) through September 30, 1998 (unaudited)
. as of December 31, 1997 (audited)
. as of September 30, 1998 (unaudited)
This summary financial information has been derived from the financial
statements of Careside and the Predecessor Business. This data should be read
in conjunction with the financial statements and related notes which appear
later in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR BUSINESS (1)
-----------------------------------
YEAR ENDED TEN MONTHS
DECEMBER 31, ENDED
---------------------- OCTOBER 31,
1994 1995 1996
--------- ----------- -----------
<S> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Operating
expenses
Research and
development.... $ 949,346 $ 2,109,802 $ 3,054,503
General and
administration.. 26,069 585,058 224,399
--------- ----------- -----------
Operating loss.. $(975,415) $(2,694,860) $(3,278,902)
========= =========== ===========
Net interest
income
(expense).......
Net loss.........
Net loss per
share(2)........
Shares used in
computing net
loss per
share(2)........
<CAPTION>
CARESIDE, INC.
-----------------------------------------------------------------------------
PERIOD FROM NINE MONTHS PERIOD FROM
INCEPTION YEAR ENDED ENDED SEPTEMBER 30, INCEPTION
(JULY 10, 1996) TO DECEMBER 31, ------------------------- (JULY 10, 1996) TO
DECEMBER 31, 1996 1997 1997 1998 SEPTEMBER 30, 1998
------------------ ------------- ------------ ------------ ------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Operating
expenses
Research and
development.... $ 1,561,847 $ 5,895,465 $ 4,501,489 $ 6,158,973 $ 13,616,285
General and
administration.. 55,515 640,574 452,431 648,530 1,344,619
------------------ ------------- ------------ ------------ ------------------
Operating loss.. (1,617,362) (6,536,039) (4,953,920) (6,807,503) (14,960,904)
Net interest
income
(expense)....... (20,809) 205,256 172,572 195,883 380,330
------------------ ------------- ------------ ------------ ------------------
Net loss......... $(1,638,171) $(6,330,783) $(4,781,348) $(6,611,620) $(14,580,574)
================== ============= ============ ============ ==================
Net loss per
share(2)........ $ (2.25) $ (2.04) $ (1.59) $ (1.48)
================== ============= ============ ============
Shares used in
computing net
loss per
share(2)........ 728,465 3,098,980 3,009,203 4,476,796
================== ============= ============ ============
</TABLE>
<TABLE>
<CAPTION>
CARESIDE, INC.
-----------------------------------------------
SEPTEMBER 30, 1998
DECEMBER 31, -----------------------------
1997 ACTUAL AS ADJUSTED (3)
------------ ------------ ---------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
short-term investments....... $ 1,237,149 $ 4,475,771 $
Total assets.................. 3,140,223 7,609,511
Deficit accumulated during
development stage............ (7,968,954) (14,580,574)
Total stockholders' equity.... 2,437,607 6,143,700
</TABLE>
- --------
(1) The operations data presented for the Predecessor Business represents the
research and development and related general and administrative costs
incurred by SmithKline Beecham Corporation and its affiliates in connection
with certain technology and know-how acquired by the Company on November 7,
1996. See "Statements of Certain Expenses" and Notes thereto on Pages F-14
and F-15.
(2) See Note 2 of "Notes to Financial Statements" on page F-7 concerning the
computation of net loss per share.
(3) As Adjusted data assumes the sale by Careside of shares of Common Stock
being offered by this Prospectus at an assumed initial public offering
price per share of $ and the receipt and application of the estimated
net proceeds as set forth in "Use of Proceeds" on page 18.
7
<PAGE>
RISK FACTORS
An investment in the Common Stock involves many risks including market,
liquidity, credit, operational, legal and regulatory risks. These risks may be
substantial and are inherent in the business of Careside. You should carefully
consider the following information about these risks, together with the other
information in this Prospectus, before buying shares of Common Stock.
If any of the following risks actually occur, our business and prospects
could be materially adversely affected, the trading price of our Common Stock
could decline, and you might lose all or part of your investment.
LIMITED OPERATING HISTORY; ABSENCE OF PROFITABILITY
Careside was formed in 1996 and has not generated any revenue. We have
incurred net losses of $14,581,000 from July 10, 1996 (inception) through
September 30, 1998. We will not generate any revenue from product sales and
will continue to incur significant additional operating losses until we
complete the development of our test menu, receive necessary FDA clearances,
expand our manufacturing and marketing efforts, manufacture our products
according to Quality System Regulations prescribed by the FDA (including Good
Manufacturing Practices), and begin selling the Careside System which is
expected in the third quarter of 1999.
Our ability to successfully commercialize our products depends on the cost to
the customer of obtaining test results with the Careside System compared to
alternative methods (such as testing in commercial laboratories and hospital
laboratories). Even if we commercialize our products, we still may not be able
to operate profitably. We may experience substantial delay and expense in
developing additional tests, problems in production and marketing, and other
unforeseen difficulties. As a result, we cannot assure you that we will
generate any revenue or be able to operate profitably. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
page 22 and "Business--Sales and Marketing" on page 38 and "--Research and
Development" on page 38.
UNCERTAIN MARKET ACCEPTANCE OF THE CARESIDE SYSTEM
The CareSide Analyzer and related test cartridges are our only products. We
will not be able to operate profitably unless these products achieve a
significant level of market acceptance. The following factors represent the
greatest risks to the market acceptance of our products:
Failure to Develop Comprehensive Test Menu. The CareSide Analyzer represents
a new approach to point-of-care diagnostic testing in part because it combines
chemistry, electrochemistry, immunochemistry and coagulation testing into a
single testing instrument. In addition, the Careside System will include a
hematology testing device manufactured by a third party. If we are not able to
develop a comprehensive test menu in all four testing categories, or are unable
to develop a sufficient number of tests in each category, or if our hematology
partner is not successful in completing the hematology device, customers may
not purchase the CareSide Analyzer or use the disposable test cartridges.
Failure to Demonstrate Economic or Clinical Benefits of Careside
System. Commercial laboratories and hospital laboratories perform most of the
diagnostic tests ordered by physicians and hospitals. Unless physicians and
hospitals determine that the Careside System is an attractive alternative to
other means of diagnostic testing and has economic benefits, they may not use
the Careside System. If we fail to demonstrate the economic or clinical
benefits of the Careside System or convince members of the medical community to
change the way they have ordered tests in the past, our business and prospects
will be adversely affected.
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Changing Technology. Blood testing technology is evolving. Other companies
may develop products in response to technological changes that make our
products noncompetitive. If the development, introduction or marketing of our
products is delayed, we may be marketing our products at a time when their cost
and performance characteristics are not competitive in the marketplace.
Pricing Pressures. The growing prevalence of managed care and health
maintenance organizations may also adversely affect the market for the Careside
System. Many health maintenance and managed care organizations have exclusive
contracts with laboratories that require participating or employed physicians
to send patient specimens to contracted laboratories. Healthcare providers are
under growing pressure by Medicare and private insurers to limit their testing
to "medically necessary" tests. In addition, further reduction in reimbursement
rates from governmental and private health insurers and other third party
payers may also adversely affect the market for the Careside System.
NO ASSURANCE OF SUCCESSFUL PRODUCT DEVELOPMENT
We intend to expand our menu of tests significantly beyond the current 19
blood tests. To do so, we must complete the development of three of the four
types of disposable cartridges, complete the validation studies for all tests
on our proposed menu, and test the Careside System at pilot sites. A variety of
factors outside our control may adversely affect our proposed development
schedules. These factors include delays in regulatory clearance, technological
difficulties, restrictions on access to proprietary technology of strategic
partners and changes in the healthcare, regulatory or reimbursement
environment. Due to any of these factors, we may experience significant delays
in this process of one year or more. Accordingly, we can give no assurance that
we will be able to complete development of our proposed products on a timely
basis, if at all. Any such failure would greatly affect our ability to continue
operations.
NO SALES, MARKETING AND DISTRIBUTION FORCE; DEPENDENCE ON THIRD PARTY
DISTRIBUTORS
Careside has no sales, marketing or distribution experience. We intend to
distribute our products in the United States primarily through our own sales
force, and internationally primarily through a limited number of distributors.
Establishing a sales and marketing capability sufficient to support the level
of sales necessary for us to attain profitability will require substantial
efforts and significant resources. We can give no assurance that we will
successfully recruit and retain direct sales and marketing personnel or that
our marketing efforts will be successful. If we are not successful in these
endeavors, our business and prospects will be materially adversely affected.
To supplement our direct sales force, we have a distribution arrangement with
SBCL for the United States and certain foreign countries. We have also granted
Fuji a right of first refusal to distribute the Careside System exclusively in
Japan and non-exclusively in certain other Asian countries. To distribute our
products worldwide, we intend to enter into additional distribution
arrangements. We will depend upon these distributors to assist us in promoting
market acceptance and creating demand for our products. We can give no
assurance that we will be able to maintain the distribution relationship with
SBCL, that Fuji will exercise its right of first refusal or that we will enter
into and maintain arrangements with other distributors on a timely basis. In
addition, we have little control over the resources that the distributors will
devote to the marketing of the Careside System. See "Business--Sales and
Marketing" on page 36 and "Certain Transactions--SmithKline Beecham" on page
57.
NO MANUFACTURING EXPERIENCE; DEPENDENCE ON CONTRACT MANUFACTURERS AND KEY
SUPPLIERS
We have never operated a manufacturing/assembly business. If the Careside
System achieves market acceptance, we will need to assemble significant and
increasing quantities of test cartridges on a timely basis, while maintaining
strict quality standards. We are in the process of purchasing equipment to
convert to automated production of cartridge components and assembly. Our
ability to assemble disposable test cartridges successfully depends on timely
delivery of manufacturing equipment that will be capable of producing
sufficient quantities of cartridges. We can give no assurance that we will be
able to achieve and maintain
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product accuracy and reliability when producing the cartridges in the
quantities required, on a timely basis and at an acceptable cost. In addition,
we will purchase the materials used in the cartridges from outside suppliers
such as Fuji, which supplies our test reagents for the chemistry and
electrochemistry tests. Although alternative sources for key materials are
available, any interruption in supply of these materials would adversely affect
our planned time schedule and would, therefore, materially adversely affect our
business and prospects.
We will use outside vendors to manufacture most of the Careside System,
including the CareSide Analyzer and components of the disposable testing
cartridges. One of these significant vendors, UMM, will manufacture the
CareSide Analyzer at its facility in Indianapolis, Indiana. We cannot be
certain that UMM or any other outside vendor will be able to provide us with a
sufficient number of instruments and cartridge components on a timely basis. We
will have only limited control over third party manufacturers as to quality
control, timeliness of production and delivery and various other factors.
Although we believe that we would find alternative vendors, any interruption in
supply would adversely affect our planned time schedule and materially
adversely affect our business and prospects.
We have significant, and in some cases exclusive, contracts with third party
suppliers for certain components of the test cartridges. Each of these
agreements has termination rights exercisable by either party. If any of these
agreements is terminated by either party for any reason, we may not be able to
replace the suppliers in a timely manner or on commercially reasonable terms.
If we are unable to maintain these contracts on their present terms, our
business and prospects may be materially adversely affected. See "Business--
Manufacturing and Supply" on page 39.
The CareSide Analyzer does not perform hematology tests. We are negotiating
an arrangement with a third party to supply hematology testing capabilities in
an additional device. We can make no assurances that we will be able to agree
upon pricing that will enable us to offer cost-effective hematology testing. In
addition, we have not yet developed an interface between the hematology device
and the CareSide Analyzer. We can give no assurance that we will be able to
develop the interface in a timely or cost-effective manner, or at all. See
"Business--The Careside System--Test Menu" on page 34.
UNCERTAINTY RELATING TO THIRD PARTY REIMBURSEMENT AND PRODUCT PRICING
Government authorities, private health insurers and other third-party payers,
such as health maintenance organizations, are increasingly challenging the
prices charged for medical products and services. Third party payers may
determine not to reimburse for some or all of the diagnostic testing performed
by our products. In addition, legislative proposals to reform healthcare and
the trend toward managed healthcare in the United States may require lower
prices for our diagnostic products. As entities such as health maintenance
organizations grow, they can control or significantly influence the purchase of
healthcare services and products. We can give no assurance that current
reimbursement amounts for diagnostic tests will be maintained or that managed
care organizations will favor delivery of testing services with our products.
Any pressure from managed care organizations or decrease in test reimbursement
amounts may reduce the demand for our products or force us to lower our sales
prices which would decrease our profitability. See "Business--Third Party
Reimbursement" on page 41.
DEPENDENCE ON MANAGEMENT AND OTHER KEY PERSONNEL
Our business and the execution of our strategy are largely dependent on our
ability to hire and retain key management and operating personnel. Competition
for qualified and talented individuals, particularly those with experience in
the point-of-care testing field, is intense. In particular, our success depends
on our ability to retain the services of Mr. Stoughton, the Chairman of the
Board of Directors and Chief Executive Officer, and Dr. Grove, Executive Vice
President--Research and Development. The Company has entered into three-year
renewable employment agreements with Mr. Stoughton and Dr. Grove. In addition
to the current administrative
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and operations personnel, we will need to attract additional sales and
marketing, research and development, and experienced manufacturing personnel.
The loss of the services of Mr. Stoughton, Dr. Grove, or other key personnel,
or our inability to attract and hire additional personnel as needed, could
materially adversely affect our business and prospects. See "Management--
Employment Agreements" on page 50.
NEED TO MANAGE EXPANDING OPERATIONS
If we are successful in achieving market acceptance for the Careside System,
we will need to expand our operations, particularly in research and
development, sales and marketing and manufacturing. This expansion will likely
result in new and increased responsibilities for management personnel and place
significant demand upon our management team and our operating and financial
systems and resources. To accommodate this growth and to compete effectively,
we would need to implement and improve our information systems, procedures and
controls, and to hire and train additional personnel. We can give no assurance
that we will be able to accommodate expanding operations, or that if we do,
that we will be able to do so adequately.
INTENSE COMPETITION
Our primary competitors are large diagnostic device manufacturers, commercial
and hospital laboratories and other point-of-care device manufacturers. We
expect that manufacturers of conventional blood testing products used in
centralized laboratories will compete intensely with us to maintain their
market share. These competitive pressures may force us to reduce prices of the
CareSide Analyzer and test cartridges to remain cost competitive. Most of our
competitors have significant marketing, manufacturing, financial and managerial
resources, and have substantially greater research and development capabilities
than we do. These competitors are actively seeking to develop systems for the
point-of-care market that will compete directly with our products. We also face
stiff competition from these companies in recruiting and retaining scientific
personnel. In addition, we also will compete with other manufacturers of point-
of-care diagnostic devices. Although none currently has a test menu as broad as
ours, we anticipate competition from these manufacturers in discrete testing
areas, such as stat testing in emergency rooms. Many of these more limited menu
products will cost less than the Careside System and so may be attractive to
some of our customers. Accordingly, we can give no assurance that we will
compete successfully against all or any of these companies. See "Business--
Competition" on page 40.
ABSENCE OF PATENTS AND DEPENDENCE ON PROPRIETARY TECHNOLOGY
We plan to protect our proprietary position by filing United States and
foreign patent applications relating to technology, inventions and improvements
that are important to our business. Although we do not currently have any
patents, we have submitted three patent applications with the United States
Patent and Trademark Office. We have filed an international application
corresponding to one of the United States applications and intend to file two
additional international applications for the other two United States
applications. We cannot be certain that any patent application will result in
the issuance of a patent or that our patents will withstand any challenges by
third parties. The failure to receive a patent, or the invalidation of any key
patents that we may obtain, could increase competition and could materially
adversely affect our business and prospects.
We are aware that universities and government laboratories, physicians and
other corporations are conducting substantial research in point-of-care
diagnostic blood testing technology. We are also aware that numerous patent
applications have been filed, and that patents have been issued, relating to
specific diagnostic products and processes. We may not be aware of all patent
or patent applications that may materially affect our ability to make, use or
sell our products. Moreover, the application of our technology may infringe
upon patents or proprietary rights of others. United States patent applications
are confidential while pending in the United States Patent and Trademark
Office, and patent applications filed in foreign countries are often first
published six or more months after filing. If we use technologies, products or
processes covered by patents issued to third parties, we may have to obtain
licenses to use such technologies, products or processes. If we are unable to
obtain such licenses on reasonable terms, or at all, our business and prospects
may be materially adversely affected.
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We will rely on trademarks and trade names for the development and protection
of brand loyalty for our products. It is our policy to take necessary measures
to protect our trademarks, trade names and associated goodwill. These measures
include filing United States and foreign trademark applications relating to our
products and business. Our registered or unregistered trademarks or trade names
may be challenged, canceled, infringed, circumvented or declared generic or
determined to be infringing on other third party marks. See "Business--Patents
and Proprietary Rights" on page 40.
We also rely on unpatented trade secrets to protect our proprietary
technology. Other companies may independently develop or otherwise acquire
equivalent technology or gain access to our proprietary technology. We can give
no assurance that we will be able to protect meaningful rights to such
unpatented proprietary technology. Except for certain of our executive
officers, our employees are not bound by confidentiality agreements which
prevent them from disclosing our confidential information and proprietary
technology.
There has been substantial litigation regarding patent and other intellectual
property rights in the medical device industry. Although we have not been a
party to any litigation concerning such rights, we may be a party to future
litigation to protect our rights or to defend against claims of infringement by
others. This potential litigation could result in substantial costs and the
diversion of management's attention. If we lost any such litigation, we could
be required to obtain licenses from third parties and be prevented from
manufacturing, selling or using certain of our products. If we were unable to
obtain such licenses on reasonable terms, or at all, or if we were prevented
from commercializing our products, our business and prospects could be
materially adversely affected.
We may be subject to further risks as we expand our operations in countries
where intellectual property laws are not well developed or are difficult to
enforce. Because we may be unable to effectively enforce our proprietary rights
in those countries, our business and prospects may be materially adversely
affected.
GOVERNMENT REGULATION
Human diagnostic products are medical devices subject to extensive regulation
by the FDA, similar agencies in other countries, and to a lesser extent, by
state regulatory authorities. Any noncompliance with these regulations can
result in fines, injunctions, civil penalties, recall or seizure of products,
or suspension of production. In addition, the regulators may refuse to grant
pre-market clearance or approval for devices or tests, may withdraw marketing
clearances or approvals, or may institute criminal prosecution. The FDA also
may request repair, replacement or refund of the cost of any device
manufactured or distributed. If previously unknown problems are discovered, the
regulators may restrict the marketing of the product or require withdrawal of
the product from the market. In addition, changes in existing regulations or
adoption of new regulations could prevent us from obtaining future regulatory
approvals and clearances, or increase the cost or timing of such approvals and
clearances.
FDA Pre-Market Clearance. The FDA regulates the preclinical and clinical
testing, manufacture, labeling, distribution, sale, marketing, advertising and
promotion, and post-market reporting of medical devices. FDA regulations
require rigorous laboratory and clinical testing, as appropriate, to establish
product performance before commercial marketing. Medical devices such as the
CareSide Analyzer are subject to pre-market clearance pursuant to Section
510(k) of the Federal Food, Drug and Cosmetic Act (the "FDC Act"). Clearance
under Section 510(k) of the FDC Act is subject to continual review in certain
instances, such as when products are modified. We cannot be certain that we
will be able to obtain all necessary approvals on a timely basis, or at all.
Moreover, it is possible that one or more of our products will be subjected to
more extensive pre-market clinical testing and the FDA pre-market approval
process under Section 515 of the FDC Act.
Point-of-Care Use Designation. The FDC Act strictly prohibits the promotion
of approved medical devices for unapproved uses. The CareSide Analyzer received
pre-market clearance for use in professional laboratory testing in March 1998.
Following clinical testing of the testing instrument at the pilot sites, we
expect that the CareSide Analyzer will receive pre-market clearance for point-
of-care use. The point-of-care
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designation depends upon a sampling of tests determined by the FDA to have
accuracy and reliability equivalent to or better than test results obtained
from tests performed in a commercial laboratory. Without the point-of-care use
designation, the CareSide Analyzer could be used only at sites with laboratory
licenses under CLIA. Although many sites that use the Careside System have such
licenses, the point-of-care designation is necessary to expand our potential
market.
GMP Manufacturing. Because we manufacture a medical device, our manufacturing
facilities and processes will be required to comply with strict federal
regulations, including Good Manufacturing Practices ("GMP") and quality system
requirements, regarding validation and quality of manufacturing. We will be
subject to periodic inspections by the government to monitor ongoing compliance
with GMP. We have limited experience in complying with regulations governing
our products and manufacturing facilities. We must devote substantial resources
and management attention to monitoring and maintaining compliance with
governmental regulations. If we, or our manufacturing partners, were found to
have violated the applicable regulations during an inspection of the
manufacturing facilities, we may be sanctioned and our production or
distribution may be suspended. In addition, the FDA may withdraw the approval
or clearance to market any of our products. Such a suspension or withdrawal
could result in significant expenses to attain compliance, and would result in
a loss of business and potential damage to our reputation with our customers,
third party payers, the medical community at large and regulatory authorities.
Any of these could materially adversely affect our business and prospects.
Foreign. The European Community has drafted a Directive for In Vitro
Diagnostic Products. When this Directive is finalized and becomes effective,
new European Community requirements will take effect. These requirements will
apply to our products and may require significant regulatory hurdles before we
may market our products in the European Community. This new Directive, as well
as other requirements of foreign governments, may adversely affect our ability
to market our products in countries outside of the United States. We have not
yet obtained regulatory clearances outside the United States and there is no
assurance that any will be obtained.
EFFECT OF CLINICAL LABORATORY IMPROVEMENT AMENDMENTS OF 1988
Our products will be subject to CLIA. This law is intended to ensure the
quality and reliability of all medical testing in the United States. CLIA
regulations have established three levels of regulatory control based on test
complexity--"waived," "moderate complexity" and "high complexity." The Center
for Disease Control and Prevention has categorized the tests performed by the
CareSide Analyzer as moderate complexity tests. CLIA regulations require
laboratories performing moderate complexity or high complexity tests to obtain
either a registration certificate or certification of accreditation from the
United States Health Care Financing Administration. Each site for laboratory
testing must file a separate application and separately meet all CLIA
requirements. Multiple laboratory sites at a single hospital location and under
common direction may file a single application.
CLIA may discourage healthcare providers from expanding point-of-care testing
to physician office laboratories and small volume test sites. In addition,
healthcare providers may be reluctant to initiate, continue or expand patient
testing. The CLIA regulations (including future interpretations) and various
state licensing requirements for point-of-care device technicians could
materially adversely affect our business and prospects.
NEED FOR SUBSTANTIAL ADDITIONAL FUNDS; UNCERTAINTY OF ADDITIONAL FUNDING
Before we may operate profitably, we must first develop a comprehensive test
menu, receive necessary approvals and clearances, and develop manufacturing,
marketing and sales capabilities. We anticipate that the net proceeds from the
Offering will be sufficient to fund our planned operating expenses and capital
requirements for approximately 18 months. These planned expenses and capital
requirements may change, however, and unanticipated expenses may arise. As a
result, there can be no assurance that the proceeds will be sufficient to fund
our operating expenses and capital requirements during this period.
To successfully commercialize our products and to support our operations
beyond such period if our sales efforts are not successful, we will need to
raise substantial additional funds. To obtain these funds, we plan to
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seek additional equity, debt, lease financing and/or third party collaboration
opportunities. We can give no assurance that any financing will be available on
acceptable terms, if at all. If adequate funds are not available, we may be
required to delay, reduce or eliminate certain of our product development
programs or to license to third parties the rights to commercialize our
products or technologies. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
on page 23.
RISKS ASSOCIATED WITH INTERNATIONAL SALES
In the future, we plan to pursue sales outside the United States.
International sales may be adversely affected by government controls, export
license requirements, political instability, trade restrictions, changes in
currency exchange rates, changes in tariffs, difficulties in staffing and
managing international operations, changes in applicable laws, less favorable
foreign intellectual property laws, longer payment cycles, difficulties in
collecting accounts receivable, fluctuations in currency exchange rates and
potential adverse tax consequences. Each of these factors could negatively
affect our international sales, if any, and our business as a whole. Foreign
regulatory agencies often establish product standards different from those in
the United States. Any inability to obtain foreign regulatory approvals on a
timely basis could materially adversely affect our international sales, if any.
Accordingly, we cannot assure you that we will be able to successfully
commercialize our products in any foreign market.
POTENTIAL PRODUCT LIABILITY
If someone alleges that the use of our products has had adverse effects on a
patient, we may be subject to product liability claims. To protect ourselves
against the impact of such claims, we plan to maintain a general insurance
policy that includes coverage for product liability claims. Liability claims
may, however, exceed the coverage limits of any such policy, and such policy
may not cover some claims. In addition, we cannot be certain that such
insurance will continue to be available to us on commercially reasonable terms,
if at all. As a result, a product liability claim or other claim with respect
to uninsured liabilities could materially adversely affect our business and
prospects.
ENVIRONMENTAL MATTERS
Due to the nature of our proposed manufacturing processes, we will be subject
to stringent regulations concerning certain materials and wastes. In
particular, we will be subject to laws, rules and regulations governing the
handling and disposal of reagent chemicals and blood products used in the
development, manufacture and testing of our products. We may incur significant
costs complying with environmental regulations as we increase manufacturing to
commercial levels. These costs, or our failure to comply with environmental
regulations, may materially adversely affect our business and prospects.
SIGNIFICANT UNALLOCATED NET PROCEEDS
We will allocate a substantial portion of the net proceeds from the Offering
to the development, marketing and manufacturing of the Careside System.
Accordingly, our management will have broad discretion in spending the proceeds
for the foreseeable future. See "Use of Proceeds" on page 18.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products use only two
digits to identify a year in the date field with the assumption that the first
two digits of the year are always "19." Consequently, on January 1, 2000,
computers that are not Year 2000 compliant may read the year as 1900. Systems
that calculate, compare or sort using the incorrect date may malfunction. As a
result, computer systems and software products used by many companies may need
to be upgraded before the end of 1999 to comply with such "Year 2000"
requirements. Specifically, these systems and programs must be modified to
accept four digit entries in the date field to distinguish 21st-century dates
from 20th-century dates. Significant uncertainty exists in the software
industry concerning the potential effects associated with such compliance.
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Most of the computer systems and software products that we use and develop
are Year 2000 compliant. As a result, we do not believe that the issues
concerning the Year 2000 will adversely affect our business. However, we may
still face exposure to potential claims on the basis that our software products
are not Year 2000 compliant in all respects. Although we are not aware of any
threatened claims against Careside related to the Year 2000 compliance issue,
we may be subject to litigation arising from such claims in the future. This
potential litigation could materially adversely affect our business and
prospects.
We believe that companies that supply products to us are or will be Year 2000
compliant. If our suppliers' software systems are not able to read and apply
proper dates, it may delay our receipt of reagents or other component products
used in the Careside System. This could have a material adverse effect on our
ability to sell our own products. We expect to have contingency plans in place
in the event any of our key suppliers are not Year 2000 compliant by the second
half of 1999. However, we can make no assurances that our contingency plans
will provide equivalent product and timing as our current suppliers.
In addition, we believe that our potential customers may be expending
significant resources to correct or upgrade their current software systems for
Year 2000 compliance. These expenditures may result in reduced funds available
to purchase our products. Year 2000 issues may also cause certain companies to
accelerate purchases, increasing short-term demand and consequently decreasing
long-term demand for our products. If our customers or potential customers fail
to complete Year 2000 modifications on their systems, they may suffer system
failures or miscalculations resulting in disruptions of operations, including,
among other things, a temporary inability to process data from CareSide
Analyzers. Any of the foregoing could materially adversely affect our business
and prospects. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Year 2000 Compliance" on page 25.
SIGNIFICANT NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE
After the Offering, we will have shares of Common Stock outstanding. All
of the shares sold in the Offering will be freely tradeable without restriction
except for any shares purchased by an "affiliate" of the Company within the
meaning of Rule 144 promulgated under the Securities Act ("Rule 144"). The
shares issued and outstanding before the Offering are "restricted securities,"
as that term is defined under Rule 144, and may only be sold if registered or
exempt under the Securities Act. Rule 144 exempts sales of restricted
securities subject to certain information and filing requirements and volume
limitations. Without the prior written consent of Fahnestock & Co. Inc.,
holders of shares and certain option and warrant holders (including our
officers and directors) are not permitted to sell their shares until after
, 2000 (one year after the closing of the Offering). At the expiration of
this lock-up period, the existing shares will become eligible for sale
under Rule 144 and pursuant to certain registration rights.
In addition, we have options outstanding to purchase an aggregate of 410,721
shares of Common Stock at exercise prices ranging from $.05 to $7.44 per share,
and may issue options to purchase an additional 773,489 shares of Common Stock
under our stock option plans. We plan to file a Form S-8 Registration Statement
180 days after the completion of the Offering pursuant to which these shares
may be sold in the public market after the lock-up period, subject to
compliance with Rule 144 in the case of an affiliate of Company.
We have also issued warrants to purchase shares of Common Stock at
exercise prices ranging from $ to $ per share. The holders of these
warrants are entitled to certain registration rights with respect to the shares
of Common Stock issuable on exercise of the warrants. These shares may be sold
in the public market upon registration, and with respect to shares, after
the lock-up period expires. See "Shares Eligible for Future Sale" on page 64.
In connection with the Offering, the Company has agreed to issue to the
Representatives warrants to purchase a number of shares of Common Stock equal
to 10% of the number of shares of Common Stock being offered hereby, excluding
over-allotment shares. The Representatives' Warrants will be exercisable during
the four-year period commencing one year after the date of their issuance.
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Sales of large numbers of Common Stock after the Offering (or the potential
for those sales even if they do not actually occur) are likely to lower the
market price of Common Stock. In addition, these sales may negatively affect
our ability to raise needed capital through the sale of our Common Stock.
SIGNIFICANT OWNERSHIP INTEREST OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
STOCKHOLDERS
Following completion of the Offering, our directors and executive officers,
together with the principal stockholders of Careside, will beneficially own
approximately % of our outstanding Common Stock. Accordingly, these
stockholders, individually and as a group, may be able to influence the outcome
of stockholder votes, including votes concerning the election of directors,
certain amendments to our charter and bylaws, and the approval of certain
mergers and other significant corporate transactions, including a sale of all
or substantially all of our assets. Such influence could have the effect of
delaying, deferring or preventing a change in control. In addition, the
interests of these stockholders could conflict with the interests of other
Careside stockholders, including the purchasers in the Offering. See "Principal
Stockholders" on page 55.
ANTI-TAKEOVER PROVISIONS
Our Board of Directors has the authority to issue up to 5,000,000 shares of
Preferred Stock and to determine the price, privileges and other terms of such
shares. The rights of the holders of Common Stock will be subject to, and may
be adversely affected by, the rights of the holders of any Preferred Stock that
may be issued in the future. The issuance of Preferred Stock may make it more
difficult for a third party to acquire control of Careside. In addition, we
will be subject to the anti-takeover provisions of Section 203 of the Delaware
General Corporation Law that prohibit Careside from engaging in a business
combination with certain of its significant stockholders for three years after
the time the person became a significant stockholder unless certain approvals
are obtained. Section 203 of the Delaware General Corporation Law could also
delay or prevent a significant stockholder from acquiring control of Careside.
In addition, our charter and bylaws may have the effect of discouraging,
delaying or preventing a merger, tender offer or proxy contest involving
Careside. Any of these anti-takeover provisions could lower the market price of
the Common Stock. See "Description of Capital Stock--Takeover Protection and
Certain Charter and By-Law Provisions" on page 62.
NO PRIOR MARKET FOR COMMON STOCK
There has been no public market for the Common Stock before the Offering. We
have applied to have the Common Stock approved for quotation on the Nasdaq
National Market. This does not, however, guarantee that a trading market for
the Common Stock will develop or, if a market does develop, the trading market
will be sustained after the Offering. The initial public offering price bears
no relationship to the market price for the Common Stock thereafter, and the
shares may trade at prices significantly below the initial public offering
price.
VOLATILITY OF SHARE PRICE
The market price for shares of the Common Stock may be highly volatile
depending on many factors, including the success of our new products or new
products introduced by our competitors, developments with respect to our
patents and other proprietary rights, changes in financial estimates by
securities analysts, or changes in general market conditions, among others.
Securities class action litigation has often been brought against companies
that experience volatility in the market price of their securities. Litigation
brought against us could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse
effect on our business and prospects.
IMMEDIATE AND SUBSTANTIAL DILUTION
The proposed initial public offering price is substantially higher than the
net tangible book value per share of Common Stock. Accordingly, purchasers of
Common Stock sold in the Offering will incur immediate and substantial dilution
in the net tangible book value of $ per share. This per share dilution
amount represents an immediate increase in the net tangible book value of $
per share to existing stockholders
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and an immediate dilution of $ per share to new investors purchasing shares
in the Offering. All of the above per share dilution amounts assume that the
initial public offering price will be $ . In addition, purchasers of shares
sold in the Offering may experience further dilution in the net tangible book
value per share if we offer additional Common Stock in the future. See
"Dilution" on page 20.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Prospectus discuss future events and
developments, including our ability to generate revenues, income and cash
flows, or state other "forward-looking" information. We generally identify
these forward-looking statements by using the words "anticipate," "believe,"
"estimate," "expect," and similar expressions. Those statements are subject to
known and unknown risks, uncertainties and other factors that could cause the
actual results to differ materially from those contemplated by the statements.
Important factors that may cause actual results to differ include those set
forth under "Risk Factors" beginning on page 8.
We do not promise to update forward-looking information to reflect actual
results or changes in assumptions or other factors that could affect those
statements.
17
<PAGE>
USE OF PROCEEDS
The Company estimates that it will receive net proceeds from the sale of
shares of Common Stock in the Offering of approximately ( if the
Underwriters' over-allotment option is exercised in full), at an assumed
initial public offering price of per share, after deduction of
underwriting discounts and commissions and expenses payable by the Company,
estimated at . The Company expects to use (i) approximately million
of the proceeds to complete product development, undertake marketing efforts to
launch the Careside System and for related expenses, (ii) approximately
million of the proceeds to purchase manufacturing equipment and expand our
facilities, (iii) approximately million of the proceeds to build up an
inventory and provide working capital, and (iv) approximately million of
the proceeds to pay off the outstanding balance under the Bridge Financing. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" on page 23 and "Risk Factors--Need
for Substantial Additional Funds; Uncertainty of Additional Funding" on page
13.
Pending use of the net proceeds, the Company intends to invest such funds in
short-term bank deposits and investment grade securities, United States
government securities, and other short-term, income-producing securities.
The foregoing discussion is merely an estimate based on the Company's current
business plans. Actual expenditures may vary depending upon circumstances not
yet known, such as the time actually required for the Company to reach a
positive cash flow, or to successfully develop the Company's products.
DIVIDEND POLICY
The Company has never paid any cash dividends on its shares of Common Stock
and does not anticipate paying any cash dividends on its shares of Common Stock
in the foreseeable future. The Company currently intends to retain any future
earnings for reinvestment in its business. Any future determination to pay cash
dividends will be at the discretion of the Board of Directors and will be
dependent upon the Company's financial condition, results of operations,
capital requirements and such other factors as the Board of Directors deems
relevant.
18
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1998, the actual
capitalization of the Company and the as adjusted capitalization of the Company
after giving effect to the sale of shares of Common Stock offered by the
Company hereby and the application of the estimated net proceeds therefrom at
an assumed initial public offering price of $ . This table should be read in
conjunction with the Financial Statements of the Company included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------------
ACTUAL AS ADJUSTED
----------- -----------
<S> <C> <C>
Debt (1).............................................. $ -- $--
----------- ----
Stockholders' equity (2):
Preferred Stock, $.01 par value --
5,000,000 shares authorized; none issued and
outstanding....................................... -- --
Common Stock, $.01 par value -- 50,000,000 shares
authorized; 5,084,281 shares issued and outstanding
(actual) and shares issued and outstanding (as
adjusted) (3)...................................... 50,843
Additional paid-in capital.......................... 20,673,431
Deficit accumulated during development stage........ (14,580,574)
----------- ----
Total stockholders' equity........................ 6,143,700
----------- ----
Total capitalization.............................. $ 6,143,700 $
=========== ====
</TABLE>
- --------
(1) In December 1998, the Company entered into (i) a commitment for equipment
lease financing and (ii) the Bridge Financing. The Company has not borrowed
under either of these debt agreements as of December 15, 1998. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" on page 23.
(2) Assumes the amendment of the Company's certificate of incorporation to
increase the number of shares of Preferred Stock immediately prior to the
completion of the Offering. See "Description of Capital Stock" on page 60.
(3) Outstanding amounts exclude (i) 1,184,210 shares of Common Stock issuable
upon exercise of options previously awarded or which may be awarded in the
future under the Company's stock option plans; (ii) 724,853 shares of
Common Stock issuable upon exercise of warrants issued prior to the
Offering; (iii) shares of Common Stock issuable upon exercise of the
Representatives' Warrants; and (iv) shares issuable upon exercise of the
Bridge Warrant. See "Management--Stock Option Plans" on page 50, "Certain
Transactions--Financing Activities" on page 58, "Description of Capital
Stock--Warrants" on page 60 and "Underwriting" on page 66.
19
<PAGE>
DILUTION
The net tangible book value of the Company as of September 30, 1998 was
$6,141,000, or $1.21 per share of Common Stock. Net tangible book value per
share represents total tangible assets of the Company less total liabilities,
divided by the total number of shares of Common Stock outstanding. Without
taking into effect any changes in the net tangible book value after September
30, 1998, other than to give effect to the sale by the Company of the
shares of Common Stock offered hereby at an assumed initial public offering
price of $ per share and the application of the estimated net proceeds
therefrom, the net tangible book value of the Company as of September 30, 1998
would have been $ or $ per share. This represents an immediate increase
of $ per share of Common Stock to existing stockholders and an immediate
dilution of $ per share of Common Stock to purchasers of Common Stock in the
Offering ("New Investors"). The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price........................... $
Net tangible book value per share before the Offering........... $1.21
-----
Increase in net tangible book value per share attributable to
New Investors..................................................
----
As adjusted net tangible book value per share after the
Offering.......................................................
Dilution in tangible book value per share to New Investors (1).. $
====
</TABLE>
- --------
(1) If the Underwriters' over-allotment option is exercised in full, dilution
per share to New Investors would be $ per share of Common Stock.
The following table summarizes as of September 30, 1998 the differences
between the existing holders of Common Stock ("Existing Stockholders") and the
New Investors with respect to the number of shares of Common Stock purchased
from the Company, the total consideration to the Company, and the average price
per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE
NUMBER PERCENT AMOUNT PERCENT PRICE PER SHARE
--------- ------- ----------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders..... 5,084,281 % $23,318,075 % $4.59
New Investors.............
--------- ----- ----------- -----
Total................... 100.0% $ 100.0%
========= ===== =========== =====
</TABLE>
The above computations assume no exercise of outstanding options or warrants
to purchase Common Stock or of the Underwriters' over-allotment option. See
"Description of Capital Stock" on page 60.
20
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data as of December 31, 1996 and 1997 and for the
period from inception (July 10, 1996) through December 31, 1996 and for the
year ended December 31, 1997 are derived from the audited financial statements
of the Company included elsewhere in this Prospectus. The selected financial
data as of September 30, 1998, for the nine months ended September 30, 1997 and
1998 and for the period from inception (July 10, 1996) through September 30,
1998 have been derived from the unaudited financial statements of the Company
and, in the opinion of management, include all adjustments (consisting only of
normal recurring adjustments) which are necessary to present fairly the results
of operations and financial position of the Company for those periods in
accordance with generally accepted accounting principles. The selected
financial data for the nine months ended September 30, 1998 are not necessarily
indicative of the results to be expected for the full year. The selected
financial data for the Predecessor Business for the year ended December 31,
1995 and for the ten months ended October 31, 1996 are derived from the audited
statements of certain expenses which are included elsewhere in this Prospectus.
The selected financial data for the Predecessor Business for the year ended
December 31, 1994 is unaudited, but, in the opinion of the Company, includes
all adjustments necessary for a fair presentation thereof. The following
selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
page 22, the Financial Statements and Notes thereto and the "Statements of
Certain Expenses" on page F-14, and Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR BUSINESS(1)
-----------------------------------
YEAR ENDED TEN MONTHS
DECEMBER 31, ENDED
---------------------- OCTOBER 30,
1994 1995 1996
--------- ----------- -----------
<S> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Operating expenses
Research and
development..... $ 949,346 $ 2,109,802 $ 3,054,503
General and
administration.. 26,069 585,058 224,399
--------- ----------- -----------
Operating loss.. $(975,415) $(2,694,860) $(3,278,902)
========= =========== ===========
Net interest in-
come
(expense)........
Net loss..........
Net loss per
share(2).........
Shares used in
computing net
loss per
share(2).........
<CAPTION>
CARESIDE, INC.
-----------------------------------------------------------------------------------
NINE MONTHS PERIOD FROM
PERIOD FROM INCEPTION YEAR ENDED ENDED SEPTEMBER 30, INCEPTION (JULY 10,
(JULY 10, 1996) TO DECEMBER 31, ------------------------- 1996) TO
DECEMBER 31, 1996 1997 1997 1998 SEPTEMBER 30, 1998
--------------------- -------------- ------------ ------------ --------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Operating expenses
Research and
development..... $ 1,561,847 $ 5,895,465 $ 4,501,489 $ 6,158,973 $ 13,616,285
General and
administration.. 55,515 640,574 452,431 648,530 1,344,619
--------------------- -------------- ------------ ------------ --------------------
Operating loss.. (1,617,362) (6,536,039) (4,953,920) (6,807,503) (14,960,904)
Net interest in-
come
(expense)........ (20,809) 205,256 172,572 195,883 380,330
--------------------- -------------- ------------ ------------ --------------------
Net loss.......... $(1,638,171) $(6,330,783) $(4,781,348) $(6,611,620) $(14,580,574)
===================== ============== ============ ============ ====================
Net loss per
share(2)......... $ (2.25) $ (2.04) $ (1.59) $ (1.48)
===================== ============== ============ ============
Shares used in
computing net
loss per
share(2)......... 728,465 3,098,980 3,009,203 4,476,796
===================== ============== ============ ============
</TABLE>
<TABLE>
<CAPTION>
CARESIDE, INC.
-----------------------------------------
DECEMBER 31,
---------------------- SEPTEMBER 30,
1996 1997 1998
---------- ---------- -------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-
term investments................... $ 31,041 $1,237,149 $ 4,475,771
Total assets........................ 1,192,562 3,140,223 7,609,511
Deficit accumulated during the
development stage.................. (1,638,171) (7,968,954) (14,580,574)
Total stockholders' equity
(deficit).......................... (1,066,818) 2,437,607 6,143,700
</TABLE>
- --------
(1) The operations data presented for the Predecessor Business represents the
research and development and related general and administrative costs
incurred by SmithKline Beecham Corporation in connection with certain
technology and know-how acquired by the Company on November 7, 1996. See
"Statements of Certain Expenses" for the Predecessor Business and Notes
thereto on Pages F-14 and F-15
(2) See Note 2 of "Notes to Financial Statements" on Page F-7 concerning the
computation of net loss per share.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Development of the point-of-care technology used in the Careside System began
in 1994 at SBCL, a subsidiary of SmithKline Beecham Corporation ("SmithKline").
In November 1996, Careside acquired the Predecessor Business, including
intellectual property, equipment and other assets, from SBCL and SmithKline
Beecham Diagnostics Systems Co., affiliates of SmithKline, to continue the
development of point-of-care diagnostic technology and create a commercial
product. As part of the consideration paid for the acquisition, SmithKline
became an equity owner in the Company. The SmithKline investment associated
with the Careside project has been reflected in the accompanying financial
statements as a Predecessor Business.
Since November 1996, Careside has devoted substantially all of its resources
to its research and development activities. The Company has incurred losses
since inception. As of September 30, 1998, the aggregate loss incurred was
approximately $14.6 million. The Company expects to incur significant losses
over at least the next 18 months as it continues its product development
activities, completes a pilot marketing program and initiates its marketing
efforts.
Although the CareSide Analyzer and 19 tests are FDA cleared or exempt for use
in laboratory testing, the rollout of the Careside System is not expected to
take place until the third quarter of 1999. To date, the Company has generated
no revenues. The Company expects that its revenue will derive primarily from
the sale of disposable test cartridges rather than of the CareSide Analyzer
itself.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1998 and 1997
Research and Development Expenses. Research and development expenses
increased to approximately $6.2 million for the nine months ended September 30,
1998 compared to approximately $4.5 million in the same period in 1997. This
increase reflects the expanded efforts to complete additional test development
and submissions to the FDA.
General and Administrative Expenses. General and administrative expenses
increased to $649,000 for the nine months ended September 30, 1998 compared to
$452,000 in the same period in 1997. This increase reflects the increase in the
preliminary sales and marketing efforts associated with planned pilot market
testing in the second quarter of 1999.
Net Interest Income (Expense). Interest income was approximately the same
for the nine months ended September 30, 1998 as compared to the same period in
1997 at $196,000 and $173,000, respectively. This reflects comparable levels of
cash and cash equivalents available for investment.
Net Loss. The net loss was approximately $6.6 million for the nine months
ended September 30, 1998 compared to approximately $4.8 million in the same
period in 1997. This increase reflects the increase in research and development
and preliminary sales and marketing efforts.
Years Ended December 31, 1997 and 1996
Research and Development Expenses. Research and development expenses
increased to approximately $5.9 million for the year ended December 31, 1997
compared to approximately $1.6 million for the period from inception through
December 31, 1996. This increase reflects a full year of spending as well as
the expanded efforts devoted to completing additional test development and
submissions of these tests to the FDA.
22
<PAGE>
Combined research and development expenses for the year ended December 31, 1996
for both Careside and the Predecessor Business were approximately $4.6 million.
General and Administrative Expenses. General and administrative expenses
increased to $641,000 for the year ended December 31, 1997 compared to $56,000
for the period from inception through December 31, 1996. This increase reflects
the full year impact of general and administrative expense and the costs
associated with raising additional capital. Combined general and administrative
expenses for the year ended December 31, 1996 for both Careside and the
Predecessor Business were $280,000.
Net Interest Income (Expense). Net interest income was $205,000 for the year
ended December 31, 1997 compared to interest expense of $21,000 for the period
from inception through December 31, 1996. This reflects the impact of the
resulting cash and cash equivalents available for investment after an equity
financing in 1997.
Net Loss. The net loss was approximately $6.3 million for the year ended
December 31, 1997 compared to approximately $1.6 million for the period from
inception through December 31, 1996. This increase reflects the increase in
research and development efforts, a full year of activity and preliminary sales
and marketing efforts.
Years Ended December 31, 1996 and 1995
Research and Development Expenses. Combined research and development expenses
for both Careside and the Predecessor Business were approximately $4.6 million
for the year ended December 31, 1996 compared to approximately $2.1 million for
the Predecessor Business for the year ended December 31, 1995.
General and Administrative Expenses. Combined general and administrative
expenses for both Careside and the Predecessor Business were $280,000 for the
year ended December 31, 1996 compared to $585,000 for the Predecessor Business
for the year ended December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through the
net proceeds from the issuance of Common Stock and with certain short-term
borrowings that were subsequently converted into equity securities. As of
September 30, 1998, the Company had received net proceeds aggregating
approximately $20.1 million from these transactions.
Net cash used in operating activities was approximately $6.0 million for the
nine months ended September 30, 1998, $6.5 million for the year ended December
31, 1997 and $0.9 million for the period from inception through December 31,
1996. Cash used for operations was primarily related to funding expansion of
research and development activities as well as the establishment of an
administrative infrastructure.
At September 30, 1998, the Company's principal source of liquidity was
approximately $4.5 million in cash and cash equivalents and short-term
investments.
In December 1998, the Company entered into a commitment with an equipment
lease financing company regarding a $2.5 million facility, which will be
secured by specific equipment assets. Each draw will be a separate loan under
the facility. The first draw under this facility line will be secured by
existing assets of the Company and is expected to occur prior to the end of
1998. The remaining amount is anticipated to be drawn in 1999 and will be used
for the purchase of manufacturing equipment for cartridge assembly. Each
equipment loan will have a 48 month term and bears an interest rate of
approximately 14% per annum plus an index rate based on four-year U.S. Treasury
Notes.
23
<PAGE>
In addition, in December 1998, the Company entered into an agreement for the
Bridge Financing with a maximum principal amount of $3.0 million, of which $1.5
million will be funded on or prior to December 31, 1998. The remaining $1.5
million will be drawn, at the Company's option, prior to January 31, 1999. The
Bridge Financing matures upon the earliest to occur of completion of the
Offering, a private equity financing of at least $8,000,000 or January 31,
2000. It bears interest at 8% per annum, payable quarterly. The Company issued
the Bridge Warrant in connection with the Bridge Financing. The Bridge Warrant
will become exercisable on the later of December 17, 1999 or six months after
the completion of the Offering for the number of shares of Common Stock which
is equal to $750,000 divided by 85% of the initial public offering price per
share of the Common Stock in the Offering. The Bridge Warrant has an exercise
price of 85% of the initial public offering price. If the Bridge Financing is
not repaid by June 30, 1999, the Bridge Warrant becomes exercisable for twice
as many shares of Common Stock. The Bridge Warrant will expire on the earlier
of December 17, 2005 or four years after the completion of the Offering.
While the Company believes its sources of liquidity, together with the
proceeds of the Offering, will be sufficient to fund its planned operating
expenses and capital requirements for approximately 18 months, the Company has
incurred negative cash flow from operations since inception and does not expect
to generate positive cash flow to fund its operations for at least the next 18
months, if ever. This estimate of the period for which the Company expects its
available sources of cash to be sufficient to meet its funding needs is a
forward looking statement that involves risks and uncertainties. There can be
no assurance that the Company will be able to meet its capital requirements for
this period as a result of certain factors set forth under "Risk Factors--Need
for Substantial Additional Funds; Uncertainty of Additional Funding" and
elsewhere in this Prospectus. In the event the Company's capital requirements
are greater than estimated, the Company may need to raise additional capital to
fund its research and development activities, to scale-up manufacturing
activities and to expand its sales and marketing efforts. The Company's future
liquidity and capital funding requirements will depend on numerous factors,
including the extent to which the Company's products under development are
successfully developed and gain market acceptance, the timing of regulatory
actions regarding the Company's products, the costs and timing of expansions of
sales, marketing and manufacturing activities, procurement and enforcement of
patents important to the Company's business, and the impact of competitors'
products. There can be no assurance that such additional capital will be
available on terms acceptable to the Company, if at all. Furthermore, any
additional equity financing may be dilutive to stockholders, and debt
financing, if available, may include restrictive covenants. If adequate funds
are not available, the Company may be forced to curtail its operations
significantly or to obtain funds through entering into collaborative agreements
or other arrangements on unfavorable terms. The failure of the Company to raise
capital on acceptable terms when needed could have a material adverse effect on
the Company's business, financial condition or results of operations.
INCOME TAXES
As of December 31, 1997, the most recent tax years completed, the Company had
$686,000 and $129,000 of net operating loss and research and development credit
carryforwards, respectively for Federal income tax purposes, which expire at
various dates between 2011 and 2013. These amounts reflect different treatment
of expenses for tax reporting than are used for financial reporting. As of
December 31, 1997, the Company had capitalized approximately $6.5 million of
research and development expenses for Federal income tax purposes. The Tax
Reform Act of 1986 (the "Tax Act") contains certain provisions that may limit
the Company's ability to utilize net operating loss and tax credit
carryforwards in any given year if certain events occur at which time
cumulative changes in ownership interests exceed 50% over the three year period
prior to the event. Careside experienced a change in ownership interest in
excess of 50% as defined under the Tax Act upon the first closing of its 1997
equity financing. The Company does not believe that this change in ownership
will impact the Company's ability to utilize its net operating loss and tax
credit carryforward. There can be no assurance that ownership changes in future
periods will not significantly limit the Company's use of its existing or
future net operating loss and tax credit carryforwards.
24
<PAGE>
YEAR 2000 COMPLIANCE
The Company has identified its Year 2000 risks in three major categories:
internal business operations software; software utilized within the CareSide
Analyzer; and software used by its external suppliers and partners.
Many of the Company's computers and software have been recently acquired. The
Company has relied on the efforts of computer and software vendors to make
their latest hardware and software releases Year 2000 compliant. As a result,
no incremental material compliance cost is expected to be incurred in this
area.
Development work on the CareSide Analyzer has occurred since the widespread
recognition of the Year 2000 issue. Electronic components and software written
have been specified to avoid the Year 2000 issue. The Company plans to issue
software updates for the CareSide Analyzer on a routine basis to add additional
tests to the menu. If an unforeseen Year 2000 issue arises, Careside could
distribute compliant software to its customers at little or no incremental cost
as part of these routine updates.
The Company inquires regularly regarding the Year 2000 program status of
critical suppliers. To date, Careside believes that its suppliers either are or
will be Year 2000 compliant. The Company expects to establish appropriate
contingency plans by mid-1999 in the event certain key suppliers are not year
2000 compliant. These contingency plans could include utilizing alternative
suppliers or building inventory of critical parts as appropriate. The Company
does not anticipate any incremental material costs if it is required to
implement its contingency plans.
The primary cost associated with Year 2000 compliance has been and is
expected to be the Company's management time. It is not possible to measure the
opportunity cost for this time expenditure.
Despite the Company's activities in regards to Year 2000 compliance, there
can be no assurance that Year 2000 problems will not result in interruption or
failure of certain normal business activities or operations. Any failure or
interruption could have a material adverse effect on the Company's results of
operations, liquidity or financial condition.
25
<PAGE>
BUSINESS
GENERAL
Careside is developing and commercializing a proprietary point-of-care blood
testing system. The Careside System provides cost-effective, accurate test
results within 10 to 15 minutes at the "point-of-care," or near the patient,
for a broad menu of routine blood tests. Because it provides rapid test
results, the Careside System can also perform blood tests required on a "stat,"
or immediate basis. The Careside System performs tests in four different test
categories (chemistry, electrochemistry, coagulation and immunochemistry)
within a single testing instrument. No other point-of-care product currently in
the market offers as broad a menu of tests or combines all four test
categories. The Company's goal is to make the Careside System the standard of
care in routine and stat blood testing. If we are successful, diagnostic
information will travel more rapidly and healthcare costs for physicians,
providers and payers will be reduced.
The Careside System consists of the CareSide Analyzer, disposable test
cartridges and a separate hematology testing device to be manufactured by a
third party. The Careside System is easy to use and can be operated by a non-
technical person. Its software will enable the user to capture all data
required to comply with the Clinical Laboratory Improvement Amendments of 1988.
CLIA governs quality assurance and quality control ("QA/QC") processes and
reporting for healthcare providers.
The United States Food and Drug Administration has granted pre-market
clearance for the CareSide Analyzer and pre-market clearance or exemption for
19 blood tests for laboratory use. Prior to the Careside System's launch in the
third quarter of 1999, Careside will conduct pilot marketing studies in certain
market segments. The Company expects the pilot studies to demonstrate how
potential customers will use the Careside System and its cost-effectiveness.
The Company will also use the pilot study results to obtain FDA designation of
the Careside System for point-of-care use by non-technical personnel. At
product launch, the Company expects to have the CareSide Analyzer and over 50
tests (including nine hematology tests) cleared or exempt for laboratory use.
As the Company expands its marketing efforts in the fourth quarter of 1999,
Careside expects to have all of its tests cleared for point-of-care use as
well. The Company believes that the Careside System's planned menu represents
over 80% of all blood tests ordered on an out-patient basis, including all of
the most commonly ordered out-patient blood tests. The Company plans to market
and distribute the Careside System in the United States through its own sales
force and through SmithKline Beecham Clinical Laboratories, Inc.
The Company has utilized strategic partners with specific design expertise
and state-of-the-art technology in order to develop the Careside System rapidly
and on a cost-effective basis. The Company has agreements with (i) Fuji Photo
Film Co., Ltd. for the supply of its dry film based chemistry reagents during
the Careside System's development stage, (ii) Diagnostic Reagents, Inc. ("DRI")
to supply immunochemistry reagents and technology during the Careside System's
development stage, (iii) International Technidyne Corporation ("ITC") for the
joint development of coagulation reagents in the and (iv) UMM Electronics, Inc.
to design and manufacture the CareSide Analyzer. The Company is negotiating
long-term supply agreements with Fuji and DRI. In addition, the Company
previously contracted with Hauser, Inc. ("Hauser") for the design of the
Careside System and with Battelle Memorial Institute ("Battelle") for the
design of the system's disposable test cartridges and their automated assembly
manufacturing system.
In November 1996, the Company acquired the assets and contracts used in the
Predecessor Business, including intellectual property, equipment and other
assets, from SBCL and SmithKline Beecham Diagnostic Systems Co., both
affiliates of SmithKline Beecham Corporation, to continue the development of
point-of-care diagnostic technology and to create a commercial product. Several
senior members of SBCL's management team worked on this point-of-care project
at SBCL, including Careside's Chief Executive Officer, are now part of the
executive management team of Careside. The Company continues to have a business
relationship with SBCL through a distribution and supply agreement. This
agreement gives SBCL, as a commercial laboratory,
26
<PAGE>
exclusive distribution rights within the commercial laboratory industry in the
United States and certain foreign countries. It also gives SBCL other non-
exclusive distribution rights, including the right to use the Careside System
in its patient service centers where blood is drawn.
MARKET OVERVIEW
According to industry data and estimates, the worldwide market for in vitro
testing (which includes testing of all body tissues and fluids) was $18.3
billion in 1997 and is expected to grow to $20 billion in 2000. The United
States and Canadian market for in vitro testing is approximately 40% of the
worldwide market. Careside believes its market opportunity is to convert a
reasonable portion of the United States and Canadian blood testing market to
point-of-care testing.
Most routine blood tests are sent to a centralized location, either a
commercial or hospital laboratory, for processing. In these centralized
laboratories, large blood analyzers reduce individual test costs by producing
high volumes of test results. Commercial laboratories provide approximately 27%
of all in vitro diagnostic testing services, hospital laboratories provide
approximately 63%, and the balance is provided in physician's offices.
Commercial laboratories are currently the low cost provider of blood testing
services due primarily to economies of scale in testing multiple samples in
large analyzers, producing low direct per test costs. However, administrative
and logistic issues limit their ability to provide test results in less than 24
hours without a significant pricing premium. Hospital laboratories typically
provide same day test results but are not as cost-efficient as commercial
laboratories. They must remain open 24 hours per day regardless of actual use
in order to respond to critical patient needs. With insufficient testing volume
to absorb laboratory operating expenses and capital costs, tests performed in
hospital laboratories are more expensive.
Currently, commercial laboratories' testing expenditures relate predominantly
to labor intensive functions such as distribution, customer service, general
administration, communication technology and preparation of the blood sample.
There are numerous steps involved in obtaining test results from commercial
laboratories. Blood samples are collected throughout the day from a variety of
sources including hospitals, physicians' offices, nursing homes and home care
agencies. The samples are transported to the laboratory, usually with special
care in packaging to preserve sample integrity. After the samples arrive at the
laboratory, several administrative tasks are necessary as thousands of samples
are processed daily. Each sample is split into tubes that are then sorted for
testing in multiple large analyzers. The high throughput analyzers require the
attention of highly skilled technicians to prepare reagents, prime multiple
pumps, calibrate, prepare and load blood samples, conduct centrifuge
operations, process measurement data and report results. This complex process
must be tightly controlled at each step to ensure both administrative and
analytical accuracy. Tests are generally run overnight and results are sent
back to the healthcare provider the following day. This factory-like process
limits the ability to provide test results in less than 24 hours. If results
are required sooner, certain laboratory operations must be interrupted,
resulting in a significant cost addition.
The process in hospital laboratories is very similar. Blood samples are
typically collected in the early morning with tests performed late morning and
early afternoon and results returned within four to five hours. However, in
many instances, hospitals must respond to critical patient conditions and
conduct tests on an immediate basis in order to support the healthcare provider
when a patient's condition is life threatening. These stat tests must be able
to be processed 24 hours a day, requiring the hospital laboratory to remain
open whether or not any tests are being conducted. Individual hospital
laboratories are not as cost-efficient as commercial laboratories as they must
be open 24 hours per day while lacking sufficient test volume to absorb
laboratory operating expenses and capital costs.
Many physician's offices currently outsource their testing to commercial
laboratories. This practice is largely the result of the enactment of CLIA in
1988. CLIA was an attempt to ensure the quality and reliability of laboratory
test results by placing more stringent administrative and regulatory burdens on
testing conducted in the physician's office. Under CLIA, technicians conducting
complex tests must meet detailed proficiency
27
<PAGE>
requirements and must have established well-defined QA/QC programs. For most
individual physicians, diagnostic testing has become too burdensome and costly
to justify its being done in the office.
Managed care has put substantial pressure on healthcare providers to reduce
costs and to treat patients using clinical treatment protocols that have been
developed for many chronic and acute illnesses. These protocols frequently
contain diagnostic tests that are used to help avoid the occurrence of acute
episodes of illness. Diagnostic blood and urine testing are two of the major
tools used in these protocols for early detection and ongoing evaluation of
treatment efficacy. Although these pressures should increase testing volume,
managed care providers and other payers are becoming more stringent by only
reimbursing tests for which there is a clear medical need. This should continue
to put pressure on healthcare providers to order individual diagnostic tests
instead of "panels," or groups, of tests performed at one time. Managed care
providers and payers will reimburse all tests in a panel only if there is a
clear medical need for each. As managed care pressures mount to perform only
medically necessary tests, reimbursement rates for individual tests have been
decreasing, requiring the healthcare provider and the testing laboratory to be
even more cost-effective. Therefore, the Company believes that, because the
Careside System performs single reagent testing and offers packages of test
reagents that are based on third party payer approved panels of tests, it will
be well received by managed care organizations and other payers.
The limitations in the hospital and commercial laboratory testing areas have
given rise to a growing point-of-care testing market. The initial products in
the market have targeted stat point-of-care testing devices which are placed in
emergency rooms or critical care units. While immediate test results benefit
the patient and the healthcare provider, current point-of-care testing devices
have added costs to the system as the hospitals must continue to operate a
central laboratory using equipment that conducts the same stat tests as well as
a much broader menu of tests required for routine care. Furthermore, current
point-of-care devices have not attempted to provide customers with the QA/QC
data storage and retrieval capabilities necessary for CLIA requirements, which
limit their utilization outside of the licensed laboratory market. The Company
believes that testing devices that simplify the work required to complete a
test and provide QA/QC capabilities make physician office laboratory testing
more marketable to the physician.
The Company believes that an easy-to-use diagnostic blood testing system
offering a broad menu of accurate point-of-care tests with built-in QA/QC
features can respond to the substantial unmet needs in the diagnostic testing
marketplace. The Company expects that the Careside System will be able to
perform all of the most commonly ordered out-patient blood tests. Consequently,
it will enable healthcare providers to shift centralized laboratory services to
the point-of-care and outsource other tests as necessary.
CARESIDE'S SOLUTION
The Company believes that the Careside System provides the solution to the
limitations of centralized laboratories and existing point-of-care blood
testing devices. In addition, the Company believes the features of the Careside
System will enable healthcare providers not currently conducting blood tests to
start providing this service. The following are the reasons why:
. Comprehensive Test Menu--The Careside System will offer a broad menu of
the most commonly ordered blood tests, including stat tests. The Careside
System performs tests in four different test categories (chemistry,
electrochemistry, coagulation and immunochemistry) within a single
testing instrument. By the time of product launch, over 50 tests
(including nine hematology tests) are expected to be available, which the
Company believes substantially exceeds the capabilities of any other
point-of-care device currently on the market. In addition, the Careside
System will include a separate hematology testing device manufactured by
a third party.
. Cost-Effective Results--The Careside System is designed to provide test
results that are cost competitive with commercial laboratories, the
lowest cost alternative currently available in the market.
28
<PAGE>
. Rapid Test Results--The Careside System furnishes test results within 10
to 15 minutes from the time blood is drawn from the patient. The Careside
System can test from one to six cartridges in this time period. By
comparison, 24 hours or more may elapse before a healthcare provider has
in hand the results of blood tests performed at commercial laboratories,
and four to five hours may elapse before results are in the provider's
hands for a blood test performed at a hospital laboratory.
. Equivalent Technology--The Careside System uses many test methods that
are the same as those used in hospital and commercial laboratories. The
Careside System's technology is a miniaturization of the technology in
the largest testing devices utilized by centralized laboratories.
. Embedded QA/QC--The CareSide Analyzer has operating software designed to
assist in meeting QA/QC documentation requirements of CLIA.
. Ease of Use--The Careside System can be easily operated and maintained by
non-technical personnel. The test process does not require separate
centrifuging or sample splitting, and has automatic dosing and mixing of
the patient's blood sample with reagents within the cartridges.
. Practice Enhancement--The Careside System's rapid test results enable a
provider to make clinical decisions more quickly, see more patients,
eliminate time spent reviewing records and making follow-up calls, and
improve patient satisfaction and quality of care. Healthcare providers
can also increase their revenues by performing and billing for tests
themselves.
CARESIDE'S STRATEGY
Careside's goal is to make point-of-care testing with the Careside System the
standard of care in all blood testing. If we are successful, diagnostic
information will travel more rapidly and reduce healthcare costs for
physicians, providers and payers will be reduced. The following are the key
elements of the Company's strategy to achieve its objective:
PROVIDE THE UNIQUE POINT-OF-CARE SOLUTION. Most point-of-care companies have
focused solely on the stat testing market with a limited number of tests. In
contrast, the Company has developed the Careside System to replace large
analyzers and decentralize testing to the point-of-care. As an illustrative
analogy, the Company believes that centralized laboratory testing is like using
a mainframe computer, whereas point-of-care testing is like using a desktop
personal computer. Unlike the "mainframe computer-based" approach of large
hospital and commercial testing laboratories, the Careside System creates a
"personal computer-based" solution for blood testing. The Company believes this
will enable hospitals and other healthcare provider-sponsored laboratories to
replace their centralized testing services with decentralized point-of-care
technology on a cost-effective basis with test results available in 10 to 15
minutes. After the Careside System's launch, the Company intends to continue to
build its test menu so as to have the broadest test menu of any point-of-care
system on the market. Its unique menu will combine four different test
categories (chemistry, electrochemistry, coagulation and immunochemistry) into
a single testing instrument.
SATISFY HEALTHCARE SYSTEM NEEDS. The Careside System is designed to meet the
various needs of each of Careside's targeted customer markets. Important
factors for hospitals will include quality of test result, ease of use, impact
on personnel, benefits to patients and whether it provides a better cost
alternative than the central hospital laboratory. For physician group
practices, the Careside System will offer improvements in daily office routine,
greater convenience, enhanced patient satisfaction, and new revenue
opportunities. For the nursing home and home care markets, which traditionally
outsource testing services, the Careside System will offer improved turnaround
time on test results, individualized testing, cost savings or revenue
opportunities, and improved patient services. The Company believes that the
Careside System will enable healthcare providers to replace their centralized
testing services with decentralized point-of-care technology on a cost-
effective basis. A key component of this strategy is that the Company's Chief
Executive Officer has over 20 years experience as a senior executive of several
large hospitals where hospital laboratory costs were a significant issue, as
well as over four years experience as President of SBCL. See "Management."
29
<PAGE>
LEVERAGE EXPERTISE OF STRATEGIC PARTNERS. The Company expects to continue to
work with its strategic partners, such as Fuji and UMM, who have already
developed specific expertise and state-of-the-art technology. Fuji supplies
chemistry and electrochemistry test reagents for the Careside System's
proprietary test cartridges and the Company has contracted software development
and device manufacturing to UMM. With these and other strategic partners, the
Company expects to be able to develop new tests on a rapid, cost-effective
basis.
SYSTEMATIC COMMERCIAL ROLLOUT. The CareSide Analyzer and 19 tests are cleared
for marketing in the United States for use in licensed laboratories. The
Company's initial product launch is not planned until the third quarter of
1999, at which time over 50 tests are expected to be cleared or exempt by the
FDA. In the second quarter of 1999, the Company intends to conduct pilot site
marketing studies in certain of its targeted market segments to determine
utilization patterns, demonstrate cost-effectiveness and develop a "franchise
book." The "franchise book" will be a tool for customers to follow in order to
take the appropriate steps in establishing diagnostic testing services using
the Careside System. In addition, the pilot sites will provide validation
testing necessary to obtain FDA clearance of tests for point-of-care use by
non-technical personnel. Currently, the Company has arranged for APRIA
Healthcare (one of the largest United States providers of home care services),
three hospitals through Child Health Corporation of America and a physician
group practice to serve as pilot sites. Careside plans to market and distribute
the Careside System in the United States through its own sales force and SBCL.
The Company believes this systematic commercial rollout improves the chances of
having a successful product launch.
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<PAGE>
STATUS OF CARESIDE PRODUCT DEVELOPMENT
<TABLE>
<CAPTION>
TECHNOLOGY
PRODUCT REGULATORY STATUS PARTNER
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
CareSide Analyzer Cleared under Section 510(k) of the FDC Act for use in UMM
licensed laboratories. Section 510(k) clearance for Hauser
point-of-care use will be applied for based on data to
be gathered during marketing pilot program.
- ----------------------------------------------------------------------------------------------------
Disposable Test Cartridges Test cartridges are integral to approval of the tests Battelle
listed below. Chemistry, electrochemistry and
coagulation cartridges have been developed. The
immunochemistry test cartridge is in development.
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
CLEARED/EXEMPT FOR PLANNED 1998 PLANNED 1999
TEST CATEGORY LABORATORY USE* SUBMISSIONS SUBMISSIONS
- ----------------------------------------------------------------------------------------------------
Chemistry Glucose AST Carbon Dioxide Fuji
BUN (Urea Nitrogen) Amylase Ionized
Calcium
Creatinine Total Calcium** Bilirubin,
Direct
BUN/Creatinine Alkaline Magnesium
Ratio Phosphatase
Albumin Osmolality (Chem- Hemoglobin
Echem)
A/G Ratio (calc.) Direct LDL-
cholesterol
Globulin (calc.) Ammonia
Total Cholesterol Anion Gap
(Chem -Echem)
HDL-Cholesterol Creatine
Kinase
LDL-Cholesterol Creatine
(calc.) Kinase MB
Cholesterol/HDL %CKMB
Chol
Ratio
GGT
ALT
Total Bilirubin
Phosphorus
Total Protein
Uric Acid
Triglycerides
LDH **Submitted,
pending approval
- ----------------------------------------------------------------------------------------------------
Electrochemistry Chloride Fuji
Potassium
Sodium
- ----------------------------------------------------------------------------------------------------
Coagulation aPTT ITC
Fibrinogen
PT
Thrombin Time
- ----------------------------------------------------------------------------------------------------
Immunochemistry Digoxin DRI
Theophylline
Phenytoin
</TABLE>
* Clearance or exemption for point-of-care use by non-technical personnel is
expected based on submissions after the Company's pilot marketing studies.
<TABLE>
<CAPTION>
TECHNOLOGY
PRODUCT REGULATORY STATUS PARTNER
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Hematology Testing In development; Section 510(k) submission Independent third
Device anticipated to be filed in 1998. party with whom the
Company is
negotiating a supply
agreement
- ---------------------------------------------------------------------------------------------------
Careside Cable Development planned for first quarter of UMM
Interface between 1999 after availability of the Hematology
the CareSide Testing Device.
Analyzer and the
Hematology Testing
Device
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Hematology Tests
Platelet count All hematology tests will be submitted with Independent third
the filing of the Hematology Testing Device party with whom the
under Section 510(k) in 1998 for laboratory Company is
and point-of-care use. negotiating a supply
agreement
Lymphocyte/Monocyte
Count
%
Lymphocyte/Monocyte
Count
Total Granulocyte
Count
% Total Granulocyte
Count
White Blood Cell
Count
Hematocrit
Hemoglobin
MCHC
</TABLE>
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<PAGE>
THE CARESIDE SYSTEM
The Careside System is comprised of an instrument, the CareSide Analyzer, and
a series of disposable, diagnostic test cartridges designed for the accurate
determination of a wide variety of commonly ordered chemistry,
electrochemistry, immunochemistry, and coagulation tests. In addition, the
Careside System will include a separate hematology testing device manufactured
by a third party. The chart on page 31 summarizes the status of tests that the
CareSide Analyzer is intended to perform.
The CareSide Analyzer
The CareSide Analyzer is approximately 13 inches tall by 12 inches wide and
11 inches deep and weighs about 17 pounds. The exterior is made of high impact
resin plastic. The top of the CareSide Analyzer consists primarily of a touch
screen, on an ergonometric angle, on which the user inputs patient, physician,
and billing information, the tests to be conducted and any pertinent desired
commentary. Alternatively, a separate keyboard is available if the user so
desires. The Company believes that the CareSide Analyzer's user interface
software is a significant strategic advantage. The software includes extensive
user interface applications in addition to its QA/QC capabilities which are
equal to those required of central laboratories. The QA/QC software stores and
interprets the quality control data generated using the embedded electronic QC
system in the CareSide Analyzer as well as the traditional wet testing QC
approach for test cartridges. After testing, QC data is flagged when out of
limits and plotted on graphical charts for ease of review. A set of five re-
usable and proprietary quality control QC test cartridges will be provided with
each instrument that allows the user to perform automated, electronic quality
control for all electrochemistry, chemistry, coagulation and immunochemistry
test categories. These reusable QC test cartridges will replace traditional QC
which involved running multiple levels of commercial plasma specimens for all
the tests on the system. The software utilized by the CareSide Analyzer is
designed to govern testing of one patient at a time, perform QA/QC
documentation and conduct the test ordering processes. It also contains a
security system that is CLIA compliant. The user interface system can be
customized for each particular customer.
The process for using the CareSide Analyzer is streamlined and partially
automated compared to conducting tests in large commercial blood diagnostic
testing laboratories. The Careside System can be operated by non-technical
personnel. The operator will first select one or more test cartridges from
inventory depending on the tests ordered by the attending healthcare provider.
Most cartridges will contain one test, but some cartridges will contain two or
three tests. Up to six cartridges of a single patient's blood can be tested at
the same time. See "--Disposable Test Cartridges." The Careside System is
currently capable of conducting a maximum of eight tests per patient in a
single 10 to 15 minute test cycle. When the development of additional multi-
test cartridges is completed, the Careside System will be able to handle 13
tests in a single 10 to 15 minute test cycle. To prepare or "sample" a
cartridge, the operator will drop a small amount of the patient's drawn blood
into the test cartridge with a pipette or other standard transfer device. The
operator will then simply load the sampled test cartridges into the instrument.
Any combination of cartridges can be loaded in any order, thus enabling the
operator flexibility to perform individual tests or customized panels. This
flexibility is designed to minimize waste by allowing the operator to run only
the tests ordered by the provider rather than traditional pre-set and fixed
panels that may contain unnecessary tests. This feature is particularly
responsive to the current and expected future requirements of third party
payer. See "--Third Party Reimbursement."
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<PAGE>
ROUTINE BLOOD ANALYSIS PROCEDURE: THE CARESIDE SOLUTION
<TABLE>
<CAPTION>
[DRAWING OF BLOOD BEING [DRAWING OF TEST CARTRIDGE [DRAWING OF DISCUSSION OF
INSERTED INTO TEST BEING INSERTED INTO TEST RESULTS BETWEEN
CARTRIDGE] CARESIDE ANALYZER] CAREGIVER AND PATIENT]
<S> <C> <C>
1. Draw blood. Place a few 2. Using the touch-screen 3. 10 to 15 minutes later,
drops of whole blood into or keyboard, input CareSide Analyzer provides
the cartridge sample well. demographic information test results via print
and select tests to be card, screen, and/or
performed. Insert electronic data transfer.
appropriate cartridges and Caregiver reviews test
press start. results with patient.
</TABLE>
After the operator inputs patient information and test orders, the instrument
will automatically perform the tests and record and display or print the
results. To perform the tests, the CareSide Analyzer undertakes cycles for
heating, centrifuging and several types of reading. The cycle time from the
moment the cartridge is dosed with whole blood and placed into the CareSide
Analyzer to final test result is approximately 10 to 15 minutes for chemistry,
electrochemistry, immunochemistry or coagulation tests, or any combination of
these tests. A standard Chem 7 panel (sodium, potassium, chloride, carbon
dioxide, glucose, creatinine and urea nitrogen) can be performed in
approximately ten minutes and will utilize five cartridges (sodium, potassium
and chloride tests are on one cartridge and they are always ordered in
combination). At the conclusion of the test, the CareSide Analyzer ejects the
cartridges into a waste container for later disposal in appropriate biohazard
vessels.
Test results are available to the healthcare professional in several ways
from the CareSide Analyzer. A self-adhesive label can be printed with test
results for direct transfer to the patient's chart. Each CareSide Analyzer also
incorporates a floppy disk drive so that information can be downloaded from the
instrument for analysis. An additional electronic output method is through use
of the rs-232 port on the rear of the machine. The Company expects to routinely
work with its customers to program an appropriate software interface into the
CareSide Analyzer to allow information to be directly transferred
electronically into the user's data system.
Disposable Test Cartridges
Each test cartridge is designed for a single use and is designed to perform
reagent and specimen temperature equilibration, sample separation, sample
metering, sample dispensing, test incubation and facilitation of result
detection. Each cartridge contains all reagents necessary to perform a reagent
measurement on a serum, plasma or whole blood sample. The proprietary
cartridges are each approximately 2.5 inches long and 1.5 inches wide and are
comprised of layers of molded plastic with channels for application of the
sample to the reagent. When stored in refrigerators, the cartridges are
expected to have a maximum of an 18 month shelf life. The cartridges are placed
in the CareSide Analyzer directly from the refrigerator after sample dosing.
The first four minutes of the test cycle warms the test cartridges to the
appropriate test temperature. If necessary, the CareSide Analyzer then spins
the cartridges using centrifugal force and capillary action to separate the
serum or plasma from the whole blood and to move the sample along the cartridge
channels. Excess sample is deposited in an overflow well. A measured amount of
sample remains in the metering passage and is dispensed onto the reagent film
or mixed with wet reagent pushed from an interior pouch. Each test cartridge is
designed to be airtight to prevent ventilation spoilage of the blood sample.
The three basic types of measurements that will be made are spectral
transmittance, reflectance and electrochemical. In the case of the chemistry
cartridge, the CareSide Analyzer's platter spins the cartridge containing the
dry film, which will turn color from reaction with the blood element, over
LED/photodiode pairs so that multiple reflectance tests can be performed. In
the case of coagulation and immunochemistry tests, the cartridge is spun over
the same LED/photodiode pairs which shine through a prismatic cuvette built
into the cartridge. The light transmission is then read by the CareSide
Analyzer. In the case of electrochemistry, the test is done on whole blood,
before the other cartridges are centrifuged. The CareSide Analyzer contains ion
specific electrodes which interact with the proprietary electrochemistry
cartridges to yield the test result.
33
<PAGE>
The disposable test cartridges have a number of key features that the Company
believes contribute to the Careside System's reliability, speed, low cost and
accuracy of analysis. These include:
. Unique Cartridge Design. Specimen preparation, calibration and test
performance are incorporated in an inexpensive plastic cartridge. Where
necessary, the cartridge design incorporates storage and measured
delivery of reagents and electrolytes for mixing with the patient's
sample prior to analysis. Cartridges are loaded into the instrument
manually and are designed so that they can be inserted in only one
direction to avoid error.
. Ease of Sampling. Sampling is automatic and requires small volumes
(approximately 75 to 150 microliters (ul) of whole blood) as compared to
current approaches requiring much larger amounts. The dosing process
requires the tester to fill the cartridge well to a point indicated on
the cartridge. Hence, no measurement of the blood sample is required by
the tester.
. Built-in Centrifuge. Separation of plasma from whole blood, as required
for many tests, is accomplished in the cartridge after placement in the
CareSide Analyzer, so that a separate centrifugation step is
unnecessary.
. Flexibility in Testing. One, two or three tests may be contained in each
cartridge. Single and three test cartridges have been designed and
manufactured. Two test cartridges have been designed, but have not yet
been manufactured and used in testing. Multi-testing capability in a
single cartridge is unique among point-of-care instrument makers. The
complications (added cost and tests done without a physician order) of
using test panels containing unnecessary tests is avoided.
. QA/QC Features. All test cartridges are bar-coded for test
identification. The bar codes contain the type of test cartridge, as
well as a lot number, expiration date and self-calibration information
(all CLIA requirements). The data from the cartridge's bar code will be
read and stored in the CareSide Analyzer. As each test is completed, it
becomes part of the CLIA documentation. Because each cartridge contains
an identifying bar code which is read by the instrument, the order in
which the cartridges are loaded is immaterial. The Careside System will
check that the ordered tests and the cartridges entered in the device
match.
Test Menu
The CareSide Analyzer combines chemistry, electrochemistry, coagulation and
immunochemistry testing in a single testing instrument. In addition, the
Careside System will include a separate hematology testing device manufactured
by a third party. The Company is not aware of any other point-of-care blood
testing system on the market that has this combined capability.
Chemistry Tests. Chemistry tests are used to assess general health status as
well as to diagnose and monitor diseases of the major organ systems such as the
heart, liver, kidney, blood, pancreas, endocrine and bone. The film chemistry
cartridges contain dry chemistry reagents (stacked one on top of the other if
required for the test) which, when they react with the sample, generate an
optical remission level that correlates to the concentration of the reagent
being measured. Within a few minutes after the sample has been applied, a
colored dye is produced. The color intensity of the dye is measured by
reflectance and, through calibration information coded in the instrument and on
the test cartridge, a test result is generated.
The Company has an agreement with Fuji for the use of its dry film chemistry
reagent technology during the Careside System's development stage and is
currently negotiating a long-term supply agreement with Fuji. Although in dry
form, the film uses the same technology as the wet reagent technology used in
high volume commercial analyzers. The Company anticipates that the long-term
agreement will continue to provide Careside with an exclusive supply of Fuji's
dry film chemistry reagents for use in the Company's point-of-care system.
Under the current development-stage agreement, Fuji has agreed to supply this
reagent technology for more than 25 chemistry tests, and the Company has agreed
to purchase dry chemistry reagents exclusively from Fuji. See "--Sales and
Marketing--International Sales." Fuji is also developing four additional
chemistry tests at its
34
<PAGE>
expense. Any additional tests that Fuji develops may be available to the
Company over the period of the agreement which runs through 2003 and thereafter
is automatically renewed on an annual basis. If the Company fails to obtain the
necessary regulatory clearances for 80% of the 39 tests specified in the
contract by the end of 1999, the Company's rights become non-exclusive.
Electrochemistry Tests. Like chemistry tests, electrochemistry tests,
produced by Fuji pursuant to its agreement with the Company, are used to assess
general health status and to diagnose and monitor diseases of the major organ
systems such as the heart, liver, kidney, blood, pancreas, endocrine and bone.
The electrochemistry cartridge contains an ion specific electrode slide. When
the slide reacts with the sample, it generates potentiometric values that
correlate to the concentration of sodium, potassium and chloride in the sample.
The test compares an electrochemical signal generated from a reference solution
to a similar signal generated from the patient's blood. The reference solution
is a liquid contained in a pre-filled pouch embedded in the cartridge. One side
of the ion specific electrode slide is exposed to a reference solution during
the testing sequence and the other side is exposed to the patient's whole
blood. The CareSide Analyzer reads the difference between the two, thereby
generating the test result.
Coagulation Tests. Coagulation testing assesses the ability of a patient's
blood to coagulate. Coagulation is the series of events that leads to the
formation of a blood clot. Tests of prothrombin time ("PT") and activated
partial thromboplastin time ("aPTT") are the primary coagulation tests used by
both physicians and hospitals.
Reagents from the coagulation test cartridge are contained in a prismatic
cuvette and in a pouch. Plasma is delivered to the cuvette by pressurization of
the membrane on the cartridge. A second reagent, such as a buffer or calcium
chloride, is added via the pouch. Light is then transmitted through the
cuvette. The coagulation reaction causes a change in the turbidity of the
plasma that is detected optically by the CareSide Analyzer. The time at which
this optical change occurs is reported out as the coagulation time.
The Company is co-developing coagulation reagent technology for PT and aPTT
tests with ITC. ITC has agreed that such reagent technology may be used by the
Company in the CareSide Analyzer on an exclusive basis. However, ITC will
retain the exclusive right to use the technology in the field of point-of-care
devices that perform coagulation testing only. ITC will also initially
manufacture the coagulation reagent and load it in the cuvette for the Company.
Immunochemistry Tests. Immunochemistry tests are used for the diagnosis of
drug effectiveness for heart, thyroid analysis and for other purposes. To date,
immunochemistry systems have had limited penetration in the point-of-care
market, because they are difficult to use, related instrumentation is
expensive, reagents are costly and assay times are long. The Company is in the
process of developing its immunochemistry test cartridge.
The immunochemistry test cartridge is identical in form and function to the
coagulation test cartridge except that a much smaller sample size is delivered
to the prismatic cuvette. The reagents in the cuvette and pouch are different
for each immunochemistry test. The CareSide Analyzer measures a rate of change
or endpoint in turbidity depending on the test. The rate of change or endpoint
is converted to concentration from calibration information coded in the
instrument and on the test cartridge, generating a test result. The Company has
entered into an agreement with DRI in which DRI agreed to supply
immunochemistry reagents during the Careside System's development stage. The
Company is currently negotiating a long-term supply agreement with DRI.
Hematology Tests. The Company expects to expand the Careside System's
capabilities by adding nine hematology tests, which will be performed on a
separate device manufactured and supported by a third party. It is expected
that this device will be electronically connected to the CareSide Analyzer via
a cable interface to take advantage of the CareSide Analyzer's extensive
ordering, data storage, clinical records and QA/QC capabilities.
35
<PAGE>
Future Developments
The Company intends to have the broadest menu of any point-of-care blood
testing device and plans to continue to develop tests for the Careside System.
At product launch, the Careside System's menu is expected to include over 50
tests (including nine hematology tests) representing over 80% of all blood
tests ordered on an out-patient basis, including all of the most commonly
ordered out-patient blood tests. Even though the Company's point-of-care
technology will not be capable of conducting every test potentially ordered by
a healthcare provider, the Company believes that, over time, its planned menu
will provide over 90% of all out-patient tests in many clinical settings, and
up to 60% of tests commonly ordered in in-patient settings. For tests not
performed by the Careside System, healthcare providers would order tests from
either a hospital laboratory or a commercial laboratory.
The Company also plans to add enhancements to the Careside System in the
future, including the ability for the blood sample to be drawn from the patient
and to be loaded into a test cartridge automatically. This will eliminate the
need for a person to handle an open tube containing the patient's blood. The
Company is also evaluating alternative methods of immunochemistry testing, such
as the use of high precision latex beads for the development of large molecule
immunoassays using the particle enhanced immunoturbometric technique. Also
designed and under development is a multi-test cartridge that will be able to
perform two or more film tests simultaneously on one cartridge. The CareSide
Analyzer's detection technology is capable of extensive menu expansion. This
gives the Company the ability to add traditional chemistry, coagulation and
small molecule immunoassay tests such as screening tests for drugs of abuse.
Careside expects to develop additional tests in the large molecule immunoassay
field such as prostate specific antigen ("PSA") for prostate cancer and
Troponin for heart attacks and tests for infectious diseases such as Strep A
and Chlamydia.
SALES AND MARKETING
The Company's marketing strategy is to position the Careside System as the
blood testing system of choice by demonstrating to hospitals the benefits of
decentralized blood testing, and by providing other healthcare providers with a
profitable and cost-effective alternative to central laboratory testing. In the
second quarter of 1999, the Company intends to conduct pilot site marketing
studies with hospitals, home care organizations and physician group practices
to determine utilization patterns, create a "franchise" book, demonstrate cost-
effectiveness and obtain FDA designation of the Careside System for point-of-
care use. The Company currently plans to roll out its system in the third
quarter of 1999 through SBCL pursuant to its distribution and supply agreement.
Commencing in the fourth quarter of 1999, the Company intends to employ its own
sales force to sell the Careside System to hospitals, nursing homes, home care
organizations and larger physician group practices. At the time of product
rollout, Careside's goal is to have the most comprehensive menu of tests
available in any single point-of-care system.
The Company's key targeted market segments are as follows:
Hospitals. There are over 5,000 acute care hospitals in the United States.
Laboratory testing services required by hospitals are usually provided by a
central hospital laboratory, which services all of the hospital's testing needs
as well as the testing service needs of hospital physician groups. Hospital
laboratories are expensive to maintain due to the following factors: (i) they
have to be maintained on a 24 hour basis; (ii) they require specially trained
personnel to be present at all times to operate high volume analyzers; and
(iii) they demand significant amounts of capital expenditures to equip and
maintain. Furthermore, hospitals are often reimbursed by institutional payers
for patient admissions based on specific diagnoses reflecting the complexity of
the care needed and a predetermined payment for such care. While laboratory
testing services are an essential part of diagnosis and monitoring the
beneficial results of treatment, they also represent a cost to the hospital as
it seeks to generate a profit by completing the care and treatment of patients
before their costs exceed the level of reimbursement. The Careside System
provides hospitals with the opportunity to decentralize laboratory testing to
the patient floors and bedside, as routine and stat tests can be conducted at
the time the patient is being evaluated by providers. Consequently, the
Careside System is expected to enable some
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hospitals to eliminate their central laboratories or replace certain costly
analyzers and outsource non-routine testing not done on the CareSide Analyzer
to a centralized laboratory.
Physician Groups. There are over 3,500 physician groups in the United States
with practices in excess of 35 doctors. Excluding radiology groups, the target
market for the Careside System is over 2,200 groups. Physicians usually obtain
their laboratory testing services from the hospital laboratories with which the
physicians are affiliated or from a commercial laboratory. In either case,
patient samples are collected from the physician's office and sent via courier
to the applicable laboratory, with results delivered to the physician, either
electronically, by fax or by telephone. For physician group practices, the
Careside System will offer improvements in daily office routine, greater
convenience, enhanced patient satisfaction and new revenue opportunities.
Home Care. Industry data shows that the number of home care agencies and
patients receiving home care services has grown significantly in recent years.
The Company believes significant growth in this market segment will continue.
Industry data reported that the total number of home care agencies in mid-1995
in the United States was approximately 17,500. This represented a 153% increase
since 1986. In addition, over 1.4 million patients were served by home care
agencies in 1993 with the elderly representing more than 74% of the patient
population. On average, 30% of home care patients visited each week require
laboratory testing. Common laboratory tests include, among others, Chem 7
panels, iron, blood glucose, magnesium, PT and immunochemistry tests for
monitoring phenobarbital, phenytoin and digoxin. Patient samples are drawn from
the patient, gathered from the home care providers and delivered via courier to
a commercial laboratory for testing. Test results are made available the next
day or on a premium price basis by fax, telephone or written report delivered
four or five hours later. The CareSide Analyzer, as a portable device, is
expected to enable the home healthcare provider to draw the patient's sample,
run the test and deliver the results all during the course of the patient
visit, without having the sample delivered via courier to a commercial
laboratory.
Nursing Homes. In 1994, the most recent year for which industry data has
been compiled, there were over 15,000 nursing homes in the United States with
more than 1.6 million licensed beds. The average occupancy rate was over 92%
with each nursing home averaging nearly 100 patients. Common diagnostic tests
ordered for nursing home patients are complete blood counts, Chem 7 panels,
electrolytes, blood glucose, PSA, therapeutic drug monitoring and urinalysis.
Nursing homes generally obtain their testing services from commercial
laboratories and encounter the same delays and reimbursement issues as
physicians. The CareSide System provides a profit opportunity to the nursing
home by allowing it to conduct and bill for laboratory services, while
simultaneously enhancing the nursing home's ability to provide better care.
Pilot Program
Prior to the Company's planned rollout of its system commencing in the third
quarter of 1999, the Company will pilot the Careside System in multiple sites
within certain targeted market segments. To date, the Company has made
arrangements with three hospitals (Children's Hospital of San Diego, Children's
Hospital--Los Angeles and the Seattle's Children's Hospital) through Child
Health Corporation of America; APRIA Healthcare, one of the largest United
States home care providers and a group physician practice in the Phoenix,
Arizona area, to serve as pilot sites for the Careside System.
The purposes of piloting the Careside System are to collect data
demonstrating the economic benefit of the Careside System in each customer
segment, and to create a "franchise" book that will be tailored to the needs of
each customer type. This franchise book will explain the process of obtaining
and maintaining a laboratory license, train personnel to conduct testing and
educate personnel about the operation of the Careside System. With both a
financial model and franchise book that are specific to customer segments, the
Company then intends to introduce the Careside System to the overall market in
the fourth quarter of 1999. The Company will also use the pilot program to
generate data to support the regulatory application for point-of-care
classification.
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Domestic Sales
The Company intends to hire, train and regionally deploy its own domestic
sales force to sell the Careside System to hospitals, healthcare systems, large
physician group practices, managed care organizations, home care agencies and
nursing homes, either directly or through institutional pharmaceutical service
organizations which serve them. Because it intends to target customers who
order large volumes of tests, the Company anticipates building a direct sales
force of approximately 40 people.
As one of the largest commercial laboratories in the United States, SBCL
conducts millions of tests for small physician groups and individual physicians
annually. If it is inefficient for a small or solo practice to own and operate
a CareSide Analyzer, the benefits of the Careside System may be available to
in-patient service centers owned and staffed by SBCL. SBCL owns and operates
over 700 patient service centers across the United States. The Company has
entered into a distribution agreement with SBCL which gives SBCL, with respect
to domestic sales, an exclusive right, as a commercial laboratory, to use and
distribute the Careside System within the commercial laboratory industry and
the non-exclusive rights to distribute the Careside System to hospitals and
healthcare systems, other health care providers, managed care organizations and
insurers. The Agreement also obligates SBCL, upon FDA clearance or exemption of
25 tests, to purchase a minimum number of CareSide Analyzers and test
cartridges from the Company for the first five years following such FDA action.
See "Certain Transactions--SmithKline Beecham."
International Sales
In international markets, the Company intends initially to enter into
distribution agreements and gradually to develop its own sales force as
appropriate. The Company's supply and distribution agreement with SBCL gives
SBCL the same exclusive and non-exclusive distribution rights as it has in the
United States in any ten of the following countries where SBCL owns, operates,
manages a commercial laboratory on or before December 31, 2000: Great Britain,
Mexico, Spain, South Africa, Singapore, Malaysia, Indonesia, Australia, Chile,
Argentina, France and Germany. In addition, Fuji has a right of first refusal
to be Careside's distributor on an exclusive basis in Japan and a non-exclusive
basis in other Asian countries. The current agreement with Fuji expires in 2003
and permits automatic annual renewal thereafter subject to cancellation by
either party. The Company is currently negotiating more specific terms of its
supply and distribution arrangement with Fuji. The Company also expects to
partner with other diagnostic instrument distributors in the international
markets with an initial focus on Europe. See "Certain Transactions--SmithKline
Beecham."
RESEARCH AND DEVELOPMENT
As of September 30, 1998, the Company employed 25 scientists and technical
staff who supervise the development of the instrument and tests, validate test
results, and perform QA/QC documentation and regulatory submissions.
After extensive review of available test technologies, the Company chose Fuji
as its partner for chemistry and electrochemistry tests. Fuji makes dry film
based chemistry tests and uses them in large analyzers that it produces and
sells in Japan and Taiwan. In addition, Fuji has agreed to supply this reagent
technology during the Careside System's development stage for more than 25
chemistry tests, and the Company is currently negotiating a long-term supply
agreement with Fuji. Fuji has agreed to develop four additional tests at its
expense for the Careside System. See "--The Careside System--Test Menu."
The utilization of third parties to develop the Company's tests has allowed
the Company to focus on creating a platform for delivery of a highly efficient
test system. For hospital environments, the CareSide Analyzer's software has a
configuration capability that facilitates a test order entry menu and security
processes as determined by laboratory management. Fields exist for extensive
data capture including patient, physician and billing information. All of these
systems are optional to the user other than the data requirements for CLIA
compliance. In addition, the Careside System easily accommodates test menu
additions by downloading new
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test algorithms into the device via a floppy disk. This eliminates the need to
remove the instrument from the field as new test capabilities receive FDA
clearance/approval.
The Company has entered into a series of research and development agreements
for its system. As is customary in the industry, these agreements are short
term and provide for termination for any reason by either party on relatively
short notice. Battelle, a leader in developing industrial technology, has
designed the disposable testing cartridge according to specifications provided
by the Company. All applicable patent rights under this contract have been
assigned to the Company. To date, three applications have been filed with the
United States Patent and Trademark Office ("PTO"). See "--Patents and
Proprietary Rights." Pursuant to this relationship, Battelle is also designing
a cost-effective manufacturing process and quality assurance methods, based on
GMP protocols, for the disposable cartridges.
The Company has engaged UMM, a contract engineering and manufacturing firm,
to perform the design and development work of the CareSide Analyzer. Other
products developed by UMM include point-of-care blood glucose monitors, point-
of-care coagulation instruments, intravenous infusion pumps, dialysis machines
and infant care warmers. UMM is an FDA-registered manufacturer of sophisticated
medical products required to comply with GMP.
Hauser, an industrial design consultant, has provided services for the design
and development of the entire Careside System. Hauser conducted focus groups
from each target market segment in order to obtain customer input on the design
features and to assist in the development of an instrument and software systems
involving user interaction.
MANUFACTURING AND SUPPLY
The Company designed and outfitted a building in Culver City, California, of
approximately 16,000 square feet in December 1996 as its development facility
and offices. The building contains space for the Company's automated assembly
system which Battelle is designing. The assembly system will mount reagent pads
in the test cartridges, and package and label the cartridges. This facility has
been set up to comply with all applicable state and federal regulatory
requirements, including registration with the state and federal governments in
accordance with applicable laws governing medical devices prior to commercial
distribution. The facility will be subject to periodic FDA inspection to
determine whether the Company's manufacturing processes comply with GMP
regulations for medical devices.
The Company intends to assemble and package at its Culver City facility all
cartridges used by the instrument. The cartridges are assembled in two main
stages. Initially, those components which are not sensitive to humidity
(plastic parts) are assembled in a normal humidity environment. The second
stage of the cartridge assembly process involves the mounting of dry film
chemistry strips or pouched reagents in the cartridges, which must be done in a
low humidity environment to preserve the film. This step will be performed in
an automated assembly line at the Company's facility. The Company is in the
process of selecting and purchasing the equipment necessary for this process.
In addition, during the cartridge manufacturing process, the Company's
equipment must test the pressure of the ultrasonic seal between the base plate
and the upper plates of the test cartridges. The Company's equipment allows for
several inspection steps during the assembly process. Battelle is assisting the
Company in developing the fully automated assembly line for the cartridges with
these steps built in. The production capacity of the pilot cartridge production
line for chemistry and immunochemistry will be approximately 1,800 units per
hour or 13,000 units per shift. Depending on the specific tests ordered,
Careside's current facility will support between $40 and $60 million of test
cartridge sales annually. The automated production line will utilize
proprietary process technology, designed by Battelle and owned by the Company,
and will be scalable to meet increasing demand.
The Company will outsource the manufacturing of the plastic components of its
cartridges. The Company has been using a third party to manufacture these
components using injection molding processes. The Company recently obtained
bids from a number of manufacturers of cartridge components and has selected a
supplier to meet its manufacturing needs based on competitive terms.
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The Company has entered into an agreement with UMM for the manufacture of the
CareSide Analyzer at UMM's facility in Indianapolis. Certain aspects of the
manufacturing agreement, including the price at which UMM will manufacture the
device, are subject to further negotiation and will be finalized once tooling
is completed and the manufacturing line set up.
The Company expects to source its chemistry, electrochemistry, coagulation
and immunochemistry reagents from Fuji, ITC and DRI. See "--The Careside
System--Test Menu."
The Company intends to purchase and distribute a hematology testing device
manufactured by a third party and is currently negotiating a supply agreement.
COMPETITION
The Company will principally compete with manufacturers of traditional
diagnostic testing equipment used by centralized laboratories and current
point-of-care diagnostic companies whose products perform stat testing.
Historically, most clinical testing has been performed in a centralized
laboratory setting. These laboratories provide analyses similar to those to be
conducted by the Company's system and have traditionally been effective at
processing large panels of tests using skilled technicians and complex
equipment. While the CareSide Analyzer will not be designed to provide the same
range of tests, the Company believes that its products will offer several
advantages over centralized laboratories, including lower costs, mobility,
faster results, simplified specimen preparation, reduced opportunity for error
through decreased specimen handling, ease of regulatory compliance and
increased patient satisfaction.
The Company is also aware of other companies with point-of-care analysis
devices. These companies have focused solely on the stat, or immediate, testing
market with a limited number of tests. Consequently, these devices are cost
additive, since the majority of routine tests would still have to be conducted
in a hospital or commercial laboratory. The Company believes that its system
will offer distinct competitive advantages over these products, including the
ability to conduct multiple tests in a single device, internal centrifugation,
convenience and ease of use. Several smaller companies, including i-STAT
Corporation, Abaxis, Inc., Diametrics Medical, Inc. and Cardiovascular
Diagnostics, Inc., are currently making or developing products that will
compete with the Careside System.
The Company expects that manufacturers of conventional diagnostic testing
products used in hospitals and clinical laboratories will compete intensely to
maintain their market share. No assurance exists that the competitive pressures
will not result in reductions in prices of the Company's system, which could
adversely affect the Company's financial performance. In addition, healthcare
providers may choose to maintain their established means of having such tests
performed. Many of the Company's competitors have substantially greater capital
resources, research and development staffs and facilities than the Company.
Such entities have developed, may be developing or could in the future attempt
to develop additional products competitive with those of the Company. Many of
these companies also have substantially greater experience than the Company in
research and development, obtaining regulatory clearances, manufacturing and
marketing. The Company believes that Abbott Laboratories, Clinical Diagnostic
Systems (a division of Johnson & Johnson) and Roche Diagnostics Systems, Inc.
are all seeking to acquire and/or develop systems targeted to the point-of-care
market. The Company's competitors may succeed in discovering and developing
technology that would render the Company's technology and products
noncompetitive. There can be no assurance that the Company will have the
financial resources, technical expertise or marketing, distribution or support
capabilities to compete successfully.
PATENTS AND PROPRIETARY RIGHTS
The Company's policy is to seek patent protection, both in the United States
and abroad, for each of the areas of invention embodied in its CareSide
Analyzer and related cartridges. To date, the Company has filed three patent
applications with the PTO on the test cartridge technology and expects to file
several additional
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applications on the cartridges and the CareSide Analyzer in 1999. Pursuant to
its agreements with Fuji, Battelle, DRI and ITC, the Company has been assigned
certain proprietary rights that result from the research conducted under the
agreements. The Company will seek to protect any such proprietary rights
assigned to it by its technology partners, and in the case of the DRI and ITC
agreements, the Company will have its partner's assistance in preparing and
prosecuting patent applications. Upon completion of the Offering, the Company
expects to proceed with the patent application process, and anticipates the
filing of additional applications. In addition to patent protection, if any,
the Company will rely upon trade secrets, know-how and continuing technological
innovation. Although the Company's Chief Executive Officer, Executive Vice
President--Research and Development and Chief Financial Officer have agreed to
maintain in confidence the Company's confidential information and proprietary
technology, the Company has not otherwise required its employees to sign
confidentiality agreements. The Company plans on seeking the execution of such
confidentiality agreements by its current and future employees.
THIRD PARTY REIMBURSEMENT
In April 1998, the federal government instituted a policy that, in connection
with Medicare reimbursement for large panel testing, it will only reimburse
four different chemistry panels, the largest of which has 13 tests. The
consequence of this policy has been that more single tests are ordered as
compared to large panels. The Careside System is currently capable of
conducting eight tests in a single 10 to 15 minute test cycle. Upon completed
development of additional multi-test cartridges, the Careside System will be
able to handle a 13-test panel in a single 10 to 15 minute test cycle. The
Careside System is also configured to easily test any combination of single
test cartridges with similar cycle times for up to six single tests per cycle.
See "Risk Factors--Uncertainty Relating to Third Party Reimbursement and
Product Pricing."
Managed care provides physicians with incentives to treat patients using
clinical treatment protocols that have been developed for many chronic and
acute illnesses. These protocols frequently contain preventative diagnostic
interventions that are used to help avoid the occurrence of acute episodes of
illness. Diagnostic blood testing is one of the major tools used in these
protocols for early detection and for ongoing evaluation of treatment efficacy.
The Company believes that a diagnostic blood testing system that is cost
effective and adds convenience and rapid information will be well received by
managed care organizations and their physicians.
Even with the growth of managed care, more than 75% of all blood tests continue
to be reimbursed on a fee for service basis. This number has remained steady in
the commercial laboratory industry for the past three years. The Company
believes that in both the managed care and fee-for-service markets, its point-
of-care system will be responsive to incentives that drive the respective
markets. Many managed care entities dictate to their member physicians which
laboratories they must use for blood testing. Physicians have the opportunity
to utilize exceptions to these mandates to conduct in-office testing. The
Careside System will enable physicians to offer laboratory testing services and
take advantage of these exceptions to the managed care organizations' policies.
The Company expects to accomplish this by working closely with the physicians
and the managed care organizations to demonstrate cost effectiveness and cost
reduction of its system. This will be a critical component of the pilot site
testing strategy and is intended to position the Careside System as the new
testing standard and the blood testing system of choice over traditional
laboratory testing methods.
GOVERNMENT REGULATION
The FDA regulates the development, manufacture, and marketing of medical
devices including diagnostic tests. The FDA requires testing of the Careside
System in accordance with regulatory requirements in the laboratory and, as
appropriate, in clinical settings to establish product performance before
marketing. After marketing has commenced, FDA clearance must be obtained before
making certain types of product changes. The CareSide Analyzer and certain
tests have already received marketing clearance for laboratory use, and the
Company expects that the CareSide Analyzer and tests will receive marketing
clearance for point-of-care use following clinical testing of the instrument at
clinical sites. Without the point-of-care use clearance, the
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CareSide Analyzer could be used only at licensed laboratory sites with
laboratory personnel, which would limit the Company's potential market.
The point-of-care designation depends upon the FDA's determination that the
results obtained from clinical studies for a small number of representative
tests, selected by the FDA, have accuracy and reliability when performed by a
non-laboratory user that is equivalent to or better than test results obtained
from the same tests performed by a laboratory professional.
The FDA has regulations that set varying requirements for medical devices
according to potential risk class. Class I devices represent the lowest
potential risk devices and are therefore subject only to the general controls
that include establishment registration, product listing, the prohibition of
mislabeling or adulteration, and a requirement to comply with GMP. Pre-market
notification is required for some Class I clinical diagnostic devices. Class II
devices present greater risk than Class I devices and are subject to special
controls, such as guidelines or performance standards, as well as the same
general controls that are applicable to Class I devices. Class II devices
require pre-market clearance to demonstrate that the FDA accepts the
manufacturer's claims that the device is substantially equivalent to other
legally marketed devices, and meets generally accepted performance criteria
that may be required to demonstrate that the device is safe and effective.
Class III devices present a higher level of risk and are additionally subject
to rigorous demonstration of safety and effectiveness through the pre-market
approval ("PMA") process.
For some Class I and most Class II devices, a pre-market notification must be
submitted to the FDA. Usually within 90 days of the receipt of this
notification, the FDA makes the determination whether the device submitted is
substantially equivalent to a legally marketed device. A legally marketed
device is one which was marketed prior to the passage of the Medical Device
Amendments of 1976, or a post-1976 device that has been determined by the FDA
to be substantially equivalent to previously cleared devices. A determination
of substantial equivalence requires several FDA findings: first, that the
device has the same intended use as the legally marketed device; and second,
either that the device has the same technological characteristics as the
legally marketed device or, if it does not, that the device is as safe and
effective as the legally marketed device and does not present different
questions about safety and effectiveness. Class III devices require extensive
clinical testing to prove safety and effectiveness, and submission of the
resulting data to the FDA as a PMA application. The FDA ordinarily will refer a
new device PMA to an advisory panel of outside experts for a recommendation on
whether to approve the PMA or to request additional testing. The Company
believes that the CareSide Analyzer and all of the tests currently expected to
be performed by it will be classified in Class II requiring pre-market
notification. If the FDA disagrees, however, a PMA might be required for one or
more tests. The Company expects certain future tests, such as PSA, to require a
PMA.
The information required for a pre-market notification for the Company's
products will be generated by or for the Company. For tests that will be
performed in a clinical laboratory, validation may be performed in the
manufacturer's laboratory. For tests that are intended for use outside of the
clinical laboratory, such as physician offices or nursing homes, the FDA also
requires that validation data be gathered from at least three clinical sites.
The Company believes that the required laboratory or clinical studies do not
constitute a significant risk for patients. Non-significant risk device studies
performed in the clinic require institutional review board approval and may
require patient informed consent but do not require the clearance of an
investigational device exemption ("IDE") application by the FDA. If the FDA
believes that such studies do constitute a significant risk, the Company would
need to submit an IDE application, containing an investigation and study
monitoring plan, and allow the FDA 30 days to review the IDE application or
request additional information prior to initiating an investigation.
Where a PMA is required, the PMA regulations require the demonstration of
safety and effectiveness, typically based upon extensive clinical trials.
Fulfilling the requirements of PMA is costly and both the preparation and
review are time consuming, commonly taking from one to several years. Before
granting a PMA, FDA must inspect and find acceptable the proposed manufacturing
procedures and facilities. The PMA regulations also require FDA approval of
most changes made after the tests have been approved.
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Manufacturing Regulation
For products either cleared through the pre-market notification process or
approved through the PMA process, the Company's manufacturing facility must
also be registered with the FDA. The manufacture of products subject to Section
510(k) of the FDC Act or PMA regulation must be in accordance with quality
system regulations and current GMP. The Company is also subject to various
post-marketing requirements, such as complaint handling and reporting of
adverse events. PMA products are also subject to annual reports. The FDA
typically inspects manufacturing facilities every two years. The Company
intends to seek and maintain ISO 9001 certification. As a result, inspections
by notified bodies may be more frequent.
The CareSide Analyzer is being developed and will be manufactured by UMM. UMM
is an FDA registered and inspected facility. UMM is also ISO 9001 certified. In
adherence to FDA and ISO requirements, UMM follows a structured design control
process.
Third Party Safety
Third party safety certification is not required for FDA marketing
permission, but will be required by the Company's customers and to enter
markets in other countries. In this regard, the Company intends to obtain an
Underwriters Laboratories ("UL") listing for the instrument. UL will review the
CareSide Analyzer according to UL 3101-1 that is equivalent to the
international standard IEC 1010. The CareSide Analyzer is also being designed
to comply with requirements that ultimately will facilitate marketing of the
product in Europe and Japan. These requirements include the Low Voltage
Directive (73/23/EEC), the Electromagnetic Compatibility Directive
(89/336/EEC), and the In Vitro Diagnostic Medical Device Directive (98/79/EC).
Clinical Laboratory Improvement Amendments of 1988
All medical testing in the United States is regulated by the Health Care
Financing Administration ("HCFA") according to the complexity of the testing as
specified by CLIA. CLIA regulations establish three categories of laboratory
tests, for which regulatory requirements become increasingly stringent as the
complexity of the test rises: (1) tests that require little or no operator
skill, which allows for a waiver of the regulations; (2) tests of moderate
complexity; and (3) high complexity tests which require significant operator
skill or training. All laboratories performing tests of moderate or high
complexity must register with HCFA or an organization to whom HCFA has
delegated such authority. All registered laboratories are subject to periodic
inspection. Careside expects all of the tests for the CareSide Analyzer to be
categorized as moderate or lower complexity. To date, the tests performed by
the CareSide Analyzer have been categorized within the moderate complexity
class as defined by current CLIA regulations. In practical terms, performing a
test of moderate complexity means that the individual supervising the test,
i.e., the physician, pathologist or laboratory director, must be appropriately
educated and trained, whereas the individual technician who operates the
CareSide Analyzer requires no formal laboratory education and only task-
specific training.
State Regulation
The Company and its products will be subject to a variety of state laws and
regulations in those states where its products are marketed, sold or used.
Certain states currently restrict or control, to varying degrees, the use of
medical devices such as the Careside System outside the clinical laboratory by
persons other than doctors or licensed technicians. These restrictions may
hinder the Company's ability to market its products in these locations.
Although the Company plans to seek interpretations, rulings or changes in
relevant laws and regulations to remove or ameliorate these restrictions, there
can be no assurance that the Company will be successful.
International Regulation
In addition to the United States market, the Company intends to pursue
markets in Asia and Europe through select strategic alliances. The recently
published European Community In Vitro Diagnostic Directive
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places the Company's products within a category that has a low regulatory
burden. Manufacturers are allowed entry into the market based upon self-
certification that the Company had complied with published directives, similar
to existing United States requirements, containing performance, labeling, and
other quality requirements. Japan has its own requirements for in vitro
diagnostics.
PRODUCT LIABILITY AND PROPERTY INSURANCE
Sale of the Company's products entails risk of product liability claims. The
medical testing industry has historically been litigious, and the Company faces
financial exposure to product liability claims in the event that use of its
products result in personal injury. The Company also faces the possibility that
defects in the design or manufacture of its products might necessitate a
product recall. There can be no assurance that the Company will not experience
losses due to product liability claims or recalls in the future. The Company
anticipates purchasing product liability insurance in reasonable customary
amounts when it begins to sell products. Such insurance can be expensive,
difficult to obtain and may not be available in the future on acceptable terms,
or at all. No assurance can be given that product liability insurance can be
maintained in the future at a reasonable cost or in sufficient amounts to
protect the Company against losses due to liability. An inability to maintain
insurance at an acceptable cost or to otherwise protect against potential
product liability could prevent or inhibit the commercialization of the
Company's products. In addition, a product liability claim in excess of
relevant insurance coverage or product recall could have a material adverse
effect on the Company's business, financial condition and results of
operations.
The Company has liability insurance covering its property and operations with
coverage and deductible amounts and exclusions that the Company believes are
customary for companies of its size in its industry. There can be no assurance
that the Company's current insurance coverage is adequate or that it will be
able to maintain insurance at an acceptable cost or otherwise to protect
against liability.
EMPLOYEES
As of September 30, 1998, the Company had 29 full-time employees, of which 25
were engaged in research and development and manufacturing activities and four
were engaged in administrative activities. None of the Company's employees is
covered by a collective bargaining agreement, and the Company believes its
relations with its employees are good. Additionally, the Company's contract
strategic partners, Battelle and UMM, have provided approximately 40 full-time
equivalent employees on a contract basis to development of the Careside System.
PROPERTIES
The Company leases approximately 16,000 square feet of space in Culver City,
California as its executive offices and for the research and development,
validation, manufacture and assembly of test cartridges. The lease has a term
of five years with the initial rent being $9,000 per month during facility
completion, and increasing to $15,220 per month until the expiration of the
lease in October 2001. The Company has an option to renew the lease for one
additional five-year term at 95% of the fair market rental value. The Company
believes that the Culver City facility will adequately serve the needs of the
Company for the immediate future.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information concerning the individuals
who serve as directors, executive officers and key employees of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Directors and Executive Officers:
W. Vickery Stoughton (1)......... 52 Chairman of the Board of Directors and Chief Executive Officer
Thomas H. Grove.................. 49 Executive Vice President--Research and Development,
Secretary and Director
James R. Koch (2)................ 44 Chief Financial Officer, Treasurer, Executive Vice
President and Director
Anthony P. Brenner (1)........... 40 Director
William F. Flatley (2)........... 57 Director
Kenneth N. Kermes (2)............ 63 Director
C. Alan MacDonald (2)............ 65 Director
Diana Mackie (1)................. 52 Director
Philip B. Smith (1).............. 62 Director
Key Employees:
Kenneth Asarch................... 41 Vice President--Quality Systems and Regulatory Affairs
Harry J. Fini.................... 48 Vice President--Sales and Marketing
Marija N. Valentekovich.......... 66 Vice President--Manufacturing
</TABLE>
- --------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Directors and Executive Officers
W. VICKERY STOUGHTON, CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE
OFFICER. Mr. Stoughton has served as the Chairman of the Board of Directors and
the Chief Executive Officer of the Company since its formation in July 1996.
Prior to that, he served as President of SmithKline Beecham Diagnostics Systems
Co. ("SBDS"), a diagnostic services and product company, from October 1995 to
July 1996, and was President of SBCL, a provider of diagnostic laboratory
services, from August 1992 to September 1995. As President of SBDS, Mr.
Stoughton had responsibility for SBCL, SmithKline Beecham Clinical Laboratories
International and SBDS's genetic testing and point-of-care testing projects. In
addition, Mr. Stoughton served as Chief Executive Officer and Vice Chancellor
for Health Affairs of Duke University Hospital from 1991 to 1992, Chief
Executive Officer of Toronto Hospital in Toronto, Canada from 1981 to 1991,
Chief Operating Officer of Brigham and Women's Hospital in Boston from 1980 to
1981 and Chief Executive Officer of Peter Bent Brigham Hospital in Boston from
1978 to 1980. Mr. Stoughton holds a B.S. in Chemistry from St. Louis University
and a M.B.A. from the University of Chicago. He is currently a director of Sun
Life Assurance Company of Canada, a financial services company, and Biomira,
Inc., a pharmaceutical company.
THOMAS H. GROVE, EXECUTIVE VICE PRESIDENT--RESEARCH AND DEVELOPMENT,
SECRETARY AND DIRECTOR. Dr. Grove has served as Executive Vice President--
Research and Development and as a director of the Company since its formation
in July 1996. From April 1984 to July 1996, he served in a number of management
positions at SBCL involving research and development activities, including the
position of Vice President of Scientific Affairs from January 1991 to July
1996, where, among other things, he was in charge of National Quality Control
and Quality Assurance for SBCL. Dr. Grove has received a number of awards,
including a NATO Science Fellowship to attend Oxford University from 1978 to
1979. He was also named Young Investigator of the Year in 1980 by the American
Association for Clinical Chemistry and was elected to the National Academy of
Clinical Biochemistry in 1977. Dr. Grove holds a B.S. in Biology from SUNY-
Albany and a Ph.D. in Biochemistry from Syracuse University.
45
<PAGE>
JAMES R. KOCH, CHIEF FINANCIAL OFFICER, TREASURER, EXECUTIVE VICE PRESIDENT
AND DIRECTOR. Mr. Koch has served as Chief Financial Officer and Treasurer,
Executive Vice President and a director of the Company since July 1998. Prior
to joining the Company, Mr. Koch served as Vice President and Chief Financial
Officer of ILEX Oncology, Inc., a company which develops oncology drugs, from
August 1996 to July 1998. In addition, Mr. Koch served as Vice President,
Finance and Chief Financial Officer for two start-up specialty pharmaceutical
companies, Symphony Pharmaceuticals, Inc., from September 1993 to August 1996,
and Neose Pharmaceuticals, Inc. (currently Neose Technologies, Inc.), from
September 1991 to September 1993. His prior experience also includes ten years
in senior financial management positions with G.D. Searle Pharmaceutical, a
manufacturer of pharmaceutical products. Mr. Koch holds a B.S. in Mechanical
Engineering from General Motors Institute and a M.S. from the Krannert School
of Management at Purdue University.
ANTHONY P. BRENNER, DIRECTOR. Mr. Brenner has served as a director of the
Company since November 1996. Since January 1998, he has served as a Managing
Director with Robertson Stephens Funds, a family of mutual funds, where he
oversees investment activities in the information and business services
industries. Prior to that, Mr. Brenner served as Senior Managing Director of
Advanta Partners LP, a private equity investment partnership, and as a member
of the Board of Directors of Advanta Corporation, a financial services company,
from 1992 to 1996. In addition, since 1989 Mr. Brenner has served as president
of Cedar Point Partners, a private equity investment partnership. Mr. Brenner
earned a B.A. from Yale University and a M.B.A. from Stanford University.
WILLIAM F. FLATLEY, DIRECTOR. Mr. Flatley has served as a director of the
Company since November 1996. Since July 1997, he has served as the President
and CEO of Executive Health Group, a provider of preventive healthcare services
to corporations. From 1980 to December 1994, he held a number of senior
management positions with Bristol-Myers Squibb ("Bristol-Myers"), including
President of a medical device division, the Health Care Group, and President of
the Drackett Company, a household products manufacturer. Mr. Flatley retired
from Bristol-Myers at the end of 1994 but continued to provide the company with
certain consulting services after his retirement. Mr. Flatley obtained a B.S.
from Villanova University and a M.B.A. from the Wharton School of the
University of Pennsylvania.
KENNETH N. KERMES, DIRECTOR. Mr. Kermes has served as a director of the
Company since February 1997. Since June 1998, he has served as a principal of
Riparian Partners Limited and of Bay View Equity Partners, two related
investment banking and private equity investment partnerships. Prior to that,
he served as Vice President of Business and Finance for the University of Rhode
Island from December 1994 to June 1998 and as Chief Financial Officer for
SmithKline from October 1986 to July 1989. From 1991 to 1994, Mr. Kermes was a
consultant and investor in the venture capital industry. Mr. Kermes obtained a
B.A. from Amherst College and attended the New York University Graduate School
of Business and the Harvard Business School Advanced Management Program.
C. ALAN MACDONALD, DIRECTOR. Mr. MacDonald has served as a director of the
Company since November 1996. Since October 1997, Mr. MacDonald has served as a
Managing Director of Directorship, Inc., a consulting firm specializing in
corporate governance issues. Prior to that, he served as General Partner of the
Marketing Partnership, Inc., a full service marketing consulting firm, from
January 1995 to July 1997 and as an acquisitions consultant with the Noel
Group, a venture capital firm, from July 1994 to December 1994. In addition, he
served as Chairman and Chief Executive Officer of Lincoln Snacks Co., a
caramelized popcorn snack company ("Lincoln Snacks"), from September 1992 to
July 1994. Mr. MacDonald holds a B.S. in Hotel Administration from Cornell
University and is a member of the Cornell Society of Hotelmen and the Dean's
Advisory Committee at Cornell. Mr. MacDonald is also a director of Lincoln
Snacks and DenAmerica Corporation, a large franchiser of Denny's and BlackEyed
Pea Restaurants.
DIANA MACKIE, DIRECTOR. Ms. Mackie has served as a director of the Company
since February 1997. She currently is a Vice President for Strategy and
Business Development at SmithKline Beecham Healthcare Services ("SBHS"), the
business development division of SmithKline, a position she has held since
October 1997, where her responsibilities include developing business plans,
long-range strategy and negotiating external alliances and investments. Prior
to that, Ms. Mackie served as Vice President, Group Business Initiatives for
46
<PAGE>
SBHS from November 1996 to October 1997, General Manager of Diversified
Prescription Delivery, a pharmaceutical mail services company and a wholly-
owned subsidiary of Diversified Pharmaceutical Services, a pharmaceutical
benefit management group, from March 1996 to November 1996, and as Vice
President, Strategy Development, SmithKline Beecham Pharmaceuticals, a
pharmaceutical company, from March 1993 to March 1996. Ms. Mackie holds a B.S.
in Chemistry from the University of Illinois, a M.B.A. from The Massachusetts
Institute of Technology Sloan School of Management and a M.S. in Polymer and
Fiber Engineering from The Massachusetts Institute of Technology.
PHILIP B. SMITH, DIRECTOR. Mr. Smith has served as a director of the Company
since November 1996. Since June 1998, Mr. Smith has served as a Vice Chairman
of Laird & Co., LLC, a merchant bank. In addition from 1991 until August 1998,
Mr. Smith served as a Vice Chairman with Spencer Trask Securities Incorporated
("Spencer Trask"), an investment banking firm. Prior to that, Mr. Smith served
in a number of other senior management positions including as Managing Director
of Prudential Securities, an investment firm, in its merchant bank division, a
position he held from June 1986 to June 1988 and as President and Chief
Executive Officer of Citicorp Venture Capital, a venture capital company which
he founded, from December 1967 to December 1972. Mr. Smith currently serves on
the board of directors of Movie Gallery, Inc., Digital Video Systems, Inc., and
KLS Enviro Resources, Inc. Mr. Smith has a B.S.E. from Princeton University and
a M.B.A. from the Harvard Business School.
Key Employees
KENNETH ASARCH, VICE PRESIDENT--QUALITY SYSTEMS AND REGULATORY AFFAIRS. Dr.
Asarch has served as Vice President--Quality Systems and Regulatory Affairs of
the Company since November 1996. From June 1995 to October 1996, Dr. Asarch
served as Director of Regulatory Affairs for SBCL and SBDS. Prior to that, he
served as Director of Regulatory Affairs, Quality Assurance and Clinical
Affairs with Diagnostic Products Corporation, an immuno-diagnostic testing
company ("Diagnostic Products"), from 1987 to 1995, where his duties included
overseeing the FDA regulatory clearance and approval process for approximately
150 blood testing products. Dr. Asarch holds a B.S. in Biochemistry from the
University of California at Los Angeles and doctoral degrees in both Clinical
Pharmacy (Pharm.D.) and Pharmaceutical Sciences (Ph.D.) from the University of
Southern California.
HARRY J. FINI, VICE PRESIDENT--SALES AND MARKETING. Mr. Fini has served as
Vice President--Sales and Marketing of the Company since June 1997. From 1995
until he joined the Company, Mr. Fini operated a consulting practice which
assisted point-of-care companies and venture capitalists in evaluating
technologies, business development, marketing and sales, and strategic
planning. Prior to that, Mr. Fini had more than 16 years of executive, sales
and marketing experience, including serving as Vice President of Sales and
Marketing at i-STAT Corporation, a medical diagnostic device manufacturer, from
1992 to 1995 where he was responsible for marketing, market research, business
development, strategic planning and sales of a point-of-care in-vitro blood
diagnostics device worldwide. From 1987 through 1992, Mr. Fini was employed at
Squibb Corporation, a pharmaceutical company, as Director of Marketing and
Sales in the managed healthcare area, and at Pyxis Corporation, a manufacturer
of drug distribution systems, as Vice President of Sales. Mr.Fini received a
B.A. in English from LaSalle College.
MARIJA N. VALENTEKOVICH, VICE PRESIDENT--MANUFACTURING. Dr. Valentekovich has
served as Vice President--Manufacturing of the Company since January 1998.
Prior to joining the Company, Dr. Valentekovich served as a Production Manager
with Diagnostic Products from January 1989 to July 1997. Dr. Valentekovich
received a M.S. in Chemical Engineering and a Ph.D. in Physical Organic
Chemistry, using radioisotope techniques, from the University of Zagreb,
Croatia.
CLASSIFIED BOARD OF DIRECTORS
Upon completion of the Offering, the Company's Board of Directors will be
divided into three classes. Each class will contain, as nearly as possible, an
equal number of directors. Directors within each class will be
47
<PAGE>
elected to serve three-year terms and approximately one-third of the directors
will sit for election at each annual meeting of the Company's stockholders. Mr.
Koch, Mr. Kermes and Mr. Smith will serve in the class whose term expires in
1999. Dr. Grove, Mr. Flatley and Ms. Mackie will serve in the class whose term
expires in 2000. Mr. Stoughton, Mr. Brenner and Mr. MacDonald will serve in the
class whose term expires in 2001. A classified board of directors may have the
effect of deterring or delaying any attempt by any group to obtain control of
the Company by a proxy contest since such third party would be required to have
its nominees elected at two separate annual meetings of the Board of Directors
in order to elect a majority of the members of the Board of Directors. See
"Description of Capital Stock--Takeover Protection and Certain Charter and By-
Law Provisions."
DIRECTOR COMPENSATION
The non-employee directors of the Company receive an annual fee of $5,000
payable semi-annually, plus $1,000 for each Board of Directors or Committee
meeting they attend in person and $500 for those meetings they attend
telephonically. Ms. Mackie is precluded by SmithKline policy from receiving any
fees or stock options for her service as a director. The Company reimburses all
reasonable expenses incurred by the directors in attending Board of Directors
or Committee meetings. In addition, the non-employee directors, other than the
SmithKline representative, participate in the 1996 Incentive and Non-Qualified
Stock Option Plan. For each year that Mr. Brenner, Mr. Flatley, Mr. Kermes, Mr.
MacDonald and Mr. Smith served as directors, the Company granted each an annual
option to purchase 2,163 shares of Common Stock at the then applicable market
price. The options granted after the end of 1996 were issued at $5.20 per
share. The options granted after the end of 1997 were issued at $6.76 per
share. Upon completion of the Offering, options granted to non-employee
directors will only be made under the 1998 Director Stock Option Plan. Under
the 1998 Director Stock Option Plan, the Company will grant each non-employee
director an annual option to purchase 2,000 shares of Common Stock at the then
applicable market price. See "--Stock Option Plans" and "Certain Transactions."
COMMITTEES OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors presently consists of
Mr. Stoughton, Mr. Brenner, Ms. Mackie and Mr. Smith. The Compensation
Committee makes recommendations to the Board of Directors concerning salaries
and incentive compensation for the Company's officers and employees other than
the Chief Executive Officer, whose compensation is determined by the Board of
Directors after consultation with the non-employee directors on the
Compensation Committee. The Audit Committee of the Board of Directors presently
consists of Mr. Koch, Mr. Flatley, Mr. Kermes and Mr. MacDonald. The Audit
Committee reviews the Company's financial statements and accounting practices,
makes recommendations to the Board of Directors regarding the selection of
independent auditors and reviews the results and scope of all audits and other
services provided by the Company's independent auditors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
While Mr. Stoughton is Chairman of the Board of Directors and Chief Executive
Officer of the Company, Mr. Brenner, Ms. Mackie and Mr. Smith have not been, at
any time since the formation of the Company, an officer or employee of the
Company. In addition, no executive officer of the Company serves as a member of
the board of directors or compensation committee of any entity that has one or
more executive officers serving on the Company's Board of Directors or
Compensation Committee. Cedar Capital Investors ("Cedar"), an entity owned and
controlled by Mr. Brenner, provided certain financial consulting services to
the Company immediately following the Company's formation and up to the
completion of the Company's private placement of Common Stock in 1997. As
consideration for such services, the Company reimbursed Cedar's out-of-pocket
expenses and granted Cedar an option to purchase 1,154 shares of Common Stock
at an exercise price of $.052 per share. Ms. Mackie, who serves as Vice
President for Strategy and Business Development at SBHS, was nominated to serve
on the Board of Directors by SmithKline pursuant to the terms of a
Stockholders' Agreement by and among the Company and its stockholders prior to
the Offering. Mr. Smith, who served as a Vice Chairman of Spencer Trask until
August 1998, was nominated to serve on the Board of Directors by Spencer Trask
and was formerly a partner in Exigent Partners L.P. See "Certain Transactions."
48
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
awarded to, earned by, or paid to the Chief Executive Officer and the executive
officers of the Company whose salary and bonus exceeded $100,000 (collectively,
the "Named Executive Officers") for all services rendered to the Company during
the year ended December 31, 1997. No executive officer who would otherwise have
been includable in such table on the basis of salary and bonus earned during
the year ended December 31, 1997 has resigned or otherwise terminated
employment during such year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- ------------------
NAME AND PRINCIPAL SECURITIES ALL OTHER
POSITION SALARY BONUS (1) UNDERLYING OPTIONS COMPENSATION (2)
------------------ ---------- --------- ------------------ -----------------
<S> <C> <C> <C> <C>
W. Vickery Stoughton.... $ 195,281 $ 27,000 158,655 $20,547
Chairman of the Board
of Directors and Chief
Executive Officer
Thomas H. Grove......... $ 154,013 $ 25,000 79,327 $ 8,353
Executive Vice
President--Research
and Development
</TABLE>
- --------
(1) Bonus earned in 1997 and paid in 1998.
(2) Includes $4,750 contributed under the Company's 401(k) Plan for the benefit
of each of Mr. Stoughton and Dr. Grove. Also includes $15,797 and $3,603 of
premiums paid for life insurance for Mr. Stoughton and Dr. Grove,
respectively.
STOCK OPTIONS GRANTED TO NAMED EXECUTIVE OFFICERS DURING 1997
The following table sets forth certain information regarding options for the
purchase of Common Stock that were granted to the Named Executive Officers
during the year ended December 31, 1997:
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SHARES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED EXERCISE OR OPTION TERM (2)
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION -----------------------
NAME GRANTED IN 1997(1) PER SHARE DATE 5% 10%
---- ---------- ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
W. Vickery Stoughton.... 7,212 2% $7.44 12/31/03 $ 18,238 $ 41,375
7,212 2% $5.72 02/04/02 $ 11,397 $ 25,184
38,462 13% $5.72 02/04/02 $ 60,782 $ 134,312
105,769 34% $5.20 02/04/07 $ 345,892 $ 876,558
Thomas H. Grove......... 3,606 1% $6.76 12/31/07 $ 15,329 $ 38,847
3,606 1% $5.20 02/04/07 $ 11,792 $ 29,883
72,115 23% $5.20 02/04/07 $ 235,835 $ 597,653
</TABLE>
- --------
(1) Based on an aggregate of 307,163 shares of Common Stock subject to options
granted to employees in 1997.
(2) Assumes stock price appreciation of 5% and 10% compounded annually from the
date the respective options were granted to their expiration date, as
mandated by the rules of the Securities and Exchange Commission, and does
not represent the Company's estimate or projection of the future
appreciation of the Company's stock price. Actual gains, if any, are
dependent upon the timing of such exercise and the future performance of
the Common Stock and may be greater or less than the potential realizable
value set forth in the table. For a summary of total option grants see "--
Stock Option Plans."
49
<PAGE>
The following table sets forth certain information regarding options held as
of December 31, 1997 by each of the Named Executive Officers. None of the Named
Executive Officers exercised options during the year ended December 31, 1997.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS AT
END FISCAL YEAR-END(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
W. Vickery Stoughton....... 4,327 154,328 $ $
Thomas H. Grove............ 2,163 77,164
</TABLE>
- --------
(1) There was no public trading market for the Common Stock as of December 31,
1997. Accordingly, these values have been calculated on the basis of the
assumed initial public offering price of $ per share minus the applicable
per-share exercise price.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Mr.
Stoughton, Dr. Grove and Mr. Koch. Each employment agreement is extended
annually on its anniversary date automatically for three year rolling terms
unless either party, at least 60 days prior to the annual extension date, gives
notice that the employment agreement shall not be so extended or otherwise
terminates the agreement. Mr. Stoughton, Dr. Grove and Mr. Koch may resign upon
90 days notice to the Company. Under the employment agreements, if Mr.
Stoughton, Dr. Grove or Mr. Koch is terminated by the Company, other than for
cause or disability (as both terms are defined in the employment agreements),
or if such officer terminates the employment agreement as a result of a
reduction in his duties, a breach of the employment agreement by the Company or
a change of control (as defined in the employment agreements) of the Company,
such officer will be entitled to have his compensation (as defined in the
employment agreements) continue to accrue through the end of the then current
term that would exist absent such termination. The employment agreements
prohibit Mr. Stoughton, Dr. Grove or Mr. Koch from competing with the Company
by engaging in the point-of-care diagnostics business during the term of the
employment agreements. In addition, this non-compete clause will remain in
effect for one year commencing on the expiration of or termination of
employment, unless the term of employment has continued for at least two years.
However, if the Company terminates employment without cause or if the employee
terminates for a reason as discussed above or because of a change of control,
the non-compete clause terminates.
Under their respective employment agreements, Mr. Stoughton serves as
Chairman of the Board of Directors and Chief Executive Officer of the Company,
and currently earns an annual base salary of $204,750, Dr. Grove serves as
Executive Vice President--Research and Development of the Company, and
currently earns an annual base salary of $162,750, and Mr. Koch serves as Chief
Financial Officer, Treasurer and Executive Vice President of the Company, and
currently earns an annual base salary of $160,000. In addition, Mr. Koch
received a $15,000 relocation allowance in connection with entering into his
employment agreement. At the discretion of the Board of Directors, an annual
bonus may be paid to Mr. Stoughton, Dr. Grove and Mr. Koch. In each case,
future raises and other compensation may be agreed to between the Company and
each of Mr. Stoughton, Dr. Grove and Mr. Koch. In addition, Mr. Stoughton, Dr.
Grove and Mr. Koch are eligible to receive stock options pursuant to the 1996
Stock Option Plans and the 1998 Incentive and Non-Qualified Stock Option Plan.
Such executive officers are also entitled to reimbursement for certain travel
and entertainment expenses incurred in connection with the performance of their
duties.
STOCK OPTION PLANS
The Company's 1996 Incentive and Non-Qualified Stock Option Plan (the "1996
Incentive Plan") and the 1996 Key Executive Stock Option Plan (the "1996 Key
Plan" and together with the 1996 Incentive Plan, the
50
<PAGE>
"1996 Stock Option Plans") provide for the grant of stock options to purchase
up to 576,923 shares of Common Stock. To date, the Company has granted options
to purchase 429,107 shares of Common Stock under the 1996 Stock Option Plans of
which options to purchase 410,721 shares are outstanding at a weighted average
exercise price of $5.80. To date, the Company has granted Mr. Stoughton, Dr.
Grove, Mr. Koch, Dr. Asarch, Mr. Fini and Ms. Valentekovich options to purchase
167,788, 84,856, 40,385, 21,875, 38,462 and 5,769 shares of Common Stock,
respectively, at a weighted average exercise price of $5.67. The Company has
granted options to purchase an aggregate of 19,471 shares of Common Stock to
non-employee directors for their service as directors of the Company under the
1996 Incentive Plan. The Company may grant options to purchase 148,489 shares
of Common Stock in the future under the 1996 Stock Option Plans.
The Company also has adopted the 1998 Incentive and Non-Qualified Stock
Option Plan (the "1998 Incentive Plan") and the 1998 Director Stock Option Plan
(the "1998 Director Plan" and together with the 1998 Incentive Plan, the "1998
Stock Option Plans") which provide for the grant of stock options to purchase
up to 565,000 and 60,000 shares of Common Stock, respectively. The 1998 Stock
Option Plans will be effective upon completion of the Offering. To date, no
awards have been granted under the 1998 Stock Option Plans.
The purpose of the Company's stock option plans is to promote the long-term
growth and profitability of the Company by providing key personnel with
incentives to improve stockholder value and to contribute to the growth and
financial success of the Company. Moreover, the Company believes that its stock
option plans will enable the Company to attract, retain and reward the best
available people for positions of substantial responsibility. Participation in
the 1996 Incentive Plan is open to directors, executive officers, employees and
consultants of the Company and participation in the 1996 Key Plan is open to
key executive officers of the Company. The persons eligible to receive grants
under the 1998 Incentive Plan are those executive officers, employees and
consultants of the Company selected by the Board of Directors (or by a
committee appointed by the Board of Directors (the "Committee"), as the case
may be) in its discretion from time to time. Participation in the 1998 Director
Plan will be limited to non-employee directors,
Except for options awarded to non-employee directors, all terms and
conditions of options granted under the 1996 Stock Option Plans are determined
by the Board of Directors or the Committee, including the types of options to
be granted, the number of shares to be covered, the exercise price of each
stock option, the expiration date of each stock option, the vesting schedule
and any other material provisions. Unless otherwise specified in the terms of
an option agreement, awards under the 1998 Incentive Plan will vest ratably in
five installments with 20% vesting on December 31 of the year of grant and on
each December 31 thereafter. Options which lapse unexercised are returned to
the applicable stock option plan.
Non-employee directors have received automatic, fully vested option grants
under the 1996 Incentive Plan. After the Offering, each year, the Company will
automatically grant each non-employee director an option to purchase 2,000
shares of Common Stock under the 1998 Director Plan. Such options will vest
immediately if they are granted after conclusion of the year of service to
which the option grant relates. If the option is granted during the year, the
option will vest on December 31 of that year. All director options under the
1998 Director Plan will be exercisable from the time of vesting until the
earlier of (i) five years from the date of grant or (ii) three years after (x)
the optionee's retirement or resignation from the Board of Directors, or (y)
the failure of the optionee to be re-elected as a director of the Company, or
(z) the disability or death of the optionee.
The 1996 Stock Option Plans and the 1998 Incentive Plan provide for the grant
of both incentive stock options ("ISOs") intended to qualify for preferential
tax treatment under Section 422 of the Internal Revenue Code of 1986, as
amended, and non-qualified stock options ("NQSOs") that do not qualify for such
treatment. The 1998 Director Plan provides only for the grant of NQSOs. All of
the Company's stock option plans are administered by the Board of Directors, or
in the alternative, the Committee.
The exercise price of an ISO must not be less than the fair market value of
the Common Stock on the date the option is granted (110% of fair market value
with respect to an ISO granted to any person who owns stock of the Company
possessing 10% or more of the total voting power of all the Company's stock at
the time of
51
<PAGE>
the grant), and is payable upon the exercise of the option. The exercise price
of an NQSO will be stated in the option agreement governing the NQSO and is not
required by the option plans to be the fair market value of the Common Stock on
the date the option is granted. The number of shares covered by ISOs granted to
any optionee is limited such that the aggregate fair market value of stock
(determined as of the date of the grant) with respect to which ISOs are
exercisable for the first time by such optionee in any calendar year may not
exceed $100,000. The excess options, if any, will be treated as NQSOs.
In the event of any stock dividend, stock split, reverse stock split,
recapitalization or reclassification of the Company, appropriate proportional
adjustments will be made in the number of shares reserved for issuance under
the option plans, and the number, kind and price of shares covered by
outstanding grants. The option plans also provide for the ability of the Board
of Directors or the Committee to accelerate the exercise date of any options
granted thereunder. In addition, in the event of one of the following events,
vesting with respect to any outstanding options under the 1996 Incentive Plan
is automatically accelerated: (1) a Change of Control (as defined in such
plan); (2) a Private Sale (as defined in such plan) which results in a
valuation of the Company of $40.0 million or more; (3) the optionee's death or
disability while in the employ of or engagement by the Company; or (4) the
retirement of the optionee from the employ of the Company at or after age 65;
however, vesting is not accelerated in the event of a Change of Control,
Private Sale, death, disability or retirement with respect to that portion of
any option which is subject to performance vesting criteria which have not been
satisfied as of the date of such event. Upon the completion of the Offering,
all outstanding options under the 1996 Key Plan will be fully vested.
Options may not be exercised more than 10 years after the date of grant (five
years after the date of grant with respect to an ISO granted to any person who
owns stock of the Company possessing 10% or more of the total voting power of
all the Company's stock at the time of the grant). If an optionee's employment
or other relationship with the Company ceases for any reason other than death,
disability or termination for cause (as such terms are defined in the
applicable stock option plan), unless otherwise specified in the terms of an
individual option agreement, any option exercisable on the date of such
termination generally may be exercised for a period of three months from the
date of such termination or until the expiration of the stated term of the
option, whichever period is shorter. In the event of termination of employment
or engagement with the Company by reason of death or disability, unless
otherwise specified in the terms of an individual option agreement, any option
exercisable at the date of such termination generally may be exercised for a
period of 12 months from the date of the optionee's death or disability or
until the expiration of the stated term of the option, whichever period is
shorter. However, if a disabled optionee commences any employment or engagement
during such 12-month period with or by a competitor of the Company, any options
held by such optionee not yet exercised prior to the date of commencement of
such employment or engagement shall immediately terminate. If an optionee's
service is terminated for cause, any option not exercised prior to the date of
such termination shall be forfeited.
The Company's stock option plans may be amended by the Board of Directors so
long as such amendment does not change the terms of any outstanding option
without the affected optionee's consent or increase the number of shares that
are the subject of the plans.
EMPLOYEE STOCK PURCHASE PLAN
The Company's Board of Directors adopted an Employee Stock Purchase Plan on
November 5, 1998 (the "ESP Plan"). The ESP Plan qualifies as an employee stock
purchase plan under Internal Revenue Code Section 423 and will be effective
upon the completion of the Offering. The ESP Plan allows employees to purchase
Common Stock from the Company at a discount, without being subject to taxes
until they sell the stock, and without having to pay any brokerage commissions
with respect to the purchases. The ESP Plan is designed to encourage and
facilitate the purchase of Common Stock by employees of the Company and thereby
to provide employees of the Company with both a personal stake in the Company
and a long range inducement to remain in the employ of the Company.
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The ESP Plan provides employees with the right to purchase shares of Common
Stock through payroll deduction. shares of Common Stock are available for
purchase under the ESP Plan, subject to adjustment in the number and price of
shares of Common Stock available for purchase in the event the outstanding
shares of Common Stock are increased or decreased through stock dividends,
recapitalizations, reorganizations or similar changes. The ESP Plan is to be
administered by the Board of Directors, which may delegate responsibility for
such administration to the Committee. Subject to the terms of the ESP Plan, the
Board of Directors or the Committee has authority to interpret the ESP Plan, to
prescribe, amend and rescind rules and regulations relating to it, and to make
all other determinations deemed necessary or advisable in administering the ESP
Plan.
An employee of the Company is eligible to participate in the ESP Plan if the
employee, as of the last day of the month immediately preceding the effective
date of an election to purchase shares of Common Stock pursuant to the ESP
Plan: (1) has been employed by the Company on a full-time basis for at least
one full calendar quarter; or (2) has been employed by the Company on a part-
time basis for at least 24 consecutive months. An employee is considered to be
a part-time employee if the employee is scheduled to work at least 20 hours per
week. Employees on an approved leave of absence remain eligible for a period of
time after commencement of the leave. Notwithstanding the foregoing, any
employee who, after purchasing Common Stock under the ESP Plan, would own five
percent or more of the total combined voting power or value of all classes of
stock of the Company is not eligible to participate. Ownership of stock is
determined in accordance with the provisions of Section 424(d) of the Internal
Revenue Code.
Eligible employees may elect to participate in the ESP Plan during a calendar
quarter designated by the Board of Directors or Committee. Shares will be
deemed to have been purchased on the last day of the calendar quarter. The
purchase price per share offered under the ESP Plan will be 85 percent of the
lesser of the fair market value per share on the first or last trading day of
the quarter.
Participants have rights prescribed in the ESP Plan to withdraw the balance
credited to the participant's account. A participant who elects to withdraw
will be deemed to have elected not to participate in each of the four
succeeding quarters in which purchases are possible under the ESP Plan. Upon
termination of a participant's employment for any reason other than death,
including termination due to disability or continuation of a leave of absence
beyond 90 days, all amounts credited to such participant's account must be
returned to the participant. In the event of a participant's (i) termination of
employment due to death or (ii) death after termination of employment but
before the participant's account has been returned, all amounts credited to
such participant's account will be returned to the participant's successor-in-
interest.
All funds held or received by the Company under the ESP Plan may be used for
any corporate purpose until applied to the purchase of shares of Common Stock
or refunded to employees and will not be segregated from the general assets of
the Company. The Company will pay all fees and expenses incurred (excluding
individual Federal, state, local or other taxes) in connection with the ESP
Plan.
The ESP Plan is not qualified under section 401(a) of the Internal Revenue
Code. The Company generally will not be entitled to a deduction with respect to
stock purchased under the ESP Plan, unless the stock is disposed of before
certain holding period requirements are met.
The Board of Directors or the Committee has the right to amend, modify or
terminate the ESP Plan at any time without notice, provided that no employee's
then existing rights are adversely affected without his or her consent, and
provided further that, upon any amendment of the ESP Plan, stockholder approval
will be obtained if required by law.
401(K) PLAN
The Company has adopted a 401(k) Salary Reduction Plan and Trust (the "401(k)
Plan") for eligible employees ("Participants"). Participants may contribute up
to 15% of their current compensation, up to a
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statutorily prescribed annual limit, to the 401(k) Plan. Each Participant is
fully vested in his or her deferred salary contributions. Participant
contributions are held in trust and invested pursuant to Participant direction
from among 20 or more investment funds made available under the 401(k) Plan.
The Company may make matching contributions of 50% of Participants' deferred
salary contributions, up to a maximum of 4% of a Participant's compensation.
The Company's matching contributions vest after a Participant has completed
three years of service, or earlier upon attainment of age 55, death while in
service, retirement for disability or termination of the 401(k) Plan. Payment
of 401(k) Plan benefits are made in a single lump sum payment. Distribution of
a Participant's vested interest in his or her account generally occurs after a
Participant's termination of employment for any reason (including retirement,
death or disability).
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of December 15, 1998, by (i) each person (or a
group of affiliated persons) known by the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock, (ii) each director of the
Company, (iii) each Named Executive Officer and (iv) all executive officers and
directors of the Company as a group. As of such date, there were 5,084,281
shares of Common Stock outstanding before giving effect to the sale of Common
Stock in the Offering.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
OUTSTANDING SHARES OUTSTANDING SHARES
NAME AND ADDRESS OF AMOUNT AND NATURE OF OWNED OWNED
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP BEFORE OFFERING AFTER OFFERING
------------------- -------------------- ------------------ ------------------
<S> <C> <C> <C>
Kevin Kimberlin(2)...... 1,102,240 20.3%
W. Vickery
Stoughton(3)........... 580,777 11.1%
Venturetech, Inc.(4).... 416,494 8.1%
Dr. Thomas H. Grove(5).. 282,120 5.5%
SmithKline Beecham
Corporation............ 229,808 4.5%
Philip B. Smith(6)...... 207,413 4.0%
James R. Koch(7)........ 32,433 0.4%
William F. Flatley(8)... 19,798 0.4%
Anthony P. Brenner(9)... 15,096 0.3%
Kenneth Kermes(10)...... 5,122 0.1%
Diana Mackie............ 4,438 0.1%
C. Alan MacDonald(11)... 4,327 0.1%
All executive officers
and directors as a
group (9 persons)(12).. 1,151,524 21.0%
</TABLE>
- --------
* Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares
beneficially owned by them. A person is deemed to be the beneficial owner
of securities that can be acquired by such person within 60 days from
December 15, 1998 upon the exercise of warrants or options. Each beneficial
owner's percentage ownership is determined by assuming that options or
warrants that are held by such person (but not those held by any other
person) are exercisable within 60 days from December 15, 1998 have been
exercised.
(1) The address of Mr. Kimberlin is: Spencer Trask Securities Incorporated,
535 Madison Avenue, 18th Floor, New York, New York 10022. The address of
Mr. Stoughton, Dr. Grove and Mr. Koch is: Careside, Inc., 6100 Bristol
Parkway, Culver City, California 90230. The address of Venturetech, Inc.
is: Friedli Corp. Finance, Freigustrasse 5, 8002 Zurich, Switzerland. The
address of SmithKline and Ms. Mackie is: One Franklin Plaza, 200 N. 16th
Street, Philadelphia, Pennsylvania 19102. The address of Mr. Smith is:
Laird & Co., LLC, 375 Park Avenue, Suite 2805, New York, New York 10022.
The address of Mr. Flatley is: Executive Health Group, 10 Rockefeller
Plaza, New York, New York 20020-1903. The address of Mr. Brenner is:
Robertson Stephen Funds Investment Management, 555 California Street, San
Francisco, California 94104. The address of Mr. Kermes is: Riparian
Partners, Ltd., 2400 Banc Boston Plaza, Providence, Rhode Island 02903.
The address of Mr. MacDonald is: Directorship, Inc., 8 South Shore Drive,
Greenwich, Connecticut 06830.
(2) Includes 426,850 shares of Common Stock held by Oshkim Limited Partners,
L.P. ("Oshkim"), and 339,041 shares of Common Stock held by Kevin
Kimberlin Partners, L.P. ("KKP"), both of which are limited partnerships
of which Mr. Kimberlin is General Partner. Also includes 20,517 shares of
Common Stock issuable upon the exercise of warrants held by Oshkim, and
38,095 shares of Common Stock issuable upon the exercise of warrants held
by KKP. Also includes 277,737 shares of Common Stock issuable upon the
exercise of warrants owned by Spencer Trask Securities Incorporated of
which Mr. Kimberlin is chairman and exercises voting control. See "Certain
Transactions--Financing Activities."
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<PAGE>
(3) Includes 153,269 shares of Common Stock issuable upon the exercise of
options.
(4) Includes 42,973 shares of Common Stock issuable upon the exercise of
warrants owned by Mr. Peter Friedli, the controlling stockholders of
Venturetech, Inc., or by Pine Incorporated, a corporation owned by Mr.
Friedli.
(5) Includes 76,827 shares of Common Stock issuable upon the exercise of
options.
(6) Includes 50,952 shares of Common Stock owned by, and 108,771 shares of
Common Stock issuable upon the exercise of warrants held by, Private
Equity Partnership, of which Mr. Smith is the General Partner, and 4,327
shares of Common Stock issuable upon exercise of options granted to Mr.
Smith for serving as a director of the Company.
(7) Consists of 32,433 shares of Common Stock issuable upon the exercise of
options.
(8) Includes 4,327 shares of Common Stock issuable upon the exercise of
options granted to Mr. Flatley for serving as a director of the Company.
(9) Includes 5,481 shares of Common Stock issuable upon the exercise of
options, of which options to purchase 1,154 were issued pursuant to a
consulting agreement with an affiliate of Mr. Brenner (See "Certain
Transactions--Financing Activities"), and 4,327 shares of Common Stock
issuable upon the exercise of options granted to Mr. Brenner for serving
as a director of the Company.
(10) Includes 2,163 shares of Common Stock issuable upon the exercise of
options granted to Mr. Kermes for serving as a director of the Company.
(11) Consists of 4,327 shares of Common Stock issuable upon the exercise of
options granted to Mr. MacDonald for serving as a director of the Company.
(12) Includes 283,154 shares of Common Stock issuable upon the exercise of
options and 108,771 shares of Common Stock issuable upon exercise of
warrants. See Footnotes 3 and 5 to 11 above.
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CERTAIN TRANSACTIONS
SmithKline Beecham
In July 1996, the Company entered into a letter of intent with SmithKline and
SBDS, an affiliate of SmithKline, with respect to its point-of-care development
program ("POC Program"). Pursuant to such letter, SmithKline supported the POC
Program by funding $1.8 million of operating expenses for the POC Program for
the period from July 1, 1996 through October 31, 1996 (the "Transition
Period"). At the conclusion of the Transition Period, on November 7, 1996,
pursuant to an Asset Purchase Agreement (the "Asset Purchase Agreement"), SBDS
and SBCL sold to the Company certain fixed and intangible assets used in
connection with the POC Program. As consideration for the purchase of the
assets, SBDS was issued 5% of the Company's total Common Stock outstanding at
that time. Ms. Mackie, Vice President for Strategy and Business Development at
SmithKline Beecham Healthcare Services, a division of SmithKline, has served as
a director of the Company since February 1997 as a representative of
SmithKline.
In addition to the operating funding provided during the Transition Period,
SmithKline made available to the Company a $1.0 million credit facility at an
interest rate of 8% per annum (the "SmithKline Credit Facility"). The
SmithKline Credit Facility was used by the Company to fund research and
development and to establish its production facility by funding capital
purchases, rental payments for the Company's facilities in Culver City,
California and operating expenses. In January 1997, the SmithKline Credit
Facility was converted into an additional 2% of the Company's outstanding
Common Stock simultaneously with the initial closing of the Company's 1997
private placement of Common Stock.
Simultaneously with the closing of the Asset Purchase Agreement, SBCL and the
Company entered into a Distribution and Supply Agreement (the "Distribution and
Supply Agreement") pursuant to which SBCL received exclusive distribution
rights to sell the Company's products to segments of the commercial laboratory
industry. The exclusive distribution rights will extend to 10 of the following
countries: United States, Great Britain, Mexico, Spain, South Africa,
Singapore, Malaysia, Indonesia, Australia, Chile, Argentina, France or Germany,
to the extent and for so long as SBCL or an affiliate of SBCL owns, operates or
manages a clinical laboratory in such country on or before December 31, 2000.
Whenever the Company obtains the necessary approvals to market and sell its
products in a listed country, SBCL must submit purchase orders for the products
within designated time periods in order to preserve its exclusive rights in
that country. Otherwise, the Company will be free to sell its products in that
country to the commercial laboratory industry as well. The Company's ability to
sell its product outside the commercial laboratory industry is not limited by
the contract with SBCL. SBCL and its affiliates are not restricted from
entering into similar commercial distribution arrangements with other point-of-
care diagnostic companies. Pursuant to the Distribution and Supply Agreement,
SBCL will pay the Company a $100,000 annual fee commencing on the date of FDA
Approval in consideration for the grant of exclusivity of the foregoing
distribution rights after product launch. As defined in the Distribution and
Supply Agreement, "FDA Approval" means the date upon which (i) the Company
completes development of the Careside System and at least 25 specified tests
and (ii) the Company receives a license by the FDA for commercial sale and
promotion of the Careside System in the United States, including a certain
number of tests agreed to by SBCL.
Under the Distribution and Supply Agreement, SBCL will, until December 31,
2000 or any earlier termination of the Distribution and Supply Agreement,
supply the Company with clinical samples to enable the Company to validate
tests for its research and development of point-of-care products. The Company
will bear the cost of retrieving the samples and conducting the Company's
comparative validation tests. In addition, the Distribution and Supply
Agreement obligates SBCL, upon FDA Approval, to purchase minimum numbers of
CareSide Analyzers and test cartridges from the Company for the first five
years following such FDA Approval. The Company has agreed to supply SBCL with
its requirements of CareSide Analyzers and cartridges at cost plus a reasonable
margin, and in any event, in an amount equal to the best price offered by the
Company from time to time to any customers in the same country. If the Company
does not develop the CareSide Analyzer and obtain FDA Approval by December 31,
2000, SBCL has the option to terminate the agreement or waive the FDA Approval
requirement. SBCL has agreed to purchase certain minimum quantities of
instruments and cartridges for a five-year period when they are approved for
marketing and sale by the FDA.
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<PAGE>
All intellectual property rights to patents, trademarks or otherwise, which
are associated with the marketing and development of point-of-care products
remain with the Company although the Company and SBCL share certain rights and
responsibilities in the protection of these rights.
Financing Activities
On December 2, 1996, in connection with the establishment of a $1 million
working capital facility, the Company issued Exigent Partners, L.P. 557,600
shares of Common Stock for an aggregate purchase price of $98,995. The working
capital facility was arranged by Exigent Partners, L.P. to be provided to the
Company in the form of a $1 million irrevocable letter of credit from Citibank,
N.A., secured by pledges of cash or cash equivalents by Exigent Partners, L.P.
The general partner of Exigent Partners, L.P. was Kevin Kimberlin, an affiliate
of Spencer Trask Securities Incorporated ("Spencer Trask"), and the limited
partners were Mr. Stoughton, Dr. Grove and Mr. Smith. Of the 557,600 shares of
Common Stock issued to Exigent Partners, L.P., Mr. Kimberlin is the beneficial
owner of 426,850 shares of Common Stock, and Mr. Stoughton and Dr. Grove, both
directors and officers of the Company, beneficially own 36,802 and 18,958
shares of Common Stock, respectively. The Company repaid all funds drawn under
the facility and the letter of credit, both of which have since terminated.
Exigent Partners, L.P. was dissolved and each of its partners received a pro
rata distribution of shares of Common Stock. See "Principal Stockholders."
In 1997 and 1998 the Company undertook two private placements of its Common
Stock (the "1997 Private Placement" and "1998 Private Placement"), both of
which were completed through Spencer Trask. Spencer Trask received
approximately $2.5 million in commissions and expenses from the private
placements, which generated aggregate net proceeds to the Company of $19.0
million. Affiliates of Spencer Trask, including Spencer Trask employees,
received warrants to purchase 384,615 shares of Common Stock at $5.20 per share
in the 1997 Private Placement and warrants to purchase 340,238 shares of Common
Stock at $6.76 per share in the 1998 Private Placement (collectively, the
"Prior Warrants"). Warrants issued in connection with both private placements
will expire three years from the closing of the Offering.
Spencer Trask was granted a right of first refusal for five years from the
final closing under the 1997 Private Placement to purchase for its own account
or to act as underwriter or agent for any proposed public offering or any
private placement of the Company's securities in which the purchasers of units
in the 1997 Private Placement are entitled to preemptive rights under the
Stockholders' Agreement (as defined below), or for any sale of Common Stock by
the former partners of Exigent Partners, L.P. Such right entitles Spencer Trask
to purchase or sell such securities on terms no less favorable than the Company
or such stockholders can obtain elsewhere. Spencer Trask has waived all such
rights.
Upon the first closing of the 1997 Private Placement, the Company and Spencer
Trask entered into an investment banking agreement pursuant to which Spencer
Trask will receive a percentage (ranging from seven percent to two and one-half
percent depending upon the size of the transaction involved) of the
consideration involved in any transaction undertaken by the Company with a
person introduced by Spencer Trask in the five years after final closing under
the 1997 Private Placement. The agreement also provides for Spencer Trask,
subject to certain terms and conditions, to act as the Company's exclusive
representative in advising the Company with respect to executive compensation
benefits, insurance and retirement planning, providing the Company with certain
investment banking services and its cash management needs. Spencer Trask has
waived all such rights relating to investment banking services.
In connection with the 1997 and 1998 Private Placements, the Company and each
of its stockholders and warrantholders entered into a Stockholders' Agreement
(the "Stockholders' Agreement"). The Stockholders' Agreement, which expires by
its terms upon completion of the Offering, provided for the nomination and
election of each of the Company's current directors.
In December 1997, Cedar, an entity owned and controlled by Mr. Brenner, a
director of the Company, provided certain financial consulting services to the
Company in connection with the 1998 Private Placement.
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<PAGE>
In consideration for providing such services, Cedar was reimbursed out-of-
pocket expenses and received options to purchase 1,154 shares of Common Stock
at an exercise price of $.052 per share. These options remain exercisable until
August 8, 2007.
In July 1998, in connection with the relocation of Mr. Koch from Texas to the
Los Angeles area in August 1998, the Company, pursuant to a promissory note
executed in its favor by Mr. Koch, provided a bridge loan to Mr. Koch in the
aggregate principal amount of $125,000. The bridge loan, which was subject to
an interest rate of 7.5% per annum, was paid in full by Mr. Koch on September
21, 1998. As of that date, an aggregate of $125,911 in principal and interest
was owing under the promissory note.
In December 1998, the Company entered into the Bridge Financing with S.R.
One, Limited (the "Investor"), a business trust affiliated with SmithKline.
Pursuant to the securities purchase agreement, the Investor has agreed to
purchase and the Company has agreed to issue and sell notes in the maximum
principal amount of $3.0 million, together with the detachable Bridge Warrant
for the purchase of that number of shares of Common Stock which is equal to
$750,000 divided by 85% of the initial public offering price per share of
Common Stock in the Offering. In addition, the Investor has the right to attend
meetings of, and to receive information distributed to, the Company's Board of
Directors. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources." Ms. Mackie, a director
of the Company, currently serves as a Vice President for Strategy and Business
Development at SBHS, the business development division of SmithKline.
The Company considers the terms of all of the above-referenced transactions
to be at arm's length and reasonably equivalent to terms it could have obtained
through negotiations with unaffiliated third parties under similar economic
conditions. Any transactions undertaken in the future, including loans, between
the Company and any of its officers, directors and principal stockholders or
their affiliates, will be approved by a majority of the entire Board of
Directors, and will be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties. See "Description of Capital Stock--
Takeover Protection and Certain Charter and By-Law Provisions."
59
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon completion of the Offering, the Company's authorized capital stock will
consist of (i) 50,000,000 shares of Common Stock, $.01 par value per share and
(ii) 5,000,000 shares of Preferred Stock, par value $.01 per share, of which
there will be shares of Common Stock and no shares of Preferred Stock
outstanding assuming no exercise of the Underwriters' over-allotment option.
The following description of the capital stock of the Company is a summary and
is qualified in its entirety by the provisions of the Company's Amended and
Restated Certificate of Incorporation and Amended and Restated By-Laws, copies
of which have been filed as exhibits to the Registration Statement of which
this Prospectus forms a part.
COMMON STOCK
The issued and outstanding shares of Common Stock being offered hereby will
be, when sold and issued in accordance herewith, validly issued, fully paid and
non-assessable. Each holder of shares of Common Stock will be entitled to one
vote for each share held of record and may not cumulate votes for election of
directors. The shares will not be entitled to preemptive rights under
applicable law and will not be subject to redemption or assessment. Subject to
the rights and preferences of the holders of any Preferred Stock outstanding in
the future, with a liquidation preference, if any, upon liquidation,
dissolution or winding-up of the Company, the holders of shares of Common Stock
will be entitled to receive, pro rata, the assets of the Company which are
legally available for distribution to stockholders. In addition, subject to the
rights and preferences of the holders of any Preferred Stock outstanding in the
future, the holders of shares of Common Stock will be entitled to share ratably
in dividends as, if and when declared by the Company's Board of Directors. The
Company does not anticipate that any dividends will be paid in the foreseeable
future.
PREFERRED STOCK
In addition to the Common Stock, the Company, without further action by
stockholders, is also authorized to issue up to 5,000,000 shares of Preferred
Stock. The Company's Board of Directors may determine the timing, series,
designation, and number of shares of Preferred Stock to be issued, as well as
the rights, preferences, and limitations of such shares, including those
relating to voting power, redemption, conversion, dividend rights, and
liquidation preferences. The issuance of Preferred Stock could adversely affect
the voting power of the holders of Common Stock or have the effect of
deterring, delaying or preventing any attempt by a person, entity or group to
obtain control of the Company. The Company has no current plans to issue any
shares of Preferred Stock.
WARRANTS
As of December 15, 1998, the Company had outstanding exercisable warrants to
purchase 384,615 shares of Common Stock at $5.20 per share. These warrants were
issued in connection with the 1997 Private Placement and will expire three
years from the closing of the Offering. In addition, the Company, as of
December 15, 1998, had outstanding exercisable warrants to purchase 340,238
shares of Common Stock at $6.76 per share. These warrants were issued in
connection with the 1998 Private Placement and will expire three years from the
closing of the Offering. In addition, the Company issued the Bridge Warrant in
connection with the Bridge Financing. The Bridge Warrant will become
exercisable on the later of December 17, 1999 or six months after the
completion of the Offering for the number of shares of Common Stock which is
equal to $750,000 divided by 85% of the initial public offering price per share
of the Common Stock in the Offering. The Bridge Warrant has an exercise price
of 85% of the initial public offering price. If the Bridge Financing is not
repaid by June 30, 1999, the Bridge Warrant becomes exercisable for twice as
many shares of Common Stock. The Bridge Warrant will expire on the earlier of
December 17, 2005 or four years after the completion of the Offering. Upon the
completion of the Offering, an additional warrants will be issued to the
Representatives. These warrants will have an exercise price equal to 120% of
the initial public offering price and will expire five years from the date of
their issuance. See "Underwriting."
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REGISTRATION RIGHTS
The Company granted investors in the 1997 and 1998 Private Placements certain
automatic, demand and incidental registration rights under Registration Rights
Agreements (the "Investor Registration Agreements"). The Company has granted
similar rights with respect to the shares underlying the Prior Warrants and the
Bridge Warrant. The Company agreed to effect a registration under the
Securities Act for the resale of the Common Stock purchased by investors in the
1997 and 1998 Private Placements and issuable upon exercise of the Prior
Warrants subject to restrictions imposed by the managing underwriter of the
Offering, automatically within 360 days or such later period of time to be
negotiated by representatives of Spencer Trask (on behalf of the investors in
the 1997 and 1998 Private Placements) with such underwriter and the Company at
the closing of the Offering. Pursuant to powers of attorney granted by such
investors and amendments to such agreements, the Company's obligation to effect
such registration has been waived by all directors, officers and principal
stockholders of the Company.
All expenses incurred in connection with the registration of the shares of
Common Stock pursuant to the Investor Registration Agreements and under
registration rights agreements between the Company and the holders of the Prior
Warrants and the Bridge Warrant are to be borne by the Company, other than
underwriting discounts and commissions. All such agreements also provide for
customary indemnification and contribution provisions involving the
participants in any registration effected pursuant thereto. Under the Investor
Registration Agreements, if the Company fails to register the Common Stock
underlying the shares in accordance with the terms of the Investor Registration
Agreements, the Company must either repurchase the shares at the fair market
value thereof to be the average of the appraised value of such shares
calculated by two independent appraisal firms selected by Spencer Trask, or
give investors the ability to elect a majority of the Board of Directors in
order to provide liquidity.
The Company has also granted additional demand and incidental registration
rights to SmithKline which may demand registration under the Securities Act for
the resale of any or all of the Common Stock held by it at any time after the
earlier of the Offering or December 6, 2001. SmithKline has agreed not to make
such a demand for a period of at least one year after consummation of the
Offering. Additionally, if the Company at any time proposes to register an
issuance of its securities (other than in the Offering, debt securities or
securities issued in connection with an employee benefit or stock option plan),
SmithKline may request that any or all of its Common Stock be included in the
registration for resale. Such registrations will be effected by the Company at
the Company's expense, other than as to underwriting discounts and commissions,
and legal fees charged by SmithKline's counsel, all of which will be paid by
SmithKline.
Additionally, Messrs. Stoughton and Smith, Drs. Grove and Asarch and three
additional members of the Company's management (the "Management Holders") and
the former partners of Exigent Partners, L.P. have also been granted certain
demand and incidental registration rights with respect to their Common Stock.
Beneficial owners of a majority of all registrable securities owned by all
Management Holders and the former partners of Exigent Partners, L.P. may demand
on two occasions registration under the Securities Act for the resale of any or
all of their shares of Common Stock at any time after the earlier of 12 months
following the Offering or June 3, 2003. Additionally, if the Company at any
time proposes to register an issuance of its securities (other than debt
securities or securities issued in connection with an employee benefit or stock
option plan), the Management Holders and the former partners of Exigent
Partners, L.P. may request that any or all of their Common Stock be included in
the registration for resale. Such registrations will be effected by the Company
at the Company's expense, except that the Company will not be obligated to pay
any underwriting discounts or commissions or legal fees incurred by the selling
stockholders.
The foregoing is only a summary of certain of the terms and conditions of the
registration rights agreements involving such parties. A copy of the actual
agreement has been filed with the Securities and Exchange Commission as an
exhibit to the Registration Statement of which this Prospectus is a part. See
"Underwriting" for a description of the registration rights pertaining to the
shares of Common Stock issuable upon exercise of the Representatives' Warrants.
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The directors, officers and principal stockholders of the Company have agreed
not to sell, transfer or otherwise dispose of their shares of Common Stock
until one year after completion of the Offering without the prior approval of
Fahnestock & Co. Inc. ("Fahnestock").
TAKEOVER PROTECTION AND CERTAIN CHARTER AND BY-LAW PROVISIONS
Certain provisions of the Delaware General Corporation Law (the "DGCL"), the
Company's Amended and Restated Certificate of Incorporation (the "Charter") and
Amended and Restated By-Laws (the "By-Laws") and the 1996 and 1998 Stock Option
Plans may have an anti-takeover effect and may delay, deter or prevent a tender
offer, proxy contest or other takeover attempt. Such provisions of the DGCL,
the Charter, the By-Laws and the stock option plans might have an anti-takeover
effect even in circumstances where a takeover attempt might result in payment
of a premium over market price for shares held by stockholders.
Following the completion of the Offering, the Company will become subject to
Section 203 of the DGCL. Section 203 prohibits, subject to certain exceptions,
a Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that such
stockholder became an interested stockholder. Section 203 of the DGCL defines
"business combination" to include mergers, asset sales and other transactions
resulting in a financial benefit to the stockholder. In general, Section 203
defines an "interested stockholder" as any person who, together with any
affiliates or associates of such person, beneficially owns, directly or
indirectly, 15% or more of the outstanding voting stock of the corporation.
This prohibition in Section 203 has three exceptions. First, the board of
directors of the corporation must have given prior approval to either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder. Second, upon the consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced. Finally,
at the time of or following the consummation of the transaction in which the
stockholder became an interested stockholder, the business combination is
approved by the board of directors and authorized at an annual or special
meeting of the stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder.
Upon completion of the Offering, the Company's Board of Directors will be
divided into three classes of directors each containing, as nearly as possible,
an equal number of directors. Directors within each class will serve three-year
terms. Approximately one-third of the directors will sit for election at each
annual meeting of the Company's stockholders. All directors elected to the
Company's classified Board of Directors serve until the election and
qualification of their successors or their earlier resignation or removal. The
Board of Directors may create new directorships and fill such positions so
created. In addition, the Board of Directors (or its remaining members, even
though less than a quorum) may fill vacancies on the Board of Directors
occurring for any reason until the next annual election of directors. Members
of the Board of Directors may only be removed for cause. These provisions may
have the effect of deterring or delaying any attempt by any group to obtain
control of the Company by a proxy contest. For example, a third party would be
required to have its nominees elected at two separate annual meetings in order
to elect a majority of the members of the Board of Directors.
The Company may issue 5,000,000 shares of undesignated Preferred Stock. Under
certain circumstances, the issuance of Preferred Stock could be utilized as a
method of discouraging, delaying or preventing a change in control of the
Company.
The Charter provides that any action required or permitted to be taken by the
stockholders of the Company may be effected only at an annual or special
meeting of stockholders. Such action will not be permitted to be taken by
written consent in lieu of a meeting. The Charter and the By-Laws also provide
that special meetings of stockholders may only be called by a majority of the
Board of Directors, the Chairman and the Chief Executive Officer of the
Company. Stockholders will not be permitted to call a special meeting or to
require that the Board of Directors call a special meeting of stockholders.
62
<PAGE>
The Charter provides that any director or the entire Board of Directors may
be removed only for cause and only upon the affirmative vote of holders of 80%
or more of the outstanding shares of capital stock of the Company. Further, the
Charter provides that the amendment of this provision for removing directors
for cause may only be amended by the affirmative vote of at least 75% of the
voting power of all the then outstanding shares of capital stock of the Company
voting together as a single class.
The By-Laws establish an advance notice procedure for nomination, other than
by or at the direction of the Board of Directors, of candidates for election as
directors. Advance notice procedures also exist for other stockholder proposals
to be considered at annual or special meetings of stockholders. In general,
notice of intent to nominate a director or raise business at an annual meeting
must be received by the Company not less than 60 nor more than 90 days prior to
the scheduled annual meeting. In the case of a special meeting called for the
purpose of electing directors, such notice of intent must be received not later
than the close of business on the fifth day following the day on which notice
of the date of the meeting was mailed. Such notice of intent must contain
certain specified information concerning the person to be nominated or the
mater to be brought before the meeting. In addition, the By-Laws provide that
special meetings of the stockholders may only be called by the Chairman of the
Board of Directors and Chief Executive Officer or at the request in writing by
a majority of the Board of Directors.
In addition, the By-Laws allow the Board of Directors to increase the number
of directors from time to time (although a decrease in the number of directors
may not have the effect of shortening the term of any incumbent director). The
By-Laws also grant the Board of Directors the authority to fill any vacancies
on the Board of Directors, including vacancies resulting from an increase in
the number of directors. The Charter states that the By-Laws may be amended by
the stockholders only by the vote of not less than 80% of the outstanding
shares of stock entitled to vote upon the election of directors.
The provisions of the Charter and the By-Laws summarized in the preceding
paragraphs may have the effect of delaying, deferring or preventing a non-
negotiated merger or other business combination involving the Company. These
provisions are intended to encourage any person interested in acquiring the
Company to negotiate with and obtain the approval of the Board of Directors in
connection with the transaction. Certain of these provisions may, however,
discourage a future acquisition of the Company not approved by the Board of
Directors in which stockholders might receive an attractive value for their
shares or that a substantial number or even a majority of the Company's
stockholders might believe to be in their best interest. As a result,
stockholders who desire to participate in such a transaction may not have the
opportunity to do so. Such provisions could also discourage bids for the Common
Stock at a premium, as well as create a depressive effect on the market price
of the Common Stock. See "Risk Factors--Anti-Takeover Provisions."
The 1996 Stock Option Plans and the 1998 Stock Option Plans, in certain
circumstances, allow the Board of Directors or a committee thereof to
accelerate the vesting or exercise date of any options granted thereunder. See
"Management--Stock Option Plans." The ability to accelerate the vesting or
exercise date of options could be utilized as a method of discouraging,
delaying or preventing a change in control of the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
63
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company expects to have shares of
Common Stock outstanding, assuming no exercise of the Underwriters' over-
allotment option and no exercise of outstanding options or warrants (or
shares if the Underwriters' over-allotment is exercised in full). Of these
shares, the shares of Common Stock sold in the Offering will be freely
tradeable without restrictions or further registration under the Securities
Act, except that any shares purchased by "affiliates" of the Company, as that
term is defined under the Securities Act ("Affiliates"), may generally only be
sold in compliance with the limitations of Rule 144 ("Rule 144") under the
Securities Act. All of the remaining outstanding shares of Common Stock are
restricted securities ("Restricted Shares") within the meaning of Rule 144 and
may not be sold in the absence of registration under the Securities Act unless
an exemption from registration is available, including the exemption from
registration offered by Rule 144.
Holders of Restricted Shares have agreed (the "Lock-Up Agreements") not to
sell or otherwise dispose of any of their shares of Common Stock for a period
of one year after completion of the Offering (the "Lock-Up Period") without the
prior written consent of Fahnestock, subject to certain limited exceptions.
After the expiration of the Lock-Up Period (or earlier upon the prior written
consent of Fahnestock) shares of the Common Stock may be sold in the public
market subject to Rule 144.
In general, under Rule 144, as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are required to
be aggregated) who has beneficially owned Restricted Shares for at least one
year, including a person who may be deemed to be an Affiliate of the Company,
may sell within any three-month period a number of shares of Common Stock that
does not exceed the greater of (i) 1% of the then outstanding shares of Common
Stock of the Company or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks immediately preceding such sale. Sales
under Rule 144 are also subject to certain restrictions relating to manner of
sale, notice and availability of current public information about the Company.
In addition, under Rule 144(k) of the Securities Act, a person who is not an
Affiliate of the Company, has not been an Affiliate within three months prior
to the sale and has beneficially owned shares for at least two years would be
entitled to sell such shares immediately without regard to volume limitations,
manner of sale provisions, notice or other requirements of Rule 144.
Beginning 90 days after the date of this Prospectus, certain shares issued or
issuable upon the exercise of options granted by the Company prior to the date
of this Prospectus will also be eligible for sale in the public market pursuant
to Rule 701 under the Securities Act. Pursuant to Rule 701, persons who
purchase shares upon exercise of options granted under a written compensatory
plan or contract may sell such shares in reliance on Rule 144 without having to
comply with the holding period requirements of Rule 144, and in the case ofnon-
Affiliates, without having to comply with the public information, volume
limitation or notice provisions of Rule 144. As of December 15, 1998, the
Company has options outstanding to purchase 410,721 shares of Common Stock
which have not been exercised and which become exercisable at various times in
the future. Any shares issued upon the exercise of these options will be
eligible for sale pursuant to Rule 701.
The Company intends to file a Form S-8 Registration Statement under the
Securities Act approximately 180 days after the closing of the Offering to
register an aggregate of 1,184,210 shares of Common Stock reserved for issuance
under the Company's 1996 and 1998 Stock Option Plans. See "Management--Stock
Option Plans." Accordingly, shares registered under such registration statement
will, subject to Rule 144 volume limitations applicable to Affiliates, be
available for sale in the open market, unless such options are subject to
vesting restrictions or the Lock-Up Agreements. As of December 15, 1998,
options to purchase 410,721 shares were outstanding and 773,489 shares of
Common Stock remained available for future grant under the 1996 and 1998 Stock
Option Plans.
64
<PAGE>
The Company has issued the Prior Warrants which are exercisable to purchase
an aggregate of 724,853 shares of Common Stock at exercise prices ranging $5.20
to $6.76 per share. The Bridge Warrant will become exercisable on the later of
December 17, 1999 or six months after the completion of the Offering to
purchase such number of shares of Common Stock determined by $750,000 by 85% of
the initial public offering price per share. The Bridge Warrant has an exercise
price of 85% of the initial public offering price and will expire on the
earlier of December 17, 2005 or four years after the completion of the
Offering. The holders of the Prior Warrants and the Bridge Warrant are entitled
to certain registration rights with respect to the shares issuable upon
exercise of such warrants. These shares may be sold without restriction in the
public market upon registration, and with respect to of these shares,
after the Lock-Up Period expires.
Prior to the Offering, there has been no market for the Common Stock of the
Company and there can be no assurance that a significant public market for the
Common Stock will develop or be sustained after the Offering. Future sales of
substantial amounts of Common Stock (including shares issued upon exercise of
outstanding options and warrants) in the public market after the Offering, or
the perception that such sales may occur, could adversely affect market prices
prevailing from time to time and could impair the Company's ability to raise
capital through the sale of its securities.
The holders of the Representatives' Warrants have been granted certain
registration rights with respect to the shares issuable upon exercise of the
Representatives' Warrants. The Representatives' Warrants will be exercisable
during the four-year period commencing one year after the date of their
issuance. The sale, or availability for sale, of the outstanding shares of
Common Stock underlying the Representatives' Warrants in the public market
subsequent to the Offering could adversely affect the prevailing market price
of the shares of Common Stock.
65
<PAGE>
UNDERWRITING
The Underwriters named below, for whom Fahnestock, Wedbush Morgan Securities
and Southeast Research Partners, Inc. are acting as the Representatives, have
severally agreed, subject to the terms and conditions contained in an
underwriting agreement (the "Underwriting Agreement"), to purchase from the
Company, and the Company has agreed to sell to each Underwriter, the aggregate
number of shares of Common Stock indicated below opposite the name of such
Underwriter at the initial public offering price less the underwriting discount
set forth below and on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NAME OF UNDERWRITER PURCHASED
- ------------------- ---------
<S> <C>
Fahnestock & Co. Inc..................................................
Wedbush Morgan Securities.............................................
Southeast Research Partners, Inc......................................
---
TOTAL...............................................................
===
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions and that the Underwriters are committed to
purchase all of the shares (other than those covered by the over-allotment
option described below) if any are purchased. The Underwriting Agreement also
provides that the Company will indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and will
contribute to payments which the Underwriters may be required to make in
respect thereof.
The Representatives have advised the Company that the Underwriters propose to
offer the Common Stock directly to the public initially at the public offering
price set forth on the cover page of this Prospectus and to certain dealers
(who may include the Underwriters) at such public offering price less a selling
concession not to exceed $ per share. The Underwriters may allow, and such
dealers may reallow, a concession of not more than $ per share to certain
other dealers. After the Offering, the offering price, the concession to
certain dealers and other selling terms may be changed by the Representatives.
The Underwriters have agreed not to confirm sales of Common Stock offered
hereby to any account over which they exercise discretionary authority without
the prior written approval of the customer.
The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to a maximum of
additional shares of Common Stock solely to cover over-allotments, if any,
at the initial public offering price less the underwriting discount set forth
herein. To the extent that the Underwriters exercise such option, each
Underwriter will be committed, subject to certain conditions, to purchase
approximately the same proportion of additional shares as the number of shares
to be purchased by it shown in the preceding table bears to the total number of
shares of Common Stock initially offered hereby.
Without the prior written consent of Fahnestock, holders of shares of
Common Stock and certain option and warrant holders (including the Company's
officers and directors) are not permitted to offer, pledge, sell, contract to
sell or otherwise transfer or dispose of, directly or indirectly, their
securities until after , 2000 (one year after the closing of the Offering).
Such prohibition does not apply to the potential issuance of Common Stock by
the Company upon exercise of the over-allotment option or to the Company's
grant of options under the 1996 and 1998 Stock Option Plans.
66
<PAGE>
The following table sets forth the amount of the underwriting discount and
the nature of the compensation to be paid to the Underwriters for each share of
Common Stock and in total. Such amounts are shown assuming both no exercise and
full exercise of the Underwriters' over-allotment option.
<TABLE>
<CAPTION>
COMPENSATION TO BE PAID TO UNDERWRITERS
---------------------------------------------------------
NO EXERCISE OF OVER- FULL EXERCISE OF OVER-
ALLOTMENT OPTION ALLOTMENT OPTION
---------------------------- ----------------------------
PER SHARE TOTAL PER SHARE TOTAL
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Underwriting Discount...
Representatives'
Warrants(1)............ 1/10th Warrant [ ] Warrants 1/10th Warrant [ ] Warrants
Non-accountable Expense
Allowance(2)........... N/A $ 250,000 N/A $ 250,000
</TABLE>
- --------
(1) In connection with the Offering, the Company has agreed to issue the
Representatives' Warrants to purchase a number of shares of Common Stock
equal to ten percent (10%) of the number of shares of Common Stock being
offered hereby, excluding over-allotment shares. The Representatives'
Warrants will be exercisable during the four-year period commencing one
year after the date of their issuance, at an exercise price equal to one
hundred twenty percent (120%) of the initial public offering price set
forth on the cover page of this Prospectus. The Representatives' Warrants
may not be transferred, except to affiliates of the Representatives. The
Representatives are entitled to certain rights with respect to the
registration of the Common Stock issuable upon the exercise of the
Representatives' Warrants (the "Warrant Shares") for offer and sale to the
public under the Securities Act. To the extent that the Representatives
realize any gain from the resale of the Warrant Shares, such gain may be
deemed additional underwriting compensation.
(2) The Company has also agreed to pay Fahnestock a non-accountable expense
allowance equal to 1% of the gross proceeds of the Offering, up to a
maximum of $250,000, of which $60,000 has been paid to date.
The Company and Fahnestock will enter into an investment banking agreement
which, among other things, will grant Fahnestock a right of first refusal in
connection with any investment banking services required by the Company for a
period of 18 months after the consummation of the Offering. In addition,
Fahnestock has the right to nominate one person to the Company's Board of
Directors who is acceptable to the Company. Such nominee may be a director,
officer, partner, employee or affiliate of Fahnestock. As of December 15, 1998,
Fahnestock has not exercised its right to nominate any person to the Company's
Board of Directors. However, Fahnestock is expected to exercise its right and
nominate a person to the Company's Board of Directors after the closing of the
Offering. Fahnestock also has the right to have one additional person attend
all meetings of the Company's Board of Directors and to have such person
receive all information provided to the Company's Board of Directors for a
period of 18 months after the closing of the Offering.
67
<PAGE>
The following table sets forth an itemization of all expenses payable by the
Company in connection with the issuance and distribution of the securities
being registered. Except for the SEC Registration Fee, the Nasdaq National
Market Listing Fee and the NASD Fee, the amounts listed below are estimates.
<TABLE>
<CAPTION>
NATURE OF EXPENSE AMOUNT
- ----------------- ----------
<S> <C>
SEC Registration Fee................................................ $ 8,896
Nasdaq National Market Listing Fee.................................. 72,875
NASD Fee............................................................ 3,663
Printing and engraving fees......................................... 120,000
Registrant's counsel fees and expenses.............................. 250,000
Accounting fees and expenses........................................ 125,000
Spencer Trask Fee................................................... 100,000
Underwriters' Expenses.............................................. 250,000
Blue Sky expenses and counsel fees.................................. 25,000
Transfer agent and registrar fees................................... 8,000
Miscellaneous....................................................... 36,566
----------
TOTAL............................................................. $1,000,000
==========
</TABLE>
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price for the Common Stock will be negotiated
between the Company and the Representatives and will not necessarily bear any
relationship to the Company's assets, book value, revenues or other established
criteria of value. The initial public offering price should not be considered
to be indicative of the actual value of the Company. Among the factors to be
considered in determining the initial public offering price, in addition to
prevailing market conditions, will be the prospects for the Company's business
and the industry in which it competes, an assessment of the Company's
management, the Company's capital structure, its past and present operations,
its prospects for future earnings and other factors deemed relevant. There can
be no assurance that an active trading market will develop for the Common Stock
or that the prices at which the Common Stock will sell in the public market
after the Offering will not be lower than the price at which it will be sold in
the Offering.
In connection with the Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Regulation M of the Securities Exchange Act of 1934, as amended, pursuant
to which such persons may bid for or purchase Common Stock for the purpose of
pegging, fixing or maintaining the price of the Common Stock at a level that is
higher than the market would dictate in the absence of such transactions.
The Underwriters may also create a short position for the account of the
Underwriters by selling more shares of Common Stock in connection with the
Offering than they are committed to purchase from the Company, and in such case
may purchase Common Stock in the open market following the completion of the
Offering to cover all or a portion of such short position. The Underwriters may
also cover all or a portion of such short position, up to shares of Common
Stock, by exercising the over-allotment option described herein.
In addition, the Representative may also impose a "penalty bid" under
contractual arrangements with the Underwriters whereby the Representatives may
reclaim from an Underwriter (or dealer participating in the Offering), for the
account of other Underwriters, the selling concession with respect to Common
Stock that is distributed in the Offering but subsequently purchased for the
account of the Underwriters in the open market.
In general, any of the transactions described above may result in the
maintenance of the price of the Common Stock at a level above that which might
otherwise prevail in the absence of such transactions. Neither the Company nor
any of the Underwriters makes any representation or prediction as to the
direction or magnitude of any effect that such transactions may have on the
price of the Common Stock. In addition, neither
68
<PAGE>
the Company nor any of the Underwriters makes any representation that the
Representatives or the Underwriters, as the case may be, will engage in such
transactions or that such transactions, once commenced, will not be
discontinued without notice.
Spencer Trask is not participating as an underwriter or member of the selling
group in the Offering but will be paid a fee of $100,000 by the Company upon
completion of the Offering pursuant to a placement agency agreement between the
Company and Spencer Task entered into in connection with the 1998 Private
Placement. See "Certain Transactions--Financing Activities."
LEGAL MATTERS
The validity of shares of Common Stock offered hereby will be passed upon for
the Company by Pepper Hamilton LLP. Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., Boston, Massachusetts has acted as counsel for the Underwriters in
connection with the Offering.
EXPERTS
The audited financial statements included in this Prospectus and elsewhere in
the registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
WHERE YOU CAN GET MORE INFORMATION
Our fiscal year ends on December 31. We will file annual, quarterly and
current reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). You may read and copy any reports,
statements or other information on file at the Commission's public reference
room in Washington, D.C. You can request copies of those documents, upon
payment of a duplicating fee, by writing to the Commission.
We have filed a Registration Statement on Form S-1 with the Commission. This
Prospectus, which forms a part of the Registration Statement, does not contain
all of the information included in the Registration Statement. Certain
information is omitted and you should refer to the Registration Statement and
its exhibits. With respect to references made in this Prospectus to any
contract or other document of Careside, such references are not necessarily
complete and you should refer to the exhibits attached to the Registration
Statement for copies of the actual contract or document. You may review a copy
of the Registration Statement at the Commission's public reference room in
Washington, D.C., and at the Commission's regional offices in Chicago, Illinois
and New York, New York. Please call the Commission at 1-800-SEC-0330 for
further information on the operation of the public reference rooms. Our
Commission filings, including the Registration Statement, can also be reviewed
by accessing the Commission's Internet site at http://www.sec.gov.
69
<PAGE>
CARESIDE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY:
Report of Independent Public Accountants................................. F-2
Balance Sheets........................................................... F-3
Statements of Operations................................................. F-4
Statements of Stockholders' Equity (Deficit)............................. F-5
Statements of Cash Flows................................................. F-6
Notes to Financial Statements............................................ F-7
PREDECESSOR BUSINESS:
Report of Independent Public Accountants................................. F-13
Statements of Certain Expenses........................................... F-14
Notes to Statements of Certain Expenses.................................. F-15
</TABLE>
F-1
<PAGE>
After the recapitalization referred to in Note 2 to the Financial Statements
is effected, we will be in a position to render the following report.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
December 17, 1998
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Careside, Inc.:
We have audited the accompanying balance sheets of Careside, Inc. (a Delaware
corporation in the development stage) as of December 31, 1996 and 1997, and the
related statements of operations, stockholders' equity (deficit) and cash flows
for the period from inception (July 10, 1996) to December 31, 1996, the year
ended December 31, 1997, and the period from inception (July 10, 1996) to
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Careside, Inc. as of December
31, 1996 and 1997, and the results of its operations and its cash flows for the
period from inception (July 10, 1996) to December 31, 1996, the year ended
December 31, 1997, and the period from inception (July 10, 1996) to December
31, 1997, in conformity with generally accepted accounting principles.
Philadelphia, Pa.,
March 26, 1998 (except for the
recapitalization discussed in Note 2,
as to which the date is , 1999)
F-2
<PAGE>
CARESIDE, INC.
(A DEVELOPMENT-STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1996 1997 1998
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............. $ 31,041 $1,237,149 $ 2,827,880
Short-term investments................. -- -- 1,647,891
Prepaid expenses and other............. 15,840 226,580 895,473
---------- ---------- -----------
Total current assets................. 46,881 1,463,729 5,371,244
PROPERTY AND EQUIPMENT, net.............. 836,075 1,578,727 1,999,201
DEFERRED FINANCING COSTS................. 191,906 -- 221,366
DEPOSITS................................. 117,700 97,767 17,700
---------- ---------- -----------
$1,192,562 $3,140,223 $ 7,609,511
========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Line of credit......................... $ 400,000 $ -- $ --
Note payable to SmithKline Beecham
Corporation........................... 1,000,000 -- --
Accounts payable....................... 284,079 492,985 1,297,845
Accrued expenses....................... 575,301 209,631 167,966
---------- ---------- -----------
Total current liabilities............ 2,259,380 702,616 1,465,811
---------- ---------- -----------
COMMITMENTS (Note 9)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value,
5,000,000 shares authorized, none
issued -- -- --
Common stock, $.01 par value,
50,000,000 shares authorized,
1,312,753, 3,365,385 and 5,084,281
shares issued and outstanding......... 13,128 33,654 50,843
Additional paid-in capital............. 657,220 10,372,907 20,673,431
Stock subscription receivable.......... (98,995) -- --
Deficit accumulated during development
stage................................. (1,638,171) (7,968,954) (14,580,574)
---------- ---------- -----------
Total stockholders' equity
(deficit)........................... (1,066,818) 2,437,607 6,143,700
---------- ---------- -----------
$1,192,562 $3,140,223 $ 7,609,511
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
CARESIDE, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
FROM FROM FROM
INCEPTION INCEPTION INCEPTION
(JULY 10, 1996) FOR THE YEAR FOR THE NINE MONTHS (JULY 10, 1996) (JULY 10, 1996)
THROUGH ENDED ENDED SEPTEMBER 30, THROUGH THROUGH
DECEMBER 31, DECEMBER 31, ------------------------ DECEMBER 31, SEPTEMBER 30,
1996 1997 1997 1998 1997 1998
--------------- ------------ ----------- ----------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
Research and
development........... $ 1,561,847 $ 5,895,465 $ 4,501,489 $ 6,158,973 $ 7,457,312 $ 13,616,285
General and
administrative........ 55,515 640,574 452,431 648,530 696,089 1,344,619
----------- ----------- ----------- ----------- ----------- ------------
Operating loss......... (1,617,362) (6,536,039) (4,953,920) (6,807,503) (8,153,401) (14,960,904)
INTEREST INCOME......... -- 213,585 180,901 195,883 213,585 409,468
INTEREST EXPENSE........ (20,809) (8,329) (8,329) -- (29,138) (29,138)
----------- ----------- ----------- ----------- ----------- ------------
NET LOSS................ $(1,638,171) $(6,330,783) $(4,781,348) $(6,611,620) $(7,968,954) $(14,580,574)
=========== =========== =========== =========== =========== ============
BASIC NET LOSS PER
SHARE.................. $ (2.25) $ (2.04) $ (1.59) $ (1.48)
=========== =========== =========== ===========
SHARES USED IN COMPUTING
BASIC NET LOSS PER
SHARE 728,465 3,098,980 3,009,203 4,476,796
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
CARESIDE, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL STOCK DURING TOTAL
----------------- PAID-IN SUBSCRIPTION DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT CAPITAL RECEIVABLE STAGE EQUITY (DEFICIT)
--------- ------- ----------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 10, 1996
(inception)............ -- $ -- $ -- $ -- $ -- $ --
Shares issued to
founders and
management............ 659,342 6,593 (6,593) -- -- --
Shares issued to
SmithKline Beecham
Corporation in
connection with asset
purchase.............. 34,702 347 571,006 -- -- 571,353
Sale of shares to
Exigent Partners,
L.P................... 557,600 5,576 93,419 (98,995) -- --
Shares issued to
investment banker in
connection with equity
financing............. 30,173 302 (302) -- -- --
Shares issued to
SmithKline Beecham
Corporation pursuant
to antidilution
agreement............. 30,936 310 (310) -- -- --
Net loss............... -- -- -- -- (1,638,171) (1,638,171)
--------- ------- ----------- ------- ------------ ----------
BALANCE, DECEMBER 31,
1996................... 1,312,753 13,128 657,220 (98,995) (1,638,171) (1,066,818)
Shares issued in
connection with
private placement, net
of expenses of
$1,291,772 1,923,077 19,231 8,688,998 -- -- 8,708,229
Shares issued to
SmithKline Beecham
Corporation upon
conversion of note
payable............... 129,555 1,295 1,026,689 -- -- 1,027,984
Payment of stock
subscription.......... -- -- -- 98,995 -- 98,995
Net loss............... -- -- -- -- (6,330,783) (6,330,783)
--------- ------- ----------- ------- ------------ ----------
BALANCE, DECEMBER 31,
1997................... 3,365,385 33,654 10,372,907 -- (7,968,954) 2,437,607
Shares issued in
connection with
private placement, net
of expenses of
$1,302,029 (unaudited) 1,701,183 17,012 10,180,959 -- -- 10,197,971
Shares issued in
connection with
exercise of stock
options (unaudited) 17,713 177 119,565 -- -- 119,742
Net loss (unaudited)... -- -- -- -- (6,611,620) (6,611,620)
--------- ------- ----------- ------- ------------ ----------
BALANCE, SEPTEMBER 30,
1998 (unaudited)....... 5,084,281 $50,843 $20,673,431 $ -- $(14,580,574) $6,143,700
========= ======= =========== ======= ============ ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
CARESIDE, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
FROM FROM FROM
INCEPTION INCEPTION INCEPTION
(JULY 10, 1996) FOR THE YEAR FOR THE NINE MONTHS (JULY 10, 1996) (JULY 10, 1996)
THROUGH ENDED ENDED SEPTEMBER 30 THROUGH THROUGH
DECEMBER 31, DECEMBER 31, ------------------------ DECEMBER 31, SEPTEMBER 30,
1996 1997 1997 1998 1997 1998
--------------- ------------ ----------- ----------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.............. $(1,638,171) $(6,330,783) $(4,781,348) $(6,611,620) $(7,968,954) $(14,580,574)
Adjustments to
reconcile net loss to
net cash used in
operating
activities--
Depreciation.......... 12,275 145,858 109,394 441,223 158,133 599,356
Imputed interest on
note payable......... -- 8,329 8,329 -- 8,329 8,329
Changes in assets and
liabilities--
Increase in prepaid
expenses and other... (15,840) (210,740) (41,650) (668,893) (226,580) (895,473)
Decrease (increase) in
deposits............. (102,700) 19,933 20,895 80,067 (82,767) (2,700)
Increase in accounts
payable.............. 284,079 208,906 270,408 804,860 492,985 1,297,845
Increase (decrease) in
accrued expenses..... 575,301 (346,014) (446,703) (41,665) 229,287 187,622
----------- ----------- ----------- ----------- ----------- ------------
Net cash used in
operating
activities.......... (885,056) (6,504,511) (4,860,675) (5,996,028) (7,389,567) (13,385,595)
----------- ----------- ----------- ----------- ----------- ------------
INVESTING ACTIVITIES:
Purchases of short-
term investments..... -- -- -- (1,647,891) -- (1,647,891)
Purchases of property
and equipment........ (344,733) (888,510) (767,821) (861,697) (1,233,243) (2,094,940)
----------- ----------- ----------- ----------- ----------- ------------
Net cash used in
investing
activities.......... (344,733) (888,510) (767,821) (2,509,588) (1,233,243) (3,742,831)
----------- ----------- ----------- ----------- ----------- ------------
FINANCING ACTIVITIES:
Net borrowings
(repayments) on line
of credit............ 400,000 (400,000) (400,000) -- -- --
Proceeds from note
payable.............. 1,000,000 -- -- -- 1,000,000 1,000,000
Deferred financing
costs................ (191,906) -- -- (221,366) (191,906) (413,272)
Proceeds from the
issuance of Common
stock................ -- 8,900,134 8,900,134 10,317,713 8,900,134 19,217,847
Payment of stock
subscription......... -- 98,995 98,995 -- 98,995 98,995
Cash received from
SmithKline Beecham
Corporation in
connection with asset
purchase............. 52,736 -- -- -- 52,736 52,736
----------- ----------- ----------- ----------- ----------- ------------
Net cash provided by
financing
activities........... 1,260,830 8,599,129 8,599,129 10,096,347 9,859,959 19,956,306
NET INCREASE IN CASH
AND CASH EQUIVALENTS.. 31,041 1,206,108 2,970,633 1,590,731 1,237,149 2,827,880
CASH AND CASH
EQUIVALENTS, BEGINNING
OF PERIOD............. -- 31,041 31,041 1,237,149 -- --
----------- ----------- ----------- ----------- ----------- ------------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD................ $31,041 $1,237,149 $3,001,674 $2,827,880 $1,237,149 $2,827,880
=========== =========== =========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
CARESIDE, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY:
BACKGROUND
Careside, Inc. (the "Company"), formerly Exigent Diagnostics, Inc., is
focused on designing products intended to perform routine diagnostic blood
tests in doctors' offices, hospital rooms, patient homes or anywhere a patient
is receiving medical attention. The Company's first product in development is a
compact portable device with related disposables that performs chemistry,
electrochemistry, immunochemistry and coagulation testing.
DEVELOPMENT-STAGE RISKS
The Company was incorporated in July 1996 to acquire an ongoing, point-of-
care ("POC") testing, development-stage product from SmithKline Beecham
Corporation ("SmithKline") and to complete the development of and to
manufacture, market and distribute POC diagnostic products. Since its
inception, the Company has generated no revenues and incurred significant
losses. The Company anticipates incurring additional losses over at least the
next several years, and such losses are expected to increase as the Company
expands its research and development activities. Substantial financing will be
needed by the Company to fund its operations and to commercially develop its
products. The ability of the Company to commercialize its products will depend
on, among other things, the relative cost to the customer of the Company's
products compared to alternative products, its ability to obtain necessary
regulatory approvals and to manufacture the products in accordance with Good
Manufacturing Practices, and its ability to market and distribute its products.
There can be no assurance that the Company's research and development efforts
will be successful or that any products developed by the Company will receive
regulatory clearance or be profitable in the marketplace.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL STATEMENTS
The financial statements as of September 30, 1998 and for the nine months
ended September 30, 1997 and 1998 are unaudited and, in the opinion of
management, include all adjustments (consisting only of normal and recurring
adjustments) necessary for a fair presentation of results for these interim
periods. The results of operations for the nine months ended September 30, 1998
are not necessarily indicative of the results expected for the entire year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of expenses during the reporting period. Actual results
could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments consisting of purchases
with an original maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Property and equipment capitalized
under capital leases are recorded at the present value of the minimum lease
payments due over the lease term. Depreciation and
F-7
<PAGE>
amortization are provided using the straight-line method over the estimated
useful lives of the related assets or the lease term, whichever is shorter. The
Company uses lives of three to five years for research and manufacturing
equipment and five to seven years for office equipment.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred.
INCOME TAXES
The Company follows Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes." Under SFAS No. 109, the liability method is
used in accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax bases of assets and liabilities and are measured using enacted tax
rates that are expected to be in effect when the differences reverse.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company applies Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," in accounting for its stock
options. The Company follows the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation," which permits pro forma disclosure
of the net loss using a fair value-based method of accounting for employee
stock option plans (see Note 8).
NET LOSS PER COMMON SHARE
The Company has presented net loss per share pursuant to SFAS No. 128,
"Earnings per Share," and the Securities and Exchange Commission Staff
Accounting Bulletin No. 98. Net loss per share is computed using the weighted
average number of common and dilutive common equivalent shares outstanding
during the period.
Basic loss per share was computed by dividing net loss applicable to common
shareholders by the weighted average number of shares of Common stock
outstanding during the period. Dilutive loss per share has not been presented,
since the impact on loss per share using the treasury stock method is anti-
dilutive due to the Company's losses.
RECAPITALIZATION
In 1999, the Company's stockholders approved a 1-for-5.2 reverse
stock split of the Company's Common stock. All references in the accompanying
financial statements to the number of shares and per share amounts have been
retroactively restated to reflect the reverse stock split.
RECENTLY ISSUED PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." This statement requires companies to
classify items of other comprehensive income separately from retained earnings
and additional paid-in capital in the stockholders' equity section of the
balance sheet. SFAS No. 130 is effective for financial statements issued for
fiscal years beginning after December 15, 1997. Management believes that SFAS
No. 130 will not have a material adverse effect on the Company's financial
statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." This statement establishes additional
standards for segment reporting in the financial statements and is effective
for fiscal years beginning after December 15, 1997. Management is currently
evaluating the need to make additional disclosures under SFAS No. 131. However,
this statement will not have any effect on the Company's reported financial
position or results of operations.
F-8
<PAGE>
3. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1996 1997 1998
-------- ---------- -------------
<S> <C> <C> <C>
Laboratory equipment.................. $659,613 $1,280,663 $1,966,185
Leasehold improvements................ 162,972 371,239 371,239
Computer and office equipment......... 25,765 84,958 105,183
-------- ---------- ----------
848,350 1,736,860 2,442,607
Less-Accumulated depreciation and
amortization......................... (12,275) (158,133) (443,406)
-------- ---------- ----------
$836,075 $1,578,727 $1,999,201
======== ========== ==========
</TABLE>
Depreciation and amortization expense for the period from inception (July 10,
1996) through December 31, 1996, the year ended 1997, the nine months ended
September 30, 1997 and 1998, the period from inception (July 10, 1996) through
December 31, 1997 and the period from inception (July 10, 1996) through
September 30, 1998 was $12,275, $145,858, $109,394, $285,273, $158,133 and
$443,406, respectively.
4. INCOME TAXES:
At December 31, 1997, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $686,000. In addition, the Company
has federal research and development credit carryforwards of approximately
$129,000. The net operating loss and credit carryforwards begin to expire in
2011 and are subject to review and possible adjustment by the Internal Revenue
Service. The Tax Reform Act of 1986 contains provisions that may limit the net
operating loss carryforwards available to be used in any given year in the
event of significant changes in ownership interest.
The approximate income tax effect of each type of temporary difference and
carryforward is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- ----------
<S> <C> <C>
Net operating loss carryforwards.......................... $ 33,865 $ 233,188
Research and development credit carryforwards............. 52,246 128,623
Capitalized research and development...................... 501,546 2,219,926
Start-up costs............................................ 17,381 185,906
Nondeductible accruals.................................... -- 8,779
Nondeductible depreciation and amortization............... 4,174 53,765
Valuation allowance....................................... (609,212) (2,830,187)
-------- ----------
$ -- $ --
======== ==========
</TABLE>
Due to the uncertainty surrounding the realization of the deferred tax asset,
the Company has provided a full valuation allowance against this asset.
5. COMMON STOCK PRIVATE PLACEMENTS:
In March 1997, the Company completed a private placement (the "1997 Private
Placement") of 1,923,077 shares of its Common stock at $5.20 per share. The
1997 Private Placement raised approximately $8,800,000, net of the placement
agent's commission and offering costs. In connection with the 1997 Private
Placement, the placement agent and its affiliates received warrants to purchase
384,615 shares of the Company's Common stock at $5.20 per share, exercisable
for seven years from the date of issuance or three years from the closing of an
initial public offering (the "Offering").
In June 1998, the Company completed a private placement (the "1998 Private
Placement") of 1,701,183 shares of its Common stock at $6.76 per share, which
generated net proceeds of approximately $10,200,000. In
F-9
<PAGE>
connection with the 1998 Private Placement, the placement agent and its
affiliates received warrants to purchase 340,238 shares of the Company's Common
stock at $6.76 per share, exercisable for seven years from the date of issuance
or three years from the closing of the Offering.
6. TRANSACTIONS WITH SMITHKLINE:
On November 7, 1996, the Company and SmithKline entered into an Asset
Purchase Agreement (the "Agreement") under which the Company acquired certain
assets and intangible property related to SmithKline's POC business in exchange
for a 5% equity interest in the Company. In connection with the Agreement,
SmithKline loaned the Company $1,000,000, which was converted into an
additional 2% equity interest in the Company upon the closing of the 1997
Private Placement (see Note 5). The Agreement provided for certain antidilution
protection, which required the Company to issue additional shares of Common
stock to SmithKline such that it maintained its 7% ownership interest, until a
defined equity financing was completed. Upon the closing of the 1997 Private
Placement, the antidilution protection lapsed and SmithKline owned 195,193
shares, representing 5.8% of the then outstanding Common stock. The tangible
property received in connection with the Agreement was as follows:
<TABLE>
<S> <C>
Cash........................................................... $ 52,736
Property and equipment......................................... 503,617
Deposit........................................................ 15,000
--------
$571,353
========
</TABLE>
7. DEBT:
In connection with the Agreement (see Note 6), the Company borrowed
$1,000,000 from SmithKline. In connection with closing the 1997 Private
Placement (see Note 5), 129,555 shares of Common stock were issued to
SmithKline upon the conversion of the $1,000,000 note plus accrued interest of
$27,985.
In December 1996, the Company established a $1,000,000 line of credit
facility with a bank collateralized by a standby letter of credit guaranteed by
Exigent Partners, L.P. ("Exigent Partners"), whose partners are the founders of
the Company and an affiliate of the private placement agent. In consideration
for the establishment of the standby letter of credit, Exigent Partners was
issued 557,600 shares of Common stock at $0.18 per share. The balance
outstanding under the line at December 31, 1996 was $400,000, with interest at
9.25% per year. The line was repaid in connection with the 1997 Private
Placement.
8. STOCK OPTIONS AND WARRANTS:
STOCK OPTIONS
The Company has adopted the 1996 Incentive and Non-Qualified Stock Option
Plan and the 1996 Key Executive Stock Option Plan (together, the "Plans"),
which provide for the granting of options to purchase up to 576,923 shares of
Common stock to directors, officers, consultants and employees of the Company.
The number of options to be granted and the option prices are determined by the
Board of Directors in accordance with the terms of the Plans. The option price
under these Plans cannot be less than the fair market value of the Common stock
on the date of grant. Each option expires on such date as the Board of
Directors may determine.
For purposes of SFAS No. 123 disclosure requirements, the fair value of each
option grant is estimated on the date of grant using the Black-Scholes option-
pricing model using the following assumptions for options granted during 1997:
weighted average risk-free interest rate of 6.41%, expected weighted average
life of 6.7 years; dividend yield of zero; and volatility of zero. The weighted
average fair value of each option granted during 1997 was $1.72. Had the
compensation cost of these options been recorded for the year ended December
31, 1997, the Company's net loss would have increased by approximately $28,000.
F-10
<PAGE>
Information with respect to options under the Plans is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------
AVAILABLE PRICE AGGREGATE
FOR GRANT SHARES PER SHARE PRICE
--------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, inception (July
10, 1996)................ -- -- $ -- $ --
Authorized.............. 576,923 -- -- --
-------- ------- ---------- ----------
Balance, December 31,
1996..................... 576,923 -- -- --
Granted................. (317,163) 317,163 .05--7.44 1,741,123
-------- ------- ---------- ----------
Balance, December 31,
1997..................... 259,760 317,163 .05--7.44 1,741,123
Granted................. (100,406) 100,406 6.76 678,742
Cancelled............... 673 (673) 5.20 (3,500)
Exercised............... -- (17,713) 6.76 (119,742)
-------- ------- ---------- ----------
Balance, September 30,
1998..................... 160,027 399,183 $.05--7.44 $2,296,623
======== ======= ========== ==========
</TABLE>
As of September 30, 1998, 179,063 options were exercisable at prices ranging
from $.05 to $7.44 per share, with a weighted average exercise price of $5.62
per share. At September 30, 1998, the aggregate exercise price of these options
was $1,006,323.
STOCK WARRANTS
The following table summarizes outstanding warrants at September 30, 1998:
<TABLE>
<CAPTION>
TYPE OF OUTSTANDING EXERCISE
WARRANTS WARRANTS PRICE ISSUANCE DATE
-------- ----------- -------- -------------
<S> <C> <C> <C>
Common stock 384,615 $5.20 February 1997
Common stock 340,238 $6.76 April 1998
-------
724,853
=======
</TABLE>
These warrants are exercisable for seven years from the date of issuance or
three years from the closing of the Offering.
9. COMMITMENTS:
LEASES
The Company leases an office and laboratory facility under a noncancelable
operating lease. Rent expense for the period from inception (July 10, 1996)
through December 31, 1996, the year ended 1997, the nine months ended September
30, 1997 and 1998, the period from inception (July 10, 1996) through December
31, 1997 and the period from inception (July 10, 1996) through September 30,
1998 was $26,126, $156,756, $117,567, $117,567, $182,882 and $300,449,
respectively. Future minimum rental payments under these leases at December 31,
1997 are as follows:
<TABLE>
<S> <C>
1998............................................................ $152,100
1999............................................................ 167,440
2000............................................................ 177,040
2001............................................................ 152,200
--------
$648,780
========
</TABLE>
F-11
<PAGE>
COLLABORATIVE ARRANGEMENTS
The Company has utilized strategic partners with specific design expertise
and state-of-the-art technology in order to develop the Careside System rapidly
and on a cost-effective basis. The Company has agreements with (i) Fuji Photo
Film Co., Ltd. ("Fuji") for the supply of its dry film based chemistry reagents
during the Careside System's development stage, (ii) Diagnostic Reagents, Inc.
("DRI") to supply immunochemistry reagents and technology during the Careside
System's development stage, (iii) International Technidyne Corporation ("ITC")
for the joint development of coagulation reagents in the and (iv) UMM
Electronics, Inc. ("UMM") to design and manufacture the CareSide Analyzer. In
addition, the Company contracted with Hauser, Inc. ("Hauser") for the design of
the Careside System and with Battelle Memorial Institute ("Battelle") for the
design of the system's disposable test cartridges and their automated assembly
manufacturing system.
10.RETIREMENT PLAN:
The Company maintains a 401(k) profit sharing plan on behalf of its
employees. Participation in the plan is voluntary and eligible employees, as
defined, may contribute up to 15% of their compensation to the plan. The
Company matches 50% of the employee's contribution up to 4% of an employee's
compensation. The Company's contributions were zero, $32,315, $26,788, $28,988,
$32,315 and $61,303 for the period from inception (July 10, 1996) through
December 31, 1996, the year ended 1997, the nine months ended September 30,
1997 and 1998, the period from inception (July 10, 1996) through December 31,
1997, and the period from inception (July 10, 1996) through September 30, 1998,
respectively.
F-12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Careside, Inc:
We have audited the accompanying statements of certain expenses for the year
ended December 31, 1995 and the ten months ended October 31, 1996 of the
Predecessor Business (see Note 1). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
The statements of certain expenses have been prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission (for inclusion in the Form S-1 filing of Careside, Inc.) as
described in Note 1 and is not intended to be a complete presentation of the
financial results of the Predecessor Business.
In our opinion, the statements of certain expenses referred to above presents
fairly, in all material respects, the expenses of the Predecessor Business for
the year ended December 31, 1995 and for the ten months ended October 31, 1996,
in conformity with generally accepted accounting principles.
Philadelphia, Pa.,
October 16, 1998
F-13
<PAGE>
PREDECESSOR BUSINESS (NOTE 1)
STATEMENTS OF CERTAIN EXPENSES
<TABLE>
<CAPTION>
TEN MONTHS
YEAR ENDED ENDED
DECEMBER 31, OCTOBER 31,
1995 1996
------------ -----------
<S> <C> <C>
OPERATING EXPENSES:
Research and development.......................... $ 2,109,802 $ 3,054,503
General and administrative........................ 585,058 224,399
----------- -----------
NET LOSS............................................ $(2,694,860) $(3,278,902)
=========== ===========
</TABLE>
The accompanying notes are integral part of these statements.
F-14
<PAGE>
PREDECESSOR BUSINESS
NOTES TO STATEMENTS OF CERTAIN EXPENSES
1.BASIS OF PRESENTATION:
Careside, Inc. (the "Company") was incorporated in Delaware on July 12, 1996,
and had no operations until the purchase of certain assets from SmithKline
Beecham Corporation ("SmithKline") on November 7, 1996. The assets were
acquired in exchange for an equity interest in the Company. The assets acquired
are referred to as the "Predecessor Business." In connection with the Company's
initial public offering as contemplated in this Prospectus, the accompanying
financial statements have been prepared to comply with the rules and
regulations of the Securities and Exchange Commission. These rules and
regulations require a statement of certain expenses of the Predecessor Business
which does not include interest and income taxes.
The statement of certain expenses represents the research and development and
related general and administrative expenses incurred by the Predecessor
Business in connection with the technology and know-how acquired by the
Company. The development of the technology related to the Predecessor Business
commenced in 1994.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of expenses during the reporting period. Actual results
could differ from those estimates.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred.
F-15
<PAGE>
[INSIDE BACK COVER]
ROUTINE BLOOD ANALYSIS PROCEDURE
<TABLE>
<CAPTION>
THE TRADITIONAL WAY [Careside Logo] THE CARESIDE SOLUTION
<S> <C> <C> <C>
[Drawings of At hospital or 1. [Photos of Draw blood. Place a
Traditional 1 commercial lab, Cartridge and Blood few drops of whole
Blood Testing caregiver or Test] blood into the
Procedures] phlebotomist draws blood cartridge sample well.
sample.
Technicians properly
2 package and store blood
sample for transport.
Hospitals hand-carry 2. [Photos of Using the touch-screen
multiple samples to the CareSide Analyzer or keyboard, input
3 clinical lab. Commercial and Test Menu] demographic
labels receive samples information and select
via ground and/or air tests to be performed.
courier. Insert appropriate
cartridges and press
start.
4 Lab technicians receive
and log the samples.
5 Samples are then 3. [Photos of Test 10 to 15 minutes
separated for different Results and Test later, CareSide
testing stations. Analysis] Analyzer(TM) provides
test results via print
card, screen, and/or
electronic data
transfer. Caregiver
can immediately review
data with patient.
Technicians centrifuge
6 the samples to separate
whole blood into serum
and plasma.
Skilled technologists
7 prepare various large,
high-volume analyzers
for batch processing,
and run the tests.
Skilled technologists CareSide Analyzer: 10 to 15 Minutes
8 review results to assure
that they pass quality Hospital lab: Typically 4 to 6 Hours
control checks.
Commercial lab: Typically 24 Hours
Data is transferred to
9 laboratory information
systems and into QA/QC
records.
10 Data is disseminated to
the caregivers.
11 Caregiver reviews the
data and reconciles it
with patient charts.
Caregiver calls patient
12 to report results, and
to order additional
therapy or schedule
follow-up visit if
required.
</TABLE>
<PAGE>
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- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION TO BUY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER TO SELL
OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE SUCH DATE.
---------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 8
Special Note Regarding Forward-Looking Statements........................ 17
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Financial Data.................................................. 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 26
Management............................................................... 45
Principal Stockholders................................................... 55
Certain Transactions..................................................... 57
Description of Capital Stock............................................. 60
Shares Eligible for Future Sale.......................................... 64
Underwriting............................................................. 66
Legal Matters............................................................ 69
Experts.................................................................. 69
Where You Can Get More Information....................................... 69
Index to Financial Statements............................................ F-1
</TABLE>
---------------
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[CARESIDE LOGO]
CARESIDE, INC.
SHARES
COMMON STOCK
---------------
PROSPECTUS
---------------
FAHNESTOCK & CO. INC.
WEDBUSH MORGAN SECURITIES
SOUTHEAST RESEARCH PARTNERS, INC.
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemization of all estimated expenses, all
of which will be paid by the Company, in connection with the issuance and
distribution of the securities being registered:
<TABLE>
<CAPTION>
NATURE OF EXPENSE AMOUNT
----------------- ----------
<S> <C>
SEC Registration Fee............................................. $ 8,896
Nasdaq National Market Listing Fee............................... 72,875
NASD Fee......................................................... 3,663
Printing and engraving fees...................................... 120,000
Registrant's counsel fees and expenses........................... 250,000
Accounting fees and expenses..................................... 125,000
Spencer Trask Fee................................................ 100,000
Underwriters' Expenses........................................... 250,000
Blue Sky expenses and counsel fees............................... 25,000
Transfer agent and registrar fees................................ 8,000
Miscellaneous.................................................... 36,566
----------
TOTAL.......................................................... $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Amended and Restated Certificate of Incorporation (the
"Charter") provides that the Company shall indemnify and advance expenses to
the fullest extent permitted by Section 145 of the Delaware General Corporation
Law ("DGCL"), as amended from time to time, to each person who is or was a
director or officer of the Company and the heirs, executors and administrators
of such a person. Any expenses (including attorneys' fees) incurred by a person
who is or was a director or officer of the Company, and the heirs, executors
and administrators of such a person in connection with defending any such
proceeding in advance of its final disposition shall be paid by the Company;
provided, however, that if the DGCL requires, an advancement of expenses
incurred by an indemnitee in his capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Company of an undertaking by or on behalf of
such indemnitee, to repay all amounts so advanced, if it shall ultimately be
determined that such indemnitee is not entitled to be indemnified for such
expenses. Notwithstanding the aforementioned indemnification provisions, the
Company may, at the discretion of the Chief Executive Officer of the Company,
enter into indemnification agreements with directors or officers.
Section 145 of the DGCL provides that a corporation has the power to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that such director or officer or former director or
officer is or was a director, officer, employee or agent of the corporation,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by them in connection with such
action, suit or proceeding, if such person shall have acted in good faith and
in a manner reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
provided that such person had no reasonable cause to believe his or her conduct
was unlawful, except that, if such action shall be in the right of the
corporation, no such indemnification shall be provided as to any claim, issue
or matter as to which such person shall have been judged to have been liable to
the corporation unless and to the extent that the Court of Chancery of the
State of
II-1
<PAGE>
Delaware, or any court in which such suit or action was brought, shall
determine upon application that, in view of all of the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses as such court shall deem proper.
The Charter which will be filed prior to the completion of the initial public
offering of the Company's securities (the "Offering"), contains a provision to
limit the personal liability of the directors of the Company to the fullest
extent permitted by Section 102(b)(7) of the DGCL, as amended. In addition, the
Amended and Restated By-Laws, which will become effective prior to the
completion of the Offering of securities, provide that the Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company) by reason of the fact that he is or was a director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. See Exhibit 3.1c, "Form
of Amended and Restated Certificate of Incorporation of Careside, Inc."
As permitted by the DGCL, the Certificate, which will be filed prior to the
completion of the Offering, provides that, subject to certain limited
exceptions, no director of the Company shall be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
for the unlawful payment of dividends on or redemption or repurchase of the
Company's capital stock or (iv) for any transaction from which the director
derived an improper personal benefit. The effect of this provision is to limit
the ability of the Company and its stockholders (through stockholder derivative
suits on behalf of the Company) to recover monetary damages against a director
for the breach of certain fiduciary duties as a director (including breaches
resulting from grossly negligent conduct). In addition, the Charter and Amended
and Restated By-Laws provide that the Company shall, to the full extent
permitted by the DGCL, indemnify all directors and officers of the Company and
that the Company may, to the extent permitted by the DGCL, indemnify employees
and agents of the Company.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since the Company's formation in July 1996, the Company has issued the
following securities (giving retroactive effect to a 1-for-5.2 reverse stock
split to be effected in connection with the Offering described in the
Prospectus) without registration under the Securities Act:
1. In July 1996 and October 1996 the Company issued an aggregate of 659,342
shares of Common Stock to its founder group.
2. In November 1996, pursuant to an Asset Purchase Agreement, SmithKline
Beecham Diagnostics Systems Co. ("SBDS") and SmithKline Beecham Clinical
Laboratories, Inc. sold to the Company certain fixed and intangible
assets used in connection with the Company's point-of-care development
program. As consideration for the purchase of the assets, the Company
issued to SBDS 34,702 shares of Common Stock, representing 5% of the
Company's total Common Stock outstanding at that time.
3. In December 1996, in connection with the establishment of a $1.0 million
working capital facility, the Company issued Exigent Partners, L.P.
557,600 shares of Common Stock for an aggregate purchase price of
$98,995. In the same month, the Company issued (i) 30,936 shares of
Common Stock to SmithKline pursuant to certain anti-dilution protections
granted to SmithKline in connection with the
II-2
<PAGE>
SmithKline Credit Facility and asset transfer and (ii) 30,173 shares of
Common Stock to Philip B. Smith for the investment banking services he
provided in connection with the Company's equity financing.
4. In January 1997, the SmithKline Credit Facility was converted into
129,555 shares of Common Stock, representing 2% of the Company's total
Common Stock outstanding at that time.
5. In January and February 1997, the Company closed a private placement of
securities through Spencer Trask Securities Incorporated ("Spencer
Trask") which resulted in the issuance by the Company of 1,923,077
shares of Common Stock at $5.20 per share to 203 investors. In
connection with the private placement in February 1997, the Company
issued warrants to purchase 384,615 shares of Common Stock at an
exercise price of $5.20 per share. These warrants expire three (3) years
after closing of the Offering.
6. In February 1997, the Company granted stock options to purchase an
aggregate of 256,370 shares of Common Stock under the Company's 1996
Incentive and Non-Qualified Stock Option Plan and the 1996 Key Executive
Stock Option Plan (collectively, the "1996 Stock Option Plans") to ten
optionees. The weighted average per share exercise price of these stock
options is $5.29.
7. In May 1997, the Company granted stock options to purchase 192 shares of
Common Stock under the Company's 1996 Incentive and Non-Qualified Stock
Option Plan to one optionee. The weighted average per share exercise
price of these stock options is $5.20.
8. In June 1997, the Company granted stock options to purchase an aggregate
of 31,731 shares of Common Stock under the Company's 1996 Stock Option
Plans to one optionee. The per share exercise price of these stock
options is $6.76.
9. In August 1997, the Company granted Cedar Capital Investors ("Cedar")
options to purchase 1,154 shares of Common Stock at an exercise price of
$.052 per share. These options remain exercisable until August 8, 2007.
These options were granted to Cedar in consideration for providing
certain financial consulting services to the Company in connection with
a private placement of securities in 1998.
10. In December 1997, the Company granted stock options to purchase an
aggregate of 27,716 shares of Common Stock under the Company's 1996
Incentive and Non-Qualified Stock Option Plan to 20 optionees. The
weighted average per share exercise price of these stock options is
$6.09.
11. In January 1998, the Company granted stock options to purchase an
aggregate of 1,923 shares of Common Stock under the 1996 Incentive and
Non-Qualified Stock Option Plan to one optionee. The weighted average
exercise price per share of these stock options is $6.76.
12. In February 1998, the Company granted stock options to purchase an
aggregate of 13,702 shares of Common Stock under the 1996 Incentive and
Non-Qualified Stock Option Plan to six optionees. The weighted average
exercise price per share of these stock options is $6.76.
13. In April 1998, the Company completed a second private placement of
securities through Spencer Trask which resulted in the issuance by the
Company of 1,701,183 shares of Common Stock at $6.76 per share to 311
investors of whom 101 invested in the 1997 private placement of
securities. In connection with the private placement in 1998, the
Company issued warrants to purchase 340,238 shares of Common Stock at
an exercisable price of $6.76 per share. These warrants expire three
years from the date of closing of the Offering.
14. In May 1998, the Company granted stock options to purchase an aggregate
of 17,713 shares of Common Stock under the Company's 1996 Incentive and
Non-Qualified Stock Option Plan to 18 optionees which were immediately
exercised. The per share exercise price of these stock options was
$6.76 per share.
15. In July 1998, the Company granted stock options to purchase an
aggregate of 67,068 shares of Common Stock under the Company's 1996
Stock Option Plans to 29 optionees. The per share exercise price of
these stock options is $6.76.
II-3
<PAGE>
16. In November 1998, the Company granted stock options to purchase an
aggregate of 11,538 shares of Common Stock under the Company's 1996
Incentive and Non-Qualified Stock Option Plan to six optionees. The per
share exercise price of these stock options is $7.28.
17. In December 1998, the Company entered into a bridge loan agreement for
a $3.0 million loan. Draw down of $1.5 million on this loan will occur
prior to December 31, 1998 with the remaining $1.5 million to be drawn
down prior to January 31, 1999 at the option of the Company. The bridge
loan matures on the date of completion of the Offering or January 31,
2000, whichever occurs sooner. The bridge loan carries an interest rate
of 8% per annum. The Company has issued a warrant which will be based
upon the price of the Offering, less a 15% discount. Such warrant will
not be exercisable until at least twelve months after completion of the
Offering.
The Company believes that the transactions described in paragraphs 1 through
17 above were exempt from registration under Section 3(b) or 4(2) of the
Securities Act because the subject securities were either (i) issued pursuant
to a compensatory benefit plan pursuant to Rule 701 under the Securities Act or
(ii) issued to a limited group of persons, each of whom was believed to have
been a sophisticated investor or to have had a preexisting business or personal
relationship with the Company or its management and to have been purchasing for
investment without a view to further distribution. In addition, the recipients
of securities in each such transaction represented their intentions to acquire
the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed
to the share certificates issued in such transactions. All recipients had
adequate access, through their relationships with the Company, to information
about the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
1.1* Form of Underwriting Agreement
3.1a Amended and Restated Certificate of Incorporation of Careside, Inc.
3.1b Form of Certificate of Amendment of Certificate of Incorporation of Careside, Inc.
3.1c Form of Amended and Restated Certificate of Incorporation of Careside, Inc.
3.2a Amended and Restated Bylaws of Careside, Inc.
3.2b Form of Amended and Restated Bylaws of Careside, Inc.
4.1* Specimen Stock Certificate
4.2 Placement Agent Warrant Agreement dated as of January 31, 1997 by and between
Careside, Inc. and Spencer Trask Securities Incorporated (including Form of Warrant)
4.3 Placement Agent Warrant Agreement dated as of March 6, 1998 by and between Careside,
Inc. and Spencer Trask Securities Incorporated (including Form of Warrant)
4.4 Securities Purchase Agreement dated as of December 17, 1998 by and between S.R. One,
Limited and Careside, Inc. (including Form of Note)
4.5 Warrant Issued to S.R. One, Limited on December 17, 1998
5.1* Opinion of Pepper Hamilton LLP
10.1 Registration Rights Agreement dated as of November 7, 1996 by and among SmithKline
Beecham Diagnostic Systems Co., SmithKline Beecham Corporation and Careside, Inc.
10.2 Registration Rights Agreement dated as of December 4, 1996 by and among Careside, Inc.,
Exigent Partners, L.P., W. Vickery Stoughton, Thomas H. Grove, Kenneth B. Asarch,
William S. Knight, Donald S. Wong, Ashok K. Sawhney and Philip B. Smith
10.3 Amendment No. 1 to Registration Rights Agreement dated as of January 31, 1997 by and among
Careside, Inc. Exigent Partners, L.P., W. Vickery Stoughton, Thomas H. Grove,
Kenneth B. Asarch, William S. Knight, Donald S. Wong, Ashok K. Sawhney and Philip B. Smith
10.4 Registration Rights Agreement dated as of December 4, 1996 by and between Careside, Inc.
and Spencer Trask Securities Incorporated
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.5 Registration Rights Agreement dated as of January 31, 1997 by and
among Careside, Inc.
and the Investors signatory thereto
10.6 Stockholders Agreement dated as of December 4, 1996 by and among
the Careside, Inc.,
SmithKline Beecham Corporation, SmithKline Beecham Diagnostic
Systems Co., Spencer Trask
Securities Incorporated, Exigent Partners, L.P., W. Vickery
Stoughton, Thomas H. Grove,
Kenneth B. Asarch, William S. Knight, Donald S. Wong, Ashok K.
Sawhney, Philip B. Smith
and each Investor signatory thereto
10.7 Consulting Agreement by and between Careside, Inc. and Cedar
Capital Investors dated August 8, 1997
10.8 Employment Agreement dated as of March 3, 1997 between Careside,
Inc. and W. Vickery Stoughton
10.9 Employment Agreement dated as of March 3, 1997 between Careside,
Inc. and Thomas H. Grove
10.10 Employment Agreement dated as of July 30, 1998 between Careside,
Inc. and James R. Koch
10.11 1996 Incentive and Non-Qualified Stock Option Plan, as amended and
restated
10.12 1996 Key Executive Stock Option Plan, as amended and restated
10.13 1998 Incentive and Non-Qualified Stock Option Plan
10.14 1998 Director Stock Option Plan
10.15 Standard Industrial/Commercial Single-Tenant Lease-NET dated as of
October 14, 1996,
by and between Fox Hills Business Park, a California Limited
Partnership and Careside, Inc.
10.16 Agreement dated as of August 23, 1996, by and between Fuji Photo
Film Co., Ltd. and Careside, Inc.
10.17 Agreement dated as of December 12, 1995, by and between United
Medical Manufacturing
Company and SmithKline Beecham Corporation and assignment
10.18 Product Development and Supply Agreement dated as of July 18,
1997, by and between
Careside, Inc. and UMM Electronics, Inc.
10.19 Agreement executed December 7, 1995 and February 28, 1996, by and
between SmithKline
Beecham Corporation and Hauser, Inc. and assignment
10.20 Agreement Number CP032284 Cost Type executed December 5 and 17,
1996 by and between
Battelle Memorial Institute and Careside, Inc.
10.21* Joint Research and Development Agreement dated as of October 28,
1996 by and between
Careside, Inc. and International Technidyne Company
10.22* Collaboration Agreement between Diagnostic Reagents, Inc. and
SmithKline Beecham Corporation
dated as of June 28, 1996
10.23* Distribution and Supply Agreement dated as of November 7, 1996, by
and between SmithKline
Beecham Clinical Laboratories and Careside, Inc.
10.24 Asset Purchase Agreement dated as of November 7, 1996, by and
among SmithKline Beecham
Clinical Laboratories, Inc., SmithKline Beecham Diagnostic Systems
Co. and Careside, Inc.
10.25 Loan and Security Agreement dated as of October 1, 1996, by and
between Careside, Inc. and
SmithKline Beecham Corporation
10.26 Placement Agency Agreement dated as of December 10, 1996, by and
between Careside, Inc.
and Spencer Trask Securities Incorporated
10.27 Placement Agency Agreement dated as of January 29, 1998, by and
between Spencer Trask
Securities Incorporated and Careside, Inc.
10.28 Investment Banking Agreement dated as of January 31, 1997, by and
between Careside, Inc.
and Spencer Trask Securities Incorporated
10.29 Agreement of Limited Partnership of Exigent Partners, L.P. dated
as of October 1996,
by and between Kevin Kimberlin and those persons listed on
Schedule A attached thereto
10.30* The Lincoln National Life Insurance Company Standardized 401(k)
Salary Reduction Plan
and Trust Prototype Plan Adoption Agreement Plan #008, effective
January 1, 1997, by and
between Careside, Inc. W. Vickery Stoughton and Thomas Grove
10.31 Employee Stock Purchase Plan
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.32 Registration Rights Agreement dated as of March 6, 1998 by and
among Careside, Inc. and the Investors signatory thereto
10.33 Registration Rights Agreement dated as of March 6, 1998 by and
between Careside, Inc. and Spencer Trask Securities Incorporated
10.34 Registration Rights Agreement dated as of December 17, 1998 by and
between Careside, Inc. and S.R. One, Limited
23.1 Consent of Arthur Andersen LLP
23.2* Consent of Pepper Hamilton LLP
24.1 Power of Attorney (included on Signature Pages)
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by Amendment.
(B) FINANCIAL STATEMENT SCHEDULES:
Financial Statement Schedules are omitted because the information is included
in the Financial Statements or notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-1 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN CULVER CITY, CALIFORNIA, ON THE 17TH DAY OF DECEMBER, 1998.
CARESIDE, INC.
/s/ W. Vickery Stoughton
By: _________________________________
W. VICKERY STOUGHTON
CHAIRMAN OF THE BOARD OF
DIRECTORS
AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW HEREBY CONSTITUTES AND APPOINTS W. VICKERY STOUGHTON, THOMAS H. GROVE AND
JAMES R. KOCH, AND EACH OR ANY OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT
AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION FOR HIM AND IN
HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL
AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION
STATEMENT, OR ANY REGISTRATION STATEMENT FOR THE SAME OFFERING THAT IS TO BE
EFFECTIVE UPON FILING PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION,
GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER
AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE OR
NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND
PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL
THAT SAID ATTORNEYS-IN-FACT AND AGENTS, OR ANY OF THEM, OR THEIR OR HIS
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ W. Vickery Stoughton Chairman of the Board of December 17, 1998
______________________________________ Directors, Chief
W. VICKERY STOUGHTON Executive Officer and
Director (principal
executive officer)
/s/ Thomas H. Grove Executive Vice President-- December 17, 1998
______________________________________ Research and Development
THOMAS H. GROVE and Director
/s/ James R. Koch Chief Financial Officer, December 17, 1998
______________________________________ Treasurer, Executive Vice
JAMES R. KOCH President and Director
(principal financial and
accounting officer)
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Anthony P. Brenner Director December 17, 1998
______________________________________
ANTHONY P. BRENNER
/s/ William F. Flatley Director December 17, 1998
______________________________________
WILLIAM F. FLATLEY
/s/ Kenneth N. Kermes Director December 17, 1998
______________________________________
KENNETH N. KERMES
/s/ C. Alan MacDonald Director December 17, 1998
______________________________________
C. ALAN MACDONALD
/s/ Diana Mackie Director December 17, 1998
______________________________________
DIANA MACKIE
/s/ Philip B. Smith Director December 17, 1998
______________________________________
PHILIP B. SMITH
</TABLE>
II-8
<PAGE>
EXHIBIT 3.1A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EXIGENT DIAGNOSTICS, INC.
______________
The Board of Directors of Exigent Diagnostics, Inc. (the
"Corporation") having proposed this Amended and Restated Certificate of
Incorporation pursuant to Sections 242 and 245 of the Delaware General
Corporation Law ("DGCL"), and the stockholders of the Corporation having given
their written consent hereto, and written notice of such consent has been
provided, all in accordance with Section 228 of the DGCL, the Corporation's
Certificate of Incorporation filed with the Delaware Secretary of State on July
10, 1996, is hereby amended and restated in its entirety as follows:
FIRST. The name of this corporation is:
Exigent Diagnostics, Inc.
SECOND. The registered office in the State of Delaware is located at
1201 Market Street, Suite 1600, in the City of Wilmington, County of New Castle
19801, and its registered agent at such address is PHS Corporate Services, Inc.
THIRD. The purpose or purposes of the corporation shall be to engage
in any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH. The total number of shares of all classes of stock which the
corporation shall have the authority to issue is:
Fifty Million (50,000,000) shares of Common Stock, $0.01 par value per
share; and
Two Million (2,000,000) shares of Preferred Stock, $0.01 par value per
share.
FIFTH. The Board of Directors of the corporation shall have full and
complete authority by resolution from time to time, to establish one or more
series and to issue shares of Preferred Stock and to fix, determine and vary the
voting rights, designations, preferences, qualifications, privileges,
limitations, options, conversion rights and other special rights of each series
of Preferred Stock, including but not limited to, dividend rates and manner of
payment, preferential amounts payable upon voluntary or involuntary liquidation,
voting rights, conversion rights, redemption prices, terms and conditions and
sinking fund and stock purchase prices, terms and conditions.
<PAGE>
SIXTH. In furtherance of and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized to make,
alter or repeal the by-laws of the corporation.
SEVENTH. No director of the corporation shall be personally liable to
the corporation or any stockholder of the corporation for monetary damages for
breach of fiduciary duty as a director, provided that this provision shall not
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve international misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
Any repeal or modification of the foregoing paragraph by the
stockholders of the corporation shall not adversely affect any right or
protection of a Director of this corporation existing at the time of such repeal
or modification.
EIGHTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or in the
application of any receiver or receivers appointed for this corporation under
the provisions of Sec. 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for this
corporation under the provisions of Sec. 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or claims of creditors, and/or on all the stockholders or class of
stockholders of this corporation, as the case may be, and also on this
corporation.
NINTH. The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the board of directors or in
the bylaws of the Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Amended and
Restated Certificate of Incorporation on this 1st day of May, 1998.
/s/ W. Vickery Stoughton
-------------------------------
W. Vickery Stoughton
Chairman and Chief Executive Officer
-2-
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
EXIGENT DIAGNOSTICS, INC.
Exigent Diagnostics, Inc. a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the Board of Directors of said corporation, by unanimous
consent in writing adopted the following resolutions:
RESOLVED, that the Company amend Article 1 of the Certificate of
Incorporation to read as follows:
"1. The name of the Corporation is CARESIDE, Inc."
SECOND: That the said amendment has been consented to and authorized by the
holders of a majority of the issued and outstanding stock entitled to vote by
written consent given in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Section 242 and 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by its President this 21 day of May 1998.
/s/ W. Vickery Stoughton
------------------------------------
W. Vickery Stoughton, President
<PAGE>
EXHIBIT 3.1B
FORM OF
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CARESIDE, INC.
CARESIDE, INC. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware ("DGCL"), does hereby certify:
FIRST: That the board of directors of the Corporation duly adopted
resolutions declaring advisable the amendment of the Certificate of
Incorporation of the Corporation by adding certain provisions effecting a
combination of the outstanding Common Stock of the Corporation and submitting
the same to the shareholders of the Corporation for approval. The resolutions
setting forth the proposed amendment are as follows:
RESOLVED, that without any other action an the part of the
Corporation or any other person, on the date (the "Filing Date") on
which a Certificate of Amendment to the Corporation's Certificate of
Incorporation, setting forth these resolutions, is filed with the
Secretary of State of the State of Delaware, every 5.2 shares of
Common Stock then outstanding shall be automatically converted into
one share of Common Stock; and
RESOLVED FURTHER, that no fractional shares of Common Stock shall
be issued upon the conversion of shares pursuant to the preceding
resolution. Instead for any fractional share of Common Stock which
would otherwise be issuable upon conversion of any shares pursuant to
the preceding resolution: (i) if such fractional share would be less
than one-half of one share, the holder shall not receive any Common
Stock for such fractional share and shall not be entitled to any other
consideration therefor, and (ii) if such fractional share would be
equal to or greater than one-half of one share, the holder shall
receive one full share of Common Stock for such fractional share; and
RESOLVED FURTHER, that following the Filing Date, (i) new stock
certificates representing shares of Common Stock shall be issued by
the Corporation in exchange for the surrender of all stock
certificates (the "Old Certificates") representing outstanding shares
of Common Stock immediately prior to the Filing Date, and (ii) all the
Old Certificates shall be deemed canceled and shall not be recognized
as evidencing outstanding Common Stock.
1
<PAGE>
SECOND: That the shareholders of the Corporation approved the aforesaid
amendment by written consent in accordance with the provisions of (S) 228 of the
DGCL.
THIRD: That the foregoing amendment was duly adopted in accordance with
the provisions of (S) 242 of the DGCL.
IN WITNESS WHEREOF, CARESIDE, INC. has caused this certificate to be signed
by W. Vickery Stoughton, its Chairman and Chief Executive Officer, this _____
day of December, 1998.
____________________________________
W. Vickery Stoughton
Chairman and Chief Executive Officer
2
<PAGE>
EXHIBIT 3.1C
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CARESIDE, INC.
______________
CARESIDE, INC. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware ("DGCL"), does hereby certify that:
1. The present name of the Corporation is CARESIDE, INC.
2. The name under which the Corporation was originally incorporated was
"Exigent Diagnostics, Inc." and the date of filing of the original Certificate
of Incorporation of the Corporation with the Secretary of State of the State of
Delaware was July 10, 1996.
3. This Amended and Restated Certificate of Incorporation, which amends
and restates the Corporation's Certificate of Incorporation in its entirety, has
been duly adopted pursuant to the provisions of Sections 242 and 245 of the
DGCL, and the stockholders of the Corporation have given their written consent
hereto in accordance with Section 228 of the DGCL. The provisions of the
Restated Certificate of Incorporation are as follows:
FIRST. The name of this corporation is:
CARESIDE, Inc.
SECOND. The registered office in the State of Delaware is located at
1201 Market Street, Suite 1600, in the City of Wilmington, County of New Castle
19801, and its registered agent at such address is PHS Corporate Services, Inc.
THIRD. The purpose or purposes of the corporation shall be to engage
in any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH. The total number of shares of all classes of stock which the
corporation shall have the authority to issue is:
Fifty Million (50,000,000) shares of Common Stock, $0.01 par value per
share; and
Five Million (5,000,000) shares of Preferred Stock, $0.01 par value
per share.
<PAGE>
FIFTH. The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of Article FOURTH, to provide for the
issuance from time to time of the shares of Preferred Stock in one or more
series, and by filing a certificate pursuant to the applicable law of the State
of Delaware, to establish from time to time the number of shares to be included
in a series, and to fix the designation, powers, preferences and rights of the
shares of such series, which may be different from the designations, powers,
preferences and rights of shares of any other series, and the qualifications,
limitations or restrictions thereof.
The authority of the Board with respect to such series shall include,
but not be limited to, determination of the following:
a. The number of shares constituting such series and the
distinctive designation of such series;
b. The dividend rate on the shares of such series, whether
dividends shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of such
series;
c. Whether such series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such voting
rights;
d. Whether such series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors shall
determine;
e. Whether or not the shares of such series shall be
redeemable, and, if so, the term and conditions of such redemption, including
the date or date upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
f. Whether such series shall have a sinking fund for the
redemption or purchase of shares of such series, and, if so, the terms and
amount of such sinking fund;
g. The rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of such series;
h. Any other relative rights, preferences and limitations of
such series.
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the common shares with respect to the
same dividend period.
-2-
<PAGE>
If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the assets available for distribution to holders
of shares of Preferred Stock of all series shall be insufficient to pay such
holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of Preferred
Stock in accordance with the respective preferential amounts (including unpaid
cumulative dividends, if any) payable with respect thereto.
SIXTH. The election of directors need not be by written ballot,
unless the By-laws so provide.
SEVENTH. The Board of Directors shall be classified as follows:
(a) The number of directors constituting the entire Board shall
be not less than six nor more than twelve (12) or, if a majority of the Board of
Directors so determines, fourteen (14), as fixed from time to time by vote of a
majority of the entire Board, provided, however, that the number of directors
shall not be reduced so as to shorten the term of any director at the time in
office. Directors need not own any shares of capital stock of the Corporation.
(b) The Board of Directors shall be divided into three classes,
as nearly equal in numbers as the then total number of directors constituting
the entire Board permits with the term of office of one class expiring each
year. At a meeting of Stockholders or pursuant to a Stockholder's action by
written consent, directors of the first class shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors of the
second class shall be elected to hold office for a term expiring at the second
succeeding annual meeting and directors of the third class shall be elected to
hold office for a term expiring at the third succeeding annual meeting. Any
vacancies in the Board of Directors for any reason, and any directorships
resulting from any increase in the number of directors, may be filled by the
Board of Directors, acting by a majority of the directors then in office,
although less than a quorum, and any directors so chosen shall hold office until
the next election of the class for which such directors shall have been chosen
and until their successors shall be elected and qualified. Notwithstanding the
foregoing, and except as otherwise required by law, whenever the holders of any
one or more series of Preferred Stock shall have the right, voting separately as
a class, to elect one or more directors of the Corporation, the terms of the
director or directors elected by such holders shall expire at the next annual
meeting of Stockholders held more than twelve months following election of such
director. Subject to the foregoing, at each annual meeting of Stockholder's the
successors to the class of directors whose term shall then expire shall be
elected to hold office for a term expiring at the third succeeding annual
meeting.
(c) Notwithstanding any other provisions of this Certificate of
Incorporation or the By-laws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by law, this Certificate of
Incorporation or the By-laws of the Corporation), any director or the entire
Board of Directors of the Corporation may be removed at
-3-
<PAGE>
any time, but only for cause and only by the affirmative vote of the holders of
80% or more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the Stockholders called for that
purpose.
Notwithstanding any other provisions of this Amended and Restated
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of capital stock required by law, this
Amended and Restated Certificate of Incorporation or any preferred stock
designation, the affirmative vote of at least 75% of the voting power of all of
the then-outstanding shares of capital stock of the Corporation, voting together
as a single class, shall be required to alter, amend or repeal this Section (c)
of Article SEVENTH.
EIGHTH. No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing, without
a meeting, to the taking of any action is specifically denied.
NINTH. Special meeting of stockholders may be called at any time by a
majority of Board of Directors or the Chairman and Chief Executive Officer of
the Corporation. At any time, upon the written request of any person who has
called a special meeting, it shall be the duty of the Secretary to fix the time
and place of the meeting, which shall be held not more than 60 days after
receipt of the request. If the Secretary neglects or refuses to fix the time or
place of the meeting, the person or persons calling the meeting may do so.
TENTH. All of the powers of this Corporation, insofar as the same may
be lawfully vested by this Certificate of Incorporation in the Board of
Directors, are hereby conferred upon the Board of Directors of this Corporation.
In furtherance and not in limitation of that power the Board of Directors shall
have the power to make, adopt, alter, amend and repeal from time to time By-laws
of this Corporation, subject to the right of the stockholders entitled to vote
with respect thereto adopt, alter, amend and repeal By-laws made by the Board of
Directors; provided, however, that By-laws shall not be adopted, altered,
amended or repealed by the stockholders of the Corporation except by the vote of
the holders of not less than eighty percent (80%) of the outstanding shares of
stock entitled to vote upon the election of directors.
ELEVENTH. The Corporation shall indemnify and advance expenses to the
fullest extent permitted by Section 145 of the General Corporation Law of
Delaware ("DGCL"), as amended from time to time, to each person who is or was a
director or officer of the Corporation and the heirs, executors and
administrators of such a person. Any expenses (including attorneys' fees)
incurred by each person who is or was a director or officer of the Corporation,
and the heirs, executors and administrators of such a person in connection with
defending any such proceeding in advance of its final disposition shall be paid
by the Corporation; provided, however, that if the DGCL requires, an advancement
of expenses
-4-
<PAGE>
incurred by an indemnitee in his capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking by or on behalf of
such indemnitee, to repay all amounts so advanced, if it shall ultimately be
determined that such indemnitee is not entitled to be indemnified for such
expenses under this Article or otherwise. Notwithstanding the aforementioned
indemnification provisions, the Corporation may, at the discretion of the Chief
Executive Officer of the Corporation, enter into indemnification agreements with
directors or officers.
TWELFTH. Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or in the
application of any receiver or receivers appointed for this corporation under
the provisions of Sec. 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for this
corporation under the provisions of Sec. 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or claims of creditors, and/or on all the stockholders or class of
stockholders of this corporation, as the case may be, and also on this
corporation.
THIRTEENTH. The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the board of directors or in
the bylaws of the Corporation.
FOURTEENTH. The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by Section
102(b)(7) of the DGCL, as the same may be amended and supplemented.
THE UNDERSIGNED, being the Chairman and Chief Executive Officer of the
Corporation, for the purpose of amending and restating the Corporation's
Certificate of Incorporation pursuant to the DGCL, do make this certificate,
hereby declaring and certifying that this is my act and deed on behalf of the
Corporation this ___ day of December, 1998.
_______________________________
W. Vickery Stoughton
Chairman and Chief Executive Officer
-5-
<PAGE>
EXHIBIT 3.2A
CARESIDE,INC.
AMENDED AND RESTATED BY-LAWS
----------------------------
ARTICLE I OFFICES
------------------
1.1 Registered Office: The registered office shall be in the City of
-----------------
Wilmington, County of New Castle, State of Delaware.
1.2 Other Offices: The corporation may also have offices at such other
-------------
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may require.
ARTICLE II MEETINGS OF STOCKHOLDERS
------------------------------------
2.1 Place of Meetings: All meetings of the stockholders for the election
-----------------
of directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the board of directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
2.2 Date of Annual Meeting: Annual meetings of stockholders, commencing
----------------------
with the year 1998, shall be held during the third week of May on a date chosen
by the board of directors, at 10:00 o'clock A.M., or at such other date and time
as shall be designated from time to time by the board of directors and stated in
the notice of the meeting, at which they shall elect by a plurality vote a board
of directors, and transact such other business as may properly be brought before
the meeting.
2.3 Notice of Annual Meeting: Written notice of the annual meeting
------------------------
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
2.4 Stockholders List: The officer who has charge of the stock ledger of
-----------------
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholders, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced
<PAGE>
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present.
2.5 Special Meetings: Special meetings of the stockholders, for any
----------------
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the Chairman and Chief Executive
Officer and shall be called by the secretary at the request in writing of a
majority of the board of directors. Such request shall state the purpose or
purposes of the proposed meeting.
2.6 Notice of Special Meetings: Written notice of a special meeting
--------------------------
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given not less than sixty nor more than
ninety days before the date of the meeting, to each stockholder entitled to vote
at such meeting.
2.7 Business Transacted at Meeting of Stockholders:
----------------------------------------------
(a) Except as otherwise provided by or in these By-laws, or except as
permitted by the presiding officer of the meeting in the exercise of such
officer's sole discretion in any specific instance, the business which shall be
voted upon or discussed at any annual or special meeting of the stockholders
shall (i) have been specified in the written notice of the meeting (or any
supplement thereto) given by the Corporation, (ii) be brought before the meeting
at the direction of the Board of Directors, (iii) be brought before the meeting
by the presiding officer of the meeting unless a majority of the Directors then
in office object to such business being conducted at the meeting, or (iv) in the
case of an annual meeting of stockholders have been specified in a written
notice given to the Corporation by or on behalf of any stockholder who shall
have been a stockholder of record on the record date for such meeting and who
shall continue to be entitled to vote thereat (the "Stockholder Notice"), in
accordance with all of the requirements set forth below.
(b) Each Stockholder Notice must be delivered to, or mailed and
received at, the principal executive offices of the Corporation addressed to the
attention of the Chairman and Chief Executive Officers (i) in the case of an
annual meeting that is called for a date that is within 30 days before or after
the anniversary date of the immediately preceding annual meeting of
Stockholders, not less than 60 days nor more than 90 days prior to such
anniversary date, provided that a proposal submitted by a stockholder for
inclusion in the Corporation's proxy statement for an annual meeting which is
appropriate for inclusion therein and otherwise complies with Securities
Exchange Act of 1934 Rule 14a-8 (including timeliness), shall be deemed to have
also been submitted timely pursuant to these By-laws, and (ii) in the case of an
annual meeting that is called for a date that is not within 30 days before or
after the anniversary date of the immediately preceding annual meeting, not
later than the close of business on the fifth day following the earlier of the
day on which notice of the date of the meeting was mailed or public disclosure
of the meeting date (which shall include disclosure of the meeting date given to
a national securities exchange or the National Association of Securities Dealers
was made. Each such Stockholder Notice must set forth (A) the name and address
of the stockholder who intends to bring the business before the annual meeting
("Proposing Stockholder"); (B) the name and address of the beneficial owner, if
different than the Proposing Stockholder, of any
-2-
<PAGE>
of the shares owned of record by the Proposing Stockholder ("Beneficial Owner");
(C) the number of shares of each class and series of shares of the Corporation
which are owned of record and beneficially by the Proposing Stockholder and the
number which are owned beneficially by any Beneficial Owner; (D) any interest
(other than an interest solely as a stockholder) which the Proposing Stockholder
or a Beneficial Owner has in the business being proposed by the Proposing
Stockholder; (E) a description of all arrangements and understandings between
the Proposing Stockholder and any Beneficial Owner and any other person or
persons (naming such person or persons) pursuant to which the proposal in the
Stockholder Notice is being made; (F) a description of the business which the
Proposing Stockholder seeks to bring before the meeting, the reason for doing so
and, if a specific action is to be proposed, the text of the resolution or
resolutions which the Proposing Stockholder proposes that the Corporation adopt;
and (G) a representation that the Proposing Stockholder is at the time of giving
the Stockholder Notice, was or will be on the record date for the meeting, and
will be on the meeting date a holder of record of shares of the Corporation
entitled to vote at such meeting and intends to appear in person or by proxy at
the meeting to bring the business specified in the Stockholder Notice before the
meeting. The presiding officer of the meeting may, in such officer's sole
discretion, refuse to acknowledge any business proposed by a stockholder which
the presiding officer determines is not made in compliance with the foregoing
procedure.
2.8 Nomination of Directors by Stockholders;
---------------------------------------
(a) Nominations for the election of Directors may be made by the Board
of Directors, by a committee appointed by the Board of Directors with authority
to do so or by any stockholder of record entitled to vote in the election of
Directors who is a stockholder at the record date of the meeting and also on the
date of the meeting at which Directors are to be elected; provided, however,
that with respect to a nomination made by a stockholder, such stockholder must
provide timely written notice to the Chairman and Chief Executive Officer of the
Corporation in accordance with the following requirements:
(i) To be timely, a stockholder's notice must be delivered to, or
mailed and received at, the principal executive offices of the Corporation
addressed to the attention of the Chairman and Chief Executive Officer (1)
in the case of an annual meeting that is called for a date that is within
30 days before or after the anniversary date of the immediately preceding
annual meeting of stockholders, not less than 60 days nor more than 90 days
prior to such anniversary date, and (2) in the case of an annual meeting
that is called for a date that is not within 30 days before or after the
anniversary date of the immediately preceding annual meeting, or in the
case of a special meeting of stockholders called for the purpose of
electing Directors, not later than the close of business on the fifth day
following the day on which notice of the date of the meeting was mailed;
and
(ii) Each such written notice must set forth: (A) the name and
address of the stockholder who intends to make the nomination ("Nominating
Stockholder"); (B) the name and address of the beneficial owner, if
different than the Nominating Stockholder, of any of the shares owned of
record by the Nominating Stockholder ("Beneficial Holder"); (C)
-3-
<PAGE>
the number of shares of each class and series of shares of the Corporation
which are owned of record and beneficially by the Nominating Stockholder
and the number which are owned beneficially by any Beneficial Holder; (D) a
description of all arrangements and understandings between the Nominating
Stockholder and any Beneficial Holder and any other person or persons
(naming such person or persons) pursuant to which the nomination is being
made; (E) the name and address of the person or persons to be nominated;
(F) a representation that the Nominating Stockholder is at the time of
giving of the notice, was or will be on the record date for the meeting,
and will be on the meeting date a holder of record of shares of the
corporation entitled to vote at such meeting, and intends to appear in
person or by proxy at the meeting to nominate the person or persons
specified in the notice; and (7) the written consent of each nominee to
serve as a Director of the Corporation of so elected. The presiding officer
of the meeting may, in such officer's sole discretion, refuse to
acknowledge the nomination of any person which the presiding officer
determines is not made in compliance with the foregoing procedure.
2.9 Quorum: The holders of a majority of the stock issued and outstanding
------
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
2.10 Vote Required: When a quorum is present at any meeting, the vote of
-------------
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
2.11 Voting: Unless otherwise provided in the certificate of incorporation
------
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
At all elections of the directors of the corporation each stockholder
having voting power shall be entitled to exercise the right to cumulative
voting, but only if so provided in the certificate of incorporation.
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<PAGE>
2.12 Action Without Meeting: Unless otherwise provided in the certificate
----------------------
of incorporation, any action required to be taken at any annual or special
meeting of stockholders of the corporation, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III DIRECTORS
----------------------
3.1 Number of Directors: The number of directors which shall constitute
-------------------
the whole board shall be not less than six (6) nor more than twelve (12) or, if
a majority of the Board of Directors so determines, fourteen (14). The first
board shall consist of two (2) directors. Thereafter, within the limits above
specified, the number of directors shall be determined by resolution of the
board of directors or by the stockholders at the annual meeting. The directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 3.2 of these By-Laws, and in the Certificate of Incorporation and
each director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
3.2 Vacancies: Vacancies and newly created directorships resulting from
---------
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute.
3.3 Powers of Directors: The business of the corporation shall be managed
-------------------
by or under the direction of its board of directors which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these By-Laws directed or
required to be exercised or done by the stockholders.
3.4 Place of Meetings: The board of directors of the corporation may hold
-----------------
meetings, both regular and special, either within or without the State of
Delaware.
3.5 First Meeting: The first meeting of each newly elected board of
-------------
directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
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<PAGE>
special meetings of the board of directors or as shall be specified in a written
waiver signed by all of the directors.
3.6 Regular Meetings: Regular meetings of the board of directors may be
----------------
held without notice at such time and at such place as shall from time to time be
determined by the board.
3.7 Special Meetings: Special meetings of the board may be called by the
----------------
president without notice to each director; special meetings shall be called by
the president or secretary in like manner and on like notice on the written
request of two directors unless the board consists of only one director; in
which case special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of the sole director.
3.8 Quorum; Vote Necessary: At all meetings of the board, a majority of
----------------------
the directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
3.9 Action Without Meeting: Unless otherwise restricted by the
----------------------
certificate of incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
3.10 Telephonic Communications: Unless otherwise restricted by the
-------------------------
certificate of incorporation or these By-Laws, members of the board of
directors, or any committee designated by the board of directors, may
participate in a meeting of the board of directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
3.11 Committees of Directors: The board of directors may, by resolution
-----------------------
passed by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
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<PAGE>
Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the By-Laws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
3.12 Minute of Committees: Each committee shall keep regular minutes of
--------------------
its meetings and report the same to the board of directors when required.
3.13 Compensation of Directors: Unless otherwise restricted by the
-------------------------
certificate of incorporation or these By-Laws, the board of directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the board of directors
and may be paid a fixed sum for attendance at each meeting of the board of
directors or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
3.14 Removal of Directors: Methods and measures for removing any director
--------------------
or the entire board of directors are set forth in the Certificate of Formation.
ARTICLE IV NOTICES
-------------------
4.1 Form: Whenever, under the provisions of the statutes or of the
----
certificate of incorporation or of these By-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
4.2 Waiver: Whenever any notice is required to be given under the
------
provisions of the statutes or of the certificate of incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
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<PAGE>
ARTICLE V OFFICERS
------------------
5.1 Officers Required: The officers of the corporation shall be chosen by
-----------------
the board of directors and shall be a president, a vice-president, a secretary
and a treasurer. The board of directors may also choose additional vice-
presidents, and one or more assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these By-Laws otherwise provide.
5.2 Election by Directors: The board of directors at its first meeting
---------------------
after each annual meeting of stockholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer.
5.3 Other Officers: The board of directors may appoint such other
--------------
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
5.4 Salaries: The salaries of all officers and agents of the corporation
--------
shall be fixed by the board of directors.
5.5 Term; Removal; Vacancy: The officers of the corporation shall hold
----------------------
office until their successors are chosen and qualify. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the board of directors. Any vacancy occurring
in any office of the corporation shall be filled by the board of directors.
5.6 President's General Duties: The president shall be the chief
--------------------------
executive officer of the corporation, shall preside at all meetings of the
stockholders and the board of directors, shall have general and active
management of the business of the corporation and shall see that all orders and
resolutions of the board of directors are carried into effect.
5.7 President's Execution of Contracts: He shall execute bonds, mortgages
----------------------------------
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation.
5.8 Vice-President's Duties: In the absence of the president or in the
-----------------------
event of his inability or refusal to act, the vice-president (or in the event
there be more than one vice-president, the vice-presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the president. The vice-presidents
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<PAGE>
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
5.9 Secretary's Duties: The secretary shall attend all meetings of the
------------------
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
5.10 Assistant Secretary's Duties: The assistant secretary, or if there be
----------------------------
more than one, the assistant secretaries in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
5.11 Treasurer's General Duties: The treasurer shall have the custody of
--------------------------
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
5.12 Treasurer to Disburse Funds: He shall disburse the funds of the
---------------------------
corporation as may be ordered by the board of directors, taking proper vouchers
for such disbursements, and shall render to the president and the board of
directors, at its regular meetings, or when the board of directors so requires,
an account of all his transactions as treasurer and of the financial condition
of the corporation.
5.13 Treasurer's Bond: If required by the board of directors, he shall
----------------
give the corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the board of
directors for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other property
of whatever kind in his possession or under his control belonging to the
corporation.
5.14 Assistant Treasurer's Duties: The assistant treasurer, or if there
----------------------------
shall be more than one, the assistant treasurers in the order determined by the
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall
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<PAGE>
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
ARTICLE VI
----------
6.1 Certificate of Stock: Every holder of stock in the corporation shall
--------------------
be entitled to have a certificate, signed by, or in the name of the corporation
by, the chairman or vice-chairman of the board of directors, or the president or
a vice-president and the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of the corporation, certifying the number of shares
owned by him in the corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock, or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights or each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
6.2 Signatures: Any of or all the signatures on the certificate may be
----------
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
6.3 Lost Certificates: The board of directors may direct a new
-----------------
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may
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<PAGE>
be made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
6.4 Transfer of Stock: Upon surrender to the corporation or the transfer
-----------------
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
6.5 Fixing Record Date: In order that the corporation may determine the
------------------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
6.6 Registered Stockholders: The corporation shall be entitled to
-----------------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VII GENERAL PROVISIONS
-------------------------------
7.1 Dividends: Dividends upon the capital stock of the corporation,
---------
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
7.2 Reserves: Before payment of any dividend, there may be set aside out
--------
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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<PAGE>
7.3 Annual Statement: The board of directors shall present at each annual
----------------
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
7.4 Checks: All checks or demands for money and notes of the corporation
------
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
7.5 Fiscal Year: The fiscal year of the corporation shall be determined
-----------
by the Board of Directors.
7.6 Seal: The corporate seal shall have inscribed thereon the name of the
----
corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII INDEMNIFICATION
-----------------------------
8.1 Actions By Third Parties: The corporation shall indemnify any person
------------------------
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
8.2 Actions By or In the Right of the Corporation: The corporation shall
---------------------------------------------
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for
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<PAGE>
negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
8.3 Expenses of Successful Defense: To the extent that a director,
------------------------------
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections
8.1 and 8.2 of these By-Laws, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
8.4 Determination That Indemnification Is Proper: Any indemnification
--------------------------------------------
under Sections 8.1 and 8.2 of these By-Laws, (unless ordered by a court) shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Sections 8.1 and 8.2 of these By-Laws. Such determination
shall be made (l) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
8.5 Advances: Expenses incurred in defending a civil or criminal action,
--------
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the board of
directors in the specific case upon receipt of an undertaking by or on behalf of
the director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this section.
8.6 Provisions Not Exclusive: The indemnification provided by this
------------------------
Article VIII shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under the certificate of formation or
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
8.7 Insurance: The corporation may purchase and maintain insurance on
---------
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article VIII.
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<PAGE>
8.8 Constituent Corporation: For purposes of this Article VIII,
-----------------------
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify the
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Article VIII with respect to the resulting or surviving corporation as
he would have with respect to such constituent corporation if its separate
existence had continued.
8.9 Other Enterprises; Fines; Services: For purposes of this Article
----------------------------------
VIII, references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interest of the corporation" as referred to in
this Article VIII.
8.10 Continuation of Indemnification and Advancement of Expenses: The
-----------------------------------------------------------
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VIII shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
ARTICLE IX AMENDMENTS
----------------------
9.1 Amendments by Stockholders or Directors: These By-Laws may be
---------------------------------------
altered, amended or repealed or new By-Laws may be adopted by the stockholders
or by the board of directors in accordance with the Certificate of
Incorporation.
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<PAGE>
EXHIBIT 3.2b
CARESIDE, INC.
FORM OF
AMENDED AND RESTATED BY-LAWS
----------------------------
ARTICLE I OFFICES
------------------
1.1 Registered Office: The registered office shall be in the City of
-----------------
Wilmington, County of New Castle, State of Delaware.
1.2 Other Offices: The corporation may also have offices at such other
-------------
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may require.
ARTICLE II MEETINGS OF SHAREHOLDERS
------------------------------------
2.1 Place of Meetings: All meetings of the shareholders for the election
-----------------
of directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the board of directors and
stated in the notice of the meeting. Meetings of shareholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
2.2 Date of Annual Meeting: Annual meetings of shareholders, commencing
----------------------
with the year 1998, shall be held during the third week of May on a date chosen
by the board of directors, at 10:00 o'clock A.M., or at such other date and time
as shall be designated from time to time by the board of directors and stated in
the notice of the meeting, at which they shall elect by a plurality vote a board
of directors, and transact such other business as may properly be brought before
the meeting.
2.3 Notice of Annual Meeting: Written notice of the annual meeting
------------------------
stating the place, date and hour of the meeting shall be given to each
shareholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
2.4 Shareholders List: The officer who has charge of the stock ledger of
-----------------
the corporation shall prepare and make, at least ten days before every meeting
of shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
Such list shall be open to the examination of any shareholders, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be
<PAGE>
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any shareholder who is present.
2.5 Special Meetings: Special meetings of the shareholders, for any
----------------
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the Chairman and Chief Executive
Officer and shall be called by the secretary at the request in writing of a
majority of the board of directors. Such request shall state the purpose or
purposes of the proposed meeting.
2.6 Notice of Special Meetings: Written notice of a special meeting
--------------------------
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given not less than sixty nor more than
ninety days before the date of the meeting, to each shareholder entitled to vote
at such meeting.
2.7 Business Transacted at Meeting of Shareholders:
----------------------------------------------
(1) Except as otherwise provided by or in these By-laws, or except as
permitted by the presiding officer of the meeting in the exercise of such
officer's sole discretion in any specific instance, the business which shall be
voted upon or discussed at any annual or special meeting of the shareholders
shall (i) have been specified in the written notice of the meeting (or any
supplement thereto) given by the Corporation, (ii) be brought before the meeting
at the direction of the Board of Directors, (iii) be brought before the meeting
by the presiding officer of the meeting unless a majority of the Directors then
in office object to such business being conducted at the meeting, or (iv) in the
case of an annual meeting of shareholders have been specified in a written
notice given to the Corporation by or on behalf of any shareholder who shall
have been a shareholder of record on the record date for such meeting and who
shall continue to be entitled to vote thereat (the "Shareholder Notice"), in
accordance with all of the requirements set forth below.
(2) Each Shareholder Notice must be delivered to, or mailed and
received at, the principal executive offices of the Corporation addressed to the
attention of the Chairman and Chief Executive Officers (i) in the case of an
annual meeting that is called for a date that is within 30 days before or after
the anniversary date of the immediately preceding annual meeting of
Shareholders, not less than 60 days nor more than 90 days prior to such
anniversary date, provided that a proposal submitted by a shareholder for
inclusion in the Corporation's proxy statement for an annual meeting which is
appropriate for inclusion therein and otherwise complies with Securities
Exchange Act of 1934 Rule 14a-8 (including timeliness), shall be deemed to have
also been submitted timely pursuant to these By-laws, and (ii) in the case of an
annual meeting that is called for a date that is not within 30 days before or
after the anniversary date of the immediately preceding annual meeting, not
later than the close of business on the fifth day following the earlier of the
day on which notice of the date of the
<PAGE>
meeting was mailed or public disclosure of the meeting date (which shall include
disclosure of the meeting date given to a national securities exchange or the
National Association of Securities Dealers was made. Each such Shareholder
Notice must set forth (A) the name and address of the shareholder who intends to
bring the business before the annual meeting ("Proposing Shareholder"); (B) the
name and address of the beneficial owner, if different than the Proposing
Shareholder, of any of the share owned of record by the Proposing Shareholder
("Beneficial Owner"); (C) the number of shares of each class and series of
shares of the Corporation which are owned of record and beneficially by the
Proposing Shareholder and the number which are owned beneficially by any
Beneficial Owner; (D) any interest (other than an interest solely as a
shareholder) which the Proposing Shareholder or a Beneficial Owner has in the
business being proposed by the Proposing Shareholder; (E) a description of all
arrangements and understandings between the Proposing Shareholder and any
Beneficial Owner and any other person or persons (naming such person or persons)
pursuant to which the proposal in the Shareholder Notice is being made; (F) a
description of the business which the Proposing Shareholder seeks to bring
before the meeting, the reason for doing so and, if a specific action is to be
proposed, the text of the resolution or resolutions which the Proposing
Shareholder proposes that the Corporation adopt; and (G) a representation that
the Proposing Shareholder is at the time of giving the Shareholder Notice, was
or will be on the record date for the meeting, and will be on the meeting date a
holder of record of shares of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to bring the business
specified in the Shareholder Notice before the meeting. The presiding officer of
the meeting may, in such officer's sole discretion, refuse to acknowledge any
business proposed by a shareholder which the presiding officer determines is not
made in compliance with the foregoing procedure.
2.8 Nomination of Directors by Shareholders;
---------------------------------------
(a) Nominations for the election of Directors may be made by the Board
of Directors, by a committee appointed by the Board of Directors with authority
to do so or by any shareholder of record entitled to vote in the election of
Directors who is a shareholder at the record date of the meeting and also on the
date of the meeting at which Directors are to be elected; provided, however,
that with respect to a nomination made by a shareholder, such shareholder must
provide timely written notice to the Chairman and Chief Executive Officer of the
Corporation in accordance with the following requirements:
(i) To be timely, a shareholder's notice must be delivered to, or
mailed and received at, the principal executive offices of the Corporation
addressed to the attention of the Chairman and Chief Executive Officer (1)
in
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<PAGE>
the case of an annual meeting that is called for a date that is within
30 days before or after the anniversary date of the immediately preceding
annual meeting of shareholders, not less than 60 days nor more than 90 days
prior to such anniversary date, and (2) in the case of an annual meeting
that is called for a date that is not within 30 days before or after the
anniversary date of the immediately preceding annual meeting, or in the
case of a special meeting of shareholders called for the purpose of
electing Directors, not later than the close of business on the fifth day
following the day on which notice of the date of the meeting was mailed;
and
(ii) Each such written notice must set forth: (A) the name and
address of the shareholder who intends to make the nomination ("Nominating
Shareholder"); (B) the name and address of the beneficial owner, if
different than the Nominating Shareholder, of any of the shares owned of
record by the Nominating Shareholder ("Beneficial Holder"); (C) the number
of shares of each class and series of shares of the Corporation which are
owned of record and beneficially by the Nominating Shareholder and the
number which are owned beneficially by any Beneficial Holder; (D) a
description of all arrangements and understandings between the Nominating
Shareholder and any Beneficial Holder and any other person or persons
(naming such person or persons) pursuant to which the nomination is being
made; (E) the name and address of the person or persons to be nominated;
(F) a representation that the Nominating Shareholder is at the time of
giving of the notice, was or will be on the record date for the meeting,
and will be on the meeting date a holder of record of shares of the
corporation entitled to vote at such meeting, and intends to appear in
person or by proxy at the meeting to nominate the person or persons
specified in the notice; and (7) the written consent of each nominee to
serve as a Director of the Corporation of so elected. The presiding officer
of the meeting may, in such officer's sole discretion, refuse to
acknowledge the nomination of any person which the presiding officer
determines is not made in compliance with the foregoing procedure.
2.9 Quorum: The holders of a majority of the stock issued and outstanding
------
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the shareholders, the shareholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may
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<PAGE>
be transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each shareholder of record entitled to
vote at the meeting.
2.10 Vote Required: When a quorum is present at any meeting, the vote of
-------------
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
2.11 Voting: Unless otherwise provided in the certificate of incorporation
------
each shareholder shall at every meeting of the shareholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such shareholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
At all elections of the directors of the corporation each shareholder
having voting power shall be entitled to exercise the right to cumulative
voting, but only if so provided in the certificate of incorporation.
2.12 Action Without Meeting: Unless otherwise provided in the certificate
----------------------
of incorporation, any action required to be taken at any annual or special
meeting of shareholders of the corporation, or any action which may be taken at
any annual or special meeting of such shareholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those shareholders who have not consented in writing.
ARTICLE III DIRECTORS
-----------------------
3.1 Number of Directors: The number of directors which shall constitute
-------------------
the whole board shall be not less than six (6) nor more than twelve (12) or, if
a majority of the Board of Directors so determines, fourteen (14). The first
board shall consist of two (2) directors. Thereafter, within the limits above
specified, the number of directors shall be determined by resolution of the
board
-5-
<PAGE>
of directors or by the shareholders at the annual meeting. The directors shall
be elected at the annual meeting of the shareholders, except as provided in
Section 3.2 of these By-Laws, and in the Certificate of Incorporation and each
director elected shall hold office until his successor is elected and qualified.
Directors need not be shareholders.
3.2 Vacancies: Vacancies and newly created directorships resulting from
---------
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute.
3.3 Powers of Directors: The business of the corporation shall be managed
-------------------
by or under the direction of its board of directors which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these By-Laws directed or
required to be exercised or done by the shareholders.
3.4 Place of Meetings: The board of directors of the corporation may hold
-----------------
meetings, both regular and special, either within or without the State of
Delaware.
3.5 First Meeting: The first meeting of each newly elected board of
-------------
directors shall be held at such time and place as shall be fixed by the vote of
the shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
shareholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the shareholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors or as shall be specified in a written
waiver signed by all of the directors.
3.6 Regular Meetings: Regular meetings of the board of directors may be
----------------
held without notice at such time and at such place as shall from time to time be
determined by the board.
3.7 Special Meetings: Special meetings of the board may be called by the
----------------
president without notice to each director; special meetings shall be called by
the president or secretary in like manner and on like notice on the written
request of two directors unless the board consists of only one director; in
which case special meetings shall be called by the president or secretary in
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<PAGE>
like manner and on like notice on the written request of the sole director.
3.8 Quorum; Vote Necessary: At all meetings of the board, a majority of
----------------------
the directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
3.9 Action Without Meeting: Unless otherwise restricted by the
----------------------
certificate of incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
3.10 Telephonic Communications: Unless otherwise restricted by the
-------------------------
certificate of incorporation or these By-Laws, members of the board of
directors, or any committee designated by the board of directors, may
participate in a meeting of the board of directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
3.11 Committees of Directors: The board of directors may, by resolution
-----------------------
passed by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
-7-
<PAGE>
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the shareholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the shareholders a dissolution of the corporation or a
revocation of a dissolution, or amending the By-Laws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
3.12 Minute of Committees: Each committee shall keep regular minutes of
--------------------
its meetings and report the same to the board of directors when required.
3.13 Compensation of Directors: Unless otherwise restricted by the
-------------------------
certificate of incorporation or these By-Laws, the board of directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the board of directors
and may be paid a fixed sum for attendance at each meeting of the board of
directors or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
3.14 Removal of Directors: Methods and measures for removing any director
--------------------
or the entire board of directors are set forth in the certificate of formation.
ARTICLE IV NOTICES
-------------------
4.1 Form: Whenever, under the provisions of the statutes or of the
----
certificate of incorporation or of these By-laws, notice is required to be given
to any director or shareholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or shareholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
4.2 Waiver: Whenever any notice is required to be given under the
------
provisions of the statutes or of the certificate of incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
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<PAGE>
ARTICLE V OFFICERS
-------------------
5.1 Officers Required: The officers of the corporation shall be chosen by
-----------------
the board of directors and shall be a president, a vice-president, a secretary
and a treasurer. The board of directors may also choose additional vice-
presidents, and one or more assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these By-Laws otherwise provide.
5.2 Election by Directors: The board of directors at its first meeting
---------------------
after each annual meeting of shareholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer.
5.3 Other Officers: The board of directors may appoint such other
--------------
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
5.4 Salaries: The salaries of all officers and agents of the corporation
--------
shall be fixed by the board of directors.
5.5 Term; Removal; Vacancy: The officers of the corporation shall hold
----------------------
office until their successors are chosen and qualify. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the board of directors. Any vacancy occurring
in any office of the corporation shall be filled by the board of directors.
5.6 President's General Duties: The president shall be the chief
--------------------------
executive officer of the corporation, shall preside at all meetings of the
shareholders and the board of directors, shall have general and active
management of the business of the corporation and shall see that all orders and
resolutions of the board of directors are carried into effect.
5.7 President's Execution of Contracts: He shall execute bonds, mortgages
----------------------------------
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation.
5.8 Vice-President's Duties: In the absence of the president or in the
-----------------------
event of his inability or refusal to act, the vice-president (or in the event
there be more than one vice-president, the vice-presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their
-9-
<PAGE>
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
5.9 Secretary's Duties: The secretary shall attend all meetings of the
------------------
board of directors and all meetings of the shareholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
5.10 Assistant Secretary's Duties: The assistant secretary, or if there be
----------------------------
more than one, the assistant secretaries in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
5.11 Treasurer's General Duties: The treasurer shall have the custody of
--------------------------
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
5.12 Treasurer to Disburse Funds: He shall disburse the funds of the
---------------------------
corporation as may be ordered by the board of directors, taking proper vouchers
for such disbursements, and shall render to the president and the board of
directors, at its regular meetings, or when the board of directors so requires,
an account of all his transactions as treasurer and of the financial condition
of the corporation.
5.13 Treasurer's Bond: If required by the board of directors, he shall
----------------
give the corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the board of
directors for the faithful performance
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<PAGE>
of the duties of his office and for the restoration to the corporation, in case
of his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the corporation.
5.14 Assistant Treasurer's Duties: The assistant treasurer, or if there
----------------------------
shall be more than one, the assistant treasurers in the order determined by the
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
ARTICLE VI
----------
6.1 Certificate of Stock: Every holder of stock in the corporation shall
--------------------
be entitled to have a certificate, signed by, or in the name of the corporation
by, the chairman or vice-chairman of the board of directors, or the president or
a vice-president and the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of the corporation, certifying the number of shares
owned by him in the corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock, or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each shareholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights or each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
6.2 Signatures: Any of or all the signatures on the certificate may be
----------
facsimile. In case any officer, transfer agent
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<PAGE>
or registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
6.3 Lost Certificates: The board of directors may direct a new
-----------------
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
6.4 Transfer of Stock: Upon surrender to the corporation or the transfer
-----------------
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
6.5 Fixing Record Date: In order that the corporation may determine the
------------------
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
6.6 Registered Shareholders: The corporation shall be entitled to
-----------------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
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<PAGE>
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VII GENERAL PROVISIONS
-------------------------------
7.1 Dividends: Dividends upon the capital stock of the corporation,
---------
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
7.2 Reserves: Before payment of any dividend, there may be set aside out
--------
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
7.3 Annual Statement: The board of directors shall present at each annual
----------------
meeting, and at any special meeting of the shareholders when called for by vote
of the shareholders, a full and clear statement of the business and condition of
the corporation.
7.4 Checks: All checks or demands for money and notes of the corporation
------
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
7.5 Fiscal Year: The fiscal year of the corporation shall be determined
-----------
by the Board of Directors.
7.6 Seal: The corporate seal shall have inscribed thereon the name of the
----
corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII INDEMNIFICATION
-----------------------------
8.1 Actions By Third Parties: The corporation shall indemnify any person
------------------------
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving
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<PAGE>
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
8.2 Actions By or In the Right of the Corporation: The corporation shall
---------------------------------------------
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
8.3 Expenses of Successful Defense: To the extent that a director,
------------------------------
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections
8.l and 8.2 of these By-Laws, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
8.4 Determination That Indemnification Is Proper: Any indemnification
--------------------------------------------
under Sections 8.1 and 8.2 of these By-Laws,
-14-
<PAGE>
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Sections 8.1 and 8.2 of these By-
Laws. Such determination shall be made (l) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the shareholders.
8.5 Advances: Expenses incurred in defending a civil or criminal action,
--------
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the board of
directors in the specific case upon receipt of an undertaking by or on behalf of
the director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation as authorized in this section.
8.6 Provisions Not Exclusive: The indemnification provided by this
------------------------
Article VIII shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under the certificate of formation or
any By-Law, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
8.7 Insurance: The corporation may purchase and maintain insurance on
---------
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article VIII.
8.8 Constituent Corporation: For purposes of this Article VIII,
-----------------------
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify the
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a
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<PAGE>
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under the
provisions of this Article VIII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
8.9 Other Enterprises; Fines; Services: For purposes of this Article
----------------------------------
VIII, references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interest of the corporation" as referred to in
this Article VIII.
8.10 Continuation of Indemnification and Advancement of Expenses: The
-----------------------------------------------------------
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VIII shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
ARTICLE IX AMENDMENTS
----------------------
9.1 Amendments by Shareholders or Directors: These By-Laws may be
---------------------------------------
altered, amended or repealed or new By-Laws may be adopted by the shareholders
or by the board of directors in accordance with the Certificate of
Incorporation.
-16-
<PAGE>
EXHIBIT 4.2
PLACEMENT AGENT WARRANT AGREEMENT
WARRANT AGREEMENT dated as of January 31, 1997, between EXIGENT
DIAGNOSTICS, INC., a Delaware corporation ("Company"), and SPENCER TRASK
SECURITIES INCORPORATED ("Agent").
WITNESSETH
WHEREAS, the Agent has agreed pursuant to the Placement Agency
Agreement dated December 10, 1996, by and between the Agent and the Company (the
"Placement Agency Agreement") to act as the placement agent in connection with
the Company's proposed private placement (the "Offering") of up to 7,15 units
("Units") (plus up to an additional 11.25 Units solely to cover over-
subscriptions, if any) each Unit consisting of 1000 shares of the Company's
common stock, par value $.01 per share ("Common Stock"); and
WHEREAS, the Company proposes to issue to the Agent or its designees
warrants ("Warrants") to purchase a number of shares of Common Stock, equal to
twenty percent (20%) of the number of shares of Common Stock contained in the
Units sold in the Offering; and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued at each of the Closings (as such term is defined in the Placement Agency
Agreement) by the Company to the Agent in consideration for, and as part of the
Agent's compensation in connection with, the Agent acting as the placement agent
pursuant to the Placement Agency Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant. The Company hereby grants to the Agent, and its assigns
-----
(each, a "Holder"), the right to purchase, at any tune during the term ("Warrant
Exercise Term") commencing on the date hereof and ending at 5:30 p.m., New York
time, on the later of (a) the seventh anniversary of the date of the Final
Closing (as defined in the Placement Agency Agreement) or (b) the date which is
three years after the dosing date of an initial public offering of the Company's
securities within such seven year period, an aggregate number of shares of
Common Stock ("Warrant Shares") equal to twenty percent (20%) of the number of
shares of Common Stock contained in the Units sold in the Offering at an initial
exercise price of $1.00 per share of Common Stock, subject to adjustment as
provided in Section 6 hereof (as in effect from time to time, the "Exercise
Price").
2. Warrant Certificates. The Warrants shall be evidenced by warrant
--------------------
certificates ("Warrant Certificates") in the form of Exhibit A hereto which
shall be issued and delivered to the Agent upon each sale of securities of the
Company in respect of which Warrants shall become issuable hereunder. The
Warrant Certificates, and the certificates representing the Warrant Shares
and/or other securities, property or rights issuable upon exercise of the
Warrants
<PAGE>
(collectively, the "Warrant Securities"), shall be executed on behalf of the
Company by the manual or facsimile signature of the then present Chairman or
Vice Chairman of the Board of Directors or President or Vice President of the
Company attested to be the manual or facsimile signature of the then present
Secretary or Assistant Secretary of the Company. Warrant Certificates shall be
dated the date of execution by the Company upon initial issuance notwithstanding
any subsequent division, exchange, substitution or transfer.
3. Exercise of Warrant.
-------------------
3.1. Exercise. Warrants may be exercised, in whole or in part
--------
(but not as to fractional shares), by surrender of a Warrant Certificate with
the annexed Form of Election to Purchase duly executed, together with payment of
the Exercise Price for the Warrant Securities for which such Warrants are being
exercised at the Company's principal offices at 709 Swedeland Road, P.O. Box
1539, King of Prussia, PA 19087. The Exercise Price shall be payable by
certified or official bank check. The Exercise Price may also be paid, in whole
or in part, in shares of Common Stock owned by the Holder having an average Fair
Market Value (as defined below) over the last five (5) trading days immediately
preceding the Exercise Date (as defined below) equal to the portion of Exercise
Price being paid in such shares. In addition, the Warrants may be exercised, by
surrendering the Warrant Certificate in the manner specified in this Section 3,
together with irrevocable instructions to the Company to issue in exchange for
the Warrant Certificate the number of shares of Common Stock equal to the
product of (a) the number of shares as to which the Warrants are being exercised
multiplied by (b) a fraction the numerator of which is the average Fair Market
Value of a share of Common Stock over the last five (5) trading days immediately
preceding the Exercise Date less the Exercise Price therefor and the denominator
of which is such average Fair Market Value. In the case of the purchase of less
than all the shares of Common Stock purchasable under any Warrant Certificate,
the Company shall cancel said Warrant Certificate and shall execute and deliver
a new Warrant Certificate of like tenor for the unexercised balance of the
Warrant Securities. For purposes hereof, "Exercise Date" shall mean the date on
which all deliveries required to be made to the Company upon exercise of
Warrants pursuant to this Section 3.1 shall have been made.
3.2. Issuance of Certificates for Warrant Shares. Upon the
-------------------------------------------
exercise of the Warrants, the issuance of certificates for Warrant Securities
shall be made forthwith (and in any event such issuance shall be made within 10
business days from the Exercise Date) without charge to the Holder thereof
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall (subject to the provisions of
Section 4 hereof) be issued in the name of, or in such names as may be directed
by, the Holder thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any such certificates in a name other than that
of the Holder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
-2-
<PAGE>
3.3. Fair Market Value. As is used herein, the "Fair Market
-----------------
Value" of a share of Common Stock on any day means: (a) if the principal market
for the Common Stock is The New York Stock Exchange, any other national
securities exchange or The Nasdaq National Market, the closing sales price of
the Common Stock on such day as reported by such exchange or market, or on a
consolidated tape reflecting transactions on such exchange or market, or (b) if
the principal market for the Common Stock is not a national securities exchange
or The Nasdaq National Market and the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System, the mean between
the closing bid and the closing asked prices for the Common Stock on such day as
quoted on such System, or (c) if the Common Stock is not quoted on the National
Association of Securities Dealers Automated Quotations System, the mean between
the highest bid and lowest asked prices for the Common Stock on such day as
reported by the National Quotation Bureau, Inc.; provided that if none of (a),
(b) or (c) above is applicable, or if no trades have been made or no quotes are
available for such day, the Fair Market Value of the Common Stock shall be
determined, in good faith, by the Board of Directors of the Company.
4. Transfer of Securities. Each Holder, by acceptance of a Warrant
----------------------
Certificate, covenants and agrees that it is acquiring the Warrants evidenced
thereby, and, upon exercise thereof, the Warrant Securities, for its own account
- -as an investment and not with a view to distribution thereof. The Warrant
Securities have not been registered under the Securities Act of 1933, as amended
(the "Act") or any state securities laws and no transfer of any Warrant
Securities shall be permitted unless the Company has received notice of such
transfer, at the address of its principal office set forth in Section 3.1
hereof, in the form of assignment attached hereto, accompanied by an opinion of
counsel reasonably satisfactory to the Company that an exemption from
registration of such Warrants Securities under the Act is available for such
transfer. Upon any exercise of the Warrants, certificates representing the
shares of Common Stock and any of the other securities issuable upon exercise of
the Warrants shall bear the following legend:
The securities represented by this certificate have not
been registered under the Securities Act of 1933
("Act") or any state securities laws for public resale,
and may not be offered or sold except pursuant to (i)
an effective registration statement under the Act and
such laws or (ii) an opinion of counsel satisfactory to
the issuer that an exemption from such registration is
available.
Any purported transfer of any Warrants or Warrant Securities not in compliance
with the provisions of this Section 4 shall be null and void.
5. [Intentionally Omitted.]
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<PAGE>
6. Adjustments to Exercise Price and Number of Securities.
------------------------------------------------------
6.1. Computation of Adjusted Exercise Price. Except as
--------------------------------------
hereinafter provided, in case the Company shall at any time after the date
hereof issue or sell any shares of Common Stock, including, without limitation,
shares held in the Company's treasury and shares of Common Stock issued upon the
exercise of any options, rights or warrants to subscribe for shares of Common
Stock and shares of Common Stock issued upon the direct or indirect conversion
or exchange of securities for shares of Common Stock, for a consideration per
share less than the Exercise Price in effect immediately prior to the issuance
or sale of such shares or the Fair Market Value (as defined in Section 3.3
hereof of a share of Common Stock over the last five (5) trading days
immediately preceding the issuance or sale of such shares, or without
consideration, then forthwith upon such issuance or sale, the Exercise Price
shall (until another such issuance or sale) be reduced to the lower of the
prices (calculated to the nearest full cent) determined as follows:
(a) by dividing (i) an amount equal to the sum of (A) the
number of shares of Common Stock outstanding immediately prior to such issuance
or sale multiplied by the then existing Exercise Price, and (B) the aggregate
amount of the consideration, if any, received by the Company upon such issuance
or sale, by (ii) the total number of shares of Common Stock outstanding
immediately after such issuance or sale; and
(b) by multiplying the Exercise Price in effect immediately
prior to the of such issuance or sale by a fraction, the numerator of which
shall be the sum of (i) the number of shares of Common Stock outstanding
immediately prior to such issuance or sale multiplied by the average Fair Market
Value of a share of Common Stock over the last five (5) trading days immediately
preceding such issuance or sale, plus (ii) the aggregate amount of the
consideration received by the Company upon such issuance or sale, and the
denominator of which shall be the product of (A) the total number of shares of
Common Stock outstanding immediately after such issuance or sale, multiplied by
(B) such Fair Market Value; provided, however, that in no event shall the
Exercise Price be adjusted pursuant to the computations in this Section 6.1 to
an amount in excess of the Exercise Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of Common
Stock, as provided by Section 6.3 hereof.
For the purposes of any computation to be made in accordance with this
Section 6.1, the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of Common
Stock for a consideration part or all of which shall be cash, the amount of the
cash consideration therefor shall be deemed to be the amount of cash received by
the Company for such shares (or, if shares of Common Stock are offered by the
Company, for subscription, the subscription price, or, ff shares of Common Stock
are sold to underwriters or dealers for public offering without a subscription
offering, the public offering price, before deducting therefrom any compensation
-4-
<PAGE>
paid or discount allowed in the sale, underwriting or purchase thereof by
underwriters or dealers or others performing similar services, or any expenses
incurred in connection therewith) plus any amounts payable to security holders
or any affiliate thereof, including without limitation, any employment
agreement, royalty, consulting agreement, covenant not to compete, amount or
contingent payment right or similar arrangement, agreement or understanding,
whether oral or written; all such amounts shall be valued at the aggregate
amount payable thereunder whether such payments are absolute or contingent and
irrespective of the period or uncertainty of payment, the rate of interest, if
any, or the contingent nature thereof except if the payment of such amounts has
been approved by the Agent.
(ii) In case of the issuance or sale (otherwise
than as a dividend or other distribution on any stock of the Company) of shares
of Common Stock for a consideration part or all of which shall be other than
cash, the amount of the consideration therefor other than cash shall be deemed
to be the value of such consideration as determined in good faith by the Board
of Directors of the Company.
(iii) Shares of Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the day following
the record date for the determination of stockholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued without
consideration.
(iv) The reclassification of securities of the
Company other than shares of Common Stock into securities including shares of
Common Stock shall be deemed to involve the issuance of such shares of Common
Stock for a consideration other than cash immediately after the opening of
business on the day following the record date for the determination of security
holders entitled to receive such shares, and the value of the consideration
allocable to such shares of Common Stock shall be determined as provided in
paragraph (2) of this Section 6.1.
(v) The number of shares of Common Stock at any one
time outstanding shall include the aggregate number of shares issued or issuable
(subject to readjustment upon the actual issuance thereof) upon the exercise of
then outstanding options, rights, warrants and upon the conversion or exchange
of then outstanding convertible or exchangeable securities.
(vi) No adjustment shall be made to the Exercise
Price then in effect upon the exercise of the Warrants or the conversion or
exchange of convertible or exchangeable securities outstanding as of the date
hereof or the exercise of options issued pursuant to the Company's stock option
plans described in the Memorandum.
6.2. Options, Rights, Warrants and Convertible and Exchangeable
----------------------------------------------------------
Securities. Except for options to be issued pursuant to the Company's stock
- ----------
option plans
-5-
<PAGE>
described in the Memorandum, in case the Company shall at any time after the
date hereof grant or issue options, rights or warrants to subscribe for shares
of Common Stock, or issue any securities convertible into or exchangeable for
shares of Common Stock, where the aggregate consideration per share is less than
the Exercise Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, the Exercise
Price in effect immediately prior to the issuance of such options, rights or
warrants, or such convertible or exchangeable securities, as the case may be,
shall be reduced to a price determined by making a computation in accordance
with the provisions of Section 6.1 hereof, provided that:
(a) The aggregate maximum number of shares of Common
Stock, as the case may be, issuable under such options, rights or warrants shall
be deemed to be issued and outstanding at the time such options, rights or
warrants were issued.
(b) The aggregate consideration for any such options,
rights or warrants shall be equal to the minimum purchase price per share
provided for in such options, rights or warrants at the time of issuance, plus
the consideration, if any, received by the Company for such options, rights or
warrants.
(c) The aggregate maximum number of shares of Common
Stock issuable upon conversion or exchange of any convertible or exchangeable
securities shall be deemed to be issued and outstanding at the time of issuance
of such securities.
(d) The aggregate consideration for any such
convertible or exchangeable securities shall be equal to the consideration
received[ by the Company for such securities, plus the total consideration, if
any, receivable by the Company upon the conversion or exchange thereof.
(e) If any change shall occur in the exercise price
per share provided for in any of such options, rights or warrants or in the
price per share at which such convertible or exchangeable securities are
convertible or exchangeable, such options, rights or warrants or convertible or
exchangeable securities, as the case may be, shall be deemed to have expired or
terminated on the date when such price change became effective in respect of
shares not theretofore issued pursuant to the exercise or conversion or exchange
thereof, and the Company shall be deemed to have issued upon such date new
options, rights or warrants or convertible or exchangeable securities at the new
price in respect of the number of shares issuable upon the exercise of such
options, rights or warrants or the conversion or exchange of such convertible or
exchangeable securities.
(f) In case there has been any adjustment hereunder in
the Exercise Price by reason of the offer, issue or sale of any subscription or
purchase rights or options or any convertible or exchangeable securities or
obligations and the purchase, conversion or exchange privilege so created
thereafter terminates unexercised or changes, such Exercise
-6-
<PAGE>
Price shall as of the date of such termination or change be adjusted to reflect
such termination or change.
6.3. Subdivision and Combination. In case the Company shall at
---------------------------
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
6.4. Adjustment in Number of Securities. Upon each adjustment of
----------------------------------
the Exercise Price pursuant to the provisions of this Section 6, the number of
securities issuable upon the exercise of each Warrant shall be adjusted to the
nearest full amount by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
6.5. Definition of Common Stock. For the purpose of this
--------------------------
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting from
successive changes or modifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value.
6.6. Merger or Consolidation. In the event there is proposed any
-----------------------
consolidation of the Company with, or merger of the Company with or into,
another corporation, other than a merger or consolidation in which the Company
is the surviving corporation and after which at least fifty percent (50%) of the
outstanding voting securities of the Company are owned by the stockholders of
the Company immediately prior to such merger or consolidation, subject to its
obligations of confidentiality, the Company shall provide the Holder with not
less than 30 days' prior written notice of the proposed effective date of such
merger or consolidation (the "Effective Date"). The Holder shall be entitled to
exercise its Warrants at any time up to the third business day prior to the
Effective Date, and this Agreement and any unexercised Warrants shall terminate
and be of no further force and effect on the Effective Date (or such later date
on which the merger or consolidation becomes effective). Any such exercise by
the Holder may be conditioned upon and made subject to the consummation of the
merger or consolidation.
6.7. No Adjustment of Exercise Price in Certain Cases. No
------------------------------------------------
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the shares
of Common Stock issuable upon the exercise of the Warrants.
(b) If the amount of said adjustment shall be less than two
cents (2c) per security issuable upon exercise of the Warrants; provided,
however, that in such
-7-
<PAGE>
case any adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the next
subsequent adjustment which, together with any adjustment so carried forward,
shall amount to at least two cents (2c) per security issuable upon exercise of
the Warrants.
6.8. Dividends and Other Distributions. In the event that the
---------------------------------
Company shall at any time prior to the exercise of all Warrants declare a
dividend (other than a dividend consisting solely of shares of Common Stock) or
otherwise distribute to its stockholders any assets, property, rights, evidence
of indebtedness, securities (other than shares of Common Stock), whether issued
by the Company or by -another, or any other thing of value, the Holders of the
unexercised Warrants shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the exercise
thereof, to receive, upon the exercise of such Warrants, the same property,
assets, rights, evidences of indebtedness, securities or any other thing of
value that they would have been entitled to receive at the time of such dividend
or distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of the
provisions of this Section 6.8.
7. Exchange and Replacement of Warrant Certificates. Each Warrant
------------------------------------------------
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal office of the Company, for a new Warrant
Certificate of like tenor and date representing in the aggregate the right to
purchase the same number of securities in such denominations as shall be
designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate,, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, ff
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
8. Elimination of Fractional Interests. The Company shall not be
-----------------------------------
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, but instead shall pay cash in lieu of such
fractional interests to the Holders entitled thereto based on the Fair Market
Value of the Common Stock as determined m good faith by the Board of Directors
of the Company.
9. Reservation and Listing of Securities. The Company shall at all
-------------------------------------
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Warrants and payment of the Exercise Price therefor,
all shares of Common Stock and other securities issuable upon such exercise
shall be
-8-
<PAGE>
duly and validly issued, fully paid, nonassessable and not subject to the
preemptive rights of any stockholder.
10. Notices to Warrant Holders. Nothing contained in this Agreement
--------------------------
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale, of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least 15 days prior to the date fixed as a record date or the
date of dosing the transfer books for the determination of the stockholders
entitled to such dividend, distribution, convertible or exchangeable securities
or subscription rights, or entitled to vote on such proposed dissolution,
liquidation, winding up or sale. Such notice shall specify such record date or
the date of dosing the transfer books, as the case may be. Failure to give such
notice or any defect therein shall not affect the validity of any action taken
in connection with the declaration or payment of any such dividend, or the
issuance of any convertible or exchangeable securities, or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding up or
sale.
11. Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to a Holder, to the address of such Holder as
shown on the books of the Company; or
-9-
<PAGE>
(b) If to the Company, to the address set forth in
Section 3.1 hereof, or to such other address as the Company may designate by
notice to the Holders.
12. Supplements and Amendments. The Company and the Agent may
--------------------------
from time to time supplement or amend this Agreement without the approval of any
Holders in order to cure any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with any provision
herein or to make any other provisions in regard to matters or questions arising
hereunder which the Company and the Agent may deem necessary or desirable and
which the Company and the Agent deem shall not adversely affect the interests of
any other Holders of Warrant Certificates. Other amendments to this Agreement
may be made only with the written consent of a Majority of Holders.
13. Successors. All the covenants and provisions of this
----------
Agreement shall be binding upon and inure to the benefit of the Company, the
Holders and their respective successors and assigns hereunder.
14. Termination. This Agreement shall terminate at the dose of
-----------
business on the seventh anniversary of the date hereof. Notwithstanding the
foregoing, the indemnification provisions of Section 5.5 hereof shall survive
such termination until the close of business on the fourteenth anniversary of
the date hereof.
15. Governing Law: Submission to Jurisdiction. This
------------------------------------------
Agreement and each Warrant Certificate issued hereunder shall be governed by,
and construed in accordance with, the laws of the State of New York applicable
to contracts entered into and to be performed wholly within said State.
The Company, the Agent and each of the Holders hereby agree that
any action, proceeding or claim against it arising out of, or relating m any way
to, this Agreement shall be brought and enforced m the courts of the State of
New York, and any Federal court located in the County of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
The Company, the Agent and each of the Holders hereby irrevocably waives any
objection to such exclusive action or inconvenient forum. Any such process or
summons to be served upon any of the Company, the Agent and any of the Holders
(at the option of the party bringing such action, proceeding or claim) may be
served by transmitting a copy thereof, by registered or certified mail, return
receipt requested, postage prepaid, addressed to it at the address as set forth
in Section 11 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the party so served in any action, proceeding or claim.
The Company and each Holder, by its acceptance of a Warrant Certificate, agrees
that the prevailing party(ies) in any such action or proceeding shall be
entitled to recover from the other party(ies) all of its/their reasonable legal
costs and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
-10-
<PAGE>
16. Entire Agreement. This Agreement contains the entire
----------------
understanding between the parties hereto and supersedes all prior agreements and
understandings, written or oral, with respect to the subject matter hereof.
17. Severability. If any provision of this Agreement shall be held
------------
to be invalid and unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
18. Captions. The caption headings of the Sections of this Agreement
--------
are for convenience of reference only and are not intended, nor should they be
construed, as a part of this Agreement and shall be given no substantive effect.
19. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any person or corporation other than the Company and the
Agent and any other Holder(s) of the Warrant Certificates or Warrant Securities
any legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Agent and any other such Holder(s).
20. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. Vickery Stoughton
------------------------------------
Name: W. Vickery Stoughton
Title:
SPENCER TRASK SECURITIES INCORPORATED
By: /s/ William T. Dioguardi
------------------------------------
Name: William T. Dioguardi
Title:
-11-
<PAGE>
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED(THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
(ii) AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER, THAT AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
No. W- _________ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _____________, or its assigns,
is the holder of _________ Warrants to purchase initially, at any time after the
date hereof until 5:30 p.m. New York time on the last day of the Warrant
Exercise Term ("Expiration Date") common stock, $.0l par value ("Common Stock"),
of Exigent Diagnostics, Inc., a Delaware corporation (the "Company"), (shares of
Common Stock are referred to herein individually as a "Security" and
collectively as the "Securities"), at the initial exercise price, subject to
adjustment in events (the "Exercise Price"), of $1.00 upon surrender of this
Warrant Certificate and payment of the Exercise Price at an office or agency of
the Company, but subject to the conditions set forth herein and in the Warrant
Agreement dated as of December ______, 1996, between the Company and Spencer
Trask Securities Incorporated (the "Warrant Agreement"). Capitalized terms used
herein and not defined herein shall have the meanings ascribed to such terms by
the Warrant Agreement Payment of the Exercise Price shall be made by certified
or official bank check payable to the order of the Company or by any other
method permitted by the Warrant Agreement.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
Agreement and is hereby referred to for a description of the rights, obligations
of rights, obligations, duties and immunities thereunder of the Company and the
Holders of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may,
A-1
<PAGE>
subject to certain conditions, be adjusted. In such event, the Company will, at
the request of the Holder, issue a new Warrant Certificate evidencing the
adjust3nent in the Exercise Price and the number and/or type of securities
issuable upon the exercise of the Warrants; provided, however, that the failure
of the Company to issue such new Warrant Certificates shall not in any way
change, alter, or otherwise impair, the rights of the Holder as set forth in the
Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate and executed form of assignment as attached hereto at the office of
the Company set forth in the Warrant Agreement, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferees) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such unexercised Warrants.
The Company may deem and treat the Holder(s) hereof as reflected on
the records of the Company as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, and of any distribution to the
Holder(s) hereof, and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of __________, 199____
EXIGENT DIAGNOSTICS, INC.
[SEAL]
By
Name:
Title:
Attest
______________________________
Secretary
A-3
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase shares of Common Stock.
In accordance with the terms of Section 3.1 of the Warrant Agreement
dated as of December _______, 1996, between Exigent Diagnostics, Inc. and
Spencer Trask Securities Incorporated, the undersigned requests that a
certificate for such securities be registered in the name of ___________________
whose address is __________________ and that such Certificate be delivered to
______________________ whose address is _______________________.
Dated: _____________, 199___
Signature:
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
(Insert Social Security or Other Identifying
Number of Holder)
A-4
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the Holder if such Holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _________________ here sells, assigns and transfers
unto ______________________________ (Please print name and address of
transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby
irrevocably constitute and appoint ________ Attorney, to transfer the within
Warrant Certificate on the books of the within-named Company, with full power of
substitution.
Dated: ____________, 199__
Signature:
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
(Insert Social Security or Other Identifying
Number of Holder)
A-5
<PAGE>
EXHIBIT 4.3
PLACEMENT AGENT WARRANT AGREEMENT
WARRANT AGREEMENT dated as of March 6, 1998, between EXIGENT
DIAGNOSTICS, INC., a Delaware corporation ("Company"), and SPENCER TRASK SECU-
RITIES INCORPORATED ("Agent").
W I T N E S S E T H
WHEREAS, the Agent has agreed pursuant to the Placement Agency
Agreement dated January 29, 1998, by and between the Agent and the Company (the
"Placement Agency Agreement") to act as the placement agent in connection with
the Company's proposed private placement (the "Offering") of up to 85 units
("Units") (plus up to an additional 12.75 Units solely to cover over-
subscriptions, if any) each Unit consisting of 76,293 shares of the Company's
common stock, par value $.01 per share ("Common Stock"); and
WHEREAS, the Company proposes to issue to the Agent or its designees
warrants ("Warrants") to purchase a number of shares of Common Stock, equal to
twenty percent (20%) of the number of shares of Common Stock contained in the
Units sold in the Offering; and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued at each of the Closings (as such term is defined in the Placement Agency
Agreement) by the Company to the Agent in consideration for, and as part of the
Agent's compensation in connection with, the Agent acting as the placement agent
pursuant to the Placement Agency Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT. The Company hereby grants to the Agent, and its
assigns (each, a "Holder"), the right to purchase, at any time during the term
("Warrant Exercise Term") commencing on the date hereof and ending at 5:30 p.m.,
New York time, on the later of (a) the seventh anniversary of the date of the
Final Closing (as defined in the Placement Agency Agreement) or (b) the date
which is three years after the closing date of an initial public offering of the
Company's securities within such seven year period, an aggregate number of
shares of Common Stock ("Warrant Shares") equal to twenty percent (20%) of the
number of shares of Common Stock contained in the Units sold in the Offering at
an initial exercise price of $1.30 per share of Common Stock, subject to
adjustment as provided in Section 6 hereof (as in effect from time to time, the
"Exercise Price").
2. WARRANT CERTIFICATES. The Warrants shall be evidenced by
warrant certificates ("Warrant Certificates") in the form of Exhibit A hereto
which shall be issued and delivered to the Agent upon each sale of securities of
the Company in respect of which Warrants shall become issuable hereunder. The
Warrant Certificates, and the certificates representing the Warrant Shares
and/or other securities, property or rights issuable upon exercise of the
Warrants (collectively, the "Warrant Securities"), shall be executed on behalf
of the Company by the manual
<PAGE>
or facsimile signature of the then present Chairman or Vice Chairman of the
Board of Directors or President or Vice President of the Company attested to be
the manual or facsimile signature of the then present Secretary or Assistant
Secretary of the Company. Warrant Certificates shall be dated the date of
execution by the Company upon initial issuance notwithstanding any subsequent
divi sion, exchange, substitution or transfer.
3. EXERCISE OF WARRANT.
3.1 EXERCISE. Warrants may be exercised, in whole or in part
(but not as to fractional shares), by surrender of a Warrant Certificate with
the annexed Form of Election to Purchase duly executed, together with payment of
the Exercise Price for the Warrant Securities for which such Warrants are being
exercised at the Company's principal offices at Five Radnor Corporate Center,
Suite 300, Radnor, PA 19087. The Exercise Price shall be payable by certified or
official bank check. The Exercise Price may also be paid, in whole or in part,
in shares of Common Stock owned by the Holder having an average Fair Market
Value (as defined below) over the last five (5) trading days immediately
preceding the Exercise Date (as defined below) equal to the portion of Exercise
Price being paid in such shares. In addition, the Warrants may be exercised, by
surrendering the Warrant Certificate in the manner specified in this Section 3,
together with irrevocable instructions to the Company to issue in exchange for
the Warrant Certificate the number of shares of Common Stock equal to the
product of (a) the number of shares as to which the Warrants are being exercised
multiplied by (b) a fraction the numerator of which is the average Fair Market
Value of a share of Common Stock over the last five (5) trading days immediately
preceding the Exercise Date less the Exercise Price therefor and the denominator
of which is such average Fair Market Value. In the case of the purchase of less
than all the shares of Common Stock purchasable under any Warrant Certificate,
the Company shall cancel said Warrant Certificate and shall execute and deliver
a new Warrant Certificate of like tenor for the unexercised balance of the
Warrant Securities. For purposes hereof, "Exercise Date" shall mean the date on
which all deliveries required to be made to the Company upon exercise of
Warrants pursuant to this Section 3.1 shall have been made.
3.2 Issuance of the Warrants, the issuance of certificates for
Warrant Securities shall be made forthwith (and in any event such issuance shall
be made within 10 business days from the Exercise Date) without charge to the
Holder thereof including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificates shall (subject to the
provisions of Section 4 hereof) be issued in the name of, or in such names as
may be directed by, the Holder thereof; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
3.3 FAIR MARKET VALUE. As is used herein, the "Fair Market
Value" of a share of Common Stock on any day means: (a) if the principal market
for the Common Stock is The New York Stock Exchange, any other national
securities exchange or The Nasdaq National Market, the closing sales price of
the Common Stock on such day as reported by such exchange or market, or on a
consolidated tape reflecting transactions on such exchange or market, or (b) if
the
2
<PAGE>
principal market for the Common Stock is not a national securities exchange or
The Nasdaq National Market and the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System, the mean between
the closing bid and the closing asked prices for the Common Stock on such day as
quoted on such System, or (c) if the Common Stock is not quoted on the National
Association of Securities Dealers Automated Quotations System, the mean between
the highest bid and lowest asked prices for the Common Stock on such day as
reported by the National Quotation Bureau, Inc.; provided that if none of (a),
(b) or (c) above is applicable, or if no trades have been made or no quotes are
available for such day, the Fair Market Value of the Common Stock shall be
determined, in good faith, by the Board of Directors of the Company.
4. TRANSFER OF SECURITIES. Each Holder, by acceptance of a
Warrant Certificate, covenants and agrees that it is acquiring the Warrants
evidenced thereby, and, upon exercise thereof, the Warrant Securities, for its
own account as an investment and not with a view to distribution thereof. The
Warrant Securities have not been registered under the Securities Act of 1933, as
amended (the "Act") or any state securities laws and no transfer of any Warrant
Securities shall be permitted unless the Company has received notice of such
transfer, at the address of its principal office set forth in Section 3.1
hereof, in the form of assignment attached hereto, accompa nied by an opinion of
counsel reasonably satisfactory to the Company that an exemption from
registration of such Warrants Securities under the Act is available for such
transfer. Upon any exercise of the Warrants, certificates representing the
shares of Common Stock and any of the other securities issuable upon exercise of
the Warrants shall bear the following legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933 ("Act") or any state securities laws for
public resale, and may not be offered or sold except pursuant to (i) an
effective registration statement under the Act and such laws or (ii) an
opinion of counsel satisfactory to the issuer that an exemption from such
registration is available.
Any purported transfer of any Warrants or Warrant Securities not in compliance
with the provisions of this Section 4 shall be null and void.
5. [INTENTIONALLY OMITTED.]
6. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES.
6.1 COMPUTATION OF ADJUSTED EXERCISE PRICE. Except as
hereinafter provided, in case the Company shall at any time after the date
hereof issue or sell any shares of Common Stock, including, without limitation,
shares held in the Company's treasury and shares of Common Stock issued upon the
exercise of any options, rights or warrants to subscribe for shares of Common
Stock and shares of Common Stock issued upon the direct or indirect conversion
or exchange of securities for shares of Common Stock, for a consideration per
share less than the Exercise Price in effect immediately prior to the issuance
or sale of such shares or the Fair Market Value (as defined in Section 3.3
hereof) of a share of Common Stock over the last five (5) trading days
immediately preceding the issuance or sale of such shares, or without
consideration, then forthwith upon such issuance or sale, the Exercise Price
shall (until another such issuance or sale) be reduced to the lower of the
prices (calculated to the nearest full cent) determined as follows:
3
<PAGE>
(a) by dividing (i) an amount equal to the sum of (A) the number
of shares of Common Stock outstanding immediately prior to such issuance or sale
multiplied by the then existing Exercise Price, and (B) the aggregate amount of
the consideration, if any, received by the Company upon such issuance or sale,
by (ii) the total number of shares of Common Stock outstanding immediately after
such issuance or sale; and
(b) by multiplying the Exercise Price in effect immediately
prior to the time of such issuance or sale by a fraction, the numerator of which
shall be the sum of (i) the number of shares of Common Stock outstanding
immediately prior to such issuance or sale multiplied by the average Fair Market
Value of a share of Common Stock over the last five (5) trading days immediately
preceding such issuance or sale, plus (ii) the aggregate amount of the
consideration received by the Company upon such issuance or sale, and the
denominator of which shall be the product of (A) the total number of shares of
Common Stock outstanding immediately after such issuance or sale, multiplied by
(B) such Fair Market Value; provided, however, that in no event shall the
Exercise Price be adjusted pursuant to the computations in this Section 6.1 to
an amount in excess of the Exercise Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of Common
Stock, as provided by Section 6.3 hereof.
For the purposes of any computation to be made in accordance with
this Section 6.1, the following provisions shall be applicable:
(1) In case of the issuance or sale of shares of Common Stock
for a consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by the
Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price, or, if shares of Common Stock
are sold to underwriters or dealers for public offering without a subscription
offering, the public offering price, before deducting therefrom any compensation
paid or discount allowed in the sale, underwriting or purchase thereof by
underwriters or dealers or others performing similar services, or any expenses
incurred in connection therewith) plus any amounts payable to security holders
or any affiliate thereof, including without limitation, any employment
agreement, royalty, consulting agreement, covenant not to compete, earnout or
contingent payment right or similar arrangement, agreement or understanding,
whether oral or written; all such amounts shall be valued at the aggregate
amount payable thereunder whether such payments are absolute or contingent and
irrespective of the period or uncertainty of payment, the rate of interest, if
any, or the contingent nature thereof except if the payment of such amounts has
been approved by the Agent.
(2) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company) of shares of Common
Stock for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash shall be deemed to be the
value of such consideration as determined in good faith by the Board of
Directors of the Company.
(3) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of stockholders
4
<PAGE>
entitled to receive such dividend or other distribution and shall be deemed to
have been issued without consideration.
(4) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of Common Stock shall be
deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately after the opening of business on the
day following the record date for the determination of security holders entitled
to receive such shares, and the value of the consideration allocable to such
shares of Common Stock shall be determined as provided in paragraph (2) of this
Section 6.1.
(5) The number of shares of Common Stock at any one time
outstanding shall include the aggregate number of shares issued or issuable
(subject to readjustment upon the actual issuance thereof) upon the exercise of
then outstanding options, rights, warrants and upon the conversion or exchange
of then outstanding convertible or exchangeable securities.
(6) No adjustment shall be made to the Exercise Price then in
effect upon the exercise of the Warrants or the conversion or exchange of
convertible or exchangeable securities outstanding as of the date hereof or the
exercise of options issued pursuant to the Company's stock option plans
described in the Memorandum.
6.2 OPTIONS, RIGHTS, WARRANTS AND CONVERTIBLE AND EXCHANGEABLE
SECURITIES.
Except for options to be issued pursuant to the Company's stock
option plans described in the Memorandum, in case the Company shall at any time
after the date hereof grant or issue options, rights or warrants to subscribe
for shares of Common Stock, or issue any securities convertible into or
exchangeable for shares of Common Stock, where the aggregate consideration per
share is less than the Exercise Price in effect immediately prior to the
issuance of such options, rights or warrants, or such convertible or
exchangeable securities, the Exercise Price in effect immediately prior to the
issuance of such options, rights or warrants, or such convertible or
exchangeable securities, as the case may be, shall be reduced to a price
determined by making a computation in accordance with the provisions of Section
6.1 hereof, provided that:
(a) The aggregate maximum number of shares of Common Stock, as
the case may be, issuable under such options, rights or warrants shall be deemed
to be issued and outstanding at the time such options, rights or warrants were
issued.
(b) The aggregate consideration for any such options, rights or
warrants shall be equal to the minimum purchase price per share provided for in
such options, rights or warrants at the time of issuance, plus the
consideration, if any, received by the Company for such options, rights or
warrants.
(c) The aggregate maximum number of shares of Common Stock
issuable upon conversion or exchange of any convertible or exchangeable
securities shall be deemed to be issued and outstanding at the time of issuance
of such securities.
5
<PAGE>
(d) The aggregate consideration for any such convertible or
exchangeable securities shall be equal to the consideration received by the
Company for such securities, plus the minimum consideration, if any, receivable
by the Company upon the conversion or exchange thereof.
(e) If any change shall occur in the exercise price per share
provided for in any of such options, rights or warrants or in the price per
share at which such convertible or exchangeable securities are convertible or
exchangeable, such options, rights or warrants or convertible or exchangeable
securities, as the case may be, shall be deemed to have expired or terminated on
the date when such price change became effective in respect of shares not
theretofore issued pursuant to the exercise or conversion or exchange thereof,
and the Company shall be deemed to have issued upon such date new options,
rights or warrants or convertible or ex changeable securities at the new price
in respect of the number of shares issuable upon the exercise of such options,
rights or warrants or the conversion or exchange of such convertible or
exchangeable securities.
(f) In case there has been any adjustment hereunder in the
Exercise Price by reason of the offer, issue or sale of any subscription or
purchase rights or options or any convertible or exchangeable securities or
obligations and the purchase, conversion or exchange privilege so created
thereafter terminates unexercised or changes, such Exercise Price shall as of
the date of such termination or change be adjusted to reflect such termination
or change.
6.3 SUBDIVISION AND COMBINATION. In case the Company shall at
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
6.4 ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 6, the number of
securities issuable upon the exercise of each Warrant shall be adjusted to the
nearest full amount by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
6.5 DEFINITION OF COMMON STOCK. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value.
6.6 MERGER OR CONSOLIDATION. In the event there is proposed any
consolidation of the Company with, or merger of the Company with or into,
another corporation, other than a merger or consolidation in which the Company
is the surviving corporation and after which at least fifty percent (50%) of the
outstanding voting securities of the Company are owned by the stockholders of
the Company immediately prior to such merger or consolidation, subject to its
obligations of confidentiality, the Company shall provide the Holder with not
less than 30 days' prior written notice of the proposed effective date of such
merger or consolidation (the "Effective
6
<PAGE>
Date"). The Holder shall be entitled to exercise its Warrants at any time up to
the third business day prior to the Effective Date, and this Agreement and any
unexercised Warrants shall terminate and be of no further force and effect on
the Effective Date (or such later date on which the merger or consolidation
becomes effective). Any such exercise by the Holder may be conditioned upon and
made subject to the consummation of the merger or consolidation.
6.7 NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the shares of
Common Stock issuable upon the exercise of the Warrants.
(b) If the amount of said adjustment shall be less than two
cents (2c) per security issuable upon exercise of the Warrants; provided,
however, that in such case any adjustment that would otherwise be required then
to be made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any adjustment
so carried forward, shall amount to at least two cents (2c) per security
issuable upon exercise of the Warrants.
6.8 DIVIDENDS AND OTHER DISTRIBUTIONS. In the event that the
Company shall at any time prior to the exercise of all Warrants declare a
dividend (other than a dividend consisting solely of shares of Common Stock) or
otherwise distribute to its stockholders any assets, property, rights, evidence
of indebtedness, securities (other than shares of Common Stock), whether issued
by the Company or by another, or any other thing of value, the Holders of the
unexercised Warrants shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the exercise
thereof, to receive, upon the exercise of such Warrants, the same property,
assets, rights, evidences of indebtedness, securities or any other thing of
value that they would have been entitled to receive at the time of such dividend
or distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of the
provisions of this Section 6.8.
7. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each
Warrant Certificate is exchangeable without expense, upon the surrender thereof
by the registered Holder at the principal office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of securities in such denominations as shall
be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of any Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
8. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the
7
<PAGE>
Warrants, but instead shall pay cash in lieu of such fractional interests to the
Holders entitled thereto based on the Fair Market Value of the Common Stock as
determined in good faith by the Board of Directors of the Company.
9. RESERVATION AND LISTING OF SECURITIES. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Warrants and payment of the Exercise Price therefor,
all shares of Common Stock and other securities issuable upon such exercise
shall be duly and validly issued, fully paid, non-assessable and not subject to
the preemptive rights of any stockholder.
10. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on
the books of the Company; or
(b) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the
Company, or any option right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall
be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least 15 days prior to the date fixed as a record date or the
date of closing the transfer books for the determination of the stockholders
entitled to such dividend, distribution, convertible or exchangeable securities
or subscription rights, or entitled to vote on such proposed dissolution,
liquidation, winding up or sale. Such notice shall specify such record date or
the date of closing the transfer books, as the case may be. Failure to give
such notice or any defect therein shall not affect the validity of any action
taken in connection with the declaration or payment of any such dividend, or the
issuance of any convertible or exchangeable securities, or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding up or
sale.
8
<PAGE>
11. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to a Holder, to the address of such Holder as shown on the
books of the Company; or
(b) If to the Company, to the address set forth in Section 3.1
hereof, or to such other address as the Company may designate by notice to
the Holders.
12. SUPPLEMENTS AND AMENDMENTS. The Company and the Agent may from
time to time supplement or amend this Agreement without the approval of any
Holders in order to cure any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with any provision
herein, or to make any other provisions in regard to matters or questions
arising hereunder which the Company and the Agent may deem necessary or
desirable and which the Company and the Agent deem shall not adversely affect
the interests of any other Holders of Warrant Certificates. Other amendments to
this Agreement may be made only with the written consent of a Majority of
Holders.
13. SUCCESSORS. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
14. TERMINATION. This Agreement shall terminate at the close of
business on the seventh anniversary of the date hereof. Notwithstanding the
foregoing, the indemnification provisions of Section 5.5 hereof shall survive
such termination until the close of business on the fourteenth anniversary of
the date hereof.
15. GOVERNING LAW: SUBMISSION TO JURISDICTION. This Agreement and
each Warrant Certificate issued hereunder shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts
entered into and to be performed wholly within said State.
The Company, the Agent and each of the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York, and any Federal court located in the County of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
The Company, the Agent and each of the Holders hereby irrevocably waives any
objection to such exclusive jurisdiction or inconvenient forum. Any such
process or summons to be served upon any of the Company, the Agent and any of
the Holders (at the option of the party bringing such action, proceeding or
claim) may be served by transmitting a copy thereof, by registered or certified
mail, return receipt requested, postage prepaid, addressed to it at the address
as set forth in Section 11 hereof. Such mailing shall be deemed personal
service and shall be legal and binding upon the party so served in any action,
proceeding or claim. The Company and each Holder, by its acceptance of a
Warrant Certificate, agrees that the prevailing party(ies) in any such action or
proceeding shall be entitled to recover from the other party(ies) all of
its/their reasonable
9
<PAGE>
legal costs and expenses relating to such action or proceeding and/or incurred
in connection with the preparation therefor.
16. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties hereto and supersedes all prior agreements
and understandings, written or oral, with respect to the subject matter hereof.
17. SEVERABILITY. If any provision of this Agreement shall be held
to be invalid and unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
18. CAPTIONS. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
19. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Agent and any other Holder(s) of the Warrant Certificates or Warrant Securities
any legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Agent and any other such Holder(s).
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. VICKERY STOUGHTON
-------------------------------------------
Name: W. VICKERY STOUGHTON
Title: CHAIRMAN & CEO
SPENCER TRASK SECURITIES
INCORPORATED
By: /s/ William P. Dioguardi
------------------------------------------
Name: William P. Dioguardi
Title:
10
<PAGE>
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECU RITIES ACT OF
1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR (ii) AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER, THAT AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFI CATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
No. W- _________ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that __________________, or its
assigns, is the holder of ______________ Warrants to purchase initially, at any
time after the date hereof until 5:30 p.m. New York time on the last day of the
Warrant Exercise Term ("Expiration Date"), up to ____________ fully paid and
non-assessable shares of common stock, $.01 par value ("Common Stock"), of
Exigent Diagnostics, Inc., a Delaware corporation (the "Company"), (shares of
Common Stock are referred to herein individually as a "Security" and
collectively as the "Securities"), at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $1.30 upon surrender of
this Warrant Certificate and payment of the Exercise Price at an office or
agency of the Company, but subject to the conditions set forth herein and in the
Warrant Agreement dated as of March __, 1998, between the Company and Spencer
Trask Securities Incorporated (the "Warrant Agreement"). Capitalized terms used
herein and not defined herein shall have the meanings ascribed to such terms by
the Warrant Agreement. Payment of the Exercise Price shall be made by certified
or official bank check payable to the order of the Company or by any other
method permitted by the Warrant Agreement.
No Warrant may be exercised after 5:30 p.m., New York, time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a
A-1
<PAGE>
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Company and the Holders of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the Holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
Holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate and executed form of assignment as attached hereto at the office of
the Company set forth in the Warrant Agreement, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such unexercised Warrants.
The Company may deem and treat the Holder(s) hereof as reflected on
the records of the Company as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, and of any distribution to the
Holder(s) hereof, and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of ____________, 199_
EXIGENT DIAGNOSTICS, INC.
[SEAL] By________________________
Name:
Title:
Attest:
_____________________
Secretary
A-2
<PAGE>
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _________ shares of Common
Stock.
In accordance with the terms of Section 3.1 of the Warrant Agreement
dated as of March __, 1998, between Exigent Diagnostics, Inc. and Spencer Trask
Securities Incorporated, the undersigned requests that a certificate for such
securities be registered in the name of ______________ whose address is
___________________________________________ and that such Certificate be
delivered to ________________ whose address is _________
_______________________________.
Dated: ______________________, _____
Signature:_____________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
________________________________________
(Insert Social Security or Other
Identifying Number of Holder)
A-3
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the Holder if such Holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED____________________________________________________
______________________________________ here sells, assigns and transfers unto __
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: ____________________, _____
Signature: ____________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
_______________________________________
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
EXHIBIT 4.4
S. R.ONE, LIMITED
AND
CARESIDE, INC.
====================================
SECURITIES PURCHASE AGREEMENT
====================================
Dated as of December 17, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1.
Definitions........................................................................................... 1
ARTICLE 2.
Purchase and Sale of the Notes........................................................................ 2
Section 2.1. Purchase and Sale................................................................. 2
ARTICLE 3.
Representations and Warranties........................................................................ 2
Section 3.1. Representations and Warranties of the Company..................................... 2
3.1.1. Organization and Standing............................................... 2
3.1.2. Corporate Power and Authority; Enforceability........................... 2
3.1.3. Validity of Contemplated Transactions................................... 3
3.1.4. Issuance of Shares...................................................... 3
3.1.5. Accuracy and Completeness of the Financial Information.................. 3
3.1.6. Compliance with all Laws................................................ 3
3.1.7. Registration Statement.................................................. 3
Section 3.2. Representations, Warranties and Covenants of the Investor......................... 3
3.2.1. Corporate Power and Authority; Enforceability........................... 3
3.2.2. Securities Act Representations.......................................... 3
3.2.3. Forbearance of Warrant Exercise......................................... 5
ARTICLE 4.
Related Matters....................................................................................... 5
Section 4.1. Registration Rights............................................................... 5
Section 4.2. Board Visitation Rights........................................................... 5
ARTICLE 5.
Miscellaneous......................................................................................... 5
Section 5.1. Entire Agreement.................................................................. 5
Section 5.2. Expenses.......................................................................... 5
Section 5.3. Jurisdiction...................................................................... 5
Section 5.4. Binding Effect; Assignment;....................................................... 5
Section 5.5. Amendment and Modification........................................................ 6
Section 5.6. Headings.......................................................................... 6
Section 5.7. Exhibits.......................................................................... 6
Section 5.8. Notices........................................................................... 6
Section 5.9. Waiver............................................................................ 7
Section 5.10. Severability...................................................................... 7
Section 5.11. Governing Law..................................................................... 7
Section 5.12. Continuing Obligation............................................................. 7
Section 5.13. Counterparts...................................................................... 7
</TABLE>
<PAGE>
Exhibits Page
- -------- ----
A. Form of Promissory Note
B. Draft Registration Statement dated 12/__/98
C. Form of Warrant
D. Stockholders Agreement
E. Registration Rights Agreement
F. Forebearance Letter
<PAGE>
SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made this 17th day
---------
of December, 1998 by and between S.R.One, Limited, a Pennsylvania Business
Trust, (the "Investor"), and CARESIDE, INC., a Delaware corporation with its
--------
principal offices located at 6100 Bristol Parkway, Culver City, California 90230
(the "Company").
-------
W I T N E S S E T H:
-------------------
WHEREAS, the Company desires to issue, sell and deliver to the Investor,
and the Investor desires to purchase from the Company, one or more promissory
notes in the aggregate principal amount of up to $3 million (each a "Note"),
each Note to be with a detachable warrant (each a "Warrant"), on the terms and
conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound hereby, do hereby agree as follows:
ARTICLE 1.
Definitions
-----------
Section 1.1. "Closing" shall mean the date or dates on which the Investor
-------
provides funding on a Note to the Company.
Section 1.2. "Common Stock" shall mean the common capital stock of the
------------
Company, $0.1 par value per share.
Section 1.3. "Governmental Entity" means any federal, state, local or
-------------------
foreign government or governmental body, or any political subdivision thereof,
including any Person exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
Section 1.4. "Initial Public Offering" means the first offering of the
-----------------------
Company's securities registered with the SEC under the Securities Act.
Section 1.5. "Law" or "Regulation" means any applicable law, statute,
--- ----------
rule, ordinance, regulation, order, decree, edict or other requirement of any
Governmental Entity.
Section 1.6. "Lien" means any mortgage, lien, security interest, pledge,
----
negative pledge, encumbrance, assessment, title retention agreement, restriction
or restraint on transfer, defect of title, charge in the nature of a lien or
security interest, or option (whether consensual, statutory or otherwise).
Section 1.7. "Note" means the promissory notes referenced in the recitals
----
hereto, each of which shall be in the form of Exhibit A hereto.
---------
Section 1.8. "Person" means an individual, a sole proprietorship, a
------
corporation, a partnership, a limited liability company or partnership, a joint
venture, an association, a trust, or any other entity or organization, including
a Governmental Entity.
Section 1.9. "Regulation D" means Regulation D promulgated by the SEC
------------
under the Securities Act, as amended from time to time.
2
<PAGE>
Section 1.10. "SEC" means the United States Securities and Exchange
---
Commission or any successor Governmental Entity.
Section 1.11. "Registration Statement" means the Company's registration
----------------------
statement on Form S-1 which the Company intends to file with the SEC after the
date hereof, a draft copy of which (dated December __, 1998) attached hereto as
Exhibit B.
- ---------
Section 1.12. "Securities Act" means the Securities Act of 1933, as
--------------
amended, and the Regulations promulgated thereunder or with respect thereto, or
any successor or substitute Laws.
Section 1.13. "Shares" means shares of Common Stock of the Company issued
------
by the Company upon exercise of the Warrants.
Section 1.14. "Transaction" means the issuance and sale of the Notes and
-----------
Warrants pursuant to Article 2 hereof, and the matters related thereto, as set
---------
forth herein.
Section 1.15. "Warrant" means the detachable warrant referenced in the
-------
recitals hereto and in the form of Exhibit C hereto.
---------
ARTICLE 2.
Purchase and Sale of the Notes
------------------------------
Section 2.1. Purchase and Sale. On or before December 31, 1998, the
-----------------
Company shall issue, sell and deliver to the Investor, and the Investor shall
purchase from the Company, a Note in the original principal amount of One
Million Five Hundred Thousand Dollars ($1,500,000) upon the terms and subject to
the conditions set forth herein. After January 1, 1999 and prior to January 31,
1999, the Company shall sell and deliver to Investor, and the Investor shall
purchase from the Company, one or more Notes in the aggregate principal amount
of One Million Five Hundred Thousand Dollars ($1,500,000). The Company shall
give five (5) days' prior written notice of its sale and issuance of each Note
to Investor. The Company shall use the proceeds from the Notes to fund its
working capital needs and for other general corporate purposes.
ARTICLE 3.
Representations and Warranties
------------------------------
Section 3.1. Representations and Warranties of the Company. As a
---------------------------------------------
material inducement to the Investor to enter into this Agreement and to
consummate the Transaction, the Company hereby represents and warrants to the
Investor as follows, which representations and warranties shall survive the
Closing and the issuance and delivery of each Note:
3.1.1. Organization and Standing. The Company is a corporation
-------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
3.1.2. Corporate Power and Authority; Enforceability. The
---------------------------------------------
Company has the requisite power and authority (corporate and otherwise) to
execute, deliver and perform this Agreement and to consummate the Transaction.
The execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the Transaction, have been duly authorized by all
necessary action
3
<PAGE>
(corporate or otherwise) on its part. This Agreement constitutes a legal, valid
and binding obligation of the Company, enforceable in accordance with its terms,
except insofar as enforceability is limited by bankruptcy, insolvency,
moratorium and similar laws affecting creditors' rights generally, and by
general principles of equity.
3.1.3. Validity of Contemplated Transactions. The execution,
-------------------------------------
delivery and performance by the Company of this Agreement, and the consummation
by it of the Transaction, do not violate or contravene any provision of the
Company's charter or bylaws, or of any material contract to which the Company is
a party.
3.1.4. Issuance of Shares. Any Shares, issued and delivered
------------------
to, and paid for by the Investor pursuant to and in accordance with exercise of
a Warrant, (a) will have been validly issued, fully paid and non-assessable, (b)
will be free and clear of any Liens (other than Liens imposed by the Securities
Act), and (c) will have been issued without violation of any preemptive or other
right to purchase or restrict the transfer of Common Stock.
3.1.5. Accuracy and Completeness of the Financial Information.
------------------------------------------------------
The Company's financial information that has been provided to the Investor is
accurate and complete in all materials respects, except that the Company makes
no representations or warranties with respect to any projections of the
Company's future results of operations, financial condition or otherwise.
3.1.6. Compliance with all Laws. To the best of its knowledge,
------------------------
the Company is in compliance in all material respects with all Laws.
3.1.7. Registration Statement. The Registration Statement is
----------------------
true and correct in all material respects and does not contain any statement
that is misleading or omit any statement necessary to make the statements made
therein not misleading.
Section 3.2. Representations, Warranties and Covenants of the Investor.
---------------------------------------------------------
As a material inducement to the Company to enter into this Agreement and to
consummate the Transaction, the Investor hereby represents and warrants to the
Company as follows, which representations and warranties shall survive the
Closing and the issuance and delivery of each Note:
3.2.1. Corporate Power and Authority; Enforceability. The
---------------------------------------------
Investor has the requisite power and authority (corporate and otherwise) to
execute, deliver and perform this Agreement and to consummate the Transaction.
The execution, delivery and performance by the Investor of this Agreement and
the consummation by the Investor of the Transaction, have been duly authorized
by all necessary action (corporate or otherwise) on its part. This Agreement
constitutes a legal, valid and binding obligation of the Investor, enforceable
in accordance with its terms, except insofar as enforceability is limited by
bankruptcy, insolvency, moratorium and similar laws affecting creditors' rights
generally and by general principles of equity.
3.2.2. Securities Act Representations. The Investor hereby
------------------------------
represents and warrants to the Company that:
(a) the Investor is an "accredited investor" within the
meaning of Regulation D [and] [or] a "qualified institutional buyer" within the
meaning of Rule 144A;
(b) the Investor (i) has such experience in financial
and business matters such that it is capable of evaluating the merits and risks
of purchasing the securities acquired hereunder, (ii) has been furnished any and
all materials has requested relating to the Company or the offering of these
4
<PAGE>
securities and the Investor has been afforded the opportunity to ask questions
of the senior management and directors of the Company concerning the terms and
conditions of the offering and to obtain any additional information necessary to
verify the accuracy of the information provided to the Investor, and (iii) is
satisfied that the Investor has received adequate information with respect to
all matters that the Investor considers material to the Investor's decision to
make this investment;
(c) the Investor is purchasing the securities to be
acquired hereunder for its own account, with no present intention of
transferring, distributing or reselling such securities, or any part thereof;
(d) the Investor understands that the securities to be
acquired under this Agreement have not been registered under the Securities Act
or under the Laws of any jurisdiction, and that the Company does not contemplate
and, except as set forth herein, is under no obligation to so register such
securities;
(e) the Investor is aware that: (i) investment in the
Company involves a high degree of risk, lack of liquidity and substantial
restrictions on transferability of interest; (ii) no Governmental Entity has
made any finding or determination as to the fairness for investment by the
public, nor has it made any recommendation or endorsement of the securities to
be acquired hereunder; and (iii) such securities must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from registration under the Securities Act covering the sale of the Shares is
available;
(f) the Investor has sufficient financial resources
available to support the loss of all or a portion of the Investor's investment
in the Company, has no need for liquidity in the investment in the Company and
is able to bear the economic risk of the investment; and
(g) the Investor has received, reviewed and understands
the section entitled "Risk Factors" contained in the Registration Statement, and
the Investor further acknowledges that (i) prior to the execution of a
definitive underwriting agreement neither the Company nor any other Person has
made any commitment or agreement that said Registration Statement will become
effective or that the initial public offering described therein will occur at a
particular price or within a particular range of prices or occur at all; (ii)
there can be no assurance that the initial public offering described therein
will occur at a particular price or within a particular range of prices or occur
at all; and (iii) the Notes are not being offered pursuant to such Registration
Statement.
5
<PAGE>
3.2.3. Forbearance of Warrant Exercise. In the event a Warrant
-------------------------------
is issued after the Company has filed the Registration Statement (or a
subsequent version thereof) with the SEC, the Investor covenants to execute the
letter attached hereto as Exhibit F which will have the effect of deferring
---------
exercisability of such Warrant as provided therein.
ARTICLE 4.
Related Matters
---------------
Section 4.1. Registration Rights. The Company hereby grants to the
-------------------
Investor the on-demand and piggyback registration rights with respect to Warrant
Shares owned by the Investor as set forth in the Registration Rights Agreement
attached hereto as Exhibit E (as modified by any amendments thereto hereafter
---------
made).
Section 4.2. Board Visitation Rights. For so long as any Notes remain
------------------------
outstanding or Investor owns the Warrant or any Warrant Shares (i) the Company
shall provide the same advance written notice to Investor as it supplies to its
directors in accordance with its bylaws, of all meetings of the Company's Board
of Directors and provide copies to Investor of any materials distributed to
directors in advance of or at such meeting, at the same time and by the same
means as they are provided to the Company's directors, and (ii) Investor shall
be entitled to have one representative attend all meetings of the Company's
Board of Directors.
ARTICLE 5.
Miscellaneous
-------------
Section 5.1. Entire Agreement. The Securities Purchase Agreement, and
----------------
the Warrants and Notes issued pursuant hereto contain the entire understanding
between the parties hereto and supersede all prior agreements and
understandings, written or oral, with respect to the subject matter hereof.
Section 5.2. Expenses. All costs and expenses incurred in connection
--------
with this Agreement shall be paid by the Person incurring such expenses.
Section 5.3. Jurisdiction. the Company and the Investor hereby agree
------------
that any action, proceeding or claim against it arising out of, or relating in
any way to, this Agreement, a Note or a Warrant shall be brought and enforced in
the courts of the State of California, and any Federal court located in any
county in the State of California in which the Company has an office and
irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive.
The Company and the Investor hereby irrevocably waive any objection to such
exclusivity based on the doctrine of inconvenient forum or otherwise. Any such
process or summons to be served upon either the Company or the Investor (at the
option of the party bringing such action, proceeding or claim) may be served by
transmitting a copy thereof, by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address as set forth in
Section 5.8 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the party so served in any action, proceeding or claim.
The Company and the Investor, by its execution of this Agreement and acceptance
of a Note and Warrant, agree that the prevailing party(ies) in any such action
or proceeding shall be entitled to recover from the other party(ies) all of
its/their reasonable legal costs and expenses relating to such action or
proceeding and/or incurred in connection with the preparation therefor.
Section 5.4. Binding Effect; Assignment; Benefit. This Agreement shall
-----------------------------------
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by either of
the parties
6
<PAGE>
hereto without the prior written consent of the other party. Nothing in this
Agreement, expressed or implied, is intended to confer on any person, other than
the parties hereto or their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
Section 5.5. Amendment and Modification. Subject to applicable law, this
--------------------------
Agreement may be amended, modified and supplemented only by a writing duly
authorized and executed by the parties hereto.
Section 5.6. Headings. The descriptive headings of the several Articles
--------
and Sections of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
Section 5.7. Exhibits. All exhibits attached hereto are a material part
--------
of this Agreement and are hereby incorporated into this Agreement.
Section 5.8. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be given to a Person either personally or by
sending a copy thereof by first class United States express mail, postage
prepaid and return-receipt requested, or by a nationally-recognized courier
service guaranteeing next-day delivery, charges prepaid, or by telecopier (with
the original sent by either of the foregoing manners), to such Person's address
(or to such Person's telecopier number). All notices shall be deemed to have
been given to the Person entitled thereto when received.
If to the Investor, to:
S.R.One, Limited
4 Towers Bridge
200 Barr Harbor Drive
Suite 250
West Conshohocken, Pennsylvania 19428
Attention: Mr. Peter Sears
Facsimile No.: __________________
If to the Company, to:
CARESIDE, Inc.
6100 Bristol Parkway
Culver City, CA 90230
Attention: President and Chief Executive Officer
Facsimile No.: 310.338.6789
with a copy to:
Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103-2799
Attention: Julia D. Corelli, Esq.
Facsimile No.: 215.981.4750
Notice of any change in any such address shall also be given in the manner
set forth above. Whenever the giving of notice is required, the giving of such
notice may be waived by the party entitled to receive such notice.
7
<PAGE>
Section 5.9. Waiver. No provision of this Agreement may be waived except
------
by a written instrument signed by the party hereto sought to be bound. No
failure or delay by any party hereto in exercising any right or remedy hereunder
or under applicable Law will operate as a waiver thereof, and a waiver of a
particular right or remedy on one occasion will not be deemed a waiver of any
other right or remedy, or a waiver on any subsequent occasion (it being
understood that specific time frames for notice or actions to be taken shall be
binding on the parties).
Section 5.10. Severability. If any term, provision, covenant or
------------
restriction contained in this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable or against
its regulatory policy, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
Section 5.11. Governing Law. This Agreement shall be construed and
-------------
enforced in accordance with the Laws of the State of Delaware without regard to
principles of conflicts of law applicable in such jurisdiction.
Section 5.12. Continuing Obligation. Except as otherwise specifically
---------------------
provided herein, neither termination nor expiration of this Agreement shall
relieve any party hereto from any obligation under this Agreement which accrued,
or arose from facts and circumstances in existence, prior thereto.
Section 5.13. Counterparts. This Agreement and any amendment or
------------
supplement hereto may be executed by the parties in separate counterparts,
whether originally or by facsimile, each of which when so executed and
delivered, shall be an original, but all such counterparts shall together
constitute one and the same agreement. The execution of this Agreement and any
such amendment or supplement by any party hereto will not become effective until
counterparts hereof have been executed by all the parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written by their duly
authorized representative.
S.R.One, Limited
By: ___________________________
Name: Peter Sears
Title:
CARESIDE, INC.
By: ___________________________
James Koch
Chief Financial Officer
8
<PAGE>
EXHIBIT A
---------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THIS NOTE MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM.
FORM OF
PROMISSORY NOTE
---------------
$_________ Philadelphia, PA
__________, 199_
FOR VALUE RECEIVED, CARESIDE, INC., a Delaware corporation with
offices at 6100 Bristol Parkway, Culver City, California 90230 ("Maker")
promises to pay to the order of S.R.One, Limited, a Pennsylvania Business Trust,
("Payee"), or to such other person or at such other place as Payee may designate
from time to time in writing, the principal amount of _________________ Dollars
($___________ ) in lawful money of the United States of America, together with
such interest as may be payable as hereinafter provided. This Note is issued
pursuant to the Securities Purchase Agreement dated December 17, 1998 between
Maker and Payee.
1. Maturity. The principal amount outstanding under the Note will
--------
be due and payable at the earliest to occur of (i) the closing of a private
equity financing of at least $8,000,000, (ii) January 31, 2000, or (iii) the
closing of an initial public offering of the Common Stock of Maker ("Maturity").
2. Interest Payments. Interest payable on the outstanding principal
-----------------
will be calculated at the rate of eight percent (8%) per annum, payable in cash
on a quarterly basis on the last business day of each calendar quarter, or on
Maturity if other than the last day of a calendar quarter, commencing with the
last business day of the calendar quarter which includes the date hereof.
3. Optional Prepayment.
-------------------
(a) From and after the date hereof, provided demand for
repayment has not been made, Maker shall have the privilege at any time and from
time to time of prepaying this Note in whole or in part (each, a "Prepayment"),
provided that Maker sends a notice (each, a "Prepayment Notice") to Payee at
least 15 days prior to the date of such
<PAGE>
prepayment (each, a "Prepayment Date"). There shall be no premium or penalty in
connection with any Prepayment. Each Prepayment shall be applied first against
accrued interest, if any, and then against principal outstanding in the inverse
order of the maturity of the installments thereof. Each Prepayment Notice shall
set forth the Prepayment Date and the amount of the Prepayment, specifying the
amount thereof being applied against accrued interest and the amount thereof
being applied against principal.
4. Security. The indebtedness outstanding under this Note will be
--------
unsecured. Maker covenants that it will not create, incur, assume or permit any
mortgage, pledge, lien, security interest or other preferential arrangement,
charge or encumbrance of any nature upon or with respect to the assets of the
Maker except for mortgages, pledges, liens, security interests or other
preferential arrangements, charges or encumbrances on the assets of the Maker
incurred, assumed or permitted pursuant to any lease financing for up to
$3,000,000 undertaken by the Maker.
5. Seniority. The indebtedness outstanding under this Note will be
---------
considered senior debt and will not be subordinated to any other indebtedness of
the Maker except insofar as Maker has granted security to Finova Technology
Finance, Inc. in connection with equipment lease financing obtained from such
lender.
6. Events of Default. The occurrence of one or more of the
-----------------
following events (after the expiration of any stated notice or cure period)
shall constitute an event of default ("Event of Default") hereunder:
(a) Maker shall fail to make any payment due to Payee under this
Note within ten (10) days after the same shall become due and payable, whether
at Maturity, by acceleration or otherwise;
(b) If Maker becomes insolvent, bankrupt or generally fails to
pay its debts as such debts become due; is adjudicated insolvent or bankrupt;
admits in writing its inability to pay its debts; or shall suffer a custodian,
receiver or trustee for it or substantially all of its property to be appointed
and if appointed without its consent, not be discharged within ninety (90) days;
makes an assignment for the benefit of creditors; or suffers proceedings under
any law related to bankruptcy, insolvency, liquidation or the reorganization,
readjustment or the release of debtors to be instituted against it, and if
contested by it, not dismissed or stayed within ninety (90) days; if proceedings
under any law related to bankruptcy, insolvency, liquidation, or the
reorganization, readjustment or the release of debtors is instituted or
commenced by Maker; if any order for relief is entered relating to any of the
foregoing proceedings; if Maker shall call a meeting of its creditors with a
view to arranging a composition or adjustment of its debts; or if Maker shall by
any act or failure to act indicate its consent to, approval of or acquiescence
in any of the foregoing;
-2-
<PAGE>
(c) Maker fails to perform in accordance with any other terms or
conditions in this Note or the Securities Purchase Agreement of even date
herewith between Maker and Payee and Maker has failed to cure the same within
thirty (30) days following its receipt of written notice of said Event of
Default hereunder or of a default thereunder;
(d) Maker sells or otherwise transfers substantially all of its
assets, discontinues its business, voluntarily or involuntarily dissolves, or
more than fifty percent (50%) of the voting power of the equity of Maker is
transferred to a single acquirer or group of acquirers acting in concert in a
single transaction or series of related transactions.
7. Remedies. Upon the occurrence of any Event of Default, at the
--------
option of Payee:
(a) the entire unpaid principal sum outstanding hereunder plus
any and all interest accrued thereon plus all other sums due and payable to
Payee hereunder shall become immediately due and payable; and
(b) Payee may exercise any and all other rights and remedies at
law or in equity.
8. Remedies Cumulative, etc.
-------------------------
(a) No right or remedy conferred upon or reserved to Payee
hereunder or now or hereafter existing at law or in equity is intended to be
exclusive of any other right or remedy, and each and every such right or remedy
shall be cumulative and concurrent, and in addition to every other such right or
remedy, and may be pursued singly, concurrently, successively or otherwise, at
the sole discretion of Payee, and shall not be exhausted by any one exercise
thereof but may be exercised as often as occasion therefor shall occur.
(b) Maker agrees that any action or proceeding against it to
enforce this Note may be commenced in state or federal court in any county in
the State of Delaware.
9. No Setoff. Maker shall not be permitted to set off any
---------
obligation owed to Payee hereunder against any obligations owed by Payee to
Maker, if any, unless such obligation setting off payments hereunder has been
finally determined to be owed to Maker and such determination is not appealable
by Payee.
10. Costs and Expenses. Following the occurrence of any Event of
------------------
Default, Maker shall pay upon demand all costs and expenses (including all
attorneys' fees and expenses) incurred by Payee in the exercise of any of its
rights, remedies or powers to enforce this Note and any amount thereof not paid
promptly following demand therefor shall be added to the principal
-3-
<PAGE>
sum hereunder and shall bear interest as set forth in Section 2 hereof, from the
date of such demand until paid in full.
11. Notices. All notices required to be given to any of the parties
-------
hereunder shall be in writing and shall be deemed to have been sufficiently
given for all purposes when presented personally to such party or sent by
certified or registered mail, return receipt requested, to such party at its
address set forth below:
If to Maker: CARESIDE, INC.
-----------
6100 Bristol Parkway
Culver City, CA 90230
Attn: President and
Chief Executive Officer
Facsimile No.: 310-338-6789
With a copy to: Pepper Hamilton LLP
--------------
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103
Attn: Julia D. Corelli, Esq.
If to Payee: S.R.One, Limited
-----------
4 Towers Bridge
200 Barr Harbor Drive
Suite 250
West Conshohocken, PA 19428
Attn: Mr. Peter Sears
Facsimile No.: ____________
Such notice shall be deemed to be given when received if delivered
personally or three (3) business days after the date mailed to a recipient in
the same country as the sender, or seven (7) business days to any other
recipient. Any notice mailed shall be sent by certified or registered mail.
Any notice of any change in such address shall also be given in the manner set
forth above. Whenever the giving of notice is required, the giving of such
notice may be waived in writing by the party entitled to receive such notice.
12. Severability. In the event that any provision of this Note is
------------
held to be invalid, illegal or unenforceable in any respect or to any extent,
such provision shall nevertheless remain valid, legal and enforceable in all
such other respects and to such extent as may be permissible. Any such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Note, but this Note shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
-4-
<PAGE>
13. Successors and Assigns. This Note inures to the benefit of Payee
----------------------
and binds Maker, and its respective successors and assigns, and the words
"Payee" and "Maker" whenever occurring herein shall be deemed and construed to
include such respective successors and assigns.
14. Entire Agreement. This Note embodies the entire understanding and
----------------
agreement between the parties hereto and thereto with respect to the subject
matter hereof and thereof and supersedes all prior agreements, understandings
and inducements, whether express or implied, oral and written.
15. Modification of Agreement. This Note may not be modified, altered
-------------------------
or amended, except by an agreement in writing signed by both Maker and Payee.
16. No Presentment, Etc. Maker hereby waives presentment, demand,
-------------------
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, Event of Default or enforcement of this Note.
17. No Waiver. Payee shall not, by any act, delay, omission or
---------
otherwise, be deemed to have waived any of its rights or remedies hereunder,
unless such waiver shall be in writing and signed by Payee. A waiver on any one
occasion shall not be construed as a bar to or waiver of any such right or
remedy on any future occasion.
18. Governing Law. This Note shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, Maker has duly executed this Promissory Note the
day and year first above written.
CARESIDE, INC.
By:_________________________________
Name:
Title:
-5-
<PAGE>
EXHIBIT 4.5
WARRANT CERTIFICATE
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND SUCH SHARES AND
ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM EXCEPT UPON THE
CONDITIONS SPECIFIED IN THIS WARRANT, AND NO TRANSFER OR THIS WARRANT OR SUCH
SHARES SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE
BEEN COMPLIED WITH.
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE HEREOF ARE
SUBJECT TO ALL THE TERMS AND CONDITIONS OF A CERTAIN STOCKHOLDERS AGREEMENT,
DATED AS OF DECEMBER 4, 1996, AMONG CARESIDE, INC. AND ITS STOCKHOLDERS, A COPY
OF WHICH THE COMPANY WILL FURNISH TO THE HOLDER OF THIS WARRANT UPON REQUEST AND
WITHOUT CHARGE.
WARRANT CERTIFICATE NO. SR-1
to Purchase Shares of Common Stock of
CARESIDE, INC.
THIS CERTIFIES THAT, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, S.R.One, Limited, a
Pennsylvania Business Trust, or its permitted assigns (the "Holder"), is the
registered owner of this Warrant Certificate (the "Warrant"), subject to the
terms and conditions hereinafter set forth.
This Warrant is issued pursuant to the Securities Purchase Agreement
dated as of December 17, 1998, between the Holder and the Company (the
"Securities Purchase Agreement") pursuant to which the Company has agreed to
issue and sell to the Holder, and the Holder has agreed to purchase, from time
to time as therein set forth, one or more promissory notes, each with a
detachable warrant to purchase a number of shares of the Company's Common Stock.
Capitalized terms used and not defined herein have the meanings set forth in the
Securities Purchase Agreement.
ARTICLE 6.
Grant. This Warrant grants to the Holder the right to purchase, at any time
- -----
after the date of issuance of this Warrant and until 5:30 p.m., New York time,
on the earlier of (a) the seventh anniversary of the date of issuance of this
Warrant or (b) four years from the closing of an Initial Public Offering, an
aggregate number of shares of Common Stock ("Warrant Shares") determined by
dividing Seven Hundred Fifty Thousand Dollars ($750,000) by either (i) $1.40, or
(ii) if an Initial Public Offering
1
<PAGE>
has occurred, 85% of the price per share at which Common Stock is sold to the
public in the Initial Public Offering (before discounts and commissions) (the
"Share Price"). In the event that the principal amount of the Note is not repaid
in full by June 30, 1999, then the Holder shall have the right to purchase
pursuant to this Warrant twice the number of Warrant Shares determined in
accordance with the foregoing sentence in this Section 1.
ARTICLE 7.
Exercise of Warrant.
- -------------------
Section 7.1. Exercise. This Warrant shall be exercisable at any time in
--------
whole and not in part. The aggregate exercise price for the purchase of the
Warrant Shares ("Exercise Price") shall be equal to the Share Price multiplied
by the number of Warrant Shares. This Warrant may be exercised by surrender of
this Warrant with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price multiplied by the number of Warrant
Shares, at the Company's principal offices located at 6100 Bristol Parkway,
Culver City, CA 90230. The Exercise Price shall be payable by certified or
official bank check. For purposes hereof, "Exercise Date" shall mean the date
on which all deliveries required to be made to the Company upon exercise of this
Warrant pursuant to this Section 2.1 shall have been made.
Section 7.2. Issuance of Certificates for Warrant Shares. Upon the
-------------------------------------------
exercise of the Warrants, the issuance of certificates for Warrant Shares shall
be made forthwith (and in any event such issuance shall be made within ten (10)
business days after the Exercise Date) without charge to the Holder including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Section 3
hereof) be issued in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder,
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
ARTICLE 8.
Transfer of Securities. The Holder, by acceptance of this Warrant Certificate,
- ----------------------
covenants and agrees that it is acquiring this Warrant and, upon exercise
hereof, the Warrant Shares, for its own account, as an investment and not with a
view to distribution thereof. The Warrant Shares have not been registered under
the Securities Act of 1933, as amended (the "Act") or any state securities laws
and no transfer of any Warrant Shares shall be permitted unless the Company has
received notice of such transfer, at the address of its principal office, in the
form of the Assignment attached hereto, accompanied by an opinion of counsel
reasonably satisfactory to the Company that an exemption from registration of
such Warrants Shares under the Act is available for such transfer. Upon any
exercise of this Warrant, certificates representing the Warrant Shares and any
of the other securities issuable upon exercise of this Warrant shall bear the
following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 ("Act") or any
state securities laws for public resale, and may not be
offered or sold
2
<PAGE>
except pursuant to (i) an effective registration statement
under the Act and such laws or (ii) an opinion of counsel
satisfactory to the issuer that an exemption from such
registration is available.
Any purported transfer of this Warrant or any Warrant Shares not in compliance
with the provisions of this Section 3 shall be null and void.
ARTICLE 9.
Adjustments to Share Price and Number of Securities.
- ---------------------------------------------------
Section 9.1. Computation of Adjusted Share Price. Except as hereinafter
-----------------------------------
provided, in case the Company shall at any time after the date hereof issue or
sell any shares of Common Stock, including, without limitation, shares held in
the Company's treasury and shares of Common Stock issued upon the exercise of
any options, rights or warrants to subscribe for shares of Common Stock and
shares of Common Stock issued upon the direct or indirect conversion or exchange
of securities for shares of Common Stock, for a consideration per share less
than the Share Price, then forthwith upon such issuance or sale, the Share Price
shall (until another such issuance or sale) be reduced to an amount equal to the
(i) sum of (A) the number of shares of Common Stock outstanding immediately
prior to such issuance or sale multiplied by the then existing Share Price, and
(B) the aggregate amount of the consideration, if any, received by the Company
upon such issuance or sale, divided by (ii) the total number of shares of Common
Stock outstanding immediately after such issuance or sale; provided, however,
that in no event shall the Share Price be adjusted pursuant to the computations
in this Section 4.1 to an amount in excess of the Share Price in effect
immediately prior to such computation, except in the case of a combination of
outstanding shares of Common Stock, as provided by Section 4.3 hereof.
For the purposes of any computation to be made in accordance with this
Section 4.1, the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of Common
Stock for a consideration part or all of which shall be cash, the amount of the
cash consideration therefor shall be deemed to be the amount of cash received by
the Company for such shares (or, if shares of Common Stock are offered by the
Company, for subscription, the subscription price, or, if shares of Common Stock
are sold to underwriters or dealers for public offering without a subscription
offering, the public offering price, before deducting therefrom any compensation
paid or discount allowed in the sale, underwriting or purchase thereof by
underwriters or dealers or others performing similar services, or any expenses
incurred in connection therewith) plus any amounts payable to security holders
or any affiliate thereof, including without limitation, any employment
agreement, royalty, consulting agreement, covenant not to compete, amount or
contingent payment right or similar arrangement, agreement or understanding,
whether oral or written; all such amounts shall be valued at the aggregate
amount payable thereunder whether such payments are absolute or contingent and
irrespective of the period or uncertainty of payment, the rate of interest, if
any, or the contingent nature thereof except if the payment of such amounts has
been approved by the Holder.
3
<PAGE>
(ii) In case of the issuance or sale (otherwise than
as a dividend or other distribution on any stock of the Company) of shares of
Common Stock for a consideration part or all of which shall be other than cash,
the amount of the consideration therefor other than cash shall be deemed to be
the value of such consideration as determined in good faith by the Board of
Directors of the Company.
(iii) Shares of Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the day following
the record date for the determination of stockholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued without
consideration.
(iv) The reclassification of securities of the Company
other than shares of Common Stock into securities including shares of Common
Stock shall be deemed to involve the issuance of such shares of Common Stock for
a consideration other than cash immediately after the opening of business on the
day following the record date for the determination of security holders entitled
to receive such shares, and the value of the consideration allocable to such
shares of Common Stock shall be determined as provided in subsection (ii) of
this Section 4.1.
(v) The number of shares of Common Stock at any one
time outstanding shall include the aggregate number of shares issued or issuable
(subject to readjustment upon the actual issuance thereof) upon the exercise of
then outstanding options, rights, warrants and upon the conversion or exchange
of then outstanding convertible or exchangeable securities.
(vi) No adjustment shall be made to the Share Price
then in effect upon the exercise of any warrant issued pursuant to the
Securities Purchase Agreement or the conversion or exchange of convertible or
exchangeable securities outstanding as of the date of execution of the
Securities Purchase Agreement.
Section 9.2 Options, Rights, Warrants and Convertible and Exchangeable
----------------------------------------------------------
Securities. In case the Company shall at any time after the date hereof grant or
- ----------
issue options, rights or warrants to subscribe for shares of Common Stock, or
issue any securities convertible into or exchangeable for shares of Common
Stock, where the aggregate consideration per share is less than the Share Price
in effect immediately prior to the issuance of such options, rights or warrants,
or such convertible or exchangeable securities, the Share Price in effect
immediately prior to the issuance of such options, rights or warrants, or such
convertible or exchangeable securities, as the case may be, shall be reduced to
a price determined by making a computation in accordance with the provisions of
Section 4.1 hereof, provided that:
(a) The aggregate maximum number of shares of Common
Stock, as the case may be, issuable under such options, rights or warrants shall
be deemed to be issued and outstanding at the time such options, rights or
warrants were issued.
(b) The aggregate consideration for any such options,
rights or warrants shall be equal to the minimum purchase price per share
provided for in such options, rights
4
<PAGE>
or warrants at the time of issuance, plus the consideration, if any, received by
the Company for such options, rights or warrants.
(c) The aggregate maximum number of shares of Common Stock
issuable upon conversion or exchange of any convertible or exchangeable
securities shall be deemed to be issued and outstanding at the time of issuance
of such securities.
(d) The aggregate consideration for any such convertible
or exchangeable securities shall be equal to the consideration received by the
Company for such securities, plus the total consideration, if any, receivable by
the Company upon the conversion or exchange thereof.
(e) If any change shall occur in the exercise price per
share provided for in any of such options, rights or warrants or in the price
per share at which such convertible or exchangeable securities are convertible
or exchangeable, such options, rights or warrants or convertible or exchangeable
securities, as the case may be, shall be deemed to have expired or terminated on
the date when such price change became effective in respect of shares not
theretofore issued pursuant to the exercise or conversion or exchange thereof,
and the Company shall be deemed to have issued upon such date new options,
rights or warrants or convertible or exchangeable securities at the new price in
respect of the number of shares issuable upon the exercise of such options,
rights or warrants or the conversion or exchange of such convertible or
exchangeable securities.
(f) In case there has been any adjustment hereunder in the
Share Price by reason of the offer, issue or sale of any subscription or
purchase rights or options or any convertible or exchangeable securities or
obligations and the purchase, conversion or exchange privilege so created
thereafter terminates unexercised or changes, such Share Price shall as of the
date of such termination or change be adjusted to reflect such termination or
change.
Section 9.3. Subdivision and Combination. In case the Company shall at
---------------------------
any time subdivide or combine the outstanding shares of Common Stock, the Share
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
Section 9.4. Adjustment in Number of Securities. Upon each adjustment of
----------------------------------
the Share Price pursuant to the provisions of this Section 4, the number of
Warrant Shares issuable on exercise of this Warrant shall be adjusted to the
nearest full amount by multiplying a number equal to the Share Price in effect
immediately prior to such adjustment by the number of Warrant Shares issuable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product so obtained by the adjusted Share Price.
Section 9.5. Definition of Common Stock. For the purpose of this
--------------------------
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended after the date hereof, or (ii) any other class of stock resulting from
successive changes or modifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value.
5
<PAGE>
Section 9.6. Merger or Consolidation. In the event there is proposed any
-----------------------
consolidation of the Company with, or merger of the Company with or into,
another corporation, other than a merger or consolidation in which the Company
is the surviving corporation and after which at least fifty percent (50%) of the
outstanding voting securities of the Company are owned by the stockholders of
the Company immediately prior to such merger or consolidation, subject to its
obligations of confidentiality, the Company shall provide the Holder with not
less than 30 days' prior written notice of the proposed effective date of such
merger or consolidation (the "Effective Date"). The Holder shall be entitled to
exercise its Warrants at any time up to the third business day prior to the
Effective Date, and this Warrant shall, if not so exercised, terminate and be of
no further force and effect on the Effective Date (or such later date on which
the merger or consolidation becomes effective). Any such exercise by the Holder
may be conditioned upon and made subject to the consummation of the merger or
consolidation.
Section 9.7. No Adjustment of Exercise Price in Certain Cases. No
------------------------------------------------
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of this Warrant or the
other warrants pursuant to the Securities Purchase Agreement or the shares of
Common Stock issuable upon the exercise of this Warrant or such other warrants.
(b) If the amount of said adjustment shall be less than
two cents (2c) per Warrant Share; provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried forward, shall amount
to at least two cents (2c) per security issuable upon exercise of the Warrants.
Section 9.8. Dividends and Other Distributions. In the event that the
---------------------------------
Company shall at any time prior to the exercise of this Warrant declare a
dividend (other than a dividend consisting solely of shares of Common Stock) or
otherwise distribute to its stockholders any assets, property, rights, evidence
of indebtedness, securities (other than shares of Common Stock), whether issued
by the Company or by another, or any other thing of value, the Holder of this
Warrant shall thereafter be entitled, in addition to the shares of Common Stock
or other securities and property receivable upon the exercise thereof, to
receive, upon the exercise of this Warrant, the same property, assets, rights,
evidences of indebtedness, securities or any other thing of value that they
would have been entitled to receive at the time of such dividend or distribution
as if this Warrant had been exercised immediately prior to such dividend or
distribution. At the time of any such dividend or distribution, the Company
shall make appropriate reserves to ensure the timely performance of the
provisions of this Section 4.8.
ARTICLE 10.
Exchange and Replacement of Warrant. Upon receipt by the Company of evidence
- -----------------------------------
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu thereof.
6
<PAGE>
ARTICLE 11.
Elimination of Fractional Interests. The Company shall not be required to issue
- -----------------------------------
certificates representing fractions of shares of Common Stock upon the exercise
of this Warrant, but instead shall pay cash in lieu of such fractional interests
to the Holder based on the Fair Market Value of the Common Stock as determined
in good faith by the Board of Directors of the Company. For this purpose, the
"Fair Market Value" of a share of Common Stock on any day means: (a) if the
principal market for the Common Stock is The New York Stock Exchange, any other
national securities exchange or The Nasdaq National Market, the closing sales
price of the Common Stock on such day as reported by such exchange or market, or
on a consolidated tape reflecting transactions on such exchange or market, or
(b) if the principal market for the Common Stock is not a national securities
exchange or The Nasdaq National Market and the Common Stock is quoted on the
National Association of Securities Dealers Automated Quotations System, the mean
between the closing bid and the closing asked prices for the Common Stock on
such day as quoted on such System, or (c) if the Common Stock is not quoted on
the National Association of Securities Dealers Automated Quotations System,
reported by the National Quotation Bureau, Inc.; provided that if none of (a),
(b) or (c) above is applicable, or if no trades have been made or no quotes are
available for such day, the Fair Market Value of the Common Stock shall be
determined, in good faith, by the Board of Directors of the Company.
ARTICLE 12.
Reservation and Listing of Securities. The Company shall at all times reserve
- -------------------------------------
and keep available out of its authorized shares of Common Stock, solely for the
purpose of issuance upon the exercise of this Warrant, such number of shares of
Common Stock or other securities, properties or rights as shall be issuable upon
the exercise thereof. The Company covenants and agrees that, upon exercise of
this Warrant and payment of the Exercise Price therefor, all shares of Common
Stock and other securities issuable upon such exercise shall be duly and validly
issued, fully paid, nonassessable and not subject to the preemptive rights of
any stockholder.
ARTICLE 13.
Notices to Warrant Holder. Nothing contained in this Agreement shall be
- -------------------------
construed as conferring upon the Holder the right to vote or to consent or to
receive notice as a stockholder in respect of any meetings of stockholders for
the election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of this Warrant and its exercise, any of the following events
shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option right or warrant to subscribe therefor; or
7
<PAGE>
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale, of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
ARTICLE 14.
Notices. All notices, requests, consents and other communications hereunder
- -------
shall be in writing and shall be deemed to have been duly made when delivered,
or mailed by registered or certified mail, return receipt requested in
accordance with Section 5.8 of the Securities Purchase Agreement.
ARTICLE 15.
Supplements and Amendments. The Company and the Holder may from time to time
- --------------------------
supplement or amend this Warrant in writing in order to cure any ambiguity, to
correct or supplement any provision contained herein which may be defective or
inconsistent with any provision herein or to make any other provisions in regard
to matters or questions arising hereunder which the Company and the Holder may
deem necessary or desirable.
ARTICLE 16.
Successors. All the covenants and provisions of this Warrant shall be binding
- ----------
upon and inure to the benefit of the Company, the Holder and their respective
successors and assigns hereunder.
ARTICLE 17.
Governing Law: Submission to Jurisdiction. This Warrant shall be governed by,
- ------------------------------------------
and construed in accordance with, the laws of the State of Delaware.
ARTICLE 18.
Entire Agreement. The Securities Purchase Agreement, this Warrant and the Note
- ----------------
issued contemporaneously with this Warrant and the other Notes and Warrants, if
any, issued pursuant to the Securities Purchase Agreement, contain the entire
understanding between the parties hereto and supersede all prior agreements and
understandings, written or oral, with respect to the subject matter hereof and
thereof.
ARTICLE 19.
Severability. If any provision of this Warrant shall be held to be invalid and
- ------------
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Warrant.
ARTICLE 20.
8
<PAGE>
Captions. The caption headings of the Sections of this Warrant are for
- --------
convenience of reference only and are not intended, nor should they be
construed, as a part of this Warrant and shall be given no substantive effect.
ARTICLE 21.
Benefits of this Agreement. Nothing in this Warrant shall be construed to give
- --------------------------
to any person or corporation other than the Company and the Holder of the
Warrant or Warrant Shares any legal or equitable right, remedy or claim under
this Warrant; and this Warrant shall be for the sole and exclusive benefit of
the Company and the Holder.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
CARESIDE, INC.
By: /s/ James Koch
--------------------------------
Name: James Koch
Title: Chief Financial
Officer
10
<PAGE>
FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase shares of Common Stock.
In accordance with the terms of Section 2 of Warrant No. S.R.- 1__
dated as of December, 17, 1998, issued by Careside, Inc. to S.R.One, Limited,
the undersigned requests that a certificate for such securities be registered in
the name of ___________________ whose address is __________________ and that
such Certificate be delivered to ______________________ whose address is
_______________________.
Dated: _____________, 199__
Signature:________________________________
Print Name:_______________________________
(Signature must conform in all respects to name of
Holder as specified on the face of the Warrant.)
________________________________________
(Insert Social Security or Other Identifying
Number of Holder)
11
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the Holder if such Holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _________________ here sells, assigns and transfers
unto ___________________________________________________________________(Please
print name and address of transferee)
this Warrant, together with all right, title and interest therein, and does
hereby
irrevocably constitute and appoint ________ Attorney, to transfer this Warrant
on the books of Careside, Inc. full power of substitution.
Dated: ________________, 199__
Signature:______________________________
Print Name:_____________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
_______________________________________
(Insert Social Security or Other Identifying
Number of Holder)
12
<PAGE>
Careside, Inc.
6100 Bristol Parkway
Culver City, CA 90320
Dear Sirs:
Reference is made to the Securities Purchase Agreement dated December
17, 1998 between the undersigned and Careside, Inc. Capitalized terms used
herein have the meanings set forth in the Securities Purchase Agreement. The
undersigned acknowledges that the Company has filed its Registration Statement
with the SEC. Accordingly, pursuant to Section 3.2.5 of said Securities
Purchase Agreement, the undersigned agrees that the undersigned will not
exercise Warrant Certificate No. SR-1 until the earlier of December 17, 1999, or
six (6) months after the closing of the Initial Public Offering of the Common
Stock of Careside, Inc.
Sincerely,
___________________________________
S.R.One, Limited
<PAGE>
EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT dated as of November 7, 1996 (the
"Effective Date") between EXIGENT DIAGNOSTICS, INC., a Delaware corporation (the
"Company") and SMITHKLINE BEECHAM CORPORATION, a Pennsylvania corporation
("SmithKline") and SMITHKLINE BEECHAM DIAGNOSTIC SYSTEMS CO., a Pennsylvania
limited liability company ("SBD", and together with SmithKline, "SKB").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to an Asset Purchase Agreement (the "Purchase
Agreement") dated as of the Effective Date, by and among the Company, SBD and
SmithKline Beecham Clinical Laboratories, Inc., a Pennsylvania corporation
("SBCL"), the Company has purchased the assets and assumed certain liabilities
of SBD and in consideration therefor has issued to SBD shares of the common
stock, par value $.01 per share, of the Company (the "Common Stock") comprising
five percent of (5%) of all issued and outstanding shares of Common Stock (the
"Purchase Agreement Shares");
WHEREAS, pursuant to the Purchase Agreement, the Company may from time
to time issue to SBD, SBCL or an affiliate thereof additional shares of Common
Stock to prevent the dilution of their equity interest in the Company (the
"Antidilution Shares");
WHEREAS, pursuant to a Loan and Security Agreement (the "Loan
Agreement") and a related Promissory Note (the "Note", and together with the
Loan Agreement, the "Loan Documents"), dated as of October 1, 1996, and amended
on December 11, 1996, by and between the Company and SmithKline, the Company
shall from time to time, at the election of SmithKline or as otherwise required
by the Loan Documents, issue to SmithKline, in exchange for a discharge of
principal due on the Note, shares of Common Stock comprising up to an additional
two percent (2%) of all issued and outstanding shares of Common Stock (the
"Conversion Shares"); and
WHEREAS, the Company desires to provide SKB and its successors and
permitted assigns with certain rights regarding the registration of the Purchase
Agreement Shares and any Antidilution Shares or Conversion Shares issued
pursuant to the Purchase Agreement or the Loan Documents, respectively.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements made herein, and other good valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and accepted, the parties hereto
agree as follows:
1. Definitions. As used herein, unless the context otherwise requires,
-----------
the following terms have the following respective meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange
Act.
"Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Common Stock" has the meaning set forth in the first WHEREAS clause
of the Recitals.
"Demand" has the meaning set forth in Section 2.1.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
promulgated thereunder, as the same shall be in effect at the time. Reference to
a particular section of the Securities Exchange Act of 1934, as amended, shall
include reference to the comparable section, if any, of any such subsequent
similar federal statute.
"Investors" means the purchasers of the Private Offering Stock (as
such term is defined in the Purchase Agreement).
"Participating Holder" has the meaning set forth in Section 2.1.4.
<PAGE>
-2-
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, government or department or
agency of a government.
"Public Offering" has the meaning set forth in Section 2.1.7.
"Registrable Common Securities" means the Purchase Agreement Shares,
and any Antidilution Shares or Conversion Shares.
"Registrable Securities" means collectively the Registrable Common
Securities and any other securities issuable in connection therewith or in
replacement thereof by way of a dividend, distribution, recapitalization,
exchange, merger, consolidation or other reorganization. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been sold as permitted by, and in compliance
with, Rule 144 (or any successor provision) promulgated under the Securities Act
or (c) they shall have ceased to be outstanding.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration, filing and National Association of Securities Dealers, Inc. fees,
all listing fees, all fees and expenses of complying with securities or blue sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities), all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements of counsel for the
Company and counsel for SKB (comprising not more than one outside law firm) and
of the Company's independent public accountants, including the expenses of
"comfort" letters required by or incident to such performance and compliance,
and any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
subsequent similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
References to a particular section of the Securities Act of 1933, as amended,
shall include a reference to the comparable section, if any, of any such
subsequent similar federal statute.
2. Registration Rights.
-------------------
2.1 Registration on Demand.
----------------------
2.1.1 Demand. After the earlier of the effective date of the initial
------
Public Offering of Common Stock and the fifth (5th) anniversary of the Effective
Date, subject to Section 2.1.7, upon the written request (the "Demand") of SKB
that the Company effect the registration under the Securities Act of all or part
of the Registrable Securities, the Company shall cause to be filed, and shall
take all commercially reasonable actions to effect, as soon as practicable and
in any event, subject to the reasonable cooperation of SKB, within 120 days
after the Demand is received from SKB, the registration under the Securities
Act, of the Registrable Securities which the Company has been so requested to
register by SKB.
2.1.2 Registration of Other Securities. Whenever the Company shall effect
--------------------------------
a registration pursuant to this Section 2.1 in connection with an underwritten
offering by SKB of Registrable Securities, holders of securities of the Company
who have "piggyback" registration rights may include all or a portion of such
securities in such registration, offering or sale. If the managing underwriter
of any such offering shall inform the Company by letter of its belief that the
number or type of securities of the Company requested by holders of the
securities of the Company other than SKB to be included in such registration
would materially and adversely affect the underwritten offering, then the
Company shall include in such registration, to the extent of the number and type
of securities which the Company is so advised can be sold in (or during the time
of) such offering, first, all of the Registrable Securities specified by SKB in
-----
the Demand and second, for each holder of the Company's securities other than
------
SKB, the fraction of such holder's securities proposed to be registered which
is obtained by dividing (i) the number of the securities of the Company that
such holder proposes to include in such registration by (ii) the total number of
securities proposed to be included in such registration by all holders other
than SKB.
<PAGE>
-3-
2.1.3 Registration Statement Form. Registrations under this Section 2.1
---------------------------
shall be on such appropriate registration form of the Commission as shall be
selected by the Company. The Company shall include in any such registration
statement all information which, in the opinion of counsel to the Company, is
required to be included.
2.1.4 Expenses. The Company shall pay the Registration Expenses in
--------
connection with the Demand registration effected pursuant to this Section 2.1,
other than underwriting discounts and selling commissions relating to the sale
or disposition of Registrable Securities. If a registration requested pursuant
to this Section 2.1 is withdrawn or otherwise not effected, other than at the
request of SKB (whether such request is for pricing or other reasons), the
Company shall pay the Registration Expenses in connection therewith. If the
registration pursuant to a Demand is withdrawn at the request of SKB and if SKB
elects not to have such registration count as its Demand registration under this
Section 2.1, SKB shall pay all the Registration Expenses of such registration,
other than the fees and expenses of counsel to Company or of any other holder of
Common Stock participating in the registration (a "Participating Holder"). At
no time shall SKB be required to pay the underwriting discounts or selling
commissions relating to the sale or disposition of shares of Common Stock by
other Persons, or the fees and expenses of any Participating Holder's or the
Company's counsel, except as required by Section 2.6.2 below.
2.1.5 Effective Registration Statement. A registration requested
--------------------------------
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, (ii)
if after it has become effective, such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason and has not thereafter become
effective, or (iii) in the case of an underwritten offering, if the conditions
to closing specified in the underwriting agreement, if any, entered into in
connection with such registration are not satisfied or waived.
2.1.6 Selection of Underwriters. In connection with each underwritten
-------------------------
offering, (a) the Company shall promptly select the managing underwriter subject
to the approval of SKB (which approval shall not be unreasonably withheld,
delayed or conditioned by SKB) and (b) SKB shall promptly select the co-managing
underwriter subject to the approval of the Company (which approval shall not be
unreasonably withheld, delayed or conditioned by the Company).
2.1.7 Limitations on Registration on Demand.
-------------------------------------
(i) The Company shall not be required to file a registration
statement pursuant to this Section 2.1 which would become effective within (a)
180 days, or such shorter period as agreed to by the managing underwriter for
the Company's initial Public Offering, following the effective date (the "IPO
Effective Date") of a registration statement filed by the Company with the
Commission pertaining to an initial underwritten public offering of convertible
debt securities or equity securities for cash (a "Public Offering") for the
account of the Company, provided that no other holder of the Company's
securities shall have been permitted to participate in such initial Public
Offering, or (b) 120 days following the effective date of a registration
statement (other than a registration statement filed on Form S-8) filed by the
Company with the Commission pertaining to any subsequent Public Offering for the
account of the Company or another holder of securities of the Company if SKB was
afforded the opportunity to include all of its Registrable Securities in such
subsequent registration pursuant to Section 2.2; provided, however, that
notwithstanding anything in this Agreement to the contrary other than Section
2.1.7(iii), the Company shall, at the request of SmithKline pursuant to Section
2.1.1, prepare and file a registration statement pursuant to this Section 2.1
that shall become effective not later than the earlier of (a) 180 days following
the IPO Effective Date and (b) the fifth anniversary of the Effective Date, or
at such other time as SKB and the Company shall mutually agree.
(ii) In no event shall the Company be required to effect more
than one registration pursuant to this Section 2.1.
(iii) Notwithstanding the foregoing, if, in the good faith
determination of the Company's Board of Directors, a registration would
adversely affect certain activities of the Company to the material detriment of
the Company, then the Company may at its option direct that the effective date
of such registration be delayed for a period not in excess of 90 days in the
aggregate from the date of the Company's receipt of the Demand (the "Delay
Period"); provided, however, any action by a Person under a registration or
other agreement with the Company in connection with or triggered by a
registration under this Agreement shall not be considered an adverse effect for
purposes of this sentence; and provided further that if there shall occur any
such delay in a registration hereunder, then SKB shall be entitled to (a) effect
such registration no later
<PAGE>
-4-
than any other holder of registration rights, or (b), if the Company shall
effect a Public Offering during any such Delay Period, sell, together with the
Investors, all of their respective Registrable Securities in connection with
such Public Offering, whichever occurs first; provided, however, that if the
managing underwriter of such Public Offering does not agree to include all (or
such lesser amount as SKB shall, in its sole discretion, agree to) of the number
of SKB's Registrable Securities in such registration, then the Company shall
include in such registration, to the extent of the number and type which the
Company is so advised can be sold in (or during the time of) such Public
Offering first, all securities proposed by the Company to be sold for its own
-----
account, and second, for each of SKB and the Investors, the fraction of such
------
holder's securities proposed to be registered which is obtained by dividing (i)
the number of the securities of the Company that such holder proposes to include
in such registration by (ii) the total number of securities proposed to be sold
in such offering by such holders.
2.2 Piggyback Registration.
----------------------
2.2.1 Right to Include Registrable Securities. If the Company at any time
---------------------------------------
proposes to register any of its securities under the Securities Act by
registration on Forms S-1, S-2, S-3 or any successor or similar form(s) (except
registrations on such Forms or similar forms solely for registration of
securities in connection with (i) an employee benefit plan or dividend
reinvestment plan or a merger or consolidation or (ii) debt securities which are
not convertible into Common Stock), whether or not for sale for its own account,
it shall each such time give written notice to SKB of its intention to do so at
least 30 days prior to the anticipated filing date of a registration statement
with respect to such registration with the Commission. Upon the written request
of SKB made as promptly as practicable and in any event within 10 business days
after the receipt of any such notice, which request shall specify the
Registrable Securities intended to be disposed of by SKB, the Company shall use
commercially reasonable efforts to effect the registration under the Securities
Act of all Registrable Securities which the Company has been so requested to
register by SKB; provided, however, that if, at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to SKB and (i) in the case of a determination not
to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from any obligation of
the Company to pay the Registration Expenses in connection therewith), without
prejudice, (provided, however, that SKB may request that such registration be
effected as a registration under Section 2.1 hereof) and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities for the same period as the delay in registering such
other securities; and provided further that SKB shall have the right to have its
Registrable Securities included in the initial Public Offering and any
subsequent Public Offering (in accordance with Section 2.2.2) if, and only if,
any other holder of the Company's convertible debt securities or equity
securities shall have the right to have its Registrable Securities included in
such Public Offering. No registration effected under this Section 2.2 shall
relieve the Company of its obligation to effect any registration upon demand
under Section 2.1. The Company shall pay all Registration Expenses in
connection with registration of Registrable Securities requested pursuant to
Section 2.2, other than underwriting discounts and selling commissions relating
to the sale or disposition of Registrable Securities.
2.2.2 Priority in Piggyback Registrations.
-----------------------------------
Notwithstanding anything in Section 2.2.1 above to the contrary and except as
provided in Section 2.1.7, if the managing underwriter of any underwritten
offering shall inform the Company by letter of its belief that the number or
type of Registrable Securities requested to be included in such registration
would materially and adversely affect such offering, then the Company shall
promptly notify SKB of such fact. If the managing underwriter does not agree to
include all (or such lesser amount as SKB shall, in its sole discretion, agree
to) of the number of the Registrable Securities initially requested by SKB to be
included in such registration, then the Company shall include in such
registration, to the extent of the number and type which the Company is so
advised can be sold in (or during the time of) such offering first, all
-----
securities proposed by the Company to be sold for its own account, if the
Company initiated such registration, or by the holder of securities who
initiated such demand registration, if any, second, for each of SKB, Exigent
------
Partners, L.P., Spencer Trask Securities, Incorporated and the Investors, other
than the holder of the securities who initiated such demand registration, if
any, the fraction of such holder's securities proposed to be registered which is
obtained by dividing (i) the number of the securities of the Company that such
holder proposes to include in such registration by (ii) the total number of
securities proposed to be sold in such offering by such holders, and third, for
-----
each remaining holder of the Company's securities, other than the holder of the
securities who initiated such demand registration and the holders listed above,
if any, the fraction of such holder's securities proposed to be registered which
is obtained by dividing (i) the number of the securities of the Company that
such holder
<PAGE>
-5-
proposes to include in such registration by (ii) the total number of securities
proposed to be sold in such offering by such holders.
2.3 Registration Procedures.
-----------------------
2.3.1 In connection with the registration of any Registrable Securities
under the Securities Act as provided in Sections 2.1 and 2.2, the Company shall
as promptly as practicable:
(i) prepare and file with the Commission the requisite registration
statement to effect such registration and thereafter use commercially reasonable
efforts to cause such registration statement to become and remain effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such registration statement for 180
days or such shorter period as may be required for the disposition of all of
such Registrable Securities by the underwriters;
(iii) furnish to SKB such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such number of copies of such other documents as SKB may reasonably request;
(iv) use commercially reasonable efforts (x) to register or qualify
all Registrable Securities and other securities covered by such registration
statement under such other securities or Blue Sky laws of such States of the
United States of America where an exemption is not available and as SKB shall
reasonably request, (y) to keep such registration or qualification in effect for
so long as such registration statement remains in effect, and (z) to take any
other action which may reasonably be necessary or advisable to enable SKB to
consummate the disposition in such jurisdictions of the Registrable Securities
to be sold by SKB, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not, but for the requirements of this paragraph
(iv), be obligated to be so qualified or to consent to general service of
process in any such jurisdiction;
(v) use commercially reasonable efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other federal or state governmental agencies or authorities as
may be necessary in the opinion of counsel to the Company and counsel to SKB to
consummate the disposition of such Registrable Securities in accordance with
their intended method of disposition;
(vi) furnish to SKB, (x) an opinion of outside counsel for the
Company, and (y) a copy of a "comfort" letter addressed to the Company and/or
any managing underwriter signed by the certified independent public accountants
who have certified the Company's financial statements included or incorporated
by reference in such registration statement, each covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) and, in the case of the accountant's comfort letter, with
respect to events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountant's comfort
letters delivered to the underwriters in underwritten public offerings of
securities (and dated the dates such opinions and comfort letters are
customarily dated);
(vii) notify SKB when a prospectus relating thereto is required to be
delivered under the Securities Act, upon discovery that, or upon the happening
of any event as a result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, in the light of the circumstances
under which they were made, and at the request of SKB to use its best efforts to
promptly prepare and furnish to SKB such number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made;
<PAGE>
-6-
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security-
holders, as soon as reasonably practicable, an earnings statement meeting the
requirements of Section 11(a) of the Securities Act, which the Company shall be
entitled to satisfy by complying with the requirements of Rule 158 promulgated
thereunder, and promptly furnish a copy of the same to SKB;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement; and
(x) use commercially reasonable efforts to list all Registrable
Securities covered by such registration statement on any national securities
exchange or over-the-counter market, if any, on which Registrable Securities of
the same class, and if applicable, series, covered by such registration
statement are then listed.
SKB agrees that upon receipt of any notice from the Company of the
happening of an event of the kind described in Section 2.3.1(vii), SKB shall
forthwith discontinue its disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until SKB's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 2.3.1(vii).
2.4 Underwritten Offerings.
----------------------
2.4.1 Requested Underwritten Offerings. If requested by the underwriters
--------------------------------
for any underwritten offering by SKB pursuant to a registration requested under
Section 2.1, the Company shall enter into an underwriting agreement with such
underwriters for such offering, such agreement to be reasonably satisfactory in
substance and form to the Company, SKB and the underwriters, and to contain such
representations and warranties by the Company and SKB and such other terms as
are generally prevailing in agreements of that type, including, without
limitation, indemnities to the effect and to the extent provided in Section 2.6
or as are generally prevailing in agreements of that type. SKB shall cooperate
with the Company in the negotiation of the underwriting agreement and shall give
consideration to the reasonable suggestions of the Company regarding the form
and substance thereof. SKB shall be a party to such underwriting agreement.
SKB shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding SKB, SKB's Registrable Securities, SKB's
intended method of distribution and any other representations or warranties
required by law or customarily given by selling shareholders in an underwritten
public offering or as reasonably required by the managing underwriter of the
offering of Registrable Securities.
2.4.2 Piggyback Underwritten Offerings. If the Company proposes to register
--------------------------------
any of its securities under the Securities Act as contemplated by Section 2.2
and such securities are to be distributed by or through one or more
underwriters, subject to the priority and other provisions of Section 2.2.2, the
Company shall, if requested by SKB, arrange for such underwriters to include all
the Registrable Securities to be offered and sold by SKB among the securities of
the Company to be distributed by such underwriters. SKB shall become a party to
the underwriting agreement negotiated between the Company and such underwriters.
SKB shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding SKB, SKB's Registrable Securities and SKB's
intended method of distribution or any other representations or warranties
required by law or customarily given by selling shareholders in an underwritten
public offering or as reasonably required by the managing underwriter of the
offering of Registrable Securities.
2.4.3 Holdback Agreements.
-------------------
(i) In connection with the initial Public Offering or any registration
of Registrable Securities in connection with an underwritten public offering,
SKB agrees if required by the underwriter or underwriters not to effect any
public sale or distribution, including any sale pursuant to Rule 144 under the
Securities Act, of any Registrable Securities, and not to effect any such public
sale or distribution of any other equity security of the Company or of any
security convertible into or exchangeable or exercisable for any equity security
of the Company (in each case, other than as part of such underwritten public
offering) during the 180-day period, or such shorter period set forth in the
underwriting agreement with respect to such offering as the managing underwriter
of such offering shall reasonably require, beginning on, the effective date of
such registration statement, provided that (a) SKB has received written notice
of such registration at least 15 days prior to such effective date and (b), with
respect to any offering other than pursuant to a firm commitment underwriting,
the
<PAGE>
-7-
underwriters continue to actively market the Registrable Securities until the
earlier of the end of such lock-up period and the closing with respect to the
sale of all, or the final portion of, the Registrable Securities offered by SKB;
provided, however, that the restrictions imposed on SKB by this Section 2.4.3(i)
shall terminate on the earlier of the end of such lock-up period and thirty (30)
days after such closing.
(ii) If any registration of Registrable Securities shall be in
connection with an underwritten public offering, the Company agrees (x) if
required by the underwriter or underwriters, not to effect any public sale or
distribution of any of its equity securities or of any security convertible into
or exchangeable or exercisable for any equity security of the Company (other
than in connection with any employee stock option or other benefit plan which
has been duly adopted by the Company and which provides for the distribution to
participants in the plan of equity securities of the Company or securities
convertible or exchangeable or exercisable for equity securities of the Company,
or in connection with a merger or acquisition approved by the Board of Directors
of the Company) during the 180-day period, or such shorter period as the
managing underwriter of such offering shall reasonably require, beginning on the
effective date of such registration statement (except as part of such
registration) and (y) that any agreement entered into after the date of this
Agreement pursuant to which the Company issues or agrees to issue any privately
placed equity securities shall contain a provision under which holders of such
securities agree that, if required by the underwriter or underwriters, they will
not effect any public sale or distribution of any such securities during the
period referred to in the foregoing clause (x), including any sale pursuant to
Rule 144 under the Securities Act (except as part of such registration, if
permitted), if such holder is participating in the offering pursuant to such
registration.
2.5 Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of any registration statement under the Securities Act in
which SKB is a selling shareholder, the Company shall give SKB not less than 30
days prior written notice of the preparation of such registration statement and
give SKB and its counsel and accountants the opportunity to participate, at
SKB's expense, in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each amendment
thereof or supplement thereto (provided that SKB shall furnish the Company with
comments on any such amendment or supplement as promptly as the Company shall
reasonably require), and give each of them such access to its books and records,
such opportunities to discuss the business of the Company with officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of SKB's counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. Any expenses incurred
by SKB in connection with any such investigation shall be borne by SKB, other
than the reasonable fees and disbursements of SKB's outside counsel.
2.6 Indemnification.
---------------
2.6.1 Indemnification by the Company. In the event of any registration of
------------------------------
any securities of the Company under the Securities Act in which SKB is or may be
a selling shareholder, the Company shall, and hereby does, indemnify and hold
harmless, SKB, its directors, officers, employees, agents and affiliates and, to
the extent required by any underwriting agreement entered into by the Company,
each other Person who participates as an underwriter in the offering or sale of
such securities and each other Person who controls SKB or any such underwriter
within the meaning of the Securities Act, insofar as losses, claims, damages, or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (a) any untrue statement or
alleged untrue statement of any fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus, or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a fact required to be stated therein or necessary to
make the statements therein in light of the circumstances in which they were
made not misleading, or (b) any violation by the Company, its directors,
officers, employees or agents of this Agreement or any law applicable to and in
connection with such registration, and the Company shall reimburse SKB and each
such director, officer, agent or affiliate, and, to the extent required by any
underwriting agreement entered into by the Company, underwriter and controlling
Person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding described in clauses (a) or (b); provided, however, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by SKB,
specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of SKB or any such director, officer, agent or affiliate or
controlling Person and shall survive the transfer of such securities by SKB.
<PAGE>
-8-
2.6.2 Indemnification by SKB. If any Registrable Securities are included in
----------------------
any registration statement, SKB shall indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 2.6.1 above) the Company,
each director of the Company, each officer of the Company and each employee of
the Company and, to the extent required by any underwriting agreement entered
into by SKB, each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person who controls any such
underwriter within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by SKB specifically stating that it
is for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, that in no event shall the liability of SKB under this
Section 2.6.2 exceed the amount of the proceeds to SKB from the sale of the
Registrable Securities in any such registration.
2.6.3 Notice of Claims, Etc. Promptly after receipt by an indemnified party
----------------------
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding paragraphs of this Section 2.6, such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party, immediately give written notice to the latter of the commencement of such
action; provided, however, that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 2.6, except to the
extent that the indemnifying party is materially prejudiced by such failure.
The indemnified party shall be entitled to receive the indemnification payments
described in Section 2.6.6 after providing such written notice to the
indemnifying party. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, the indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that the indemnifying parties may agree, with counsel
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable out of pocket costs
related to the indemnified party's cooperation with the indemnifying party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties arises in respect of such
claim after the assumption of the defense thereof. No indemnifying party shall
be liable for any settlement of any action or proceeding effected without its
written consent, which consent shall not be unreasonably withheld, delayed or
conditioned. Consent of the indemnified party shall be required for the entry of
any judgment or to enter into a settlement only when such judgment or settlement
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
such claim or litigation.
2.6.4 Contribution. If the indemnification provided for in this Section 2.6
------------
shall for any reason be held by a court to be unavailable to an indemnified
party under Section 2.6.1 or 2.6.2 hereof in respect of any loss, claim, damage
or liability, or any action in respect thereof, then, in lieu of the amount paid
or payable under Sections 2.6.1 or 2.6.2 hereof, the indemnified party and the
indemnifying party under Sections 2.6.1 or 2.6.2 hereof shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on one hand and SKB on the other or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect the relative fault of the Company
on one hand and SKB on the other that resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations. No Person guilty of fraudulent misrepresentation (within the
meaning of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. In addition, no Person
shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim, effected without such Person's written
consent, which consent shall not be unreasonably withheld. In no event shall
the liability of SKB under this Section 2.6.4 exceed the amount of the proceeds
to SKB from the sale of the Registrable Securities in the related registration.
2.6.5 Other Indemnification. Indemnification and contribution similar to
---------------------
that specified in the preceding paragraphs of this Section 2.6 (with appropriate
modifications) shall be given by the Company and SKB with respect to any
required registration or other qualification of securities under any federal or
state law or regulation of any governmental authority other than the Securities
Act.
<PAGE>
-9-
3. Rule 144. With a view to making available the benefits of certain rules
--------
and regulations of the Commission that may permit the sale of the Registrable
Securities to the public without registration after an initial Public Offering,
the Company agrees to:
(a) provide information and such other assistance requested by SKB as
is customarily provided by issuers in connection with sales of their common
stock by directors or affiliates under Rule 144, promulgated under the
Securities Act;
(b) make and keep public information available, as those terms are
understood and defined in Rule 144 promulgated under the Securities Act at all
times;
(c) use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act; and
(d) deliver a written statement as to whether it has complied with such
requirements of this Section, to SKB
upon SKB's request.
4. Modification; Waivers. This Agreement may be modified or amended only
---------------------
with the written consent of each party hereto. No party shall be released from
its obligations hereunder without the written consent of the other party. The
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) by the party
entitled to enforce such term, but any such waiver shall be effective only if in
a writing signed by the party against which such waiver is to be asserted.
Except as otherwise specifically provided herein, no delay on the part of any
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party hereto of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.
5. Entire Agreement. This Agreement represents the entire understanding and
----------------
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
6. Severability. If any provision of this Agreement, or the application of
------------
such provision to any Person or circumstance, shall be held invalid, the
remainder of this Agreement or the application of such provision to other
Persons or circumstances, to the extent permitted by law, shall not be affected
thereby; provided, that the parties shall negotiate in good faith with respect
to an equitable modification of the provision or application thereof held to be
invalid.
7. Notices.
-------
(i) Any notice or communication to any party hereto shall be duly given
if in writing and delivered in person, receipt requested, or courier
guaranteeing next day delivery, or facsimile (with written confirmation of
receipt) to such other party's address or facsimile number set forth below.
If to Exigent Diagnostics, Inc.:
7 Harford Lane
Radnor, Pennsylvania 19087
Attention: W. Vickery Stoughton
Facsimile:
with a copy to:
Barry M. Abelson, Esq.
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Philadelphia, Pennsylvania 19103-2799
<PAGE>
-10-
If to SmithKline Beecham Corporation:
SmithKline Beecham Corp.
One Franklin Plaza
P.O. Box 7929
Philadelphia, Pennsylvania 19101-7929
Attention:
Facsimile:
with a copy to:
SmithKline Beecham Corp.
One Franklin Plaza
P.O. Box 7929
Philadelphia, Pennsylvania 19101-7929
Attention: Edward J. Buthusiem, Esq.
Facsimile: (215) 751-3935
If to SmithKline Beecham Diagnostic System Co.:
SmithKline Beecham Corp.
One Franklin Plaza
P.O. Box 7929
Philadelphia, Pennsylvania 19101-7929
Attention:
Facsimile:
with a copy to:
SmithKline Beecham Corp.
One Franklin Plaza
P.O. Box 7929
Philadelphia, Pennsylvania 19101-7929
Attention: Edward J. Buthusiem, Esq.
Facsimile: (215) 751-3935
(ii) All notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered or facsimiled
(with written confirmation of receipt); and the next business day after timely
delivery to the courier, if sent by courier guaranteeing next day delivery.
8. Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and shall be binding upon the Company and SKB and their respective successors
and permitted assigns. SKB may assign its rights under this Agreement to any
Person to whom SKB transfers any of the Registrable Securities or any interest
therein without the necessity of obtaining any consent to such assignment,
provided that such Person becomes a party to that certain stockholders
agreement, by and among the Company, SKB and certain other holders of the Common
Stock. In the event that SKB assigns its rights to a holder or holders of only a
portion of the Registrable Securities, then all references to SKB herein shall
also be deemed to refer to such other holder or holders, but in such event SKB
shall have the sole right to make all decisions by and give notices for such
holder or holders under this Agreement; provided, that if SKB no longer owns any
Registrable Securities, then all decisions and notices hereunder shall be made
by the holders of not less than a majority of the Registrable Securities
outstanding and all other holders of Registrable Securities shall be bound by
any such decision.
9. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which for all purposes shall be deemed to be an original
and all of which together shall constitute the same agreement.
10. Headings. The Section headings in this Agreement are for
--------
convenience of reference only, and shall not be deemed to alter or affect the
meaning or interpretation of any provisions hereof.
11. Construction. This Agreement shall be governed, construed and
------------
enforced in accordance with the laws of the Commonwealth of Pennsylvania without
regard to its principles of conflict of laws.
<PAGE>
-11-
12. No Inconsistent Agreements. The Company has not previously, and shall
--------------------------
not hereafter, enter into any agreement with respect to its securities which is
inconsistent with the rights granted to SKB in this Agreement.
13. Recapitalizations, etc. In the event that any capital stock or other
----------------------
securities are issued in respect of, in exchange for, or in substitution of, any
Registrable Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Registrable Securities or any other
similar change in the Company's capital structure, appropriate adjustments shall
be made in this Agreement so as to fairly and equitably preserve, as far as
practicable, the original rights and obligations of the parties hereto under
this Agreement.
14. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association in effect at
the time such arbitration is instituted. The arbitration panel shall be composed
of three arbitrators, one of whom shall be chosen by the Company, one of whom
shall be chosen by SKB, and one of whom shall be chosen by the two arbitrators
previously designated. If both or either of the Company and/or SKB fails to
choose an arbitrator within fourteen (14) calendar days after receiving notice
of commencement of arbitration or if the two arbitrators fail to choose a third
arbitrator within fourteen (14) calendar days of their appointment, such
arbitrators shall be chosen by the American Arbitration Association. Unless the
parties to the arbitration shall otherwise agree to a different place of
arbitration, the place of arbitration shall be Philadelphia, PA. The arbitration
award shall be final and binding upon the parties thereto and may be entered in
any court having jurisdiction. Each party shall bear (i) its own expenses in
connection with such arbitration and (ii) one-half of the fees and expenses of
the American Arbitration Association and all arbitrators. No arbitration award
shall contain any provision which is inconsistent with the preceding sentence.
15. Specific Performance. The parties hereto agree that the Registrable
--------------------
Securities of the Company cannot be purchased or sold in the open market and
that, for these reasons, among others, the holder or holders of the Registrable
Securities will be irreparably damaged in the event that this Agreement is not
specifically enforceable. Accordingly, in the event of any controversy
concerning the Registrable Securities which are the subject of this Agreement,
or any right or obligation to register such securities, such right or obligation
determined as part of an arbitration award described in Section 14 shall be
enforceable in a court of equity by specific performance. The rights granted in
this Section 15 shall be cumulative and not exclusive, and shall be in addition
to any and all other rights which the parties hereto may have hereunder, at law
or in equity. SKB consents to the jurisdiction of the federal courts of the
Commonwealth of Pennsylvania in any suit, action or proceeding brought pursuant
to this Section 15, waives any objection it may have to the laying of venue in
any such suit, action or proceeding in any of such court, and agrees that
service of any court paper may be made in such manner as may be provided under
applicable laws or court rules governing service of process.
16. Term. This Agreement shall continue in full force and effect until
----
the earlier of (i) ten (10) years after the last issuance of any Antidilution
Shares or Conversion Shares and (ii) the first date on which SKB and its
permitted assigns may sell all of the Registrable Securities held by them in a
ninety (90) day period pursuant to Rule 144 under the Securities Act.
<PAGE>
-12-
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first above written and delivered by their respective duly
authorized officers.
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. Vickery Stoughton
---------------------------------------------
Name: W. Vickery Stoughton
Title: Chairman and Chief Executive Officer
SMITHKLINE BEECHAM CORPORATION
By: /s/ Edward J. Buthusiem
---------------------------------------------
Name: Edward J. Buthusiem
Title: Attorney-in-fact
SMITHKLINE BEECHAM DIAGNOSTIC SYSTEMS CO.
By: /s/ Edward J. Buthusiem
---------------------------------------------
Name: Edward J. Buthusiem
Title: Attorney-in-fact
<PAGE>
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT dated December 4, 1996 (the "Effective
Date") between Exigent Diagnostics, Inc.., a Delaware corporation (the
"Company"), Exigent Partners, L.P., a Delaware limited partnership (the
"Partnership"), W. Vickery Stoughton ("Stoughton"), Thomas H. Grove ("Grove"),
Kenneth B. Asarch ("Asarch"), William S. Knight ("Knight"), Donald S. Wong
("Wong"), Ashok K. Sawhney ("Sawhney") and Philip B. Smith ("Smith") (the
Partnership and each of the foregoing listed individuals is a "Stockholder";
collectively, are the "Stockholders").
W I T N E S S E T H:
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WHEREAS, Stoughton and Grove formed the Company on July 10, 1996 and
as a result of the incorporation were issued that number of shares of common
capital stock of the Company, $.01 par value per share ("Common Stock"), as is
set forth opposite their names on Exhibit A hereto;
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WHEREAS, Asarch, Knight, Wong, Sawhney and Smith became Stockholders
of the Company in October, 1996 subject to certain forfeiture restrictions
pertaining to their stock, and in the case of Smith, rights to additional stock,
as more fully set forth in the letter agreements entered into between each of
them and the Company (the "Letter Agreement Shares");
WHEREAS, Smith has purchased additional shares of Common Stock from
the Company pursuant to a Subscription Agreement dated today's date (the
"Subscription Agreement Shares")
WHEREAS, the Partnership purchased the number of shares of Common
Stock set opposite its name on Exhibit A hereto (the "Partnership Shares") in
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November 1996;
WHEREAS, the Company intends to undertake a 7,257.258 for one stock
split and, thereafter, the offer and sale of an additional 7,500,000 shares of
Common Stock (exclusive of an option by the Company to offer and sell an
additional 1,125,000 shares of Common Stock solely to cover over subscriptions)
pursuant to a private placement memorandum contemplated by a letter of intent
with Spencer Trask Securities Incorporated (the "Memorandum")
NOW, THEREFORE, in consideration of the mutual covenants and
agreements made herein, and other good valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and accepted, the parties hereto
agree as follows:
1. Definitions. As used herein, unless the context otherwise requires,
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the following terms have the following respective meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange
Act.
<PAGE>
"Closing Price" means the last sale price, regular way, as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the principal national securities
exchange on which the Registrable Securities shall be listed or admitted to
trading on a Trading Day or, if the Registrable Securities shall not be listed
or admitted to trading on any national securities exchange an such Trading Day,
the last reported transaction price on such Trading Day or, if not so quoted,
the closing bid price in the over-the-counter market on such Trading Day, as
reported by NASDAQ or such other system then in use.
"Commission" means the United States Securities and' Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Common Stock" has the meaning set forth in the first WHEREAS clause
of the Recitals.
"Demand" has the meaning set forth in Section 2.1.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
promulgated thereunder, as the same shall be in effect at the time. Reference to
a particular section of the Securities Exchange Act of 1934, as amended, shall
include reference to the comparable section, if any, of any such subsequent
similar federal statute.
"Participating Holder" has the meaning set forth in Section 2.1.4.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, government or department or
agency of a government.
"Public Offering" means a Public Offering of securities registered
with the Commission under the Securities Act.
"Registrable Common Securities" means the Letter Agreement Shares, the
Subscription Agreement Shares and the Partnership Shares.
"Registrable Securities" means collectively the Registrable Common
Securities and any other securities issuable in connection therewith or in
replacement thereof by way of a dividend, distribution, recapitalization,
exchange, merger, consolidation or other reorganization. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been sold as permitted by, and in compliance
with, Rule 144 (or any successor provision) promulgated under the Securities Act
or (c) they shall have ceased to be outstanding.
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"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration, filing and National Association of Securities Dealers, Inc. fees,
all listing fees, all fees and expenses of complying with securities or blue sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities), all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements of counsel for the
Company and counsel for the Participating Holders comprising not more than one
outside law firm which shall be selected by the Participating Holders of a
majority of the Registrable Securities sought to be registered in such
registration (the "Selling Stockholder Counsel"), and of the Company's
independent public accountants, including the expenses of "comfort" letters
required by or incident to such performance and compliance, and any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
subsequent similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
References to a particular section of the Securities Act of 1933, as amended,
shall include a reference to the comparable section, if any, of any such
subsequent similar federal statute.
2. Registration Rights.
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2.1. Registration on Demand.
----------------------
2.1.1. Demand. After the earlier of the effective date of
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the initial Public Offering of Common Stock and the fifth (5th) anniversary of
the Final Closing (as defined in the Memorandum), subject to Section 2.1.7, upon
the written request (the "Demand") of the holders of a majority of Registrable
Securities that the Company effect the registration under the Securities Act of
all or part of the Registrable Securities, the Company shall cause to be filed,
and shall take all commercially reasonable actions to effect, as soon as
practicable and in any event, subject to the reasonable cooperation of the
Stockholders, within 120 days after the Demand is received from the
Stockholders, the registration under the Securities Act, of the Registrable
Securities which the Company has been so requested to register by the
Stockholders. Prior to such registration being declared effective, the holders
of a majority of the Registrable Securities requesting such Demand registration
may withdraw such Demand registration, subject to the provisions of Section
2.1.4 below.
2.1.2. Registration of Other Securities. Whenever the
--------------------------------
Company shall effect a registration pursuant to this Section 2.1 in connection
with an underwritten offering by the Stockholders of Registrable Securities,
holders of securities of the Company who have "piggyback" registration rights
may include all or a portion of such securities in such registration, offering
or sale. If the managing underwriter of any such offering shall inform the
Company by letter of its belief that the number or type of securities of the
Company requested by holders of the securities of the Company other than the
Stockholders to be included in such registration would
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<PAGE>
materially and adversely affect the underwritten offering, then the Company
shall include in such registration, to the extent of the number and type of
securities which the Company is so advised can be sold in (or during the time
of) such offering, first, all of the Registrable Securities specified by the
Stockholders in the Demand and second, for each holder of the Company's
securities other than the Stockholders, the fraction of each holder's securities
proposed to be registered which is obtained by dividing (i) the number of the
securities of the Company that such holder proposes to include in such
registration by (ii) the total number of securities proposed to be included in
such registration by all holders other than the Stockholders.
2.1.3. Registration Statement Form. Registrations under
---------------------------
this Section 2.1 shall be on such appropriate registration form of the
Commission as shall be selected by the Company. The Company shall include in any
such registration statement all information which, in the opinion of counsel to
the Company, is required to be included.
2.1.4. Expenses. The Company shall pay the Registration
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Expenses in connection with any Demand registration effected pursuant to this
Section 2.1, other than underwriting discounts and selling commissions relating
to the sale or disposition of Registrable Securities and the fees and expenses
of the Stockholders' counsel. If the registration pursuant to a Demand is
withdrawn at the request of the Stockholders participating in the registration
(a "Participating Holder") and such Stockholders elect not to have such
registration count as its Demand registration under this Section 2.1, the
Stockholders shall pay all the Registration Expenses of such registration, other
than the fees and expenses of counsel to Company or of any other holder of
Common Stock. At no time shall the Stockholders be required to pay the
underwriting discounts or selling commissions relating to the sale or
disposition of shares of Common Stock by other Persons, or the fees and expenses
of any other Persons or the Company's counsel, except as required by Section
2.6.2 below.
2.1.5. Effective Registration Statement. A registration
--------------------------------
requested pursuant to this Section 2.1 shall not be deemed to have been effected
(i) unless a registration statement with respect thereto has become effective,
(ii) if after it has become effective, such registration is interfered with by
any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason and has not thereafter become
effective, or (iii) in the case of an underwritten offering, if the conditions
to closing specified in the underwriting agreement, if any, entered into in
connection with such registration are not satisfied or waived.
2.1.6. Selection of Underwriters. In connection with each
-------------------------
underwritten offering, (a) the Company shall promptly select the managing
underwriter subject to the approval of the Stockholders (which approval shall
not be unreasonably withheld, delayed or conditioned by the Stockholders) and
(b) if they so desire, the Stockholders shall promptly (by the holders of a
majority of the Registrable Securities sought to be registered by the
Participating Holders in such Demand) select the co-managing underwriter subject
to the approval of the Company (which approval shall not be unreasonably
withheld, delayed or conditioned by the Company).
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2.1.7. Limitations on Registration on Demand. The Company
-------------------------------------
shall not be required to prepare and file a registration statement pursuant to
this Section 2.1 which would become effective within (a) 180 days following the
effective date of a registration statement filed by the Company with the
Commission pertaining to an initial underwritten Public Offering of convertible
debt securities or equity securities for cash (a "Public Offering") for the
account of the Company, provided that no other holder of the Company's
securities shall have been permitted to participate in such initial Public
Offering, or (b) 120 days following the effective date of a registration
statement (other than a registration statement filed on Form S-4 or S-8) filed
by the Company with the Commission pertaining to any subsequent Public Offering
for the account of the Company or another holder of securities of the Company if
the Stockholders were afforded the opportunity to include all of its Registrable
Securities in such subsequent registration pursuant to Section 2.2. In no event
shall the Company be required to effect more than two (2) registrations pursuant
to this Section 2.1. Notwithstanding the foregoing, if, in the good faith
determination of the Company's Board of Directors, a registration would
adversely affect certain activities of the Company to the material detriment of
the Company, then the Company may at its option direct that such Demand be
delayed for a period not in excess of 90 days in the aggregate from the date of
the Company's receipt of the Demand. The rights of the holders of Registrable
Securities to cause a Demand registration to be effected hereunder are subject
to the prior rights of the investors in the private offering contemplated by the
Memorandum (the "Offering") to effect a registration pursuant to the last
sentence of Section 2.1.7 of the Registration Rights Agreement to be entered
into by the Company in connection with the Private Offering, the form of which
is attached to the Memorandum.
2.2. Piggyback Registration.
----------------------
2.2.1. Right to Include Registrable Securities. If the
---------------------------------------
Company at any time proposes to register any of its securities under the
Securities Act by registration on Forms S-1, S-2, S-3 or any successor or
similar form(s) (except registrations on such Forms or similar forms solely for
registration of securities in connection with (i) an employee benefit plan or
dividend reinvestment plan or a merger or consolidation or (ii) debt securities
which are not convertible into Common Stock), whether or not for sale for its
own account, it shall each such time give written notice to the Stockholders of
its intention to do so at least 30 days prior to the anticipated filing date of
a registration statement with respect to such registration with the Commission.
Upon the written request of the Stockholders made as promptly as practicable and
in any event within 10 business days after the receipt of any such notice, which
request shall specify the Registrable Securities intended to be disposed of by
the Stockholders, the Company shall use commercially reasonable efforts to
effect the registration under the Securities Act of all Registrable Securities
which the Company has been so requested to register by the Stockholders;
provided, however, that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to the Stockholders and (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from
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<PAGE>
any obligation of the Company to pay the Registration Expenses in connection
therewith), without prejudice, (provided, however, that the Stockholders may
request that such registration be effected as a registration under Section 2.1
hereof) and (ii) in the case of a determination to delay registering, shall be
permitted to delay registering any Registrable Securities for the same period as
the delay in registering such other securities.
2.2.2. Priority in Piggyback Registrations. Notwithstanding
-----------------------------------
anything in Section 2.2.1 above to the contrary, if the managing underwriter of
any underwritten offering shall inform the Company by letter of its belief that
the number or type of Registrable Securities requested to be included in such
registration would materially and adversely affect such offering, then the
Company shall promptly notify the Stockholders of such fact. If the managing
underwriter does not agree to include all (or such lesser amount as the
Stockholders shall, in their discretion, agree to) of the number of the
Registrable Securities initially requested by the Stockholders to be included in
such registration, then the Company shall include in such registration, to the
extent of the number and type which the Company is so advised can be sold in (or
during the time of) such offering first, all securities proposed by the Company
to be sold for its own account, if the Company initiated such registration, or
by the holder of securities who initiated such demand registration, if any,
second, for each of the Stockholders, Spencer Trask Securities Incorporated,
SmithKline Beecham Corporation (and its affiliates), and the purchasers of
Common Stock offered pursuant to the Memorandum (and the respective successors
and assigns of any of the foregoing), other than the holder of the securities
who initiated such demand registration, if any, the fraction of such holder's
securities proposed to be registered which is obtained by dividing (i) the
number of the securities of the Company that such holder proposes to include in
such registration by (ii) the total number of securities proposed to be sold in
such offering by such holders, and third, for each remaining holder of the
Company's securities, other than the holder of the securities who initiated such
demand registration and the holders listed above, if any, the fraction of such
holder's securities proposed to be registered which is obtained by dividing (i)
the number of the securities of the Company that such holder proposes to include
in such registration by (ii) the total number of securities proposed to be sold
in such offering by such holders.
2.3. Registration Procedures.
-----------------------
2.3.1. In connection with the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2, the
Company shall as promptly as practicable:
(i) prepare and file with the Commission the
requisite registration statement to effect such registration and thereafter use
commercially reasonable efforts to cause such registration statement to become
and remain effective;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
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<PAGE>
registration statement for 180 days or such shorter period as may be required
for the disposition of all of such Registrable Securities by the underwriters;
(iii) furnish to the Stockholders such number of
conformed copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of copies
of the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such number of copies of such other
documents as the Stockholders may reasonably request;
(iv) use commercially reasonable efforts (x) to
register or qualify all Registrable Securities and other securities covered by
such registration statement under such other securities or Blue Sky laws of such
States of the United States of America where an exemption is not available and
as the Stockholders shall reasonably request, (y) to keep such registration or
qualification in effect for so long as such registration statement remains in
effect, and (z) to take any other action which may reasonably be necessary or
advisable to enable the Stockholders to consummate the disposition in such
jurisdictions of the Registrable Securities to be sold by the Stockholders,
except that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign Company in any jurisdiction wherein it
would not, but for the requirements of this paragraph (iv), be obligated to be
so qualified or to consent to general service of process in any such
jurisdiction;
(v) use commercially reasonable efforts to cause
all Registrable Securities covered by such registration statement to be
registered with or approved by such other federal or state governmental agencies
or authorities as may be necessary in the opinion of counsel to the Company and
counsel to the Stockholders to consummate the disposition of such Registrable
Securities in accordance with their intended method of disposition;
(vi) furnish to the Stockholders, (x) an opinion of
outside counsel for the Company, and (y) a copy of a "comfort" letter addressed
to the Company and/or any managing underwriter signed by the certified
independent public accountants who have certified the Company's financial
statements included or incorporated by reference in such registration statement,
each covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountant's comfort letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountant's comfort letters delivered to the underwriters in
underwritten Public Offerings of securities (and dated the dates such opinions
and comfort letters are customarily dated);
(vii) notify the Stockholders when a prospectus
relating thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required
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<PAGE>
to be stated therein or necessary to make the statements therein not misleading,
in the light of the circumstances under which they were made, and at the request
of the Stockholders to use its best efforts to promptly prepare and furnish to
the Stockholders such number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its security-holders, as soon as reasonably practicable, an earnings statement
meeting the requirements of Section 11(a) of the Securities Act, which the
Company shall be entitled to satisfy by complying with the requirements of Rule
158 promulgated thereunder, and promptly furnish a copy of the same to the
Stockholders;
(ix) provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement; and
(x) use commercially reasonable efforts to list all
Registrable Securities covered by such registration statement on any national
securities exchange or over-the-counter market, if any, on which Registrable
Securities of the same class, and if applicable, series, covered by such
registration statement are then listed.
The Stockholders agree that upon receipt of any notice from the
Company of the happening of an event of the kind described in Section
2.3.1(vii), the Stockholders shall forthwith discontinue its disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until the Stockholders' receipt of the copies of the
supplemented or amended prospectus contemplated by Section 2.3.1(vii).
2.4. Underwritten Offerings.
----------------------
2.4.1. Requested Underwritten Offerings. If requested by
--------------------------------
the underwriters for any underwritten offering by the Stockholders pursuant to a
registration requested under Section 2.1, the Company shall enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be reasonably satisfactory in substance and form to the Company, the
Stockholders and the underwriters, and to contain such representations and
warranties by the Company and the Stockholders and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
indemnities to the effect and to the extent provided in Section 2.6 or as are
generally prevailing in agreements of that type. The Stockholders shall
cooperate with the Company in the negotiation of the underwriting agreement and
shall give consideration to the reasonable suggestions of the Company regarding
the form and substance thereof. The Stockholders shall be a party to such
underwriting agreement. The
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Stockholders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters other than representations,
warranties or agreements regarding the Stockholders, the Stockholders'
Registrable Securities, the Stockholders' intended method of distribution and
any other representations or warranties required by law or customarily given by
selling shareholders in an underwritten Public Offering or as reasonably
required by the managing underwriter of the offering of Registrable Securities.
2.4.2. Piggyback Underwritten Offerings. If the Company
--------------------------------
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, subject to the priority and other provisions
of Section 2.2.2 the Company shall, if requested by the Stockholders, arrange
for such underwriters to include all the Registrable Securities to be offered
and sold by the Stockholders among the securities of the Company to be
distributed by such underwriters. The Stockholders shall become a party to the
underwriting agreement negotiated between the Company and such underwriters. The
Stockholders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters other than representations,
warranties or agreements regarding the Stockholders, the Stockholders'
Registrable Securities and the Stockholders' intended method of distribution or
any other representations or warranties required by law or customarily given by
selling shareholders in an underwritten Public Offering or as reasonably
required by the managing underwriter of the offering of Registrable Securities.
2.4.3. Holdback Agreements.
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(i) In connection with the initial Public Offering
or any registration of Registrable Securities in connection with an underwritten
Public Offering, the Stockholders agree if required by the underwriter or
underwriters not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any Registrable Securities,
and not to effect any such public sale or distribution of any other equity
security of the Company or of any security convertible into or exchangeable or
exercisable for any equity security of the Company (in each case, other than as
part of such underwritten Public Offering) during the 15 days prior to, and
during the 180-day period, or such shorter period set forth in the underwriting
agreement with respect to such offering as the managing underwriter of such
offering shall reasonably require, beginning on, the effective date of such
registration statement.
(ii) If any registration of Registrable Securities
shall be in connection with an underwritten Public Offering, the Company agrees
(x) if required by the underwriter or underwriters, not to effect any public
sale or distribution of any of its equity securities or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (other than in connection with any employee stock option or other
benefit plan which has been duly adopted by the Company and which provides for
the distribution to participants in the plan of equity securities of the Company
or securities convertible or exchangeable or exercisable for equity securities
of the Company, or in connection with a merger or acquisition approved by the
Board of Directors of the Company) during the 180-day period, or
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<PAGE>
such other period as the managing underwriter of such offering shall reasonably
require, beginning on the effective date of such registration statement (except
as part of such registration) and (y) that any agreement entered into after the
date of this Agreement pursuant to which the Company issues or agrees to issue
any privately placed equity securities shall contain a provision under which
holders of such securities agree that, if required by the underwriter or
underwriters, they will not effect any public sale or distribution of any such
securities during the period referred to in the foregoing clause (x), including
any sale pursuant to Rule 144 under the Securities Act (except as part of such
registration, if permitted), if such holder is participating in the offering
pursuant to such registration.
2.5. Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of any registration statement under the Securities Act in
which the Stockholders are a selling shareholder, the Company shall give the
Stockholders not less than 30 days prior written notice of the preparation of
such registration statement and give the Stockholders and its counsel and
accountants the opportunity to participate, at the Stockholders' expense, in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto
(provided that the Stockholders shall furnish the Company with comments on any
such amendment or supplement as promptly as the Company shall reasonably
require), and give each of them such access to its books and records, such
opportunities to discuss the business of the Company with officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of the Stockholders' counsel, to conduct a
reasonable investigation within the meaning of the Securities Act. Any expenses
incurred by the Stockholders in connection with any such investigation shall be
borne by the Stockholders, other than the reasonable fees and disbursements of
Selling Stockholder Counsel incurred in connection with such investigation.
2.6. Indemnification.
---------------
2.6.1. Indemnification by the Company. In the event of any
------------------------------
registration of any securities of the Company under the Securities Act in which
the Stockholders are selling shareholders, the Company shall, and hereby does,
indemnify and hold harmless, in the case of any registration statement filed
pursuant to Sections 2.1 or 2.2, the Participating Holders, its directors,
officers, employees, agents and affiliates and, to the extent required by any
underwriting agreement entered into by the Company, each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person who controls a Participating Holder or any such underwriter
within the meaning of the Securities Act, insofar as losses, claims, damages, or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any fact contained in any registration statement under which
such securities were registered under the Securities Act, any preliminary
prospectus, final prospectus, or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
and the Company shall reimburse the Stockholders and each such director,
officer, agent or affiliate, and, to the extent required by any
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underwriting agreement entered into by the Company, underwriter and controlling
Person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company through an
instrument duly executed by the Participating Holders, specifically stating that
it is for use in the preparation thereof. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Participating Holders or any such director, officer, agent or affiliate or
controlling Person and shall survive the transfer of such securities by the
Participating Holders.
2.6.2. Indemnification by the Stockholders. If any Registrable
-----------------------------------
Securities are included in any registration statement, the Participating
Holders shall indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 2.6.1 above) the Company, each director of the
Company, each officer of the Company and each employee of the Company and, to
the extent required by any underwriting agreement entered into by the
Participating Holders, each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person who controls any
such underwriter within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by the Participating Holders
specifically stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement; provided, however, in no event shall the liability of
any Participating Holder under this Section 2.6.2 exceed the proceeds from the
Sale of the securities to be sold by such Participating Holder in any such
registration.
2.6.3. Notice of Claims, Etc. Promptly after receipt, by an indemnified
----------------------
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraphs of this Section 2.6, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party, immediately give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 2.6, except to the extent that the indemnifying party is materially
prejudiced by such failure. The indemnified party shall be entitled to receive
the indemnification payments described in Section 2.6.6 after providing such
written notice to the indemnifying party. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to
-11-
<PAGE>
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that the indemnifying
parties may agree, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable out of pocket costs related to the indemnified party's cooperation
with the indemnifying party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties arises in respect of such claim after the assumption of the defense
thereof. No indemnifying party shall be liable for any settlement of any action
or proceeding effected without its written consent, which consent shall not be
unreasonably withheld, delayed or conditioned. Consent of the indemnified party
shall be required for the entry of any judgment or to enter into a settlement
only when such judgment or settlement does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect such claim or litigation.
2.6.4. Contribution. If the indemnification provided for in this Section
------------
2.6 shall for any reason be held by a court to be unavailable to an indemnified
party under Section 2.6.1 or 2.6.2 hereof in respect of any loss, claim, damage
or liability, or any action in respect thereof, then, in lieu of the amount paid
or payable under Sections 2.6.1 or 2.6.2 hereof, the indemnified party and the
indemnifying party under Sections 2.6.1 or 2.6.2 hereof shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on one hand and the Stockholders on the other or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect the relative fault of the
Company on one hand and the Stockholders on the other that resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. No Person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any Person who was not guilty of such fraudulent
misrepresentation. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim,
effected without such Person's written consent, which consent shall not be
unreasonably withheld; provided, however, in no event shall the liability of any
Participating Holder under this Section 2.6.4 exceed the proceeds from the sale
of the securities to be sold by such Participating Holder in any such
registration.
2.6.5. Other Indemnification. Indemnification and contribution similar to
---------------------
that specified in the preceding paragraphs of this Section 2.6 (with appropriate
modifications) shall be given by the Company and the Participating Holders with
respect to any required registration or other qualification of securities under
any federal or state law or regulation of any governmental authority other than
the Securities Act.
-12-
<PAGE>
3. Rule 144. With a view to making available the benefits of certain
--------
rules and regulations of the Commission that may permit the sale of the
Registrable Securities to the public without registration after an initial
Public Offering, the Company agrees to:
(a) provide information and such other assistance requested by the
Stockholders as is customarily provided by issuers in connection with sales of
their common stock by directors or affiliates under Rule 144, promulgated under
the Securities Act;
(b) make and keep public information available, as those terms are
understood and defined in Rule 144 promulgated under the Securities Act at all
times;
(c) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(d) deliver a written statement as to whether it has complied with
such requirements of this Section, to the Stockholders upon the Stockholders'
request.
4. Intentionally Omitted
---------------------
5. Modification; Waivers. This Agreement may be modified or amended only
---------------------
with the written consent of each party hereto. No party shall be released from
its obligations hereunder without the written consent of the other party. The
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) by the party
entitled to enforce such term, but any such waiver shall be effective only if in
a writing signed by the party against which such waiver is to be asserted.
Except as otherwise specifically provided herein, no delay on the part of any
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party hereto of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.
6. Entire Agreement. This Agreement represents the entire understanding
----------------
and agreement between the parties hereto with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
7. Severability. If any provision of this Agreement, or the application
------------
of such provision to any Person or circumstance, shall be held invalid, the
remainder of this Agreement or the application of such provision to other
Persons or circumstances, to the extent permitted by law, shall not be affected
thereby; provided, that the parties shall negotiate in good faith with respect
to an equitable modification of the provision or application thereof held to be
invalid.
-13-
<PAGE>
8. Notices.
-------
(a) Any notice or communication to any party hereto shall be duly
given if in writing and delivered in person, receipt requested, or courier
guaranteeing next day delivery, or facsimile (with written confirmation of
receipt) to such other party's address or facsimile number set forth below.
If to EXIGENT DIAGNOSTICS, INC., W. VICKERY STOUGHTON, THOMAS H.
GROVE, KENNETH B. ASARCH, WILLIAM S. KNIGHT, DONALD S. WONG or ASHOK K. SAWHNEY:
7 Harford Lane
Radnor, Pennsylvania 19087
Attention: W. Vickery Stoughton
Facsimile: 610-270-6150
with a copy to:
James D. Epstein, Esquire
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Philadelphia, Pennsylvania 19103-2799
Facsimile: (215) 981-4750
If to EXIGENT PARTNERS, L.P. OR PHILIP B. SMITH:
c/o Spencer Trask Securities Incorporated
535 Madison Avenue
18th Floor
New York, New York 10022
Facsimile: (212) 751-3483
with a copy to:
John D. Vaughan, Esquire
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
Facsimile: 212-213-1199
(b) All notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered or facsimiled
(with written confirmation of receipt); and the next business day after timely
delivery to the courier, if sent by courier guaranteeing next day delivery.
-14-
<PAGE>
9. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and shall be binding upon the Company and the Stockholders and their respective
successors and permitted assigns. Each Stockholder may assign its rights under
this Agreement to any Person to whom the Stockholder transfers any of the
Registrable Securities or any interest therein without the necessity of
obtaining any consent to such assignment, provided that the such Person becomes
a party to that certain stockholders agreement, by and among the Company, the
Stockholders and certain other holders of the Common Stock. In the event that a
Stockholder assigns its rights to a holder or holders of only a portion of the
Registrable Securities, then all references to the Stockholder herein shall also
be deemed to refer to such other holder or holders, but in such event the
Stockholder shall have the sole right to make all decisions by and give notices
for such holder or holders under this Agreement; provided, that if the
Stockholder no longer owns any Registrable Securities, then all decisions and
notices hereunder shall be made by the holders of not less than a majority of
the Registrable Securities outstanding and all other holders of Registrable
Securities shall be bound by any such decision.
10. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which for all purposes shall be deemed to be an original
and all of which together shall constitute the same agreement.
11. Headings. The Section headings in this Agreement are for convenience
--------
of reference only, and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
12. Construction. This Agreement shall be governed, construed and
------------
enforced in accordance with the laws of the State of New York without regard to
its principles of conflict of laws.
13. No Inconsistent Agreements. The Company has not previously, and shall
--------------------------
not hereafter, enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Stockholders in this Agreement.
14. Recapitalizations, Etc. In the event that any capital stock or other
-----------------------
securities are issued in respect of, in exchange for, or in substitution of, any
Registrable Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Registrable Securities or any other
similar change in the Company's capital structure, appropriate adjustments shall
be made in this Agreement so as to fairly and equitably preserve, as far as
practicable, the original rights and obligations of the parties hereto under
this Agreement.
15. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association in effect at
the time such arbitration is instituted. The arbitration panel shall be
composed of three arbitrators, one of whom shall be chosen by the Company, one
of
-15-
<PAGE>
whom shall be chosen by the Stockholders, and one of whom shall be chosen by the
two arbitrators previously designated. If both or either of the Company and/or
the Stockholders fails to choose an arbitrator within fourteen (14) calendar
days after receiving notice of commencement of arbitration or if the two
arbitrators fail to choose a third arbitrator within fourteen (14) calendar days
of their appointment, such arbitrators shall be chosen by the American
Arbitration Association. Unless the parties to the arbitration shall otherwise
agree to a different place of arbitration, the place of arbitration shall be New
York, New York. The arbitration award shall be final and binding upon the
parties thereto and may be entered in any court having jurisdiction. Each party
shall bear (i) its own expenses in connection with such arbitration and (ii)
one-half of the fees and expenses of the American Arbitration Association and
all arbitrators unless any arbitration award shall contain otherwise provide.
16. Specific Performance. The parties hereto agree that the Registrable
--------------------
Securities of the Company cannot be purchased or sold in the open market and
that, for these reasons, among others, the holder or holders of the Registrable
Securities will be irreparably damaged in the event that this Agreement is not
specifically enforceable. Accordingly, in the event of any controversy
concerning the Registrable Securities which are the subject of this Agreement,
or any right or obligation to register such securities, such right or obligation
determined as part of an arbitration award described in Section 15 shall be
enforceable in a court of equity by specific performance. The rights granted in
this Section 16 shall be cumulative and not exclusive, and shall be in addition
to any and all other rights which the parties hereto may have hereunder, at law
or in equity. the Stockholders consents to the jurisdiction of the federal
courts in the City of New York in any suit, action or proceeding brought
pursuant to this Section 16, waives any objection it may have to the laying of
venue in any such suit, action or proceeding in any of such court, and agrees
that service of any court paper may be made in such manner as may be provided
under applicable laws or court rules governing service of process.
17. Term. This Agreement shall continue in full force and effect for nine
----
(9) years from the Final Closing or, with respect to any Stockholder, the first
date on which the such Stockholder and their affiliates may sell all of the
Registrable Securities held by them in a ninety (90) day period pursuant to Rule
144 under the Securities Act.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first above written and delivered by their respective duly
authorized officers.
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. Vickery Stoughton
---------------------------------
W. Vickery Stoughton
Chairman and Chief Executive Officer
EXIGENT PARTNERS, L.P.
By: /s/ Kevin Kimberlin
---------------------------------
Kevin Kimberlin, General Partner
/s/ W. VICKERY STOUGHTON
-------------------------------------
W. VICKERY STOUGHTON
/s/ THOMAS H. GROVE
--------------------------------------
THOMAS H. GROVE
/s/ KENNETH B. ASARCH
--------------------------------------
KENNETH B. ASARCH
/s/ WILLIAM S. KNIGHT
--------------------------------------
WILLIAM S. KNIGHT
/s/ DONALD S. WONG
--------------------------------------
DONALD S. WONG
/s/ ASHOK K. SAWHNEY
--------------------------------------
ASHOK K. SAWHNEY
/s/ PHILIP B. SMITH
--------------------------------------
PHILIP B. SMITH
-17-
<PAGE>
EXHIBIT 10.3
AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT
------------------------------------------------
AMENDMENT NO. 1 to the REGISTRATION RIGHTS AGREEMENT, dated as of
January 31, 1997 (the "Effective Date"), between Exigent Diagnostics, Inc., a
Delaware corporation (the "Company"), Exigent Partners, L.P., a Delaware limited
partnership (the "Partnership"), W. Vickery Stoughton ("Stoughton"), Thomas H.
Grove ("Grove"), Kenneth B. Asarch ("Asarch"), William S. Knight ("Knight"),
Donald S. Wong ("Wong"), Ashok K. Sawhney ("Sawhney") and Philip B. Smith
("Smith") (the Partnership and each of the foregoing listed individuals is a
"Stockholder"; collectively, are the "Stockholders") ("Amendment No. 1").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and the Stockholders entered into a Registration
Rights Agreement dated December 4, 1996 whereby the Company agreed to register
shares of common stock, par value $.01 per share (the "Common Stock") of the
Company (the "Shares") held by the Stockholders under certain conditions;
WHEREAS, the Company and the Stockholders desire to enter into this
Amendment No. 1 to correct certain scrivener errors contained in the
Registration Rights Agreement,
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in the Registration Rights Agreement and this Amendment No.
1, the parties hereby agree as follows:
1. Amendments to Registration Rights Agreement. The Registration
-------------------------------------------
Rights Agreement is hereby amended as follows:
(a) The fifth WHEREAS clause of the Registration Rights
Agreement is amended to read, in its entirety, as follows:
"WHEREAS, the Company intends to undertake a 7,422.775 for one
stock split and, thereafter, the offer and sale of an additional
7,500,000 shares of Common Stock (exclusive of an option by the
Company to offer and sell an additional 1,125,000 shares of Common
Stock solely to cover over subscriptions) pursuant to a private
placement memorandum contemplated by a letter of intent with Spencer
Trask Securities Incorporated (the "Memorandum");"
(b) Exhibit A of the Registration Rights Agreement is amended to
read, in its entirety, as follows:
<PAGE>
EXHIBIT A
---------
Name of Shareholder Number of Shares of Common Stock
------------------- --------------------------------
Exigent Partners, L.P. 2,899,522*
W. Vickery Stoughton 1,951,670
Thomas A. Grove 961,249
Kenneth B. Asarch 137,544
William S. Knight 103,177
Donald S. Wong 103,177
Ashok K. Sawhney 103,177
Phillip B. Smith 225,484*
________________________________
* Subject to reduction pursuant to certain call rights
contained in Subscription Agreements executed by them and the
Company."
2. Full Force and Effect. This Amendment No. 1 shall be deemed
---------------------
effective as of the date hereof. Except as expressly amended hereby, the
Subscription Agreement shall continue in full force and effect in accordance
with the provisions thereof on the date hereof.
3. Arbitration. Any controversy or claim arising out of or relating
-----------
to this Amendment No. 1 or the Registration Rights Agreement, or the breach
thereof, shall be settled by arbitration in accordance with the Rules of the
American Arbitration Association in effect at the time such arbitration is
instituted. The arbitration panel shall be composed of three arbitrators, one of
whom shall be chosen by the Company, one of whom shall be chosen by the
Stockholders, and one of whom shall be chosen by the two arbitrators previously
designated. If both or either of the Company and/or the Stockholders fails to
choose an arbitrator within fourteen (14) calendar days after receiving notice
of commencement of arbitration or if the two arbitrators fail to choose a third
arbitrator within fourteen (14) calendar days of their appointment, such
arbitrators shall be chosen by the American Arbitration Association. Unless the
parties to the arbitration shall otherwise agree to a different place of
arbitration, the place of arbitration shall be New York, New York. The
arbitration award shall be final and binding upon the parties thereto and may be
entered in any court having jurisdiction. Each party shall bear (i) its own
expenses in connection with such arbitration and (ii) one-half of the fees and
expenses of the American Arbitration Association and all arbitrators unless any
arbitration award shall contain otherwise provide.
4. Counterparts. This Amendment No. 1 may be executed
------------
(including by facsimile) in two or more counterparts, each of which for all
purposes shall be deemed to be an original and all of which together shall
constitute the same agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have duly caused
this Amendment No. 1 to be duly executed as of the day and year first above
written.
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. Vickery Stoughton
---------------------------------------
W. Vickery Stoughton
Chairman and Chief Executive Officer
EXIGENT PARTNERS, L.P.
By: /s/ K. Kimberlin
---------------------------------------
Kevin Kimberlin, General Partner
/s/ W. Vickery Stoughton
------------------------------------------
W. VICKERY STOUGHTON
/s/ Thomas H. Grove
------------------------------------------
THOMAS H. GROVE
/s/ Kenneth B. Asarch
------------------------------------------
KENNETH B. ASARCH
/s/ William S. Knight
------------------------------------------
WILLIAM S. KNIGHT
/s/ Donald Wong
------------------------------------------
DONALD S. WONG
/s/ A. K. Sawhney
------------------------------------------
ASHOK K. SAWHNEY
/s/ Philip B. Smith
------------------------------------------
PHILIP B. SMITH
-3-
<PAGE>
EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT dated December 4, 1996 (the "Effective
Date") between Exigent Diagnostics, Inc., a Delaware corporation (the
"Company"), and Spencer Trask Securities Incorporated, a Delaware corporation
(the "Placement Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company intends to undertake a 7,257.258 for one stock
split and, thereafter, the offer and sale of an additional 7,500,000 shares of
common stock, par value $.01 per share (the "Common Stock"), exclusive of an
option by the Company to offer and sell an additional 1,125,000 shares of Common
Stock solely to cover over subscriptions, pursuant to a private placement
memorandum contemplated by a Placement Agency Agreement with the Placement Agent
(the "Memorandum");
WHEREAS, as part of the consideration to be paid to the Placement
Agent pursuant to the Placement Agency Agreement, the Company has agreed to
issue to the Placement Agent warrants to purchase shares of Common Stock of the
Company equal to 20% of the number of shares of Common Stock sold pursuant to
the Memorandum (the "Warrants");
WHEREAS, in order to induce the Placement Agent to enter into the
Placement Agency Agreement, the Company has agreed to provide the Placement
Agent with certain registration rights respecting both the Warrants and the
shares of Common Stock issuable upon exercise of the Warrants (the "Covered
Securities"), on and subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements made herein, and other good valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and accepted, the parties hereto
agree as follows:
1. Definitions. As used herein, unless the context otherwise requires,
-----------
the following terms have the following respective meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange
Act.
"Commission" means the United States Securities and' Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Common Stock" has the meaning set forth in the first WHEREAS clause
of the Recitals.
"Covered Securities" has the meaning set forth in the third WHEREAS
clause of the Recitals.
<PAGE>
"Demand" has the meaning set forth in Section 2.1.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
promulgated thereunder, as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include reference to the comparable section, if any, of any such
subsequent similar federal statute.
"Participating Holder" has the meaning set forth in Section 2.1.4.
"Person" means any individual, partnership, joint venture, corporation,
trust, unincorporated organization, government or department or agency of a
government.
"Public Offering" means a public offering of securities registered with the
Commission under the Securities Act.
"Registrable Common Securities" means the Purchase Agreement Shares, the
Antidilution Shares and the Partnership Shares.
"Registrable Securities" means collectively the Covered Securities and any
other securities issuable in connection therewith or in replacement thereof by
way of a dividend, distribution, recapitalization, exchange, merger,
consolidation or other reorganization. As to any particular Registrable
Securities, once issued such securities shall cease to be Registrable Securities
when (a) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, (b) they
shall have been sold as permitted by, and in compliance with, Rule 144 (or any
successor provision) promulgated under the Securities Act or (c) they shall have
ceased to be outstanding.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration, filing and National Association of Securities Dealers, Inc. fees,
all listing fees, all fees and expenses of complying with securities or blue sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities), all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements of counsel for the
Company and counsel for the Participating Holders comprising not more than one
outside law firm which shall be selected by the Participating Holders of a
majority of the Registrable Securities sought to be registered in such
registration (the "Selling Stockholder Counsel") and of the Company's
independent public accountants, including the expenses of "comfort" letters
required by or incident to such performance and compliance, and any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities.
-2-
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, or any
subsequent similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
References to a particular section of the Securities Act of 1933, as amended,
shall include a reference to the comparable section, if any, of any such
subsequent similar federal statute.
"Warrants" has the meaning set forth in the third WHEREAS clause of
the Recitals.
2. Registration Rights.
-------------------
2.1. Registration on Demand.
----------------------
2.1.1. Demand. After the earlier of the effective date of the
------
initial Public Offering of Common Stock and the fifth (5th) anniversary of the
Final Closing (as defined in the Memorandum), subject to Section 2.1.7, upon the
written request (the "Demand") of the holders of a majority of Registrable
Securities that the Company effect the registration under the Securities Act of
all or part of the Registrable Securities, the Company shall cause to be filed,
and shall take all commercially reasonable actions to effect, as soon as
practicable and in any event, subject to the reasonable cooperation of the
holders of Registrable Securities, within 120 days after the Demand is received,
the registration under the Securities Act, of the Registrable Securities which
the Company has been so requested to register. Prior to such registration being
declared effective, the holders of a majority of the Registrable Securities
requesting such Demand registration may withdraw such Demand registration,
subject to the provisions of Section 2.1.4 below.
2.1.2. Registration of Other Securities. Whenever the Company
--------------------------------
shall effect a registration pursuant to this Section 2.1 in connection with an
underwritten offering, holders of securities of the Company who have "piggyback"
registration rights may include all or a portion of such securities in such
registration, offering or sale. If the managing underwriter of any such
offering shall inform the Company by letter of its belief that the number or
type of securities of the Company requested by holders of the securities of the
Company other than the holders of Registrable Securities to be included in such
registration would materially and adversely affect the underwritten offering,
then the Company shall include in such registration, to the extent of the number
and type of securities which the Company is so advised can be sold in (or during
the time of) such offering, first, all of the Registrable Securities specified
by the Placement Agent in the Demand and second, for each holder of the
Company's securities other than the Placement Agent, the fraction of each
holder's securities proposed to be registered which is obtained by dividing (i)
the number of the securities of the Company that such holder proposes to include
in such registration by (ii) the total number of securities proposed to be
included in such registration by all holders other than the Placement Agent.
2.1.3. Registration Statement Form. Registrations under this
---------------------------
Section 2.1 shall be on such appropriate registration form of the Commission as
shall be selected by the
-3-
<PAGE>
Company. The Company shall include in any such registration statement all
information which, in the opinion of counsel to the Company, is required to be
included.
2.1.4. Expenses. The Company shall pay the Registration Expenses in
--------
connection with the first Demand registration effected pursuant to this Section
2.1, other than underwriting discounts and selling commissions relating to the
sale or disposition of Registrable Securities, and the holders of Registrable
Securities the securities of which are the subject of the second Demand
registration effected pursuant to this Section 2.1 (the "Participating
Holders"), shall pay all Registration Expenses in connection with the second
Demand registration effected pursuant to this Section 2.1. If the registration
pursuant to a Demand is withdrawn at the request of the Placement Agent and if
the Placement Agent elect not to have such registration count as its Demand
registration under this Section 2.1, the Placement Agent shall pay all the
Registration Expenses of such registration. At no time shall the Placement
Agent be required to pay the underwriting discounts or selling commissions
relating to the sale or disposition of shares of Common Stock by other Persons,
or the fees and expenses of any other Person or the Company's counsel, except as
required by Section 2.6.2 below.
2.1.5. Effective Registration Statement. A registration requested
--------------------------------
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, (ii)
if after it has become effective, such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason and has not thereafter become
effective, or (iii) in the case of an underwritten offering, if the conditions
to closing specified in the underwriting agreement, if any, entered into in
connection with such registration are not satisfied or waived.
2.1.6. Selection of Underwriters. In connection with each underwritten
-------------------------
offering, (a) the Company shall promptly select the managing underwriter subject
to the approval of the Placement Agent (which approval shall not be unreasonably
withheld, delayed or conditioned by the Placement Agent) and (b) if they so
desire, the Placement Agent shall promptly (by the holders of a majority of the
Registrable Securities sought to be registered by the Participating Holders in
such Demand) select the co-managing underwriter subject to the approval of the
Company (which approval shall not be unreasonably withheld, delayed or
conditioned by the Company).
2.1.7. Limitations on Registration on Demand. The Company shall not be
-------------------------------------
required to file a registration statement pursuant to this Section 2.1 which
would become effective within (a) 180 days following the effective date of a
registration statement filed by the Company with the Commission pertaining to an
initial underwritten Public Offering of convertible debt securities or equity
securities for cash (a "Public Offering") for the account of the Company, or
such other period as may be required or requested by any managing underwriter of
such initial Public Offering so long as Exigent Partners, L.P., W. Vickery
Stoughton and Thomas Grove are subject to a similar restriction period; provided
that no other holder of the Company's securities shall have been permitted to
participate in such initial Public Offering, or (b) 120 days following
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<PAGE>
the effective date of a registration statement (other than a registration
statement filed on Form S-4 or S-8) filed by the Company with the Commission
pertaining to any subsequent Public Offering for the account of the Company or
another holder of securities of the Company if the Placement Agent were afforded
the opportunity to include all of its Registrable Securities in such subsequent
registration pursuant to Section 2.2. In no event shall the Company be required
to effect more than two (2) registrations pursuant to this Section 2.1.
Notwithstanding the foregoing, if, in the good faith determination of the
Company's Board of Directors, a registration would adversely affect certain
activities of the Company to the material detriment of the Company, then the
Company may at its option direct that such Demand be delayed for a period not in
excess of 90 days in the aggregate from the date of the Company's receipt of the
Demand. The rights of the Placement Agent to cause a Demand registration to be
effected hereunder are subject to the prior rights of the investors in the
private offering contemplated by the Memorandum (the "Offering") to effect a
registration pursuant to the last sentence of Section 2.1.7 of the Registration
Rights Agreement to be entered into by the Company in connection with the
Private Offering Memorandum, the form of which is attached to the Memorandum.
2.2. Piggyback Registration.
----------------------
2.2.1. Right to Include Registrable Securities. If the Company
---------------------------------------
at any time proposes to register any of its securities under the Securities Act
by registration on Forms S-1, S-2, S-3 or any successor or similar form(s)
(except registrations on such Forms or similar forms solely for registration of
securities in connection with (i) an employee benefit plan or dividend
reinvestment plan or a merger or consolidation or (ii) debt securities which are
not convertible into Common Stock), whether or not for sale for its own account,
it shall each such time give written notice to the Placement Agent of its
intention to do so at least 30 days prior to the anticipated filing date of a
registration statement with respect to such registration with the Commission.
Upon the written request of the Placement Agent made as promptly as practicable
and in any event within 10 business days after the receipt of any such notice,
which request shall specify the Registrable Securities intended to be disposed
of by the Placement Agent, the Company shall use commercially reasonable efforts
to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Placement
Agent; provided, however, that if, at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to the Placement Agent and (i) in the case of a determination not
to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from any obligation of
the Company to pay the Registration Expenses in connection therewith), without
prejudice, (provided, however, that the Placement Agent may request that such
registration be effected as a registration under Section 2.1 hereof) and (ii) in
the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities for the same period as the delay in
registering such other securities.
-5-
<PAGE>
2.2.2. Priority in Piggyback Registrations. Notwithstanding anything in
-----------------------------------
Section 2.2.1 above to the contrary, if the managing underwriter of any
underwritten offering shall inform the Company by letter of its belief that the
number or type of Registrable Securities requested to be included in such
registration would materially and adversely affect such offering, then the
Company shall promptly notify the Placement Agent of such fact. If the managing
underwriter does not agree to include all (or such lesser amount as the
Placement Agent shall, in their discretion, agree to) of the number of the
Registrable Securities initially requested by the Placement Agent to be included
in such registration, then the Company shall include in such registration, to
the extent of the number and type which the Company is so advised can be sold in
(or during the time of) such offering first, all securities proposed by the
Company to be sold for its own account, if the Company initiated such
registration, or by the holder of securities who initiated such demand
registration, if any, second, for Placement Agent, Exigent Partners, L.P., such
members of management who have been provided with registration rights pursuant
to the agreement in which the Company provided registration rights to Exigent
Partners, L.P., SmithKline Beecham Corporation (and its affiliates), and the
purchasers of Common Stock offered pursuant to the Memorandum (and the
respective successors and assigns of any of the foregoing), other than the
holder of the securities who initiated such demand registration, if any, the
fraction of such holder's securities proposed to be registered which is obtained
by dividing (I) the number of the securities of the Company that such holder
proposes to include in such registration by (ii) the total number of securities
proposed to be sold in such offering by such holders, and third, for each
remaining holder of the Company's securities, other than the holder of the
securities who initiated such demand registration and the holders listed above,
if any, the fraction of such holder's securities proposed to be registered which
is obtained by dividing (I) the number of the securities of the Company that
such holder proposes to include in such registration by (ii) the total number of
securities proposed to be sold in such offering by such holders.
2.3. Registration Procedures.
-----------------------
2.3.1. In connection with the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2, the
Company shall as promptly as practicable:
(i) prepare and file with the Commission the requisite
registration statement to effect such registration and thereafter use
commercially reasonable efforts to cause such registration statement to become
and remain effective;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with provisions of the Securities Act with respect to
the disposition of all Registrable Securities covered by such registration
statement for 180 days or such shorter period as may be required for the
disposition of all of such Registrable Securities by the underwriters;
(iii) furnish to the Placement Agent such number of
conformed copies of such registration statement and of each such amendment and
supplement thereto (in
-6-
<PAGE>
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such number of copies of such other documents as the Placement Agent may
reasonably request;
(iv) use commercially reasonable efforts (x) to register or
qualify all Registrable Securities and other securities covered by such
registration statement under such other securities or Blue Sky laws of such
States of the United States of America where an exemption is not available and
as the Placement Agent shall reasonably request, (y) to keep such registration
or qualification in effect for so long as such registration statement remains in
effect, and (z) to take any other action which may reasonably be necessary or
advisable to enable the Placement Agent to consummate the disposition in such
jurisdictions of the Registrable Securities to be sold by the Placement Agent,
except that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign Company in any jurisdiction wherein it
would not, but for the requirements of this paragraph (iv), be obligated to be
so qualified or to consent to general service of process in any such
jurisdiction;
(v) use commercially reasonable efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other federal or state governmental agencies or authorities as
may be necessary in the opinion of counsel to the Company and counsel to the
Placement Agent to consummate the disposition of such Registrable Securities in
accordance with their intended method of disposition;
(vi) furnish to the Placement Agent, (x) an opinion of outside
counsel for the Company, and (y) a copy of a "comfort" letter addressed to the
Company and/or any managing underwriter signed by the certified independent
public accountants who have certified the Company's financial statements
included or incorporated by reference in such registration statement, each
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountant's comfort letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountant's comfort letters delivered to the underwriters in
underwritten Public Offerings of securities (and dated the dates such opinions
and comfort letters are customarily dated);
(vii) notify the Placement Agent when a prospectus relating
thereto is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, in
the light of the circumstances under which they were made, and at the request of
the Placement Agent to use its best efforts to promptly prepare and furnish to
the Placement Agent such number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus
-7-
<PAGE>
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security-holders, as soon as reasonably practicable, an earnings statement
meeting the requirements of Section 11(a) of the Securities Act, which the
Company shall be entitled to satisfy by complying with the requirements of Rule
158 promulgated thereunder, and promptly furnish a copy of the same to the
Placement Agent;
(ix) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement; and
(x) use commercially reasonable efforts to list all
Registrable Securities covered by such registration statement on any national
securities exchange or over-the-counter market, if any, on which Registrable
Securities of the same class, and if applicable, series, covered by such
registration statement are then listed.
The Placement Agent agree that upon receipt of any notice from the Company
of the happening of an event of the kind described in Section 2.3.1(vii), the
Placement Agent shall forthwith discontinue its disposition of Registrable
Securities pursuant to the registration statement relating to such Registrable
Securities until the Placement Agent' receipt of the copies of the supplemented
or amended prospectus contemplated by Section 2.3.1(vii).
2.4. Underwritten Offerings.
----------------------
2.4.1. Requested Underwritten Offerings. If requested by the
--------------------------------
underwriters for any underwritten offering by the Placement Agent pursuant to a
registration requested under Section 2.1, the Company shall enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be reasonably satisfactory in substance and form to the Company, the
Placement Agent and the underwriters, and to contain such representations and
warranties by the Company and the Placement Agent and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
indemnities to the effect and to the extent provided in Section 2.6 or as are
generally prevailing in agreements of that type. The Placement Agent shall
cooperate with the Company in the negotiation of the underwriting agreement and
shall give consideration to the reasonable suggestions of the Company regarding
the form and substance thereof. The Placement Agent shall be a party to such
underwriting agreement. The Placement Agent shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding the
Placement Agent, the Placement Agent' Registrable Securities, the Placement
Agent' intended method of distribution and any other representations or
warranties
-8-
<PAGE>
required by law or customarily given by selling shareholders in an underwritten
Public Offering or as reasonably required by the managing underwriter of the
offering of Registrable Securities.
2.4.2. Piggyback Underwritten Offerings. If the Company proposes to
--------------------------------
register any of its securities under the Securities Act as contemplated by
Section 2.2 and such securities are to be distributed by or through one or more
underwriters, subject to the priority and other provisions of Section 2.2.2 the
Company shall, if requested by the Placement Agent, arrange for such
underwriters to include all the Registrable Securities to be offered and sold by
the Placement Agent among the securities of the Company to be distributed by
such underwriters. The Placement Agent shall become a party to the underwriting
agreement negotiated between the Company and such underwriters. The Placement
Agent shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding the Placement Agent, the Placement Agent'
Registrable Securities and the Placement Agent' intended method of distribution
or any other representations or warranties required by law or customarily given
by selling shareholders in an underwritten Public Offering or as reasonably
required by the managing underwriter of the offering of Registrable Securities.
2.4.3. Holdback Agreements.
-------------------
(i) In connection with the initial Public Offering or any
registration of Registrable Securities in connection with an underwritten Public
Offering, the Placement Agent agree if required by the underwriter or
underwriters not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any Registrable Securities,
and not to effect any such public sale or distribution of any other equity
security of the Company or of any security convertible into or exchangeable or
exercisable for any equity security of the Company (in each case, other than as
part of such underwritten Public Offering) during the 15 days prior to, and
during the 180-day period, or such shorter period set forth in the underwriting
agreement with respect to such offering as the managing underwriter of such
offering shall reasonably require, beginning on, the effective date of such
registration statement.
(ii) If any registration of Registrable Securities shall be
in connection with an underwritten Public Offering, the Company agrees (x) if
required by the underwriter or underwriters, not to effect any public sale or
distribution of any of its equity securities or of any security convertible into
or exchangeable or exercisable for any equity security of the Company (other
than in connection with any employee stock option or other benefit plan which
has been duly adopted by the Company and which provides for the distribution to
participants in the plan of equity securities of the Company or securities
convertible or exchangeable or exercisable for equity securities of the Company,
or in connection with a merger or acquisition approved by the Board of Directors
of the Company) during the 180-day period, or such other period as the managing
underwriter of such offering shall reasonably require, beginning on the
effective date of such registration statement (except as part of such
registration) and (y) that any agreement entered into after the date of this
Agreement pursuant to which the
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<PAGE>
Company issues or agrees to issue any privately placed equity securities shall
contain a provision under which holders of such securities agree that, if
required by the underwriter or underwriters, they will not effect any public
sale or distribution of any such securities during the period referred to in the
foregoing clause (x), including any sale pursuant to Rule 144 under the
Securities Act (except as part of such registration, if permitted), if such
holder is participating in the offering pursuant to such registration.
2.5. Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of any registration statement under the Securities Act in
which the Placement Agent is a selling shareholder, the Company shall give the
Placement Agent not less than 30 days prior written notice of the preparation of
such registration statement and give the Placement Agent and its counsel and
accountants the opportunity to participate, at the Placement Agent's expense, in
the preparation of such registration statement, each prospectus included therein
or filed with the Commission, and each amendment thereof or supplement thereto
(provided that the Placement Agent shall furnish the Company with comments on
any such amendment or supplement as promptly as the Company shall reasonably
require), and give each of them such access to its books and records, such
opportunities to discuss the business of the Company with officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of the Placement Agent's counsel, to conduct
a reasonable investigation within the meaning of the Securities Act. Any
expenses incurred by the Placement Agent in connection with any such
investigation shall be borne by the Placement Agent, other than the reasonable
fees and disbursements of Seller Stockholder Counsel incurred in connection with
such investigation.
2.6. Indemnification.
---------------
2.6.1. Indemnification by the Company. In the event of any
------------------------------
registration of any securities of the Company under the Securities Act in which
the Placement Agent is or may be a selling shareholder, the Company shall, and
hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Sections 2.1 or 2.2, the Participating Holders, its
directors, officers, employees, agents and affiliates and, to the extent
required by any underwriting agreement entered into by the Company, each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person who controls a Participating Holder or any such
underwriter within the meaning of the Securities Act, insofar as losses, claims,
damages, or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon (a) any untrue
statement or alleged untrue statement of any fact contained in any registration
statement under which such securities were registered under the Securities Act,
any preliminary prospectus, final prospectus, or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a fact required to be stated therein or necessary to
make the statements therein in light of the circumstances in which they were
made not misleading, or (b) any violation by the Company, its directors,
officer, employees or agents of this Agreement or any law applicable to and in
connection with such registration, and the Company shall reimburse the Placement
Agent and each such director, officer, agent or affiliate, and, to the extent
required by
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<PAGE>
any underwriting agreement entered into by the Company, underwriter and
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding described in clauses (a) or (b); provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by the Participating Holders, specifically stating that it is for use
in the preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Participating
Holders or any such director, officer, agent or affiliate or controlling Person
and shall survive the transfer of such securities by the Participating Holders.
2.6.2. Indemnification by the Placement Agent. If any Registrable
--------------------------------------
Securities are included in any registration statement, the Participating
Holders shall indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 2.6.1 above) the Company, each director of the
Company, each officer of the Company and each employee of the Company and, to
the extent required by any underwriting agreement entered into by the
Participating Holders, each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person who controls any
such underwriter within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by the Participating Holders
specifically stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement; provided, however, in no event shall the liability of
the Placement Agent under this Section 2.6.2 exceed the proceeds from the sale
of the securities to be sold by the Placement Agent in any such registration.
2.6.3. Notice of Claims, Etc. Promptly after receipt, by an indemnified
----------------------
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraphs of this Section 2.6, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party, immediately give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 2.6, except to the extent that the indemnifying party is materially
prejudiced by such failure. The indemnified party shall be entitled to receive
the indemnification payments described in Section 2.6.6 after providing such
written notice to the indemnifying party. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to
-11-
<PAGE>
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that the indemnifying
parties may agree, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable out of pocket costs related to the indemnified party's cooperation
with the indemnifying party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties arises in respect of such claim after the assumption of the defense
thereof. No indemnifying party shall be liable for any settlement of any action
or proceeding effected without its written consent, which consent shall not be
unreasonably withheld, delayed or conditioned. Consent of the indemnified party
shall be required for the entry of any judgment or to enter into a settlement
only when such judgment or settlement does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect such claim or litigation.
2.6.4. Contribution. If the indemnification provided for in this
------------
Section 2.6 shall for any reason be held by a court to be unavailable to an
indemnified party under Section 2.6.1 or 2.6.2 hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under Sections 2.6.1 or 2.6.2 hereof, the indemnified
party and the indemnifying party under Sections 2.6.1 or 2.6.2 hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on one hand and the Placement Agent on the
other or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect the relative
fault of the Company on one hand and the Placement Agent on the other that
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. No Person guilty of
fraudulent misrepresentation (within the meaning of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim,
effected without such Person's written consent, which consent shall not be
unreasonably withheld provided, however, in no event shall the liability of the
Placement Agent under this Section 2.6.4 exceed the proceeds from the sale of
the securities to be sold by the Placement Agent in any such registration.
2.6.5. Other Indemnification. Indemnification and contribution similar to
---------------------
that specified in the preceding paragraphs of this Section 2.6 (with appropriate
modifications) shall be given by the Company and the Participating Holders with
respect to any required registration or other qualification of securities under
any federal or state law or regulation of any governmental authority other than
the Securities Act.
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<PAGE>
3. Rule 144. With a view to making available the benefits of certain
--------
rules and regulations of the Commission that may permit the sale of the
Registrable Securities to the public without registration after an initial
Public Offering, the Company agrees to:
(a) provide information and such other assistance requested by the
Placement Agent as is customarily provided by issuers in connection with sales
of their common stock by directors or affiliates under Rule 144, promulgated
under the Securities Act;
(b) make and keep public information available, as those terms are
understood and defined in Rule 144 promulgated under the Securities Act at all
times;
(c) use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act; and
(d) deliver a written statement as to whether it has complied with such
requirements of this Section, to the Placement Agent upon the Placement Agent'
request.
4. Intentionally Blank.
-------------------
5. Modification; Waivers. This Agreement may be modified or amended only
---------------------
with the written consent of each party hereto. No party shall be released from
its obligations hereunder without the written consent of the other party. The
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) by the party
entitled to enforce such term, but any such waiver shall be effective only if in
a writing signed by the party against which such waiver is to be asserted.
Except as otherwise specifically provided herein, no delay on the part of any
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party hereto of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.
6. Entire Agreement. This Agreement represents the entire understanding
----------------
and agreement between the parties hereto with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
7. Severability. If any provision of this Agreement, or the application
------------
of such provision to any Person or circumstance, shall be held invalid, the
remainder of this Agreement or the application of such provision to other
Persons or circumstances, to the extent permitted by law, shall not be affected
thereby; provided, that the parties shall negotiate in good faith with respect
to an equitable modification of the provision or application thereof held to be
invalid.
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<PAGE>
8. Notices.
-------
(a) Any notice or communication to any party hereto shall be duly given
if in writing and delivered in person, receipt requested, or courier
guaranteeing next day delivery, or facsimile (with written confirmation of
receipt) to such other party's address or facsimile number set forth below.
If to EXIGENT DIAGNOSTICS, INC.:
7 Harford Lane
Radnor, Pennsylvania 19087
Attention: W. Vickery Stoughton
Facsimile: (610) 270-6150
with a copy to:
James D. Epstein, Esquire
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Philadelphia, Pennsylvania 19103-2799
Facsimile: (215) 981-4750
If to SPENCER TRASK SECURITIES INCORPORATED:
535 Madison Avenue
18th Floor
New York, New York 10022
Facsimile: (212) 751-3483
Attention: Mr. Kevin Kimberlin
with a copy to:
John D. Vaughan, Esquire
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
Facsimile: 212-213-1199
(b) All notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered or facsimiled
(with written confirmation of receipt); and the next business day after timely
delivery to the courier, if sent by courier guaranteeing next day delivery.
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<PAGE>
9. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and shall be binding upon the Company and the Placement Agent and their
respective successors and permitted assigns. The Placement Agent may assign its
rights under this Agreement to any Person to whom the Placement Agent transfers
any of the Registrable Securities or any interest therein without the necessity
of obtaining any consent to such assignment, provided that such Person becomes a
party to that certain Stockholders' Agreement, by and among the Company, the
Placement Agent and certain other holders of the Common Stock. In the event
that the Placement Agent assigns its rights to a holder or holders of only a
portion of the Registrable Securities, then all references to the Placement
Agent herein shall also be deemed to refer to such other holder or holders, but
in such event the Placement Agent shall have the sole right to make all
decisions by and give notices for such holder or holders under this Agreement;
provided, that if the Placement Agent no longer owns any Registrable Securities,
then all decisions and notices hereunder shall be made by the holders of not
less than a majority of the Registrable Securities outstanding and all other
holders of Registrable Securities shall be bound by any such decision.
10. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which for all purposes shall be deemed to be an original
and all of which together shall constitute the same agreement.
11. Headings. The Section headings in this Agreement are for convenience
--------
of reference only, and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
12. Construction. This Agreement shall be governed, construed and
------------
enforced in accordance with the laws of the State of New York without regard to
its principles of conflict of laws.
13. No Inconsistent Agreements. The Company has not previously, and shall
--------------------------
not hereafter, enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Placement Agent in this Agreement.
14. Recapitalizations, Etc. In the event that any capital stock or other
-----------------------
securities are issued in respect of, in exchange for, or in substitution of, any
Registrable Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to Placement
Agent or combination of the shares of Registrable Securities or any other
similar change in the Company's capital structure, appropriate adjustments shall
be made in this Agreement so as to fairly and equitably preserve, as far as
practicable, the original rights and obligations of the parties hereto under
this Agreement.
15. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association in effect at
the time such arbitration is instituted. The arbitration panel shall be
composed of three arbitrators, one of whom shall be chosen by the Company, one
of
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<PAGE>
whom shall be chosen by the Placement Agent, and one of whom shall be chosen by
the two arbitrators previously designated. If both or either of the Company
and/or the Placement Agent fails to choose an arbitrator within fourteen (14)
calendar days after receiving notice of commencement of arbitration or if the
two arbitrators fail to choose a third arbitrator within fourteen (14) calendar
days of their appointment, such arbitrators shall be chosen by the American
Arbitration Association. Unless the parties to the arbitration shall otherwise
agree to a different place of arbitration, the place of arbitration shall be New
York, New York. The arbitration award shall be final and binding upon the
parties thereto and may be entered in any court having jurisdiction. Each party
shall bear (i) its own expenses in connection with such arbitration and (ii)
one-half of the fees and expenses of the American Arbitration Association and
all arbitrators unless any arbitration award shall otherwise provide.
16. Specific Performance. The parties hereto agree that the Registrable
--------------------
Securities of the Company cannot be purchased or sold in the open market and
that, for these reasons, among others, the holder or holders of the Registrable
Securities will be irreparably damaged in the event that this Agreement is not
specifically enforceable. Accordingly, in the event of any controversy
concerning the Registrable Securities which are the subject of this Agreement,
or any right or obligation to register such securities, such right or obligation
determined as part of an arbitration award described in Section 15 shall be
enforceable in a court of equity by specific performance. The rights granted in
this Section 16 shall be cumulative and not exclusive, and shall be in addition
to any and all other rights which the parties hereto may have hereunder, at law
or in equity. the Placement Agent consents to the jurisdiction of the federal
courts in the City of New York in any suit, action or proceeding brought
pursuant to this Section 16, waives any objection it may have to the laying of
venue in any such suit, action or proceeding in any of such court, and agrees
that service of any court paper may be made in such manner as may be provided
under applicable laws or court rules governing service of process.
17. Term. This Agreement shall continue in full force and effect for the
----
later of (i) the Warrant Exercise Term (as defined in the Warrants) or (ii) nine
(9) years from the Final Closing, or with respect to any holder of Registrable
Securities, the first date on which such holder of Registrable Securities and
its affiliates may sell all of the Registrable Securities held by them in a
ninety (90) day period pursuant to Rule 144 under the Securities Act.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first above written and delivered by their respective duly
authorized officers.
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. Vickery Stoughton
-------------------------------
W. Vickery Stoughton
Chairman and Chief Executive Officer
SPENCER TRASK SECURITIES INCORPORATED
By: /s/ William P. Dioguardi
-------------------------------
Name: William P. Dioguardi
Title: President
-17-
<PAGE>
EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT dated Jan. 31, 1997 (the "Effective
Date") between Exigent Diagnostics, Inc., a Delaware corporation (the
"Company"), and each Investor executing a copy hereof (each a "Stockholder";
collectively, are the "Stockholders").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company intends to effect a 7,422.775 for one stock split
and, thereafter, offer for sale to the Stockholders up to 7,500,000 shares of
common stock, $.01 par value per share (the "Common Stock"), plus, at the option
of the Company, up to an additional 1,125,000 shares of Common Stock solely to
cover over subscriptions;
WHEREAS, the Stockholders desire to purchase from the Company, and the
Company desires to issue and sell to the Stockholders, up to an aggregate of 75
Units (plus, at the option of the Company, an additional 11.25 Units solely to
cover oversubscriptions, if any), each Unit consisting of 100,000 shares of
Common Stock, all upon the terms set forth in the Company's Confidential Private
Placement Memorandum dated December 4, 1996 (the "Memorandum") (the "Purchase
Shares");
WHEREAS, to induce the Stockholders to purchase Units, the Company has
agreed to register shares of Common Stock pursuant to the terms and conditions
set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements made herein, and other good valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and accepted, the parties hereto
agree as follows:
1. Definitions. As used herein, unless the context otherwise requires,
-----------
the following terms have the following respective meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange
Act.
"Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Common Stock" has the meaning set forth in the first WHEREAS clause
of the Recitals.
"Demand" has the meaning set forth in Section 2.1.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
promulgated thereunder,
<PAGE>
as the same shall be in effect at the time. Reference to
a particular section of the Securities Exchange Act of 1934, as amended, shall
include reference to the comparable section, if any, of any such subsequent
similar federal statute.
"Initial Public Offering" means the first offering of securities registered
with the Commission under the Securities Act.
"Participating Holder" has the meaning set forth in Section 2.1.4.
"Person" means any individual, partnership, joint venture, corporation,
trust. unincorporated organization, government or department or agency of a
government.
"Public Offering" means a public offering of the securities registered with
the Commission under the Securities Act.
"Registrable Common Securities" means the Purchase Shares.
"Registrable Securities" means collectively the Registrable Common
Securities and any other securities issuable in connection therewith or in
replacement thereof by way of a dividend, distribution, recapitalization,
exchange, merger, consolidation or other reorganization. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been sold as permitted by, and in compliance
with, Rule 144 (or any successor provision) promulgated under the Securities Act
or (c) they shall have ceased to be outstanding.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration, filing and National Association of Securities Dealers, Inc. fees,
all listing fees, all fees and expenses of complying with securities or blue sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities), all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements of counsel for the
Company and counsel for the Participating Holders comprising not more than one
outside law firm which shall be selected by the Participating Holders of a
majority of the Registrable Securities sought to be registered in such
registration ("Selling Stockholder Counsel"), and of the Company's independent
public accountants, including the expenses of "comfort" letters required by or
incident to such performance and compliance, and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
subsequent similar federal statute, and the rules and regulations of the
Commission thereunder, all as the
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<PAGE>
same shall be in effect at the time. References to a particular section of the
Securities Act of 1933, as amended, shall include a reference to the comparable
section, if any, of any such subsequent similar federal statute.
2. Registration Rights.
-------------------
2.1. Initial Registration and Registration on Demand.
-----------------------------------------------
2.1.1. Initial Registration. In the event the Company shall
--------------------
complete an Initial Public Offering of its securities prior to the fifth (5th)
anniversary of the Final Closing Date (as defined in the Memorandum), the
Company shall, subject to and in accordance with the terms, conditions,
procedures and requirements set forth herein, cause to be filed and take all
commercially reasonable efforts to effect the registration under the Securities
Act of all Registrable Securities not later than 180 days after the closing of
such Initial Public Offering (or such later date as determined by the terms
hereof); provided, however, that a holder of Registrable Securities may inform
the Company in writing that it wishes to exclude all or a portion of its
Registrable Securities from such registration.
2.1.2. Demand. In the event that by the fifth (5th) anniversary
------
of the Effective Date the Company has not yet completed an Initial Public
Offering, subject to Section 2.1.7, upon the written request (the "Demand") of
the holders of a majority of Registrable Securities that the Company effect the
registration under the Securities Act of all or part of the Registrable
Securities, the Company shall cause to be filed, and shall take all commercially
reasonable actions to effect, as soon as practicable and in any event, subject
to the reasonable cooperation of the Stockholders, within 120 days after the
Demand is received from the Stockholders, the registration under the Securities
Act, of the Registrable Securities which the Company has been so requested to
register by the Stockholders. Whenever the Company shall effect a registration
pursuant to Section 2.1 in connection with an underwritten Public Offering by
the Stockholders of Registrable Securities, holders of securities of the Company
who have "piggyback" registration rights may include all or a portion of such
securities in such registration, offering or sale. If the managing underwriter
of any such Public Offering shall inform the Company by letter of its belief
that the number or type of securities of the Company requested by holders of the
securities of the Company other than the Stockholders to be included in such
registration would materially and adversely affect the underwritten Public
Offering, then the Company shall include in such registration, to the extent of
the number and type of securities which the Company is so advised can be sold in
(or during the time of) such Public Offering, first, all of the Registrable
Securities specified by the Stockholders in the Demand and second, for each
holder of the Company's securities other than the Stockholders, the fraction of
each holder's securities proposed to be registered which is obtained by dividing
(i) the number of the securities of the Company that such holder proposes to
include in such registration by (ii) the total number of securities proposed to
be included in such registration by all holders other than the Stockholders.
Prior to such registration being declared effective, the Stockholders holding a
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<PAGE>
majority of the Registrable Securities requesting such Demand registration may
withdraw such Demand registration, subject to the provisions of Section 2.1.4
below.
2.1.3. Registration Statement Form. Registrations under this Section 2.1
---------------------------
shall be on such appropriate registration form of the Commission as shall be
selected by the Company. The Company shall include in any such registration
statement all information which. in the opinion of counsel to the Company, is
required to be included.
2.1.4. Expenses. The Company shall pay the Registration Expenses in
--------
connection with any registration effected pursuant to this Section 2.1, other
than underwriting discounts and selling commissions relating to the sale or
disposition of Registrable Securities. if the registration pursuant to Section
2.1.2 is withdrawn at the request of a majority of the Stockholders requesting
registration and if such Stockholders elect not to have such registration count
as its Demand registration under Section 2.1.2, the Stockholders shall pay all
the Registration Expenses of such registration, other than the fees and expenses
of counsel to the Company or of any other holder of Common Stock participating
in the registration (a "Participating Holder"). At no time shall the
Stockholders be required to pay the underwriting discounts or selling
commissions relating to the sale or disposition of shares of Common Stock by
other Persons, or the fees and expenses of any Participating Holder's or the
Company's counsel, except as required by Section 2.6.2 below.
2.1.5. Effective Registration Statement. A registration requested
--------------------------------
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, (ii)
if after it has become effective, such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason and has not thereafter become
effective, or (iii) in the case of an underwritten Public Offering, if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not satisfied or waived.
2.1.6. Selection of Underwriters. In connection with each underwritten
-------------------------
Public Offering, (a) the Company shall promptly select the managing underwriter
subject to the approval of the Stockholders (by the holders of a majority of the
Registrable Securities sought to be registered by the Participating Holders),
which approval shall not be unreasonably withheld, delayed or conditioned by the
Stockholders, and (b) if they so desire, the Stockholders shall promptly (by the
holders of a majority of the Registrable Securities sought to be registered by
the Participating Holders in such Demand) select the co-managing underwriter
subject to the approval of the Company (which approval shall not be unreasonably
withheld, delayed or conditioned by the Company).
2.1.7. Limitations on Registration. The Company shall not be required to
---------------------------
file a registration statement pursuant to this Section 2.1 which would become
effective within (i) 180 days, or such shorter period as agreed to by the lead
managing underwriter for the
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<PAGE>
Company's Initial Public Offering, following the effective date of a
registration statement filed by the Company with the Commission pertaining to an
Initial Public Offering for the account of the Company, provided that no other
holder of the Company's securities shall have been permitted to participate in
such Initial Public Offering, or (ii) 120 days following the effective date of a
registration statement (other than a registration statement filed on Form S-4 or
S-8) filed by the Company with the Commission pertaining to any subsequent
Public Offering for the account of the Company or another holder of securities
of the Company if the Stockholders were afforded the opportunity to include all
of its Registrable Securities in such subsequent registration pursuant to
Section 2.2, or (b) if it would violate any restriction or prohibition requested
by any managing underwriter for the Company's Initial Public Offering. In no
event shall the Company be required to effect more than one (1) registration
pursuant to Section 2.1.1 and one (1) registration pursuant to Section 2.1.2.
Notwithstanding the foregoing, if, in the good faith determination of the
Company's Board of Directors, a registration would adversely affect certain
activities of the Company to the material detriment of the Company, then the
Company may at its option direct that such registration be delayed for a period
not in excess of 90 days in the aggregate from the date of the Company's receipt
of the Demand or from the first date upon which the Company is required to
effect the registration contemplated by Section 2.1.1, as applicable (the
"Period of Delay"); provided, however, if there shall occur any such delay in
the registration hereunder, then the holders of the Registrable Securities shall
be entitled, (i) for a period of thirty (30) days after the Period of Delay, to
effect a Demand registration under Section 2.1.2 prior to any other holder of
registration rights (other than SmithKline Beecham Corporation, its affiliates
and their permitted transferees, as to which the rights hereunder shall be pari
----
pasu) or prior to a registered Public Offering by the Company (other than such a
- ----
Public Offering by the Company on Form S-4 or S-8), and (ii) to effect a
registration under Section 2. 1.1 prior to any other holder of registration
rights (other than SmithKline Beecham Corporation, its affiliates and their
permitted transferees, as to which the rights hereunder shall be pari pasu) or
---- ----
prior to a registered Public Offering by the Company (other than such a Public
Offering by the Company on Form S-4 or S-8) .
2.2. Piggyback Registration.
----------------------
2.2.1. Right to Include Registrable Securities. If the Company at any
---------------------------------------
time proposes to register any of its securities under the Securities Act by
registration on Forms S- 1, S-2, S-3) or any successor or similar form(s)
(except registrations on such Forms or similar forms solely for registration of
securities in connection with (i) an employee benefit plan or dividend
reinvestment plan or a merger or consolidation or (ii) debt securities which are
not convertible into Common Stock), whether or not for sale for its own account,
it shall each such time give written notice to the Stockholders of its intention
to do so at least 30 days prior to the anticipated filing date of a registration
statement with respect to such registration with the Commission. Upon the
written request of the Stockholders made as promptly as practicable and in any
event within 10 business days after the receipt of any such notice, which
request shall specify the Registrable Securities intended to be disposed of by
the Stockholders, the Company shall use commercially reasonable efforts to
effect the registration under the Securities Act of all
-5-
<PAGE>
Registrable Securities which the Company has been so requested to register by
the Stockholders; provided, however, that if, at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to the Stockholders and (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
any obligation of the Company to pay the Registration Expenses in connection
therewith), without prejudice, provided, however, that the Stockholders may
request that such registration be effected as a registration under Section 2.1.2
hereof if such registration right was then available to the Stockholders under
Section 2.1.2 hereof) and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities
for the same period as the delay in registering such other securities. The
Company shall pay all Registration Expenses in connection with registration of
Registrable Securities requested pursuant to Section 2.2, other than
underwriting discounts and selling commissions relating to the sale or
disposition of Registrable Securities.
2.2.2. Priority in Piggyback Registrations. Notwithstanding anything in
-----------------------------------
Section 2.2.1 above to the contrary, if the managing underwriter of any
underwritten Public Offering shall inform the Company by letter of its belief
that the number or type of Registrable Securities requested to be included in
such registration would materially and adversely affect such Public Offering,
then the Company shall promptly notify the Stockholders of such fact. If the
managing underwriter does not agree to include all (or such lesser amount as the
Stockholders shall, in their discretion, agree to) of the number of the
Registrable Securities initially requested by the Stockholders to be included in
such registration, then the Company shall include in such registration, to the
extent of the number and type which the Company is so advised can be sold in (or
during the time of) such Public Offering first, all securities proposed by the
Company to be sold for its own account, if the Company initiated such
registration, or by the holder of securities who initiated such demand
registration, if any, second, for each of the Stockholders, Spencer Trask
Securities Incorporated, SmithKline Beecham Corporation (and its affiliates),
Exigent Partners, L.P., and those individuals who were granted registration
rights pursuant to the same agreement as Exigent Partners, L.P. (and the
respective successors and assigns of any of the foregoing), other than the
holder of the securities who initiated such demand registration, if any, the
fraction of such holder's securities proposed to be registered which is obtained
by dividing (i) the number of the securities of the Company that such holder
proposes to include in such registration by (ii) the total number of securities
proposed to be sold in such Public Offering by such holders, and third, for each
remaining holder of the Company's securities, other than the holder of the
securities who initiated such demand registration and the holders listed above,
if any, the fraction of such holder's securities proposed to be registered which
is obtained by dividing (i) the number of the securities of the Company that
such holder proposes to include in such registration by (ii) the total number of
securities proposed to be sold in such Public Offering by such holders.
-6-
<PAGE>
2.3. Registration Procedures.
-----------------------
2.3.1. In connection with the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2, the
Company shall as promptly as practicable:
(i) prepare and file with the Commission the requisite
registration statement to effect such registration and thereafter use
commercially reasonable efforts to cause such registration statement to become
and remain effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such registration statement for 180
days or such shorter period as may be required for the disposition of all of
such Registrable Securities by the underwriters;
(iii) furnish to the Stockholders such number of conformed
copies of such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule
424 under the Securities Act, in conformity with the requirements of the
Securities Act, and such number of copies of such other documents as the
Stockholders may reasonably request;
(iv) use commercially reasonable efforts (x) to register or
qualify all Registrable Securities and other securities covered by such
registration statement under such other securities or Blue Sky laws of such
States of the United States of America where an exemption is not available and
as the Stockholders shall reasonably request, (y) to keep such registration or
qualification in effect for so long as such registration statement remains in
effect, and (z) to take any other action which may reasonably be necessary or
advisable to enable the Stockholders to consummate the disposition in such
jurisdictions of the Registrable Securities to be sold by the Stockholders,
except that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign Company in any jurisdiction wherein it
would not, but for the requirements of this paragraph (iv), be obligated to be
so qualified or to consent to general service of process in any such
jurisdiction;
(v) use commercially reasonable efforts to cause all
Registrable Securities covered by such registration statement to be registered
with or approved by such other federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to the Company and
counsel to the Stockholders to consummate the disposition of such Registrable
Securities in accordance with their intended method of disposition;
-7-
<PAGE>
(vi) furnish to the Stockholders, (x) an opinion of outside
counsel for the Company, and (y) a copy of a "comfort" letter addressed to the
Company and/or any managing underwriter signed by the certified independent
public accountants who have certified the Company's financial statements
included or incorporated by reference in such registration statement, each
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountant's comfort letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountant's comfort letters delivered to the underwriters in
underwritten Public Offerings of securities (and dated the dates such opinions
and comfort letters are customarily dated);
(vii) notify the Stockholders when a prospectus relating thereto
is required to be delivered under the Securities Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, in the light
of the circumstances under which they were made, and at the request of the
Stockholders to use its best efforts to promptly prepare and furnish to the
Stockholders such number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security-holders, as soon as reasonably practicable, an earnings statement
meeting the requirements of Section 11(a) of the Securities Act, which the
Company shall be entitled to satisfy by complying with the requirements of Rule
158 promulgated thereunder, and promptly famish a copy of the same to the
Stockholders;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement; and
(x) use commercially reasonable efforts to list all Registrable
Securities covered by such registration statement on any national securities
exchange or over-the-counter market, if any, on which Registrable Securities of
the same class, and if applicable, series, covered by such registration
statement are then listed.
The Stockholders agree that upon receipt of any notice from the Company of
the happening of an event of the kind described in Section 2.3.1 (vii), the
Stockholders shall forthwith discontinue its disposition of Registrable
Securities pursuant to the registration
-8-
<PAGE>
statement relating to such Registrable Securities until the Stockholders'
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 2.3.1(vii).
2.4. Underwritten Offerings.
----------------------
2.4.1. Requested Underwritten Offerings. If requested by the
--------------------------------
underwriters for any underwritten Public Offering by the Stockholders pursuant
to a registration requested under Section 2.1, the Company shall enter into an
underwriting agreement with such underwriters for such Public Offering, such
agreement to be reasonably satisfactory in substance and form to the Company,
the Stockholders and the underwriters, and to contain such representations and
warranties by the Company and the Stockholders and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
indemnities to the effect and to the extent provided in Section 2.6 or as are
generally prevailing in agreements of that type. The Stockholders shall
cooperate with the Company in the negotiation of the underwriting agreement and
shall give consideration to the reasonable suggestions of the Company regarding
the form and substance thereof. The Stockholders shall be a party to such
underwriting agreement. The Stockholders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding the
Stockholders, the Stockholders' Registrable Securities, the Stockholders'
intended method of distribution and any other representations or warranties
required by law or customarily given by selling shareholders in an Underwritten
Public Offering or as reasonably required by the managing underwriter of the
Public Offering of Registrable Securities.
2.4.2. Piggyback Underwritten Offerings. If the Company proposes to
--------------------------------
Section 2.2 and such securities are to be distributed by or through one or more
underwriters, subject to the other provisions of Section 2.2.2 the Company
shall, if requested by the Stockholders such underwriters to include all the
Registrable Securities to be offered and sold by the Stockholders among the
securities of the Company to be distributed by such underwriters. The
Stockholders shall become a party to the underwriting agreement negotiated
between the Company and such underwriters. The Stockholders shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding the Stockholders, the Stockholders' Registrable Securities and the
Stockholders' intended method of distribution or any other representations or
warranties required by law or customarily given by selling shareholders in an
underwritten Public Offering or as reasonably required by the managing
underwriter of the Public Offering of Registrable Securities.
2.4.3. Holdback Agreements.
-------------------
(i) In connection with the Initial Public Offering or any
registration of Registrable Securities in connection with an underwritten Public
Offering, the Stockholders agree if required by the underwriter or underwriters
not to effect any public sale or
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<PAGE>
distribution, including any sale pursuant to Rule 144 under the Securities
Act, of any Registrable Securities, and not to effect any such public sale or
distribution of any other equity security of the Company or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (in each case, other than as part of such underwritten Public Offering)
during the 15 days prior to, and during the 180-day period, or such shorter
period set forth in the underwriting agreement with respect to such Public
Offering as the managing underwriter of such Public Offering shall reasonably
require, beginning on, the effective date of such registration statement.
(ii) If any registration of Registrable Securities shall be in
connection with an underwritten Public Offering, the Company agrees (x) if
required by the underwriter or underwriters, not to effect any public sale or
distribution of any of its equity securities or of any security convertible into
or exchangeable or exercisable for any equity security of the Company (other
than in connection with any employee stock option or other benefit plan which
has been duly adopted by the Company and which provides for the distribution to
participants in the plan of equity securities of the Company or securities
convertible or exchangeable or exercisable for equity securities of the Company,
or in connection with a merger or acquisition approved by the Board of Directors
of the Company) during the 180-day period, or such shorter period as the
managing underwriter of such Public Offering shall reasonably require, beginning
on the effective date of such registration statement (except as part of such
registration) and (y) that any agreement entered into after the date of this
Agreement pursuant to which the Company issues or agrees to issue any privately
placed equity securities shall contain a provision under which holders of such
securities agree that, if required by the underwriter or underwriters, they will
not effect any public sale or distribution of any such securities during the
period referred to in the foregoing clause (x), including any sale pursuant to
Rule 144 under the Securities Act (except as part of such registration, if
permitted), if such holder is participating in the Public Offering pursuant to
such registration.
2.5. Preparation: Reasonable Investigation. In connection with the
--------------------------------------
preparation and filing of any registration statement under the Securities Act in
which the Stockholders are or may be a selling shareholder, the Company shall
give the Stockholders not less than 30 days prior written notice of the
preparation of such registration statement and give the Stockholders and its
counsel and accountants the opportunity to participate, at the Stockholders'
expense, in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto @provided that the Stockholders shall furnish the Company
with comments on any such amendment or supplement as promptly as the Company
shall reasonably require), and give each of them such access to its books and
records, such opportunities to discuss the business of the Company with officers
and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of the Stockholders' counsel,
to conduct a reasonable investigation within the meaning of the Securities Act.
Any expenses incurred by the Stockholders in connection with
-10-
<PAGE>
any such investigation shall be borne by the Stockholders other than the
reasonable fees and disbursements of Selling Stockholder Counsel incurred in
connection with such investigation.
2.6. Indemnification.
---------------
2.6.1. Indemnification by the Company. In the event of any
------------------------------
registration of any securities of the Company under the Securities Act in which
the Stockholders are selling shareholders, the Company shall, and hereby does,
indemnify and hold harmless, in the case of any registration statement filed
pursuant to Sections 2.1 or 2.2, the Participating Holders, its directors,
officers, employees, agents and affiliates and, to the extent required by any
underwriting agreement entered into by the Company, each other Person who
participates as an underwriter in the Public Offering or sale of such securities
and each other Person who controls a Participating Holder or any such
underwriter within the meaning of the Securities Act, insofar as losses, claims,
damages, or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon (a) any untrue
statement or alleged untrue statement of any fact contained in any registration
statement under which such securities were registered under the Securities Act,
any preliminary prospectus, final prospectus, or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a fact required to be stated therein or necessary to
make the statements therein in light of the circumstances in which thy were made
not misleading, (b) any violation by the Company, its directors, officers,
employees or agents of this Agreement or any law applicable to and in connection
with such registration, and the Company shall reimburse the Stockholders and
each such director, officer, agent or affiliate and, to the extent required by
an underwriting agreement entered into by the Company, any underwriter and
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding described in clauses (a) and (b); provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by the
Participating Holders, specifically stating that it is for use in the
preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Participating
Holders or any such director, officer, agent or affiliate or controlling Person
and shall survive the transfer of such securities by the Participating Holders.
2.6.2. Indemnification by the Stockholders. If any Registrable
-----------------------------------
Securities are included in any registration statement, the Participating Holders
shall indemnify and hold harmless (in the same manner and to the same extent as
set forth in Section 2.6.1 above) the Company, each director of the Company,
each officer of the Company and each employee of the Company and, to the extent
required by any underwriting agreement entered into by the Participating
Holders, each other Person who participates as an underwriter in the Public
-11-
<PAGE>
Offering or sale of such securities and each other Person who controls any such
underwriter within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by the Participating Holders
specifically stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement; provided, however, in no event shall the liability of
any Stockholder under this Section 2.6.2. exceed the proceeds obtained by the
sale of such Stockholder's Shares in any such registration.
2.6.3. Notice of Claims, Etc. Promptly after receipt, by an
---------------------
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 2.6,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party, immediately give written notice to the latter of
the commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 2.6, except to the extent that the indemnifying party is materially
prejudiced by such failure. The indemnified party shall be entitled to receive
the indemnification payments described in Section 2.6.6 after providing such
written notice to the indemnifying party. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that the indemnifying
parties may agree, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable out of pocket costs related to the indemnified party's cooperation
with the indemnifying party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties arises in respect of such claim after the assumption of the defense
thereof. No indemnifying party shall be liable for any settlement of any action
or proceeding effected without its written consent, which shall not be
unreasonably withheld, delayed or conditioned. Consent of the indemnified party
shall be required for the entry of any judgment or to enter into a settlement
only when such judgment or settlement does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect such claim or litigation.
2.6.4. Contribution. If the indemnification provided for in this
------------
Section 2.6 shall for any reason be held by a court to be unavailable to an
indemnified party under Section 2.6.1 or 2.6.2 hereof in respect of any loss,
claim, damage or liability, or any action in
-12-
<PAGE>
respect thereof, then, in lieu of the amount paid or payable under Sections
2.6.1 or 2.6.2 hereof, the indemnified party and the indemnifying party under
Sections 2.6.1 or 2.6.2 hereof shall contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating the same), (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the Company on one hand
and the Stockholders on the other or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect the relative fault of the Company on one hand and the
Stockholders on the other that resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations. No Person guilty of fraudulent misrepresentation (within the
meaning of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. In addition, no Person
shall be obligated to contribute hereunder any amounts in payment for' any
settlement of any action or claim, effected without such Person's written
consent, which consent shall not be unreasonably withheld; provided, however, in
no event shall the liability of any Stockholder under this Section 2.6.4. exceed
the proceeds obtained by the sale of such Stockholder's Shares in any such
registration.
2.6.5. Other Indemnification. Indemnification and contribution
---------------------
similar to that specified in the preceding paragraphs of this Section 2.6 (with
appropriate modifications) shall be given by the Company and the Participating
Holders with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority other than the Securities Act.
3. Rule 144. With a view to making available the benefits of certain
--------
rules and regulations of the Commission that may permit the sale of the
Registrable Securities to the public without registration after an initial
Public Offering, the Company agrees to:
(a) provide information and such other assistance requested by
the Stockholders as is customarily provided by issuers in connection with sales
of their common stock by directors or affiliates under Rule 144, promulgated
under the Securities Act;
(b) make and keep public infoRMation available, as those terms
are understood and defined in Rule 144 promulgated under the Securities Act at
all times;
(c) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
-13-
<PAGE>
(d) deliver a written statement as to whether it has complied
with such requirements of this Section, to the Stockholders upon the
Stockholders' request.
4. Remedies.
--------
(a) If the Company fails for any reason (other than reasons relating
to acts or omissions of any Shareholder) to register a Stockholder's Registrable
Securities subject and pursuant to the terms and conditions of this Agreement,
then, at the election of the Company, the Company shall (i) to the extent of
funds legally available therefor ("Available Funds"), repurchase all of the
Registrable Securities owned by all such Stockholders for an amount per share
equal to the sum of the average of the appraised values of the Common Stock
(which shall not include any discount for minority interest) calculated by each
of two independent appraisal firms, one of which shall be selected by the
Spencer Trask Securities Incorporated and the other of which shall be selected
by the Company (the "Fair Market Value"), or (ii) provide such Stockholders with
the rights set forth in subsection (b) below. If the Company elects to purchase
Registrable Securities pursuant to clause (i) above and the aggregate Fair
Market Value of the Registrable Securities to e repurchased by the Company is
greater than the amount of Available Funds, then the number of Registrable
Securities that the Company shall so repurchase from each such Stockholder shall
equal the product obtained by multiplying the Available Funds by a fraction, the
numerator of which is the number of Registrable Securities owned by such
Stockholder and the denominator of which is the total number of Registrable
Securities owned by such Stockholders.
(b) If the Company elects not to repurchase all of the Registrable
Securities which may be purchased pursuant to subsection (a) above, then any
Stockholders who thereafter continue to own shares of Common Stock and whose
Registrable Securities have not been registered shall have the right to nominate
a majority of the Board of Directors of the Company (including the right to
remove directors as necessary to create vacancies for the election of such
nominees), and Exigent Partners, L.P. (the "Partnership"), W. Vickery Stoughton
and Thomas H. Grove (the "Management Stockholders") hereby agree to vote their
shares of Common Stock, and the Company will cause any future purchaser of 5% or
more of the Common Stock of the Company to vote such shares of Common Stock, in
favor of the directors nominated by such Stockholders at any meeting of
stockholders or pursuant to any written consent in which the election of
directors is submitted to the vote of the Company's stockholders (and to remove
directors as necessary to create vacancies therefor). The Company shall take all
steps necessary to cause a meeting of the Company's Stockholders for the purpose
of effecting the foregoing. The obligations of the Partnership and the
Management Stockholders under this Section 5(b) shall terminate upon the earlier
of (i) the redemption of each such Stockholder's Registrable Securities or (ii)
the registration of each such stockholder's Registrable Securities. Upon the
termination of all the Stockholder's rights set forth in this subsection (b),
all members of the Board of Directors of the Company who were nominated and
elected pursuant to the provisions of this subsection (b) shall, immediately
resign from the Board of Directors and the Company may remove any such
directors. The remaining members of the Board of Directors of the
-14-
<PAGE>
Company are hereby authorized to fill any vacancies created as a result of any
such resignation or removal.
(c) For purposes of this Section 5, any Stockholder's Registrable
Securities shall be deemed to be so registered if such Stockholder elects not to
include his Registrable Securities in any registration statement in which such
Registrable Securities are eligible to be included pursuant to this Agreement.
(d) If Available Funds are insufficient to allow the Company to
repurchase all such Registrable Securities, each of the Management Stockholders,
the Partnership and the Investors shall perform such acts, execute such
instruments, and vote his or its shares in such manner as may be necessary to
increase such surplus to an amount sufficient to authorize such purchase,
including but not limited to the following: (i) a recapitalization of the
Company so as to reduce its stated capital and increase its surplus and (ii) a
reappraisal of the Company's assets (including goodwill, if any) to reflect the
market value of such assets, in the event such value exceeds the book value
thereof.
(e) The rights of the Stockholders pursuant to this Section 5 shall
be in addition to all other rights and remedies that such Stockholders may have
hereunder or at law or otherwise.
5. Modification: Waivers. This Agreement may be modified or amended only
----------------------
with the written consent of each party hereto. No party shall be released from
its obligations hereunder without the written consent of the Company and the
holders of at least a majority of the Registrable Securities. The observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) by the party entitled to
enforce such term but any such waiver shall be effective only if in a writing
signed by the party against which such waiver is to be asserted. Except as
otherwise specifically provided herein, no delay on the part of any party hereto
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any right, power or privilege hereunder.
6. Entire Agreement. This Agreement represents the entire understanding
----------------
and agreement between the parties hereto with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, between the par-ties with respect to the subject matter
hereof.
7. Severability. If any provision of this Agreement, or the application
------------
of such provision to any Person or circumstance, shall be held invalid, the
remainder of this Agreement or the application of such provision to other
Persons or circumstances, to the extent permitted by
-15-
<PAGE>
law, shall not be affected thereby; provided, that the parties shall negotiate
in good faith with respect to an equitable modification of the provision or
application thereof held to be invalid.
8. Notices.
-------
(a) Any notice or communication to any party hereto shall be duly
given if in writing and delivered in person, receipt requested, or courier
guaranteeing next day delivery, or facsimile (with written confirmation of
receipt) to such other party's address or facsimile number facsimile set forth
below.
If to EXIGENT DIAGNOSTICS, INC. or a MANAGEMENT STOCKHOLDER:
7 Hartford Lane
Radnor, Pennsylvania 19087
Attention: W. Vickery Stoughton
Facsimile: 610-270-6150
with a copy to:
James D. Epstein, Esquire
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Philadelphia, PA 19103-2799
Facsimile: 215-981-4750
If to the Partnership:
c/o Spencer Trask Securities Incorporated
535 Madison Avenue - 18th Floor
New York, New York 10022
Attention: Mr. Kevin Kimberlin
Facsimile: 212-751-3483
with a copy to:
John D. Vaughan, Esquire
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
Facsimile: 212-213-1199
-16-
<PAGE>
If to a Stockholder, to such address set forth on the Stockholder's
signature page hereto, or if to an assignee or successor of a Stockholder, to
such address appearing in the records of the Company.
(b) All notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered or telecopied
(with written confirmation of receipt); and the next business day after timely
delivery to the courier, if sent by courier guaranteeing next day delivery.
9. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and shall be binding upon the Company and the Stockholders and their respective
successors and permitted assigns. Each Stockholder may assign its rights under
this Agreement to any Person to whom the Stockholder transfers any of the
Registrable Securities or any interest therein without the necessity of
obtaining any consent to such assignment, provided that such Person becomes a
party to that certain stockholders agreement, by and among the Company, the
Stockholders and certain other holders of the Common Stock. In the event that a
Stockholder assigns its rights to a holder or holders of only a portion of the
Registrable Securities, then all references to the Stockholder herein shall also
be deemed to refer to such other holder or holders, but in such event the
Stockholder shall have the sole right to make all decisions by and give notices
for such holder or holders under this Agreement; provided, that if the
Stockholder no longer owns any Registrable Securities, then all decisions and
notices hereunder shall be made by the holders of not less than a majority of
the Registrable Securities outstanding and all other holders of Registrable
Securities shall be bound by any such decision.
10. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which for all purposes shall be deemed to be an original
and all of which together shall constitute the same agreement.
11. Headings. The Section headings in this Agreement are for convenience
--------
of reference only, and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
12. Construction. This Agreement shall be governed, construed and
------------
enforced in accordance with the laws of the State of New York without regard to
its principles of conflict of laws.
13. No Inconsistent Agreements. The Company has not previously, and shall
--------------------------
not hereafter, enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Stockholders in this Agreement.
14. Recapitalization, Etc. In the event that any capital stock or other
---------------------
securities are issued in respect of, in exchange for, or in substitution of, any
Registrable Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or
-17-
<PAGE>
complete liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Registrable Securities or any other
similar change in the Company's capital structure, appropriate adjustments shall
be made in this Agreement so as to fairly and equitably preserve, as far as
practicable, the original rights and obligations of the parties hereto under
this Agreement.
15. Specific Performance. The parties hereto agree that the Registrable
--------------------
Securities of the Company cannot be purchased or sold in the open market and
that, for these reasons, among others, the holder or holders of the Registrable
Securities will be irreparably damaged in the event that this Agreement is not
specifically enforceable. The rights granted in this Section 16 shall be
cumulative and not exclusive, and shall be in addition to any and all other
rights which the parties hereto may have hereunder, at law or in equity. The
Company and the Stockholders consent to the jurisdiction of the federal courts
in the City of New York in any suit, action or proceeding brought pursuant to
this Section 16, waives any objection it may have to the laying of venue in any
such suit, action or proceeding in any of such court, and agrees that service of
any court paper may be made in such manner as may be provided under applicable
laws or court rules governing service of process.
16. Term. This Agreement shall continue in full force and effect with
----
respect to any Stockholder for nine (9) years from the Final Closing (as defined
in the Memorandum), or the first date on which the such Stockholder and their
affiliates may sell all of the Securities held by them in a ninety (90) day
period pursuant to Rule 144 under the Securities Act.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first above written and delivered by their respective duly
authorized officers.
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. Vickery Stoughton
---------------------------------
W. Vickery Stoughton
Chairman and Chief Executive Officer
As to Section 5 only:
EXIGENT PARTNERS, L.P.
By: /s/ Kevin Kimberlin
---------------------------------
Kevin Kimberlin
General Partner
/s/ W. Vickey Stoughton
------------------------------------
W. Vickery Stoughton
/s/ Thomas H. Grove
------------------------------------
Thomas H. Grove
-19-
<PAGE>
STOCKHOLDER SIGNATURE PAGE
TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
_________ __, 199_.
If the Holder is an INDIVIDUAL:
________________________________________________
Print Name
________________________________________________
Signature
________________________________________________
________________________________________________
Print Address
If the Holder is a PARTNERSHIP,
CORPORATION or a TRUST:
_______________________________________________
Name of Partnership, Corporation or Trust
By:_____________________________________________
Signature
Print Name:________________________________
Print Title:_______________________________
________________________________________________
________________________________________________
Print Address
Accepted and agreed to this
____ day of _______________, 199_
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. Vickery Stoughton
--------------------------------------------
W. Vickery Stoughton
Chairman & CEO
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<PAGE>
EXHIBIT 10.6
================================================================================
STOCKHOLDERS AGREEMENT
among
EXIGENT DIAGNOSTICS, INC.,
SMITHKLINE BEECHAM CORPORATION,
SMITHKLINE BEECHAM DIAGNOSTIC SYSTEMS CO.,
SPENCER TRASK SECURITIES INCORPORATED,
EXIGENT PARTNERS, L.P.,
W. VICKERY STOUGHTON,
THOMAS H. GROVE,
KENNETH B. ASARCH,
WILLIAM S. KNIGHT,
DONALD S. WONG,
ASHOK K. SAWHNEY,
PHILIP B. SMITH,
AND
EACH INVESTOR SIGNATORY HERETO
================================================================================
Dated as of December 4, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Sections Page
- -------- ----
<S> <C>
1. Certain Defined Terms.................................. 3
2. Limitations on Transfers............................... 7
3. Consultation with and Consent of Spencer Trask in
Connection with Future Issuances of Securities........ 8
4. Preemptive Rights...................................... 8
5. Stock Splits, Etc...................................... 11
6. Registration Rights.................................... 11
7. Financial Reports and Information...................... 11
8. Corporation Governance Provisions...................... 12
9. Specific Performance................................... 14
10. Legend................................................. 14
11. Notices................................................ 14
12. Termination............................................ 17
13. Entire Agreement; Effectiveness and Amendments......... 17
14. Expenses............................................... 17
15. Governing Law; Successors and Assigns.................. 17
16. Waivers................................................ 18
17. Severability........................................... 18
18. Captions............................................... 18
19. Counterparts........................................... 18
20. Attorney's Fees........................................ 18
21. Parties Benefitted..................................... 18
22. Successors and Assigns................................. 18
</TABLE>
<PAGE>
STOCKHOLDERS AGREEMENT
----------------------
THIS STOCKHOLDERS AGREEMENT (the "Agreement") is made as of this 4th
day of December, 1996, by and among
. EXIGENT DIAGNOSTICS, INC., a Delaware corporation (the
"Corporation"),
. SMITHKLINE BEECHAM CORPORATION, a Pennsylvania corporation
("SmithKline"),
. SMITHKLINE BEECHAM DIAGNOSTIC SYSTEMS CO., a Pennsylvania
limited liability company ("SBD"),
. SPENCER TRASK SECURITIES INCORPORATED, a Delaware Corporation
("Spencer Trask"),
. EXIGENT PARTNERS, L.P., a Delaware limited partnership ("Exigent
Partners"),
. W. VICKERY STOUGHTON ("Stoughton"),
. THOMAS H. GROVE ("Grove"),
. KENNETH B. ASARCH ("Asarch"),
. WILLIAM S. KNIGHT ("Knight"),
. DONALD S. WONG ("Wong"),
. ASHOK K. SAWHNEY ("Sawhney"),
. PHILIP B. SMITH ("Smith"), and
. EACH INVESTOR WHO SHALL HEREAFTER BECOME A SIGNATORY HERETO
(individually, an "Investor" and collectively, the "Investors").
WHEREAS, Stoughton and Grove formed the Corporation on July 10, 1996
and as a result of the incorporation were issued that number of shares of common
capital stock of the Corporation, $.01 par value per share ("Common Stock"), as
is set forth opposite their names on Exhibit A hereto;
---------
<PAGE>
WHEREAS, on July 24, 1996, the Corporation entered into a letter of
intent (the "Letter of Intent") with SmithKline relating to the Corporation's
purchase from SmithKline of substantially all of the assets and assumption of
liabilities relating to the business then being operated by SmithKline in
connection with the research and development of point of care diagnostic
equipment (as more particularly described in the Private Placement Memorandum
(hereinafter defined), the "POC Business");
WHEREAS, Asarch, Knight, Wong, Sawhney (collectively, the "Employee
Stockholders", and together with Stoughton and Grove, the "Management
Stockholders") and Smith became Stockholders of the Corporation in October,
1996, subject to certain forfeiture restrictions pertaining to their stock and,
in the case of Smith, rights to additional stock, as more fully set forth in the
letter agreements entered into between each of them and the Corporation attached
hereto as Exhibit B (the "Letter Agreements");
---------
WHEREAS, on or prior to the date hereof, pursuant to an Asset Purchase
Agreement (the "Purchase Agreement") by and among the Corporation, SmithKline
Beecham Clinical Laboratories, Inc. and SBD, the Corporation has purchased the
assets and assumed the liabilities of the POC Business from SBD and in
consideration therefor has issued to SBD that number of shares of Common Stock
as is set forth opposite SBD's name on Exhibit A hereto, such number comprising
---------
five percent (5%) of the total issued and outstanding shares of Common Stock as
of the date hereof;
WHEREAS, pursuant to the Purchase Agreement, the Company may from time
to time issue to SBD and its Affiliates (defined below) additional shares of
Common Stock to prevent the dilution of their equity interests in the Company
(the "Antidilution Shares");
WHEREAS, on or prior to the date hereof, Exigent Partners has extended
or caused a third party to extend to the Corporation a working capital loan in
the original principal amount of One Million Dollars ($1,000,000) and in
consideration therefor has received the shares of Common Stock set forth
opposite its name on Exhibit A hereto;
---------
WHEREAS, the Corporation has engaged Spencer Trask to conduct a
private offering (the "Private Offering") to the Investors of shares of Common
Stock equal to up to 50% of the total issued and outstanding shares of Common
Stock (plus certain over-subscription shares) of Common Stock (all as more
particularly described in the private placement memorandum ("Private Placement
Memorandum") prepared by the Corporation in connection with the Private
Offering), the first closing thereunder to occur at such time as a minimum of
Four Million Dollars ($4,000,000) has been raised from the Investors in such
offering, and subsequent closings to occur as additional funds up to an
aggregate (including the initial closing's funds) of Seven Million Five Hundred
Thousand Dollars ($7,500,000) are raised from the Investors (all such amounts
being before commissions and expenses);
-2-
<PAGE>
WHEREAS, the Corporation will issue to Spencer Trask warrants to
purchase a number of shares of Common Stock equal to twenty percent (20%) of
that number of shares of Common Stock sold in the Private Offering;
WHEREAS, if the minimum amount of funds, Four Million Dollars
($4,000,000), is raised in the Private Offering, the Investors will own thirty-
five and 81/100 percent (35.81%) of the total issued and outstanding Common
Stock; if the maximum amount, Seven Million Five Hundred Thousand Dollars
($7,500,000), is raised, the Investors will own fifty percent (50%) of the total
issued and outstanding Common Stock of the Corporation (the shares of Common
Stock representing such percentages being the "Private Offering Stock");
WHEREAS, pursuant to the Letter of Intent, SmithKline made available
to the Corporation a One Million Dollar ($1,000,000) loan, secured by all of the
present and future assets of the Corporation, the outstanding principal amount
of which loan is convertible, at the election of SmithKline or as otherwise
required by the loan documents, into up to two percent (2%) of the Corporation's
issued and outstanding Common Stock upon the earlier of the first closing of the
Private Offering or December 31, 1996 (the "Conversion Shares");
WHEREAS, the Corporation and its stockholders desire to set forth
certain rights and obligations which each will have to the other with respect to
their stock interest in the Corporation, whether now owned or hereafter
acquired; and desire to cause each new stockholder to enter into a counterpart
to and to become bound by the terms and conditions of this Agreement at such
time as they become stockholders in the Corporation.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and undertakings set forth below, the parties hereto,
intending to be legally bound hereby, agree with each other as follows:
1. Certain Defined Terms. Capitalized terms used in this Agreement
---------------------
have the meanings set forth in this Section 1, or are defined in the provisions
of this Agreement identified in this Section 1.
(a) "Affiliate" of a Person shall mean any Person which,
---------
directly or indirectly, controls, is controlled by, is under common control
with, or under a common management agreement with, such Person. For purposes
hereof, (i) the partners of Exigent Partners shall be deemed to be Affiliates of
Exigent Partners (but only to the extent of their pro rata interest therein),
(ii) other members of the consolidated group of corporations of which SmithKline
is a member, as well as SBD and SmithKline Beecham Clinical Laboratories, Inc.,
shall be considered to be Affiliates of SmithKline and SBD, and (iii) the
officers and directors of the Corporation shall be deemed to be Affiliates of
the Corporation for so long as they hold such position.
-3-
<PAGE>
(b) "Agreement" means this Stockholders Agreement, as the same may be
---------
amended from time to time in accordance herewith.
(c) "Bona Fide Offer" shall mean a bona fide written offer from any
---------------
Person to purchase any Securities owned by a Stockholder.
(d) "Common Equity Percentage" shall mean, as to any Stockholder, the
------------------------
percentage that (i) the outstanding shares of Common Stock then owned by such
Stockholder and any shares of Common Stock issuable upon exercise of any
warrants (including as warrants for this purpose the right to receive
Antidilution Shares) or Options, in each case which are fully vested and then
owned by such Stockholder, is of (ii) the aggregate outstanding number of shares
of Common Stock then owned by Stockholders, plus all shares of Common Stock
issuable upon exercise of any warrants (including as warrants for this purpose
the right to receive Antidilution Shares) or Options, in each case which are
fully vested and then owned by such Stockholders.
(e) "Common Shares" shall mean issued and outstanding shares of Common
-------------
Stock.
(f) "Counterpart" shall mean a counterpart to this Agreement in the
-----------
form of Exhibit C hereto, pursuant to the execution of which a Person shall
---------
become bound by all of the terms and conditions to this Agreement.
(g) "Excluded Securities" shall mean, collectively:
-------------------
(i) the Warrant Shares and shares issued in connection with the
exercise of Options;
(ii) Stock to be issued as a stock dividend;
(iii) any Antidilution Shares or Conversion Shares
issued to SmithKline or its Affiliates;
(iv) shares of any class of the Corporation's Stock to be issued
upon any subdivision, combination, stock split or reverse
stock split of all the outstanding shares of such class of
Stock of the Corporation;
(v) any securities to be issued by the Corporation pursuant to
the acquisition by the Corporation of any Person by means
of merger, stock purchase, reorganization, purchase of
substantially all the assets or otherwise in which the
-4-
<PAGE>
Corporation or its stockholders of record immediately
prior to the effective date of such transaction, directly
or indirectly, own at least a majority of the voting power
of the acquired or resulting entity after such
transaction; provided, that such recipient(s) of shares of
--------
Stock execute(s) a Counterpart and agree(s) to be bound by
the terms and conditions hereof; and provided, further,
-------- -------
that such acquisition has been approved by a majority of
the Independent Directors; and
(vi) any securities to be issued pursuant to a Public Offering;
(vii) the Private Offering Stock; and
(viii) any Securities to be issued to one or more investors for
the purpose of raising additional capital for the benefit
of the Corporation and such issuance is approved by a
majority of the Independent Directors (the "Exempted
Securities").
(h) "Options" shall mean incentive stock or non-qualified options
-------
granted in accordance with the Purchase Agreement, pursuant to the Stock Option
Plan as described in the Private Placement Memorandum.
(i) "Person" shall mean an individual, a sole proprietorship, a
------
corporation, a partnership, limited liability company, limited liability
partnership, a joint venture, an association, a trust, or any other entity or
organization, including a government or a political subdivision, agency or
instrumentality thereof.
(j) "Public Offering" shall mean the sale of shares of Common Stock
---------------
in a registered underwritten public offering.
(k) "Securities" shall mean all shares of capital stock, options,
----------
warrants, notes, bonds or other equity or debt securities offered or sold by the
Corporation from time to time on or after the date hereof.
(l) "Stock" shall mean any Common Shares or any other shares of any
-----
other class of capital stock that the Corporation may from time to time have
outstanding.
(m) "Stockholder" shall mean any Person who is a party to this
-----------
Agreement, provided such person holds one or more shares of Stock.
-5-
<PAGE>
(n) "Stock Option Plan" shall mean the Stock Option Plan adopted by
-----------------
the Corporation on or after the date hereof providing for the issuance of the
shares of Common Stock to certain employees of the Corporation.
(o) "Transfer" shall mean any transfer of Stock, whether by sale,
--------
assignment, gift, will, devise, bequest, operation of the laws of descent and
distribution, or in trust, pledge, hypothecation, mortgage, encumbrance or other
disposition. The verb to "Transfer" shall mean to sell, assign, give, transfer
(including by gift, will, devise, bequest, or operation of laws of descent and
distribution, or in trust), pledge, hypothecate, mortgage, encumber or dispose
of.
(p) "Warrant Shares" shall mean the warrants and shares of Stock
--------------
issuable on exercise thereof to be issued to Spencer Trask at each closing of
the Private Offering.
Other capitalized terms used in this Agreement have the definitions set
forth in the following sections:
Capitalized Term Section
---------------- -------
5-Day Period 4(d)
20-Day Period 4(b)
90-Day Period 4(f)
Accepting Stockholders 4(d)
Additional Directors 8(b)
Antidilution Shares Preamble
Board 2(d)
Conversion Shares Preamble
Director 8(b)
Employee Stockholders Preamble
Fair Market Value 2(f)
Final Closing 3(a)
First Closing 8(b)
Holdings Preamble
Independent Directors 8(b)
Investor Registration Agreement 8(b)
Management Directors 8(b)
Management Stockholders Preamble
Notice of Acceptance 4(c)
Notice of Refused Securities 4(c)
Offer 3(b)
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<PAGE>
Outside Offer 4(f)
Purchase Agreement Preamble
Preemptive Offer 4(a)
Private Offering Preamble
Private Offering Stock Preamble
Private Placement Memorandum Preamble
Refused Securities 4(c)
SKB Director 8(b)
Spencer Trask Directors 8(b)
Strategic/Venture Capital Securities 4(a)
Voting Securities 8(b)
2. Limitations on Transfers.
------------------------
(a) Each Stockholder hereby agrees that it shall Transfer all or
any of his or its Stock only if such Transferee shall, as a condition to such
Transfer, execute a Counterpart and thereafter the Transferee shall be treated
as a Stockholder having the obligations of the Stockholder from whom Transferred
for all purposes under this Agreement. No Transfer shall be effective and the
Corporation shall not, and shall not be compelled to, recognize any Transfer or
record any Transfer on their books made unless such Transfer is effected in
accordance with the terms of this Agreement, or issue any certificate
representing any Stock to any Person who has received such Stock in a Transfer
unless such Transfer is effected in accordance with the terms of this Agreement.
(b) Any Stockholder shall be permitted to pledge his Stock to a
lender to the pledging Stockholder provided that, in the case of Stockholders
other than Investors, (i) prior to completing the pledge, the lender undertakes
in a writing (in form and substance acceptable to the lender and the
Corporation) delivered to the Corporation that (A) such lender is prohibited
from selling or syndicating all, or any portion of the debt obligation secured
by the pledge, and (B) in the event of any default on the debt secured by such
pledge, all or any portion of the pledged Stock (as determined by the
Corporation) may be purchased by the Corporation for a price equal to the lower
of (1) the Fair Market Value (as determined under procedures comparable to those
set forth in Section 2(c) hereof with decisions as to choice of the valuation
determiner being made by the Corporation and the lender) of the Stock being
purchased, or (2) the unpaid principal, plus accrued interest, plus all other
amounts accrued and owing to the lender in respect of such indebtedness, secured
by the pledge, and (ii) the lender is an institution normally engaged in the
business of making commercial loans.
(c) For purposes of this Agreement, "Fair Market Value" of a
share of Stock shall mean such value as determined by an investment banking firm
mutually acceptable to both the Board of Directors of the Corporation (the
"Board") and the Stockholder. In the event an investment banking firm cannot be
mutually agreed upon, such value shall be a value per
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<PAGE>
share of Stock as determined by a nationally recognized firm engaged in the
business of (among other things) valuing privately held businesses, which is not
an Affiliate of the Corporation, any director of the Corporation, or any of the
Stockholders, and which is selected by the Corporation.
3. Consultation with and Consent of Spencer Trask in Connection with
-----------------------------------------------------------------
Future Issuances of Securities.
- ------------------------------
(a) Until the second anniversary of the final closing (the "Final
Closing") of the Private Offering, the Corporation shall not issue any
Securities, or other rights to acquire Securities, or create any class of
Securities, without prior consultation with, and obtaining the consent of (which
consent will not be unreasonably withheld, delayed or conditioned) Spencer
Trask; provided, however, no such consultation or consent shall be required (i)
-------- -------
if the Corporation does not sell at least $4,000,000 of Common Stock in the
Private Offering or (ii) in connection with Excluded Securities, except that the
Corporation shall first be required to consult with, but not be required to
obtain the consent of, the Placement Agent with respect to the Exempted
Securities.
4. Preemptive Rights.
-----------------
(a) The Corporation shall not issue, sell or exchange, agree to
issue, sell or exchange, or reserve or set aside for issuance, sale or exchange,
any Securities unless it shall have first offered (the "Preemptive Offer") to
sell such Securities to the Stockholders on the terms set forth herein;
provided, however, the Preemptive Offer shall not apply to Excluded Securities,
- -------- -------
other than to Exempted Securities (exclusive of those Exempted Securities that
are to be offered in any transaction or series of related transactions to a
limited number, not to exceed four (4), of institutional, venture capital or
strategic investors ("Strategic/Venture Capital Securities") in which case the
Preemptive Offer shall not apply thereto). Each Stockholder shall have a
preemptive right to purchase up to such Stockholder's Common Equity Percentage
of such Securities. Each Stockholder may assign all or any part of its rights
and responsibilities with respect to such Offer (as defined below) to an
Affiliate (or a permitted transferee). Such Affiliate or Affiliates (or a
permitted transferee) which are such assignees shall thereafter be deemed to be
such assigning Stockholder (to the extent of such assignment) for purposes of
applying this Section 4 to such Preemptive Offer. Each such Affiliate shall
agree in writing, as a condition to such assignment, to execute a Counterpart in
the event of a purchase of Securities pursuant to such assignment.
(b) The Corporation shall deliver to each Stockholder written
notice of the Preemptive Offer, specifying the price and terms and conditions of
the offer, including, without limitation, the minimum and maximum limits on the
amount of Securities proposed to be sold by the Corporation pursuant to the
offer (the "Offer"), and the Common Equity Percentage applicable to the
Stockholder receiving such notice. The Preemptive Offer by its terms shall
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<PAGE>
remain open and irrevocable for a period of twenty (20) days from the date such
notice is given (the "20-Day Period").
(c) If a Stockholder desires to purchase Securities pursuant to
the Preemptive Offer, such Stockholder shall evidence his or its intention to
accept the Preemptive Offer by delivering a written notice to the Corporation
signed by the Stockholder, setting forth the percentage of the Securities (not
exceeding such Stockholder's Common Equity Percentage of such Securities) that
the Stockholder agrees to purchase pursuant to the terms and conditions set
forth herein (the "Notice of Acceptance"). Provided the minimum number of
Securities set forth in the Preemptive Offer has been sold after conclusion of
all procedures set forth in this Section 4, then, upon closing of the Preemptive
Offer, each Stockholder shall be obligated to buy the percentage set forth in
such Stockholder's Notice of Acceptance times the number of Securities being
sold at such closing. The Corporation shall not be permitted to sell at such
closing (or any subsequent closing with respect to which the procedures set
forth in this Section 4 have not again been followed, except as provided in this
Section 4) more than the maximum number of Securities set forth in the
Preemptive Offer. The Notice of Acceptance must be given, if at all, prior to
the end of the 20-Day Period.
(d) Within five (5) days following the end of the 20-Day Period,
the Corporation shall give written notice (the "Notice of Refused Securities")
to the Stockholders setting forth the percentage, if any, of Securities for
which a Notice of Acceptance could have been but was not received from the
Stockholders (the "Refused Securities"). Each Stockholder giving a Notice of
Acceptance ("Accepting Stockholders") shall be entitled to purchase by an
additional Notice of Acceptance given to the Corporation within five (5) days
after the date the Notice of Refused Securities is given (the "5-Day Period"),
that proportion of any Refused Securities which the Common Equity Percentage of
such Accepting Stockholder (prior to the Offer) bears to the Common Equity
Percentage of all Accepting Stockholders (prior to the Offer). The procedure set
forth in this section shall be repeated until there are no more Accepting
Stockholders or no more Refused Securities, whichever occurs first. To the
extent any Investor does not purchase a portion of the Refused Securities within
the 5-Day Period so entitled to be purchased by such Investor (the "Investor
Refused Securities"), Spencer Trask shall be entitled to purchase all, but not
less than all of the Investor Refused Securities by giving notice of its
agreement to do so within two business days of the end of the 5-Day Period (the
"7-Day Period").
(e) If, subject to Section (d) above, the Stockholders give
Notices of Acceptance prior to the end of the 20-Day Period or a 7-Day Period,
as applicable, indicating their intention to purchase, in the aggregate, at
least the minimum amount of Securities set forth in the Preemptive Offer, the
Corporation shall schedule a closing of the sale of the Securities to occur on a
date not more than sixty (60) days nor less than twenty (20) days after the
termination of the 20-Day Period or 7-Day Period, as applicable. Upon the
closing of the sale of the Securities, each Accepting Stockholder shall purchase
those Securities for which it tendered Notices of Acceptance upon the terms
specified in the Offer.
-9-
<PAGE>
(f) Upon completion of the procedures set forth in Sections 4(b)
through 4(d) above, regardless of whether the Stockholders tender Notices of
Acceptance for at least the minimum amount of Securities set forth in the Offer
allocable to their Common Equity Percentages, any remaining Refused Securities
may be sold for a period of ninety (90) days after the expiration of the 20-Day
Period or 7-Day Period, as applicable (the "90-Day Period"), to any other Person
or Persons (including without limitation, executive officers of the Corporation)
upon terms and conditions which are in all material respects (including without
limitation, price, form of consideration, payment period and interest rates) the
same as those set forth in the Preemptive Offer (the "Outside Offer"). The
closing of the sale of such Refused Securities (which shall only occur if the
minimum amount is sold pursuant to this Section 4 and shall include full payment
to the Corporation in cash or notes in accordance with the terms of such offer)
shall take place not more than thirty (30) days after the expiration of such 90-
Day Period and not less than twenty (20) days after notice of said closing shall
have been given by the Corporation to each Accepting Stockholder. In the event
Accepting Stockholders gave Notices of Acceptance for less than the minimum
number of Securities set forth in the Preemptive Offer, provided the Refused
Securities agreed to be purchased pursuant to the Outside Offer, plus the
Securities for which Accepting Stockholders gave Notices of Acceptance exceeds
such minimum, then at the same time as the closing of the sale of Refused
Securities, each Accepting Stockholder shall purchase those Securities for which
it tendered Notices of Acceptance upon the terms specified in the Preemptive
Offer.
(g) (i) If at least the minimum amount of the Securities set
forth in the Preemptive Offer and the Outside Offer are not agreed to be
purchased within the 90-Day Period, the Corporation may rescind all Notices of
Acceptance tendered by Stockholders by providing written notice of such
rescission to each Accepting Stockholder and the Corporation shall not sell any
Securities pursuant to the Outside Offer.
(ii) Any Securities as to which Notices of Acceptance are rescinded,
and any Refused Securities not purchased in the Outside Offer may not be sold or
otherwise disposed of until they are again offered to the Stockholders under the
procedures specified in subsections (a) through (g) hereof.
(h) The transferability of Securities purchased by any Stockholder or
other Person pursuant to this Section 4 shall be subject to the terms and
conditions set forth in this Agreement and any Person who is not then a
Stockholder and who purchases Securities shall execute a Counterpart as a
condition precedent to such purchase. The obligation of any Stockholder to
purchase such Securities is further conditioned upon the preparation of a
purchase agreement embodying the terms of the Preemptive Offer or Outside Offer
which shall be
-10-
<PAGE>
reasonably satisfactory in form and substance to the Corporation and its
counsel, and such Stockholder or other purchaser and such Stockholder's or other
purchaser's counsel.
5. Stock Splits, Etc. If there shall be any change in the Stock
------------------
of a Corporation as a result of any merger, consolidation, reorganization,
recapitalization, stock dividend, split-up, combination or exchange of Shares,
or otherwise, the provisions of this Agreement shall apply with equal force to
additional and/or substitute Securities, if any, received by each Stockholder in
exchange for or by virtue of its ownership of Shares.
6. Registration Rights. The Stockholders shall have the registration
-------------------
and other rights set forth in the various Registration Rights Agreements between
the Corporation and the Stockholders.
7. Financial Reports and Information.
---------------------------------
(a) Within ninety (90) days after the end of each fiscal year of
the Corporation, for so long as this Agreement shall be in effect, the
Corporation shall furnish each of the Stockholders with audited consolidated and
consolidating financial statements of the Corporation for such fiscal year
(showing comparison to the prior fiscal year) which shall include a statement of
income and retained earnings for each such fiscal year, a balance sheet as at
the last day thereof, and a statement of cash flows prepared in accordance with
generally accepted accounting principles consistently applied, and accompanied
by the report, without qualification, of the Corporation's independent certified
public accountants (which shall be of recognized national standing), including
such accountant's management letters to the Corporation and a breakdown of all
the Stockholders of each Corporation, listing next to each Stockholder's name,
the Stockholder's Common Equity Percentage.
(b) If for any period the Corporation shall have any subsidiary
or subsidiaries whose accounts are consolidated with those of the Corporation,
then in respect of such period the financial statements delivered pursuant to
the foregoing Section 7(a) shall be the consolidated financial statements of the
Corporation and all such consolidated subsidiaries.
(c) Promptly upon becoming available, copies of all financial
statements, reports, press releases, notices, proxy statements and other
documents sent by any of the Corporation to their lenders or released to the
public and copies of all regular and periodic reports, if any, filed by the
Corporation with the Securities and Exchange Commission or any securities
exchange.
(d) Upon request from any Stockholder including any Selling
Stockholder, the Corporation shall disclose to such Stockholder, in writing, the
name and address of such Stockholder (as it then appears on the records of the
Corporation) and such Stockholder's Common Equity Percentage.
-11-
<PAGE>
8. Corporation Governance Provisions.
---------------------------------
(a) The Board shall have a minimum of two (2) and a maximum of
ten (10) seats; provided, however, in no event shall the number of directors
-------- -------
exceed seven (7) without the prior written consent of Spencer Trask. Effective
with the First Closing of the Private Offering (the "First Closing"), there
shall be not less than seven (7) directors. No person shall serve as a director
of the Corporation unless such person meets the qualifications set by the
Corporation applicable to all of its directors.
(b) Following the First Closing and continuing for a period of
five (5) years thereafter, except as set forth in Section 5 of the Registration
Rights Agreement among the Corporation and the Investors (the "Investor
Registration Agreement"), the Corporation shall cause from time to time the
following individuals to be nominated to serve as members of the Board, and the
Stockholders shall promptly (i) vote any shares of Stock and any other
securities issued by the Corporation which are entitled to be voted for the
election of directors (collectively, "Voting Securities") which they own or
otherwise have the power to vote (including, without limitation, by execution of
a written consent or in any other manner permitted by law, the Corporation's
certificate of incorporation and by-laws), and (ii) take any other action
necessary or otherwise reasonably requested by the Corporation, in each case to
facilitate the election of the following nominees to serve as members of the
Board:
(i) Stoughton and Grove; provided, that (A) if Stoughton is
not then employed by the Corporation, the Corporation's then Chief Executive
Officer, unless such Chief Executive Officer is Grove, in which case, an
executive officer selected by Grove; and (B) if Grove is not then employed by
the Corporation, an executive officer of the Corporation selected by Stoughton
or, if Stoughton is not then employed by the Corporation, by the then Chief
Executive Officer of the Corporation (the "Management Directors");
(ii) so long as SmithKline or its Affiliates beneficially
own at least five-sevenths (5/7ths) of the shares of Common Stock owned in the
aggregate by it and by its Affiliates on November 7, 1996, an individual
selected by SmithKline, if SmithKline shall so designate an individual to so
serve on the Board, which individual shall be reasonably acceptable to Stoughton
or, if Stoughton is no longer employed by the Corporation, by the Corporation's
then Chief Executive Officer (the "SKB Director"); provided, that the SKB
--------
Director shall be elected pursuant to this Section 8(b)(ii) notwithstanding any
provisions of the Investor Registration Agreement or any other agreement; and
provided, further, that the SKB Director shall serve on any compensation
- -------- -------
committee of the Board of Directors; and provided, further, if SKB shall not be
-------- -------
entitled to designate the SKB Director, then an individual designated by Mr.
Stoughton (or if Mr. Stoughton is not then employed by the Corporation, an
individual designated by the then Chief Executive Officer of the Corporation)
shall be designated as a director nominee (an "Additional Management Director").
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<PAGE>
(iii) one individual designated by Spencer Trask, if Spencer
Trask shall so designate an individual to so serve on the Board, which
individual shall be reasonably acceptable to the Corporation and the Management
Directors; provided, however, if the Board shall consist of more than seven
individuals, then two individuals designated by Spencer Trask, if Spencer Trask
shall so designate two individuals to so serve on the Board, which individuals
shall be reasonably acceptable to Stoughton or, if Stoughton is no longer
employed by the Corporation, by the Corporation's then Chief Executive Officer
(the "Spencer Trask Directors");
(iv) three individuals (who are neither full-time employees
of the Corporation nor Affiliates of any beneficial owner of 5% or more of the
then outstanding Voting Securities of the Corporation) designated by Stoughton
or, if Stoughton is no longer employed by the Corporation, by the Corporation's
then Chief Executive Officer, which individuals shall be reasonably acceptable
to Spencer Trask and SmithKline (the "Independent Directors"); and
(v) subject to Spencer Trask's agreement to the expansion
of the Board to consist of more than seven (7) individuals, that number of
individuals, any of whom may be affiliates or employees of the Corporation,
designated by Stoughton or, if Stoughton is no longer employed by the
Corporation, by the Corporation's then Chief Executive Officer, up to a maximum
of two individuals, which individuals shall be reasonably acceptable to Spencer
Trask and SmithKline (the "Additional Directors").
The Management Directors, the Additional Management Director, the SKB Director,
the Spencer Trask Directors, the Independent Directors and the Additional
Directors are each a "Director" and collectively, the "Directors."
Notwithstanding the foregoing, the five (5) year time limitation set forth in
the first sentence of this subsection (b) shall not apply to the nomination of,
the agreement to vote in favor of, or the rights of, the SKB Director.
(c) Subject to the provisions of Section 5 of the Investor
Registration Agreement: (i) no Director may be removed, except for cause,
without the approval of the Person nominating such director; provided however,
-------- -------
that in no event shall the SKB Director be removed, other than for cause,
without the consent of SmithKline; and (ii) any Director which is nominated
pursuant to this Agreement may be removed by the Person so nominating such
Director, with or without cause, and each Stockholder agrees to vote their
shares of Common Stock (whether at a meeting duly called and held, by execution
of a written consent, or otherwise) in favor of the removal of any such Director
if so requested to do so by the Person who nominated such Director sought to be
removed. Upon the creation of any vacancies on the Board as a result of the
death, disability, resignation or removal of any Director, the person nominating
the director whose death, disability, resignation or removal resulted in the
vacancy in the Board shall be entitled to nominate a replacement Director and
the Stockholders shall promptly vote their Voting Securities (including, without
limitation, by execution of a written consent or in any other manner permitted
by law, the Corporation's certificate of incorporation and by-laws), and (ii)
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<PAGE>
take any other action necessary or otherwise reasonably requested by the
Corporation, to cause the election of such nominee.
(d) Unless an individual nominated to serve on the Board
expressly agrees in writing otherwise, such nominee shall not be deemed to be
the deputy of or otherwise required to discharge his or her duties on the Board
under the direction of, or with special attention to the interests of, the
person or designating such nominee to serve on the Board.
9. Specific Performance. Because of the unique character of the
--------------------
shares of Stock, the Corporation will be irreparably damaged if this Agreement
is not specifically enforced. Should any dispute arise concerning the Transfer
of Stock, an injunction may be issued restraining any Transfer pending the
determination of such controversy. In the event of any controversy concerning
the right or obligation to Transfer any such Stock, such right or obligation
shall be enforceable in a court of equity by a decree of specific performance.
Such remedy shall be cumulative and not exclusive, and shall be in addition to
any other remedy which the Corporation or the other Stockholders of the
Corporation may have.
10. Legend. Each certificate evidencing any of the Shares shall bear
------
a legend substantially as follows:
"The shares represented by this Certificate are subject to
restrictions on transfer and may not be sold, exchanged, transferred,
pledged, hypothecated or otherwise disposed of except in accordance
with and subject to all the terms and conditions of a certain
Stockholders Agreement dated as of December 4, 1996, among the
Corporation and its stockholders, a copy of which the Corporation will
furnish to the holder of this certificate upon request and without
charge."
11. Notices. All notices and other communications hereunder shall be
-------
in writing and shall be given to the person either personally or by sending a
copy thereof by first class or express mail, postage prepaid, or by telegram
(with messenger service specified), telex or TWX (with answer back received) or
courier services, charges prepaid, or by telecopier, to such party's address (or
to such party's telex, TWX, telecopier or telephone number). If the notice is
sent by mail, it shall be deemed to have been received by the addressee five (5)
business days after being deposited in the United States mail, and if the notice
is sent by telegraph or courier services, it shall be deemed to have been given
to the addressee one (1) business day after deposited with a telegraph office or
courier service for delivery to that person or, in the case of telex, TWX or
telecopy when dispatched.
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<PAGE>
If to the Corporation or Stoughton to:
Exigent Diagnostics, Inc.
709 Swedeland Road
P.O. Box 1539
King of Prussia, PA 19406-0939
Attention: W. Vickery Stoughton
Telecopy No.: 610-270-6150
With a copy to:
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Philadelphia, PA 19103
Attention: Julia D. Corelli, Esquire
Telecopy No.: 215-981-4750
If to any of the Management Stockholders other than Stoughton to:
Exigent Diagnostics, Inc.
7600 Tyrone Avenue
Van Nuys, CA 91405
Attention: Dr. Thomas H. Grove
Telecopy No.: 818-376-6387
With a copy to:
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Philadelphia, PA 19103
Attention: Julia D. Corelli, Esquire
Telecopy No.: 215-981-4750
If to SmithKline to:
SmithKline Beecham Corporation
One Franklin Plaza (Mail Code FP 2225)
P.O. Box 7929
Philadelphia, PA 19101
Attention: Chief Operating Officer
Telecopy No.: 215-751-3935
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<PAGE>
With a copy to:
SmithKline Corporation
One Franklin Plaza (Mail Code FP 2225)
P.O. Box 7929
Philadelphia, PA 19101
Attention: General Counsel, Corporate Law - U.S.
Telecopy No.: 215-751-3935
If to Exigent Partners to:
Exigent Partners, L.P.
c/o Spencer Trask Securities Incorporated
535 Madison Avenue
New York, NY 10022
Attention: Kevin Kimberlin, General Partner
Telecopy No.: 212-751-3483
With a copy to:
Hertzog, Calamari & Gleason
100 Park Avenue
New York, NY 10017
Attention: John D. Vaughan
Telecopy No.: 212-213-1199
If to Spencer Trask Securities Incorporated to:
Spencer Trask Securities Incorporated
535 Madison Avenue
New York, NY 10022
Attention: Ms. Laura McNamara
Telecopy No.: 212-751-3483
With a copy to:
Hertzog, Calamari & Gleason
100 Park Avenue
New York, NY 10017
Attention: John D. Vaughan
Telecopy No.: 212-213-1199
-16-
<PAGE>
If to an Investor, to the address set forth on the Investor Signature
Page hereto.
Notice of any change in any such address shall also be given in the manner set
forth above. Whenever the giving of notice is required, the giving of such
notice may be waived by the party entitled to receive such notice.
12. Termination. Except as provided in Section 13 hereof, this
-----------
Agreement shall terminate upon (i) the consummation of a Public Offering or (ii)
the earlier mutual agreement of a group of Stockholders having an aggregate
Common Equity Percentage of at least ninety percent (90%) of the aggregate
Common Equity Percentage of all shareholders in the Corporation, so long as such
group includes Exigent Partners and SmithKline.
13. Entire Agreement; Effectiveness and Amendments. This Agreement
----------------------------------------------
constitutes the entire agreement of the parties with respect to the subject
matter hereof and shall be effective as of December 4, 1996 as to the parties
who are then signatories hereto and, thereafter, as to all other parties at the
time they became signatories hereto. Except as provided in Section 12 hereof,
neither this Agreement nor any provision hereof may be waived, modified, amended
or terminated except by a writing duly executed by holders of Stock having an
aggregate Common Equity Percentage of at least ninety (90%) so long as such
writing is executed by SmithKline, and, if the waiver, modification, amendment
or termination would affect the rights or obligations of a holder of another
class of Stock other than Common Stock, by holders of at least eighty percent
(80%) of the outstanding shares of such class of Stock so affected; provided,
--------
that (i) until the termination of this Agreement pursuant to Section 12 hereof,
and except as otherwise provided by operation of the terms of Section 8 hereof,
the right of any Stockholder to nominate a director in accordance with the
provisions of Section 8 hereof may not be modified, amended or terminated
without the consent of such Stockholder, (ii) any such waiver, amendment or
modification shall affect all Stockholders equally unless the Stockholder
affected differently shall have specifically approved the waiver, amendment or
modification, and (iii) the terms and provisions of this Section 13 shall not be
modified or amended without the prior written consent of each of the
Stockholders. To the extent any term or other provision of any other indenture,
agreement or instrument by which any party hereto is bound conflicts with this
Agreement, this Agreement shall have precedence over such conflicting term or
provision.
14. Expenses. Each of the parties hereto shall bear its or his own
--------
expenses with respect to the agreements set forth herein unless expressly agreed
otherwise in a writing signed by the parties to bear such expenses.
15. Governing Law; Successors and Assigns. This Agreement shall be
-------------------------------------
construed and enforced in accordance with New York law without regard to the
choice of law
-17-
<PAGE>
provisions thereof and shall be binding upon the parties hereto and their
respective successors and assigns.
16. Waivers. The failure of any party to insist upon strict
-------
performance of any of the terms or conditions of this Agreement will not
constitute a waiver of any of its rights hereunder.
17. Severability. If any provision of this Agreement is held
------------
illegal, invalid, or unenforceable, such illegality, invalidity, or
unenforceability will not affect any other provision hereof. This Agreement
shall, in such circumstances, be deemed modified to the extent necessary to
render enforceable the provisions hereof.
18. Captions. Captions are for convenience only and are not deemed
--------
to be part of this Agreement.
19. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. Attorney's Fees. In the event of litigation of any dispute or
---------------
controversy arising from, in, under or concerning this Agreement or any
amendment hereof, including, without limiting the generality of the foregoing,
any claimed breach hereof or thereof, the prevailing party in such action shall
be entitled to recover from the other party in such action, such sum as the
court shall fix as reasonable attorney's fees incurred by such prevailing party.
21. Parties Benefitted. Nothing in this Agreement, express or
------------------
implied, is intended to confer upon any third party any rights, remedies,
obligations or liabilities.
22. Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.
[SPACE INTENTIONALLY LEFT BLANK]
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Stockholders
Agreement under seal on the date first above written.
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. Vickery Stoughton
----------------------------------------
W. Vickery Stoughton
President and Chief Executive Officer
SMITHKLINE BEECHAM CORPORATION
By: /s/ E. J. Buthusien
----------------------------------------
Name: E J Buthusien
Title: Attorney in fact
SPENCER TRASK SECURITIES INCORPORATED
By: /s/ William P. Dioguench
----------------------------------------
Name: William P. Dioguench
Title: President
EXIGENT PARTNERS, L.P.
By: /s/ Kevin Kimberlin
-----------------------------------------
Kevin Kimberlin
General Partner
/s/ W. Vickery Stoughton
--------------------------------------------
W. VICKERY STOUGHTON
/s/ Thomas H. Grove
--------------------------------------------
THOMAS H. GROVE
[EXECUTIONS CONTINUED]
-19-
<PAGE>
/s/ Kenneth B. Asarch
--------------------------------------
KENNETH B. ASARCH
/s/ William S. Knight
--------------------------------------
WILLIAM S. KNIGHT
/s/ Donald S. Wong
--------------------------------------
DONALD S. WONG
/s/ Ashok K. Sawhney
--------------------------------------
ASHOK K. SAWHNEY
/s/ Philip B. Smith
--------------------------------------
PHILIP B. SMITH
[INVESTOR SIGNATURES FOLLOW ON SEPARATE PAGES]
-20-
<PAGE>
INVESTOR SIGNATURE PAGE
TO STOCKHOLDERS' AGREEMENT
IN WITNESS WHEREOF, the undersigned Investor has executed this
Agreement as of ____________ ___, 199__.
If the Holder is an INDIVIDUAL:
____________________________________
Print Name
____________________________________
Signature
____________________________________
____________________________________
Print Address
If the Holder is a PARTNERSHIP,
CORPORATION or a TRUST:
____________________________________
Name of Partnership, Corporation
or Trust
By:__________________________________
Signature
Print Name:___________________________
Print Title:____________________________
_____________________________________
_____________________________________
Print Address
Accepted and agreed to this
____ day of ___________, 199__
EXIGENT DIAGNOSTICS, INC.
By:____________________________________
W. Vickery Stoughton
Chairman & CEO
-21-
<PAGE>
EXHIBIT 10.7
EXIGENT DIAGNOSTICS, INC.
709 Swedeland Road
P.O. Box 1539
King of Prussia, PA 19406
Cedar Capital Investors
767 Third Avenue, Suite 36A
New York, New York 10017
Attn.: Anthony P. Brenner
Re: Consulting Engagement
---------------------
Ladies and Gentlemen:
This letter sets forth the terms upon which Exigent Diagnostics, Inc.
("Exigent") has engaged Cedar Capital Investors ("CCI") to provide certain
consulting services in connection with securing the next round of financing for
Exigent. The services are expected to include phone consultation, meetings with
interested financing sources, review of funding proposals and general strategy
development (the "Services"). Generally, Exigent will not expect CCI to
participate in early stage presentations to potential funding sources, but
instead will rely on CCI for advice in connection with (i) devising overall
strategies designed to obtain funding and (ii) the actual negotiation of
financing agreements with funding sources selected by Exigent. Exigent will use
its reasonable best efforts to provide CCI with advance notice of critical
meetings.
It is agreed that Anthony P. Brenner will be the CCI representative to
fulfill CCI's obligations to provide the Services. CCI will make Mr. Brenner's
services available when reasonably requested by Exigent on an as needed basis
until the next round of financing is complete. The Services to be performed by
Mr. Brenner are in addition to his duties and responsibilities as a member of
Exigent's Board of Directors and Chairman of Exigent's Compensation Committee.
Either Exigent or CCI may cancel this letter agreement at any time by written
notice to the other party, but cancellation will not affect Exigent's obligation
to compensate CCI as hereafter provided for services rendered prior to the date
of cancellation.
CCI will invoice Exigent on a biweekly basis for time incurred to
perform the Services, for travel time and for all direct out of pocket expenses
paid by CCI in performance of the Services. CCI will be compensated hereunder
as follows:
Exigent hereby grants to CCI non-qualified stock options for the purchase
of 15,000 shares of Exigent's Common Stock ("Options"). The Options will
have an exercise price of $.0l per share and, once vested as provided
below, will remain exercisable until the tenth anniversary of the date of
this letter. Options will vest at the rate of'200 shares per hour of
Services performed, and at the rate of 100 shares per hour of travel time
outside the New York City metropolitan area. Once vested, Options will be
immediately exercisable. Options not vested prior to June 1, 1998 will
lapse. Should CCI incur more
<PAGE>
than 75 hours of billable time performing Services, Exigent will either (a)
grant additional options to CCI (which additional options would have all of
the same terms and conditions as the Options hereby granted), or (b)
compensate CCI in cash at an hourly rate of $300 per hour for Services
performed and at an hourly rate of $150 per hour for travel time outside
the New York City metropolitan area. The Options are subject to the terms
and conditions of the 1996 Incentive and Non-Qualified Stock Option Plan of
Exigent, a copy of which has been delivered to you. As such, this grant is
subject to approval by the Board of Directors of Exigent. Upon exercise of
Options, which will occur pursuant to Exigent's standard Non-Qualified
Stock Option Agreement, you will be required to become a party to the
Shareholders Agreement among Exigent and its shareholders dated as of
December 4, 1996, as hereafter amended from time to time.
Additionally, Exigent will reimburse CCI in cash for all direct out of pocket
expenses incurred in provision of Services hereunder as follows: (i) for travel
expenses (e.g. transportation, hotel and meals) promptly after presentation of
normal and customary receipts setting forth the amounts actually incurred; and
(ii) at the rate of $7.50 per hour of Services performed during a particular
period for all other expenses, including telephone, computer, facsimile,
duplicating and other miscellaneous expenses.
Exigent hereby confirms that in connection with performing Services
CCI and its employees will be entitled to the benefits of the indemnification
provisions contained in Exigent's Bylaws at Article VIII thereof, as in effect
from time to time.
Should the terms of this letter agreement be satisfactory to you,
please sign one copy and return it to me and retain the other for your files.
Exigent looks forward to working with you in completing its next round of
financing.
Sincerely,
/s/ W. Vickery Stoughton
W. Vickery Stoughton
Chairman and Chief Executive Officer
Accepted and agreed to
this 8th day of August, 1997.
Cedar Capital Investors
By:/s/ Anthony P. Brenner
-----------------------------
Anthony P. Brenner
-2-
<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of March 3, 1997 between Exigent Diagnostics, Inc.,
a Delaware corporation with its principal place of business in Pennsylvania (the
"Company"), and W. VICKERY STOUGHTON, a Pennsylvania resident ("Employee").
W I T N E S S E T H:
-------------------
WHEREAS, the Company and Employee mutually desire to enter into this
Agreement with respect to Employee's employment with the Company on the terms
set forth herein; and
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Company and Employee agree as follows:
1. Employment and Term. The Company agrees to employ Employee and
-------------------
Employee agrees to serve the Company as Chief Executive Officer and Chairman or
in such other executive position as may be mutually agreed upon by Employee and
the Company, during the Term (as defined below). The term of this Agreement
(the "Term") shall commence on the date hereof and end on the date which is the
one-year anniversary thereof, or such later date to which Employee's employment
may be extended as provided in Section 11.
2. Duties. During the Term, Employee agrees to serve the Company
------
faithfully, to devote his time, efforts, skills and ability to promote its
interests; and to perform such duties as from time to time may be assigned to
him by the Board of Directors of the Company (the "Board"), subject to Section 3
hereof. Notwithstanding the foregoing, Employee may engage in charitable and
public activities and other activities in the health care industry, including
board memberships, so long as such activities do not materially interfere with
the performance of his duties and responsibilities under this Agreement. During
the Term, Employee shall serve as a member of the Board of Directors of the
Company.
3. Responsibilities. Employee's area of responsibility shall be
----------------
that of Chairman of the Board, President, and Chief Executive Officer of the
Company or such other executive position as may be mutually agreed upon by
Employee and the Company. During the Term, the Company shall not assign any
duties to or remove any duties from Employee inconsistent with Employee's
position. The Company shall at all times provide Employee with such executive
powers and authority as shall reasonably be required by him to enable him to
discharge such duties in an efficient manner, together with such facilities and
services as are suitable or customary to such position. During the Term,
Employee shall report directly to the Board.
4. Compensation. The Company agrees to pay Employee as compensation
------------
("Compensation") for all duties performed by him in any capacity during the
period of his employment under this Agreement:
<PAGE>
(a) Base salary of $195,000 ("Base Salary"), for the calendar
year 1997, paid in accordance with the Company's normal payroll or in such other
installments as the Company shall pay its other executive officers, subject to
increases during future annual periods as mutually agreed to between Employee
and Company;
(b) An annual bonus (the "Bonus"), at the discretion of the
Board; and
(c) Stock options, pursuant to the Exigent Diagnostics Inc. 1996
Incentive and Non-Qualified Stock Option Plan, the Exigent Diagnostics Inc. 1996
Key Executive Stock Option Plan, and any other equity-based plan of the Company
(collectively the "Stock Plans"), to the extent determined by the Board or the
committee responsible for administering the Stock Plans and consistent with the
terms of the Stock Plans, provided that the determination of the level of
participation for the Employee shall be consistent with that which is customary
for the chief executive officer of similarly-situated companies.
5. Benefits; Reimbursement of Expenses. Employee shall also be
-----------------------------------
entitled to:
(a) Participate in all of the benefit programs which are
presently or may hereafter be provided by the Company to any of its executives
and key employees, including, without limitation, all pension, thrift,
incentive, retirement, health insurance and life insurance programs.
(b) Reimbursement by the Company of all expenses reasonably
incurred by him in connection with the performance of his duties, including,
without limitation, travel and entertainment expenses reasonably related to the
business or interests of the Company, upon submission by him of written
documentation of such expenses.
(c) Such other benefits as the Board may determine from time to
time.
6. Termination Due to Death, Cause or Disability.
---------------------------------------------
Employee's rights to Compensation under this Agreement shall cease to
accrue as of the date of termination of employment due to death, Cause, or
Disability, the latter two of which are defined as follows:
(a) Cause. Employee will be considered to have been terminated
-----
for Cause if, during the Term, Employee is terminated because Employee (i) has
engaged in any type of disloyalty to the Company, including without limitation,
fraud, embezzlement, theft, or dishonesty in the course of his employment, or
has otherwise breached any fiduciary duty owed to the Company, or (ii) has been
convicted of a felony or (iii) breached Section 8 of this Agreement regarding
confidentiality or non-competition.
-2-
<PAGE>
(b) Disability. Employee may be considered to have been
----------
terminated on account of Disability if, during the Term of this Agreement,
Employee is terminated because Employee does not perform services for the
Company for either (i) 180 consecutive days or (ii) 180 days within a 210-day
period on account of the Employee's mental or physical disability.
7. Other Termination. Employee's rights to Compensation under this
-----------------
Agreement shall continue to accrue through the end of the then current Term that
would exist absent the termination, if:
(a) Employee is terminated by the Company for any other reason
than Cause, including termination for no reason;
(b) Employee terminates his employment for "good reason," which,
for purposes of this Agreement, shall mean a reduction in duties or breach of
the Agreement by the Company; or
(c) Employee terminates employment due to a Change of Control,
which, for purposes of this Agreement, shall mean the happening of an event,
which shall be deemed to have occurred upon the earliest to occur of the
following events:
(i) the date the stockholders of the Company (or the Board,
if stockholder action is not required) approve a plan or other arrangement
pursuant to which the Company will be dissolved or liquidated; or
(ii) the date the stockholders of the Company (or the Board,
if stockholder action is not required) and the stockholders of the other
constituent corporations (or their respective boards of directors, if and to the
extent that stockholder action is not required) have approved a definitive
agreement to merge or consolidate the Company with or into another corporation,
other than, in either case, a merger or consolidation of the Company in which
holders of shares of the Company's voting capital stock immediately prior to the
merger or consolidation will have at least 30% of the ownership of voting
capital stock of the surviving corporation immediately after the merger or
consolidation (on a fully diluted basis), which voting capital stock is to be
held in the same proportion (on a fully diluted basis) as such holders'
ownership of voting capital stock of the Company immediately before the merger
or consolidation; or
(iii) the date any entity, person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act
of 1934, as amended), other than (A) the Company, or (B) any of its
Subsidiaries, or (C) any of the holders of the capital stock of the Company, as
determined on the date of this Agreement, or (D) any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its Subsidiaries
or (E) any Affiliate (as such term is defined in Rule 405 promulgated under the
Securities Act of 1933, as amended) of any of the foregoing, shall have acquired
beneficial ownership of, or shall have
-3-
<PAGE>
acquired voting control over more than 70% of the outstanding shares of the
Company's voting capital stock (on a fully diluted basis), unless the
------
transaction pursuant to which such person, entity or group acquired such
beneficial ownership or control resulted from the original issuance by the
Company of shares of its voting capital stock and was approved by at least a
majority of directors who shall have been either members of the Board on the
date of this Agreement or members of the Board for at least twelve (12) months
prior to the date of this Agreement; or
(iv) the first day after the date of this Agreement when
directors are elected such that there shall have been a change in the
composition of the Board such that a majority of the Board shall have been
members of the Board for less than twelve (12) months, unless the nomination for
election of each new director who was not a director at the beginning of such
twelve (12) month period was approved by a vote of at least sixty percent (60%)
of the directors then still in office who were directors at the beginning of
such period; or
(v) the date upon which the Board determines (in its sole
discretion) that based on then current available information, the events
described in clause (iii) are reasonably likely to occur.
8. Confidential Information; Non-Compete.
-------------------------------------
(a) Confidential Information. Without the express prior written
------------------------
consent of the Company, Employee shall not disclose or make available to anyone
outside the Company, its subsidiaries or affiliated corporations or entities any
confidential or proprietary information of, or concerning, the Company,
including, without limitation, trade secrets, knowhow, customer lists,
inventions or other information not generally known to any competitor of the
Company, its subsidiaries or affiliated corporations or entities ("Confidential
Information"). Employee shall abide by this prohibition on disclosure of
Confidential Information during the Term of this Agreement and for one (1) year
commencing on the expiration or termination of the Term. Further, Employee
agrees that any Confidential Information developed or invented during the Term
or any period of employment preceding the Term shall be considered to be owned
by the Company.
(b) Non-Compete. In consideration of the compensation and other
-----------
benefits payable to Employee hereunder, Employee agrees that he shall not,
without the prior written consent of the Company, engage in the point-of-care
diagnostics business ("Prohibited Business") during the Term (the "Non-
Compete"). The Non-Compete shall extend for one (1) year commencing on the
expiration or termination of the Term; provided, however, if the Term of this
-----------------
Agreement shall have continued for at least two (2) years from the date hereof,
the Non-Compete shall terminate simultaneously with the expiration or
termination of the Term. Employee shall be regarded as engaged in a Prohibited
Business if he engages as partner, owner, agent, representative, employee,
officer, director or consultant or participates, directly or indirectly, whether
through investment, partnership, license, joint venture, or otherwise, in any
Prohibited Business. Nothing set forth above shall be deemed to prevent
Employee from merely
-4-
<PAGE>
acquiring or owning five percent (5%) or less of any entity, whether public or
private, regardless of the business in which such entity is engaged. Anything
in this paragraph (b) to the contrary notwithstanding, in the event of the
termination of this Agreement by Employee pursuant to paragraph (b) or (c) of
Section 7, or in the event of the termination of this Agreement by the Company
other than for Cause, the Non-Compete shall thereafter be null and void and of
no further force or effect, and the Company shall not have any right to extend
the Non-Compete as set forth above.
9. Work Situs and Relocation. Except for travel consistent with the
-------------------------
development of the Company's business, Employee shall not be required to perform
his duties under this Agreement outside of the Philadelphia or Los Angeles
metropolitan areas or any other area where the employee may choose to locate the
business.
10. Termination of Prior Agreements. This Agreement expressly
-------------------------------
supersedes all agreements and understandings between the parties regarding the
subject matter hereof and any such agreement is terminated as of the date first
above written.
11. Renewal/Non-renewal. This Agreement shall be automatically
-------------------
extended annually on each March 3 without further action by the parties, for
three-year rolling terms unless either party shall, at least 60 days prior to
the annual extension date, have given notice to the other party that this
Agreement shall not be so extended or otherwise terminated this Agreement. After
the first two years of employment, the Employee may resign with at least 90 days
notice subject to the discretion of the Board to shorten the notice time.
12. Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the parties hereto, their respective legal representatives and
to any successor of the Company, which successor shall be deemed substituted for
the Company under the terms of this Agreement. As used in this Agreement, the
term "successor" shall include any person, firm, corporation or other business
entity which at any time, whether by merger, purchase or otherwise, acquires all
or substantially all of the assets or business of the Company.
13. Waiver of Breach. The waiver by the Company of a breach of any
----------------
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach.
14. Notices. Any notice required or permitted to be given hereunder
-------
shall be sufficient if in writing and if sent by registered or certified mail to
Employee at his residence or to the Company at its principal place of business.
15. Entire Agreement. This document contains the entire agreement of
----------------
the parties and may not be changed except in a writing signed by both parties.
-5-
<PAGE>
16. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the Commonwealth of Pennsylvania as applied to
contracts executed and performed wholly within the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
EXIGENT DIAGNOSTICS, INC.
By: /s/ Thomas H. Grove
--------------------------
Name:________________________
Title:_______________________
/s/ W. Vickery Stoughton
-----------------------------
W. VICKERY STOUGHTON
-6-
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of March 3, 1997 between Exigent Diagnostics, Inc.,
a Delaware corporation with its principal place of business in Pennsylvania (the
"Company"), and THOMAS H. GROVE, a California resident ("Employee").
W I T N E S S E T H:
-------------------
WHEREAS, the Company and Employee mutually desire to enter into this
Agreement with respect to Employee's employment with the Company on the terms
set forth herein; and
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Company and Employee agree as follows:
1. Employment and Term. The Company agrees to employ Employee and
-------------------
Employee agrees to serve the Company as Vice President, Research and Development
or in such other executive position as may be mutually agreed upon by Employee
and the Company, during the Term (as defined below). The term of this Agreement
(the "Term") shall commence on the date hereof and end on the date which is the
one-year anniversary thereof, or such later date to which Employee's employment
may be extended as provided in Section 11.
2. Duties. During the Term, Employee agrees to serve the Company
------
faithfully, to devote his time, efforts, skills and ability to promote its
interests; and to perform such duties as from time to time may be assigned to
him by the Chief Executive Officer, President and Chairman of the Board of
Directors of the Company (the "Board"), subject to Section 3 hereof.
Notwithstanding the foregoing, Employee may engage in charitable and public
activities and other activities in the health care industry, including board
memberships, so long as such activities do not materially interfere with the
performance of his duties and responsibilities under this Agreement. During the
Term, Employee shall serve as a member of the Board of Directors of the Company.
3. Responsibilities. Employee's area of responsibility shall be
----------------
that of Vice President, Research and Development, of the Company or such other
executive position as may be mutually agreed upon by Employee and the Company.
During the Term, the Company shall not assign any duties to or remove any duties
from Employee inconsistent with Employee's position. The Company shall at all
times provide Employee with such executive powers and authority as shall
reasonably be required by him to enable him to discharge such duties in an
efficient manner, together with such facilities and services as are suitable or
customary to such position. During the Term, Employee shall report directly to
the Chief Executive Offer, President and Chairman of the Board.
<PAGE>
4. Compensation. The Company agrees to pay Employee as compensation
------------
("Compensation") for all duties performed by him in any capacity during the
period of his employment under this Agreement:
(a) Base salary of $155,000 ("Base Salary"), for the calendar
year 1997, paid in accordance with the Company's normal payroll or in such other
installments as the Company shall pay its other executive officers, subject to
increases during future annual periods as mutually agreed to between Employee
and Company;
(b) An annual bonus (the "Bonus"), at the discretion of the
Board; and
(c) Stock options, pursuant to the Exigent Diagnostics Inc. 1996
Incentive and Non-Qualified Stock Option Plan, the Exigent Diagnostics Inc. 1996
Key Executive Stock Option Plan, and any other equity-based plan of the Company
(collectively the "Stock Plans"), to the extent determined by the Board or the
committee responsible for administering the Stock Plans and consistent with the
terms of the Stock Plans, provided that the determination of the level of
participation for the Employee shall be consistent with that which is customary
for the vice president of research and development of similarly-situated
companies.
5. Benefits; Reimbursement of Expenses. Employee shall also be
-----------------------------------
entitled to:
(a) Participate in all of the benefit programs which are
presently or may hereafter be provided by the Company to any of its executives
and key employees, including, without limitation, all pension, thrift,
incentive, retirement, health insurance and life insurance programs.
(b) Reimbursement by the Company of all expenses reasonably
incurred by him in connection with the performance of his duties, including,
without limitation, travel and entertainment expenses reasonably related to the
business or interests of the Company, upon submission by him of written
documentation of such expenses.
(c) Such other benefits as the Board may determine from time to
time.
-2-
<PAGE>
6. Termination Due to Death, Cause or Disability.
---------------------------------------------
Employee's rights to Compensation under this Agreement shall cease to
accrue as of the date of termination of employment due to death, Cause, or
Disability, the latter two of which are defined as follows:
(a) Cause. Employee will be considered to have been terminated
-----
for Cause if, during the Term, Employee is terminated because Employee (i) has
engaged in any type of disloyalty to the Company, including without limitation,
fraud, embezzlement, theft, or dishonesty in the course of his employment, or
has otherwise breached any fiduciary duty owed to the Company, or (ii) has been
convicted of a felony or (iii) breached Section 8 of this Agreement regarding
confidentiality or non-competition.
(b) Disability. Employee may be considered to have been
----------
terminated on account of Disability if, during the Term of this Agreement,
Employee is terminated because Employee does not perform services for the
Company for either (i) 180 consecutive days or (ii) 180 days within a 210-day
period on account of the Employee's mental or physical disability.
7. Other Termination. Employee's rights to Compensation under this
-----------------
Agreement shall continue to accrue through the end of the then current Term that
would exist absent the termination, if.
(a) Employee is terminated by the Company for any other reason
than Cause, including termination for no reason;
(b) Employee terminates his employment for "good reason," which,
for purposes of this Agreement, shall mean a reduction in duties or breach of
the Agreement by the Company; or
(c) Employee terminates employment due to a Change of Control,
which, for purposes of this Agreement, shall mean the happening of an event,
which shall be deemed to have occurred upon the earliest to occur of the
following events:
(i) the date the stockholders of the Company (or the Board,
if stockholder action is not required) approve a plan or other arrangement
pursuant to which the Company will be dissolved or liquidated; or
(ii) the date the stockholders of the Company (or the Board,
if stockholder action is not required) and the stockholders of the other
constituent corporations (or their respective boards of directors, if and to the
extent that stockholder action is not required) have approved a definitive
agreement to merge or consolidate the Company with or into another corporation,
other than, in either case, a merger or consolidation of the Company in which
holders of shares of the Company's voting capital stock immediately prior to the
merger or
-3-
<PAGE>
consolidation will have at least 30% of the ownership of voting capital stock of
the surviving corporation immediately after the merger or consolidation (on a
fully diluted basis), which voting capital stock is to be held in the same
proportion (on a fully diluted basis) as such holders' ownership of voting
capital stock of the Company immediately before the merger or consolidation; or
(iii) the date any entity, person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act
of 1934, as amended), other than (A) the Company, or (B) any of its
Subsidiaries, or (C) any of the holders of the capital stock of the Company, as
determined on the date of this Agreement, or (D) any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its Subsidiaries
or (E) any Affiliate (as such term is defined in Rule 405 promulgated under the
Securities Act of 1933, as amended) of any of the foregoing, shall have acquired
beneficial ownership of, or shall have acquired voting control over more than
70% of the outstanding shares of the Company's voting capital stock (on a fully
diluted basis), unless the transaction pursuant to which such person, entity or
------
group acquired such beneficial ownership or control resulted from the original
issuance by the Company of shares of its voting capital stock and was approved
by at least a majority of directors who shall have been either members of the
Board on the date of this Agreement or members of the Board for at least twelve
(12) months prior to the date of this Agreement; or
(iv) the first day after the date of this Agreement
when directors are elected such that there shall have been a change in the
composition of the Board such that a majority of the Board shall have been
members of the Board for less than twelve (12) months, unless the nomination for
election of each new director who was not a director at the beginning of such
twelve (12) month period was approved by a vote of at least sixty percent (60%)
of the directors then still in office who were directors at the beginning of
such period; or
(v) the date upon which the Board determines (in its
sole discretion) that based on then current available information, the events
described in clause (iii) are reasonably likely to occur.
8. Confidential Information; Non-Compete.
-------------------------------------
(a) Confidential Information. Without the express prior written
------------------------
consent of the Company, Employee shall not disclose or make available to anyone
outside the Company, its subsidiaries or affiliated corporations or entities any
confidential or proprietary information of, or concerning, the Company,
including, without limitation, trade secrets, knowhow, customer lists,
inventions or other information not generally known to any competitor of the
Company, its subsidiaries or affiliated corporations or entities ("Confidential
Information"). Employee shall abide by this prohibition on disclosure of
Confidential Information during the Term of this Agreement and for one (1) year
commencing on the expiration or termination of the Term. Further, Employee
agrees that any Confidential
-4-
<PAGE>
Information developed or invented during the Term or any period of employment
preceding the Term shall be considered to be owned by the Company.
(b) Non-Compete. In consideration of the compensation and other
-----------
benefits payable to Employee hereunder, Employee agrees that he shall not,
without the prior written consent of the Company, engage in the point-of-care
diagnostics business ("Prohibited Business") during the Term (the "Non-
Compete"). The Non-Compete shall extend for one (1) year commencing on the
expiration or termination of the Term; provided, however, if the Term of this
-----------------
Agreement shall have continued for at least two (2) years from the date hereof,
the Non-Compete shall terminate simultaneously with the expiration or
termination of the Term. Employee shall be regarded as engaged in a Prohibited
Business if he engages as partner, owner, agent, representative, employee,
officer, director or consultant or participates, directly or indirectly, whether
through investment, partnership, license, joint venture, or otherwise, in any
Prohibited Business. Nothing set forth above shall be deemed to prevent
Employee from merely acquiring or owning five percent (5%) or less of any
entity, whether public or private, regardless of the business in which such
entity is engaged. Anything in this paragraph (b) to the contrary
notwithstanding, in the event of the termination of this Agreement by Employee
pursuant to paragraph (b) or (c) of Section 7, or in the event of the
termination of this Agreement by the Company other than for Cause, the Non-
Compete shall thereafter be null and void and of no further force or effect, and
the Company shall not have any right to extend the Non-Compete as set forth
above.
9. Work Situs and Relocation. Except for travel consistent with the
-------------------------
development of the Company's business, Employee shall not be required to perform
his duties under this Agreement outside of the Philadelphia or Los Angeles
metropolitan areas.
10. Termination of Prior Agreements. This Agreement expressly
-------------------------------
supersedes all agreements and understandings between the parties regarding the
subject matter hereof and any such agreement is terminated as of the date first
above written.
11. Renewal/Non-renewal. This Agreement shall be automatically
-------------------
extended annually on each March 3 without further action by the parties, for
three-year rolling terms unless either party shall, at least 60 days prior to
the annual extension date, have given notice to the other party that this
Agreement shall not be so extended or otherwise terminated this Agreement. After
the first two years of employment, the Employee may resign with at least 90 days
notice subject to the discretion of the Board to shorten the notice time.
12. Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the parties hereto, their respective legal representatives and
to any successor of the Company, which successor shall be deemed substituted for
the Company under the terms of this Agreement. As used in this Agreement, the
term "successor" shall include any person, firm, corporation or other business
entity which at any time, whether by merger, purchase or otherwise, acquires all
or substantially all of the assets or business of the Company.
-5-
<PAGE>
13. Waiver of Breach. The waiver by the Company of a breach of any
----------------
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach.
14. Notices. Any notice required or permitted to be given hereunder
-------
shall be sufficient if in writing and if sent by registered or certified mail to
Employee at his residence or to the Company at its principal place of business.
15. Entire Agreement. This document contains the entire agreement of
----------------
the parties and may not be changed except in a writing signed by both parties.
16. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the Commonwealth of Pennsylvania as applied to
contracts executed and performed wholly within the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
EXIGENT DIAGNOSTICS, INC.
By: /s/ Vic Stoughton
------------------------------
Name:____________________________
Title:___________________________
/s/ Tom Grove
---------------------------------
THOMAS H. GROVE
-6-
<PAGE>
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT dated as of July 30, 1998 between CARESIDE, INC., a Delaware
corporation with its principal place of business in California (the "Company"),
and JAMES R. KOCH, a Texas resident ("Employee").
W I T N E S S E T H:
-------------------
WHEREAS, the Company and Employee mutually desire to enter into this
Agreement with respect to Employee's employment with the Company on the terms
set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained and intending to be legally bound, the Company and Employee agree as
follows:
1. Employment and Term. The Company agrees to employ Employee and
-------------------
Employee agrees to serve the Company as Vice President and Chief Financial
Officer or in such other executive position as may be mutually agreed upon by
Employee and the Company, during the Term (as defined below). The term of this
Agreement (the "Term") shall commence on the date hereof and end on the date
which is the one-year anniversary thereof, or such later date to which
Employee's employment may be extended as provided in Section 11.
2. Duties. During the Term, Employee agrees to serve the Company
------
faithfully, to devote his entire business time during regular business (except
for illness or incapacity, and except for vacation time as provided herein) to
such employment; to use his best efforts, skills and ability to promote its
interests; and to perform such duties as from time to time may be assigned to
him by the Board of Directors of the Company (the "Board"), subject to Section 3
hereof. Notwithstanding the foregoing, Employee may engage in charitable and
public activities and other activities in the health care industry, including
board memberships, so long as such activities do not materially interfere with
the performance of his duties and responsibilities under this Agreement. During
the Term, Employee shall be elected to, and shall serve as a member of the
Board.
3. Responsibilities. Employee's area of responsibility shall be
----------------
that of Chief Financial Officer of the Company or such other executive position
as may be mutually agreed upon by Employee and the Company. During the Term,
the Company shall not assign any duties to or remove any duties from Employee
inconsistent with Employee's position. The Company shall at all times provide
Employee with such executive powers and authority as shall reasonably be
required by him to enable him to discharge such duties in an efficient manner,
together with such facilities and services as are suitable or customary to such
position. During the Term, Employee shall report directly to the Chief
Executive Officer of the Company.
4. Compensation. The Company agrees to pay Employee as compensation
------------
("Compensation") for all duties performed by him in any capacity during the
period of his employment under this Agreement:
<PAGE>
(a) Base salary of $160,000 ("Base Salary"), payable in equal
biweekly installments or in such other installments as the Company shall pay its
other executive officers, subject to increases during future terms as mutually
agreed to between Employee and Company;
(b) A bonus (the "Bonus"), at the discretion of the Board; and
(c) Stock options, pursuant to the Careside, Inc. 1996 Incentive and
Non-Qualified Stock Option Plan, the Careside, Inc. 1996 Key Executive Stock
Option Plan, and any other equity-based plan of the Company (collectively the
"Stock Plans"), to the extent determined by the Board or the committee
responsible for administering the Stock Plans and consistent with the terms of
the Stock Plans, provided that the determination of the level of participation
for the Employee shall be consistent with that which is customary for the Chief
Financial Officer of similarly-situated companies.
5. Benefits; Reimbursement of Expenses. Employee shall also be
-----------------------------------
entitled to:
(a) Participate in all of the benefit programs which are presently or
may hereafter be provided by the Company to any of its executives and key
employees, including, without limitation, all pension, thrift, incentive,
retirement, health insurance and life insurance programs.
(b) Reimbursement by the Company of expenses reasonably incurred by
him in connection with the performance of his duties, including, without
limitation, travel and entertainment expenses reasonably related to the business
or interests of the Company, upon submission by him of written documentation of
such expenses.
(c) A vacation of four (4) weeks each year at such time or times as he
shall reasonably determine with the consent of the Chief Executive Officer of
the Company.
(d) A one-time signing bonus of $15,000 to be paid by the Company
to him within ninety days of the date of this Agreement.
(e) A one-time reimbursement by the Company of expenses reasonably
incurred in connection with the relocation of him and his immediate family's
household goods from their present location in Texas to the Los Angeles area, as
well as, a one-time reimbursement by the Company of expenses reasonably incurred
in connection with travel and lodging costs for him and his immediate family to
visit the Los Angeles area to review and secure housing and schooling
opportunities, all such reimbursements shall be upon submission by him of
written documentation of such expenses.
(f) Such other benefits as the Board may determine from time to
time.
-2-
<PAGE>
6. Termination Due to Death, Cause or Disability.
---------------------------------------------
Employee's rights to Compensation under this Agreement shall cease to
accrue as of the date of termination of employment due to death, Cause, or
Disability, the latter two of which are defined as follows:
(a) Cause. Employee will be considered to have been terminated
-----
for Cause if, during the Term, Employee is terminated because Employee (i) has
engaged in any type of disloyalty to the Company, including without limitation,
fraud, embezzlement, theft, or dishonesty in the course of his employment, or
has otherwise breached any fiduciary duty owed to the Company, or (ii) has been
convicted of a felony or (iii) breached Section 8 of this Agreement regarding
confidentiality or non-competition or (iv) has disclosed trade secrets and
confidential information of the Company.
(b) Disability. Employee may be considered to have been
----------
terminated on account of Disability if, during the Term of this Agreement,
Employee is terminated because Employee does not perform services for the
Company for either (i) 90 consecutive days or (ii) 90 days within a 120-day
period on account of the Employee's mental or physical disability.
7. Other Termination. Employee's rights to Compensation under this
-----------------
Agreement shall continue to accrue through the end of the then current Term that
would exist absent the termination, if :
(a) Employee is terminated by the Company for any other reason
than Cause, including termination for no reason;
(b) Employee terminates his employment for "good reason," which,
for purposes of this Agreement, shall mean a reduction in duties or breach of
the Agreement by the Company; or
(c) Employee terminates employment due to a Change of Control,
which, for purposes of this Agreement, shall mean the happening of an event,
which shall be deemed to have occurred upon the earliest to occur of the
following events:
(i) the date the stockholders of the Company (or the Board,
if stockholder action is not required) approve a plan or other arrangement
pursuant to which the Company will be dissolved or liquidated; or
(ii) the date the stockholders of the Company (or the Board,
if stockholder action is not required) and the stockholders of the other
constituent corporations (or their respective boards of directors, if and to the
extent that stockholder action is not required) have approved a definitive
agreement to merge or consolidate the Company with or into another corporation,
other than, in either case, a merger or consolidation of the Company in which
-3-
<PAGE>
holders of shares of the Company's voting capital stock immediately prior to the
merger or consolidation will have at least 30% of the ownership of voting
capital stock of the surviving corporation immediately after the merger or
consolidation (on a fully diluted basis), which voting capital stock is to be
held in the same proportion (on a fully diluted basis) as such holders'
ownership of voting capital stock of the Company immediately before the merger
or consolidation; or
(iii) the date any entity, person or group (within the meaning
of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934,
as amended), other than (A) the Company, or (B) any of its Subsidiaries, or (C)
any of the holders of the capital stock of the Company, as determined on the
date of this Agreement, or (D) any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its Subsidiaries or (E) any
Affiliate (as such term is defined in Rule 405 promulgated under the Securities
Act of 1933, as amended) of any of the foregoing, shall have acquired beneficial
ownership of, or shall have acquired voting control over more than 70% of the
outstanding shares of the Company's voting capital stock (on a fully diluted
basis), unless the transaction pursuant to which such person, entity or
------
group acquired such beneficial ownership or control resulted from the original
issuance by the Company of shares of its voting capital stock and was approved
by at least a majority of directors who shall have been either members of the
Board on the date of this Agreement or members of the Board for at least twelve
(12) months prior to the date of this Agreement; or
(iv) the first day after the date of this Agreement when
directors are elected such that there shall have been a change in the
composition of the Board such that a majority of the Board shall have been
members of the Board for less than twelve (12) months, unless the nomination for
election of each new director who was not a director at the beginning of such
twelve (12) month period was approved by a vote of at least sixty percent (60%)
of the directors then still in office who were directors at the beginning of
such period; or
(v) the date upon which the Board determines (in its sole
discretion) that based on then current available information, the events
described in clause (iii) are reasonably likely to occur.
8. Confidential Information; Non-Compete.
-------------------------------------
(a) Confidential Information. Without the express prior written
------------------------
consent of the Company, Employee shall not disclose or make available to anyone
outside the Company, its subsidiaries or affiliated corporations or entities any
confidential or proprietary information of, or concerning, the Company,
including, without limitation, trade secrets, knowhow, customer lists,
inventions or other information not generally known to any competitor of the
Company, its subsidiaries or affiliated corporations or entities ("Confidential
Information"). Employee shall abide by this prohibition on disclosure of
Confidential Information during the Term of this Agreement and for one (1) year
commencing on the expiration or termination of the Term. Further, Employee
agrees that any Confidential
-4-
<PAGE>
Information developed or invented during the Term or any period of employment
preceding the Term shall be considered to be owned by the Company.
(b) Non-Compete. In consideration of the compensation and other
-----------
benefits payable to Employee hereunder, Employee agrees that he shall not,
without the prior written consent of the Company, engage in the point-of-care
diagnostics business ("Prohibited Business") during the Term (the "Non-
Compete"). The Non-Compete shall extend for one (1) year commencing on the
expiration or termination of the Term; provided, however, if the Term of this
-----------------
Agreement shall have continued for at least two (2) years from the date hereof,
the Non-Compete shall terminate simultaneously with the expiration or
termination of the Term. Employee shall be regarded as engaged in a Prohibited
Business if he engages as partner, owner, agent, representative, employee,
officer, director or consultant or participates, directly or indirectly, whether
through investment, partnership, license, joint venture, or otherwise, in any
Prohibited Business. Nothing set forth above shall be deemed to prevent
Employee from merely acquiring or owning five percent (5%) or less of any
entity, whether public or private, regardless of the business in which such
entity is engaged. Anything in this paragraph (b) to the contrary
notwithstanding, in the event of the termination of this Agreement by Employee
pursuant to paragraph (b) or (c) of Section 7, or in the event of the
termination of this Agreement by the Company other than for Cause, the Non-
Compete shall thereafter be null and void and of no further force or effect, and
the Company shall not have any right to extend the Non-Compete as set forth
above.
9. Work Situs and Relocation. Except for travel consistent with the
-------------------------
development of the Company's business, Employee shall not be required to perform
his duties under this Agreement outside of the Los Angeles metropolitan area or
any other area where the Company may choose to locate the business.
10. Termination of Prior Agreements. This Agreement expressly
-------------------------------
supersedes all agreements and understandings between the parties regarding the
subject matter hereof and any such agreement is terminated as of the date first
above written.
11. Renewal/Non-renewal. This Agreement shall be automatically
-------------------
extended annually on each July 30 without further action by the parties, for
three year terms unless either party shall, at least 60 days prior to the
expiration date or the expiration date as so extended, have given notice to the
other party that this Agreement shall not be so extended or otherwise terminate
this Agreement. After the first two years of employment, the Employee may
resign with at least 90 days notice subject to the discretion of the Board to
shorten the notice time.
12. Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the parties hereto, their respective legal representatives and
to any successor of the Company, which successor shall be deemed substituted for
the Company under the terms of this Agreement. As used in this Agreement, the
term "successor" shall include any person, firm,
-5-
<PAGE>
corporation or other business entity which at any time, whether by merger,
purchase or otherwise, acquires all or substantially all of the assets or
business of the Company.
13. Waiver of Breach. The waiver by the Company of a breach of any
----------------
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach.
14. Notices. Any notice required or permitted to be given hereunder
-------
shall be sufficient if in writing and if sent by registered or certified mail to
Employee at his residence or to the Company at its principal place of business.
15. Entire Agreement. This document contains the entire agreement of
----------------
the parties and may not be changed except in a writing signed by both parties.
16. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the Commonwealth of Pennsylvania as applied to
contracts executed and performed wholly within the Commonwealth of Pennsylvania
without regard to the conflict-of-law provisions thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
CARESIDE, INC.
By: /s/ Vic Stoughton
---------------------------------
Name:_______________________________
Title:______________________________
/s/ Jim Koch
------------------------------------
JAMES R. KOCH
-6-
<PAGE>
EXHIBIT 10.11
CARESIDE, INC.
1996 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
(AS AMENDED AND RESTATED)
EFFECTIVE SEPTEMBER 9, 1998
Section 1. Purposes.
--------
The purposes of the Plan are (a) to promote the long-term growth and
profitability of the Company by providing key personnel with incentive to
improve shareholder value; (b) to contribute to the growth and financial success
of the Company; and (c) to enable the Company to attract, retain and award the
best available persons for positions of substantial responsibility. The Plan is
intended to comply with the conditions and requirements for employee benefit
plans under Rule 16b-3, promulgated under Section 16 of the Exchange Act. The
Options issued pursuant to the Plan are intended to constitute either Incentive
Stock Options, or non-qualified stock options, as determined by the Committee,
or the Board, if no Committee has been appointed, at the time of Award. The
type of Options awarded will be specified in the Option Agreement between the
Company and the Optionee. The terms of this Plan shall be incorporated into the
Option Agreement to be executed by the Optionee.
Section 2. Definitions.
-----------
(a) "Administrator" shall be the Board or a Committee appointed by the
Board pursuant to Section 3 of the Plan, which shall administer the Plan.
(b) "Award" shall mean a grant of Options to an Employee pursuant to the
provisions of this Plan. Each separate grant of Options to an Employee and each
group of Options which matures on a separate date is treated as a separate
Award.
(c) "Board" shall mean the Board of Directors of the Company, as
constituted from time to time.
(d) "Change of Control" shall mean the happening of an event, which shall
be deemed to have occurred upon the earliest to occur of the following events:
(i) the date the stockholders of the Company (or the Board, if stockholder
action is not required) approve a plan or other arrangement pursuant to which
the Company will be dissolved or liquidated, or (ii) the date the stockholders
of the Company (or the Board, if stockholder action is not required) and the
stockholders of the other constituent corporations (or their respective boards
of directors, if and to the extent that stockholder action is not required) have
approved a definitive agreement to merge or consolidate the Company with or into
another corporation, other than, in either case, a merger or consolidation of
the Company in which holders of shares of the Company's voting capital stock
immediately prior to the merger or consolidation will have at least 30% of the
ownership of voting capital stock of the surviving corporation immediately after
the merger or
<PAGE>
consolidation (on a fully diluted basis), which voting capital stock is to be
held in the same proportion (on a fully diluted basis) as such holders'
ownership of voting capital stock of the Company immediately before the merger
or consolidation, or (iii) the date any entity, person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than
(A) the Company, or (B) any of its Subsidiaries, or (C) any of the holders of
the capital stock of the Company, as determined on the date that this Plan is
adopted by the Board, or (D) any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its Subsidiaries or (E) any
Affiliate (as such term is defined in Rule 405 promulgated under the Securities
Act) of any of the foregoing, shall have acquired beneficial ownership of, or
shall have acquired voting control over, more than 70% of the outstanding shares
of the Company's voting capital stock (on a fully diluted basis), unless the
transaction pursuant to which such person, entity or group acquired such
beneficial ownership or control resulted from the original issuance by the
Company of shares of its voting capital stock and was approved by at least a
majority of directors who shall have been either members of the Board on the
date that this Plan is adopted by the Board or members of the Board for at least
twelve (12) months prior to the date of such approval, or (iv) the first day
after the date of this Plan when directors are elected such that there shall
have been a change in the composition of the Board such that a majority of the
Board shall have been members of the Board for less than twelve (12) months,
unless the nomination for election of each new director who was not a director
at the beginning of such twelve (12) month period was approved by a vote of at
least sixty percent (60%) of the directors then still in office who were
directors at the beginning of such period, or (v) the date upon which the Board
determines (in its sole discretion) that based on then current available
information, the events described in clause (iii) are reasonably likely to
occur.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Committee" shall mean the Committee appointed by the Board in
accordance with Section 4 of the Plan, if one is appointed, in which event the
Committee shall possess the power and authority of the Board.
(g) "Company" shall mean CARESIDE, Inc., a Delaware corporation.
(h) "Common Stock" shall mean common stock of the Company, $.01 par value
per share.
(i) "Disability" or "Disabled" shall mean the inability of an Optionee to
perform his or her normal employment duties for the Company, its Parent, any of
its Subsidiaries or its successors, as the case may be, resulting from a mental
or physical illness, impairment or any other similar occurrence which can be
expected to result in death or which has lasted or can be expected to last for a
period of twelve (12) consecutive months, as determined by the Board; provided,
however, that a Disability shall not be determined to occur any earlier than it
would under the provisions of any employment agreement applicable to the
Optionee.
-2-
<PAGE>
(j) "Employee" shall mean any person, including officers and directors,
employed by the Company, its Parent, any of its Subsidiaries or its successors.
The payment of directors' fees by the Company, its Parent, any of its
Subsidiaries or its successors, as the case may be, shall not be sufficient to
constitute employment. Additionally, and notwithstanding the foregoing
sentence, solely for purposes of determining those persons eligible under the
Plan to be recipients of Awards of Options, which Options shall be limited to
non-qualified stock options, and not for the purpose of affecting the status of
the relationship between such person and the Company, the term "Employee" shall
include directors and independent contractors of and consultants to the Company.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" shall mean the fair market value of a share of
Common Stock, as determined pursuant to Section 8 hereof.
(m) "Grant Date" means the earlier of the date an award is authorized by
the Board or the date of the Company's annual shareholder's meeting.
(n) "Incentive Stock Option" shall mean an Option which is an incentive
stock option as described in Section 422 of the Code.
(o) "Non-Employee Director" shall have the meaning set forth in Rule 16b-
3(b)(3)(i) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and Exchange
Commission; provided, however, that the Administrator may, to the extent the
Administrator deems it necessary or desirable to comply with Section 162(m) of
the Code and applicable regulations thereunder, ensure that each Non-Employee
Director also qualifies as an "outside director" as that term is defined in the
regulations under Section 162(m) of the Code.
(p) "Option" shall mean an Incentive Stock Option or a non-qualified stock
option to purchase Shares that is awarded pursuant to the Plan.
(q) "Option Agreement" shall mean a written agreement Executed by the
Optionee and the Company in such form as the Board (subject to the terms and
conditions of this Plan) may from time to time approve evidencing and reflecting
the terms of an Option.
(r) "Optionee" shall mean an Employee to whom an Option is awarded.
(s) "Parent" shall mean a "parent corporation" whether now or hereafter
existing, as defined in Sections 424(e) and (g) of the Code.
-3-
<PAGE>
(t) "Plan" shall mean the CARESIDE, Inc. 1996 Incentive and Non-Qualified
Stock Option Plan, as amended from time to time.
(u) "Pool" shall mean the pool of shares of Common Stock subject to the
Plan, as described and set forth in Section 6 hereof.
(v) "Private Asset Sale" shall mean a transaction which constitutes a sale
of all or substantially all of the Company's assets, which transaction shall be
deemed to have occurred upon the date the stockholders of the Company (or the
Board, if stockholder action is not required) approve a definitive agreement to
sell or otherwise dispose of all or substantially all of the assets of the
Company.
(w) "Securities Act" shall mean the Securities Act of 1933, as amended.
(x) "Shares" shall mean shares of Common Stock contained in the Pool, as
adjusted in accordance with Section 9 of the Plan.
(y) "Stock Purchase Agreement" shall mean an agreement in such form as the
Board (subject to the terms and conditions of this Plan) may from time to time
approve, which an Optionee shall be required to execute as a condition of
purchasing Shares upon the exercise of an Option.
(z) "Subsidiary" shall mean a subsidiary corporation, whether now or
hereafter existing, as defined in Sections 424(f) and (g) of the Code.
Section 3. Participation.
-------------
(a) Employees, Consultants and Independent Contractors. Options
--------------------------------------------------
may be granted at any time and from time to time to any Employee who shall be
selected by the Administrator; provided, however, that no further grants shall
be made under this Plan to directors when and if the Company adopts a separate
plan providing for options for directors. Any grant of Options may include or
exclude any Employee as the Administrator shall determine in its sole
discretion. Employees who are consultants, independent contractors or directors
not employed by the Company are eligible to be granted Non-Qualified Stock
Options under the Plan but are not eligible to be granted Incentive Stock
Options under the Plan.
(b) Directors Automatic Awards. Awards of Options to directors
--------------------------
of the Company shall be granted, without any further action by the Committee, as
follows. Upon the Grant Date, each director of the Company who is a
Disinterested Person shall receive an Award of a non-qualified stock Option to
purchase 11,250 Shares. The Option Price shall be the price per Share payable
upon the exercise of any Option granted under this Section 3(b) shall be 100% of
the Fair Market Value of such Share on the Grant Date.
-4-
<PAGE>
Section 4. Administration.
--------------
(a) Procedure. The Plan shall be administered by the Board or a Committee
---------
consisting of not less than two (2) persons appointed by the Board, which shall
be the Administrator. In the event the Company has a class of equity securities
registered under the Exchange Act, the Board shall administer the Plan; provided
that it may appoint a Committee in accordance with Section 4(b).
(b) Committees. If a Committee is appointed by the Board, then the
----------
Committee shall possess the power and authority of the Board in administering
the Plan on behalf of the Board, subject to the terms and conditions as the
Board may prescribe. Members of the Committee shall be members of the Board and
shall serve for such period of time as the Board may determine. From time to
time, the Board may increase the size the Committee and appoint additional
members thereto, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan. Notwithstanding
the foregoing, in the event the Company has a class of equity securities
registered under the Exchange Act, the Committee shall be composed solely of two
(2) or more Non-Employee Directors.
(c) Powers of the Administrator. Subject to the provisions of the Plan
---------------------------
(and, in the case of the Committee, the specific duties delegated by the Board
to such Committee), the Administrator shall have the authority, in its sole
discretion: (i) to make Awards of Options; (ii) to determine, upon review of
relevant information and in accordance with Section 8 of the Plan, the Fair
Market Value per Share; (iii) to determine the exercise price of the Options to
be awarded in accordance with Sections 7 and 8 of the Plan; (iv) to determine
the Employees to whom, and the time or times at which, Options shall be awarded,
and the number of Shares to be subject to each Option; (v) to prescribe, amend
and rescind rules and regulations relating to the Plan; (vi) to determine the
terms and provisions of each Option awarded under the Plan, each Option
Agreement and each Stock Purchase Agreement (which need not be identical with
the terms of other Options, Option Agreements and Stock Purchase Agreements)
and, with the consent of the Optionee, to modify or amend an outstanding Option,
Option Agreement or Stock Purchase Agreement; (vii) to accelerate the vesting
or exercise date of any Option; (viii) to determine whether any Optionee will
be required to execute a stock repurchase agreement or other agreement as a
condition to the exercise of an Option, and to determine the terms and
provisions of any such agreement (which need not be identical with the terms of
any other such agreement) and, with the consent of the Optionee, to amend any
such agreement; (ix) to interpret the Plan or any agreement entered into with
respect to the Award or exercise of Options; (x) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the Award
of an Option previously awarded by the Board or to take such other actions as
may be necessary or appropriate with respect to the Company's rights pursuant to
Options or agreements relating to the Award or exercise thereof; and (xi) to
make such other determinations and establish such other procedures as it deems
necessary or advisable for the administration of the Plan.
-5-
<PAGE>
(d) Effect of the Board's or Committee's Decision. All decisions,
---------------------------------------------
determinations and interpretations of the Board or the Committee shall be final
and binding with respect to all Options and Optionees.
(e) Limitation of Liability. Notwithstanding anything herein to the
-----------------------
contrary (with the exception of Section 30 hereof), no member of the Board or of
the Committee shall be liable for any good faith determination, act or failure
to act in connection with the Plan or any Option awarded hereunder.
Section 5. Eligibility.
-----------
Options may be awarded only to Employees. An Employee who has been awarded
an Option, if he or she is otherwise eligible, may be awarded additional
Options.
Section 6. Stock Subject to the Plan.
-------------------------
Subject to the provisions of Section 9 of the Plan, the maximum aggregate
number of Shares which may be awarded and sold under the Plan is 1,500,000
(collectively, the "Pool"). The maximum aggregate number of Shares with respect
to which Options may be granted under the Plan to any Employee under the Plan
during any calendar year is 50,000 Shares. Options awarded from the Pool may be
either Incentive Stock Options or non-qualified stock options, as determined by
the Board. If an Option should expire or become unexercisable for any reason
without having been exercised in full, or, if Shares are subsequently
repurchased by the Company, the unpurchased or repurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, return to the
Plan and become available for future Awards under the Plan.
Section 7. Terms and Conditions of Options Awarded to Employees,
-----------------------------------------------------
Consultants and Independent Contractors.
- ---------------------------------------
Each Option awarded pursuant to the Plan shall be authorized by the Board
and shall be evidenced by an Option Agreement in such form as the Board may from
time to time determine. Each Option Agreement shall incorporate by reference
all other terms and conditions of the Plan, including the following terms and
conditions:
(a) Number of Shares. The number of Shares subject to the Option, which
----------------
may not include fractional Shares.
(b) Option Price. The price per Share payable on the exercise of any
------------
Option which is an Incentive Stock Option shall be stated in the Option
Agreement and shall be no less than the Fair Market Value per share of the
Common Stock on the date such Option is awarded, without regard to any
restriction other than a restriction which by its terms will never lapse.
-6-
<PAGE>
Notwithstanding the foregoing, if an Option which is an Incentive Stock Option
shall be awarded under this Plan to any Employee who, at the time of the Award
of such Option, owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of the stock of the Company (or its Parent
or Subsidiaries), the price per Share payable upon exercise of such Option shall
be no less than one hundred ten percent (110%) of the Fair Market Value of the
stock on the date such Option is awarded. The price per Share payable on the
exercise of an Option which is a non-qualified stock option shall be stated in
the Option Agreement.
(c) Consideration. The consideration to be paid for the Shares to be
-------------
issued upon the exercise of an Option, including the method of payment, shall be
determined by the Board and may consist entirely of cash, check or shares of
Common Stock having a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, or any combination of such methods of payment, or such other
consideration and method of payment permitted under any laws to which the
Company is subject and which is approved by the Board, provided that shares of
Common Stock may be surrendered in satisfaction of the exercise price only if
the Optionee has held such shares for more than six months (or such shorter time
as shall not, in the Board's sole discretion have an adverse effect on the
Company's financial statements). In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company. If the
consideration for the exercise of an Option is the surrender of previously
acquired and owned shares of Common Stock, the Optionee will be required to make
representations and warranties satisfactory to the Company regarding his title
to the shares of Common Stock used to effect the purchase, including without
limitation, representations and warranties that the Optionee has good and
marketable title to such shares of Common Stock free and clear of any and all
liens, encumbrances, charges, equities, claims, security interests, options or
restrictions, and has full power to deliver such shares of Common Stock without
obtaining the consent or approval of any person or governmental authority other
than those which have already given consent or approval in a manner satisfactory
to the Company. Further, to the extent that Optionee surrenders Common Stock
previously acquired pursuant to an Incentive Stock Option, the Optionee will be
required (i) to certify that the applicable holding period with respect thereto
required for favorable tax treatment under Section 422 of the Code has been met
or (ii) to acknowledge the income tax consequences in the event the holding
period has not been met. The value of the shares of Common Stock used to effect
the purchase shall be the Fair Market Value of such shares of Common Stock on
the date of exercise as determined by the Board in its sole discretion,
exercised in good faith.
(d) Form of Option. The Option Agreement will state whether the Option
--------------
awarded is an Incentive Stock Option or a non-qualified stock Option, and will
constitute a binding determination as to the form of Option awarded.
(e) Exercise of Options. Any Option awarded hereunder shall be exercisable
-------------------
only after it shall have vested in accordance with the Plan and then only at
such times and under such conditions as may be determined by the Board and as
shall be permissible under the terms
-7-
<PAGE>
of the Plan, including performance criteria with respect to the Company and/or
the Optionee, and as shall be permissible under the terms of the Plan.
An Option may be exercised in accordance with the provisions of this Plan
as to all or any portion of the Shares then exercisable under an Option from
time to time during the term of the Option. An Option may not be exercised
solely for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company at its principal executive office in
accordance with the terms of the Option Agreement by the person entitled to
exercise the Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company, accompanied by an executed
Stock Purchase Agreement and any other agreements required by the terms of the
Plan and/or Option Agreement. Full payment may consist of such consideration
and method of payment allowable under Section 7 of the Plan. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the Option is exercised, except as provided in Section 9 of the
Plan.
As soon as practicable after any proper exercise of an Option in accordance
with the provisions of the Plan, the Company shall, without transfer or issue
tax to the Optionee, deliver to the Optionee at the principal executive office
of the Company or such other place as shall be mutually agreed upon between the
Company and the Optionee, a certificate or certificates representing the Shares
for which the Option shall have been exercised. The time of issuance and
delivery of the certificate(s) representing the Shares for which the Option
shall have been exercised may be postponed by the Company for such period as may
be required by the Company, with reasonable diligence, to comply with any
applicable listing requirements of any national or regional securities exchange
or any law or regulation applicable to the issuance or delivery of such Shares.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for Award under the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(f) Term and Vesting of Options.
---------------------------
(i) Except as set forth below, options granted pursuant to each Award shall
vest over a five (5) year period, at a rate of twenty percent (20%) each year.
In addition to the time vesting specified in the preceding sentence, the Board
or Committee also may impose performance vesting conditions as specified in
individual option agreements, and may in its discretion provide for an outside
vesting date for such options in the event such performance vesting criteria are
not met. Notwithstanding the preceding sentences, (A) Options awarded pursuant
to Section 3(b) hereunder shall be fully vested at grant; (B) the initial grant
of Options to any person employed by the Company to serve in any of the
following capacities may vest over a three (3) year period, at a rate of one-
third each year: Chief Operating Officer, Chief
-8-
<PAGE>
Financial Officer and any other Vice President approved by the Board; (C)
Options awarded to persons or entities providing consulting services to the
Company as independent contractors may have such vesting provisions as the Board
or the Committee shall determine; such determination may take into
consideration whether the grant of Options is being made in lieu of the receipt
of cash compensation from the Company; and (D) selected employees of the
Company may be awarded Options, which shall be fully vested at grant, to
purchase up to an aggregate of 150,000 shares of the Company's Common Stock.
(ii) Vesting shall be accelerated, and Optionees shall become fully vested
in any and all Awards under the Plan, upon the occurrence of any one of the
following events: (A) a Change of Control; (B) a Private Sale which results in
a valuation of the Company of forty million dollars ($40,000,000) or more; (C)
the Optionee's death or Disability while in the employ of or engagement by the
Company; or (D) the retirement of the Optionee from the employ of the Company at
or after age 65; provided, however, that vesting shall not be accelerated in the
-----------------
event of a Change of Control, Private Sale, death, Disability or retirement with
respect to that portion of any Option which is subject to performance vesting
criteria which have not been satisfied as of the date of such event.
(iii) Notwithstanding any other provision of this Plan, no Incentive Stock
Option shall be (A) awarded under this Plan after ten (10) years from the date
on which this Plan is adopted by the Board, or (B) exercisable more than ten
(10) years from the date of Award; provided, however, that if an Incentive Stock
Option shall be awarded under this Plan to any Employee who, at the time of the
Award of such Option, owns stock possessing more than ten percent (10%) of the
total combined voting power for all classes of the stock of the Company (or its
Parent or Subsidiaries), the foregoing clause (B) shall be deemed modified by
substituting "five (5) years" for the term "ten (10) years" that appears
therein.
(iv) No Option awarded to any Optionee shall be treated as an Incentive
Stock Option to the extent such Option would cause the aggregate Fair Market
Value of all Shares with respect to which Incentive Stock Options are
exercisable by such Optionee for the first time during any calendar year
(determined as of the date of Award of each such Option) to exceed $100,000.
For purposes of determining whether an Incentive Stock Option would cause such
aggregate Fair Market Value to exceed the $100,000 limitation, such Incentive
Stock Options shall be taken into account in the order awarded. For purposes of
this subsection, Incentive Stock Options include all incentive stock options
under all plans of the Company and its Parent and Subsidiaries that are
incentive stock option plans as described in Section 422 of the Code. Options
awarded hereunder shall mature and become exercisable in whole or in part, in
accordance with such vesting schedule as the Board shall determine, which
schedule shall be stated in the Option Agreement. Options may be exercised in
any order elected by the Optionee whether or not the Optionee holds any
unexercised Options under this Plan or any other plan of the Company.
-9-
<PAGE>
(g) Termination of Options.
----------------------
(i) Unless sooner terminated as provided in this Plan, each Option
shall be exercisable for the period of time as shall be determined by the Board
and set forth in the Option Agreement, and shall be void and unexercisable
thereafter.
(ii) Except as otherwise provided herein or in the Option Agreement,
upon the termination of the Optionee's employment or other relationship with the
Company for any reason, Options exercisable on the date of termination of
employment or such other relationship shall be exercisable by the Optionee (or
in the case of the Optionee's death subsequent to termination of employment or
such other relationship, by the Optionee's executor(s) or administrator(s)) for
a period of three (3) months from the date of the Optionee's termination of
employment or such other relationship.
(iii) Upon the Disability or death of an Optionee while in the employ
of or engagement by the Company, Options held by such Optionee which are
exercisable on the date of Disability or death shall be exercisable for a period
of twelve (12) months commencing on the date of the Optionee's Disability or
death, by the Optionee or his legal guardian or representative or, in the case
of death, by his executor(s) or administrator(s); provided, however, that if
such disabled Optionee shall commence any employment or engagement during such
one (1) year period with or by a competitor of the Company (including, but not
limited to, full or part-time employment or independent consulting work), as
determined solely in the judgment of the Board, all Options held by such
Optionee which have not yet been exercised shall terminate immediately upon the
commencement thereof.
(iv) Options may be terminated at any time by agreement between the
Company and the Optionee.
(v) Forfeiture. Notwithstanding any other provision of this Plan, if
----------
the Optionee's employment or engagement is terminated for "cause" (as such term
is defined in the Optionee's employment agreement or non-disclosure agreement
with the Company, if any, and if the Optionee is not a party to any such
agreement, then, as such term is defined in the Stock Purchase Agreement) or if
the Board makes a determination that the Optionee (i) has engaged in any type of
disloyalty to the Company, including without limitation, fraud, embezzlement,
theft, or dishonesty in the course of his employment or engagement, or has
otherwise breached any fiduciary duty owed to the Company, or (ii) has been
convicted of a felony or (iii) has disclosed trade secrets or confidential
information of the Company or (iv) has breached any agreement with or duty to
the Company in respect of confidentiality, non-disclosure, non-competition or
otherwise, all unexercised Options shall terminate upon the date of such a
finding, or, if earlier, the date of termination of employment or engagement for
"cause." In the event of such a finding, in addition to immediate termination of
all unexercised Options, the Optionee shall forfeit all Shares for which the
Company has not yet delivered share certificates to the Optionee and the Company
shall refund to the Optionee the Option purchase price paid to it, if any, in
the same
-10-
<PAGE>
form as it was paid (or in cash at the Company's discretion). Notwithstanding
anything herein to the contrary, the Company may withhold delivery of share
certificates pending the resolution of any inquiry that could lead to a finding
resulting in forfeiture.
Section 8. Determination of Fair Market Value of Common Stock.
---------------------------------------------------
(a) Except to the extent otherwise provided in this Section 8, the Fair
Market Value of a share of Common Stock shall be determined by the Board in its
sole discretion.
(b) Notwithstanding the provisions of Section 8(a), in the event that
shares of Common Stock are traded in the over-the-counter market, the Fair
Market Value of a share of Common Stock, other than for purposes of determining
the price per Share payable on the exercise of an Option which is an Incentive
Stock Option, shall be the average of the bid and asked prices for a share of
Common Stock for a period of ten (10) consecutive trading days ending on the
relevant valuation date as reported in The Wall Street Journal (or, if not so
-----------------------
reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotations ("NASDAQ") System). In the event shares of Common
Stock are listed on a national or regional securities exchange or traded through
the NASDAQ National Market, the Fair Market Value of a share of Common Stock
shall be the average of the closing price for a share of Common Stock on the
exchange or on the NASDAQ National Market, as reported in The Wall Street
---------------
Journal for a period of ten (10) consecutive trading days ending on the relevant
- -------
valuation date.
(c) Notwithstanding the provisions of Section 8(a), in the event that
shares of Common Stock are traded in the over-the-counter market, the Fair
Market Value of a share of Common Stock for purposes of determining the price
per Share payable on the exercise of an Option which is an Incentive Stock
Option shall be determined by the Board in its sole discretion.
Section 9. Adjustments.
-----------
(a) Subject to required action by the stockholders, if any, the number of
Shares as to which Options may be awarded under this Plan and the number of
Shares subject to outstanding Options and the option prices thereof shall be
adjusted proportionately for any increase or decrease in the number of
outstanding shares of Common Stock of the Company resulting from stock splits,
reverse stock splits, stock dividends, reclassifications and recapitalizations.
(b) No fractional Shares shall be issuable on account of any action
aforesaid, and the aggregate number of Shares into which Shares then covered by
an Option, when changed as the result of such action, shall be reduced to the
number of whole Shares resulting from such action, and any right to a fractional
share shall be satisfied in cash, based on the Fair Market Value thereof.
-11-
<PAGE>
Section 10. Rights as a Stockholder.
-----------------------
The Optionee shall have no rights as a stockholder of the Company and shall
not have the right to vote nor receive dividends with respect to any Shares
subject to an Option until such Option has been exercised and a certificate with
respect to the Shares purchased upon such exercise has been issued to him.
Section 11. Time of Awarding Options.
------------------------
The date of Award of an Option shall, for all purposes, be the date on
which the Board makes the determination awarding such Option. Notice of the
determination shall be given to each Employee to whom an Option is so awarded
within a reasonable time after the date of such Award.
Section 12. Modification, Extension and Renewal of Option.
---------------------------------------------
Subject to the terms and conditions of the Plan, the Board may modify,
extend or renew an Option, or accept the surrender of an Option (to the extent
not theretofore exercised). Notwithstanding the foregoing, (a) no modification
of an Option which adversely affects the Optionee shall be made without the
consent of the Optionee, and (b) no Incentive Stock Option may be modified,
extended or renewed if such action would cause it to cease to be an "incentive
stock option" as described in Section 422 of the Code.
Section 13. Purchase for Investment and Other Restrictions.
----------------------------------------------
The issuance of Shares on the exercise of an Option shall be conditioned on
obtaining such appropriate representations, warranties, restrictions and
agreements of the Optionee as set forth in the applicable Stock Purchase
Agreement. Among other representations, warranties, restrictions and
agreements, the Optionee shall represent and agree that the purchase of Shares
under the applicable Option Agreement shall be for investment, and not with a
view to the public resale or distribution thereof, unless the Shares subject to
the Option are registered under the Securities Act and the transfer or sale of
such Shares complies with all other laws, rules and regulations applicable
thereto. Unless the Shares are registered under the Securities Act, the
Optionee shall acknowledge that the Shares purchased on exercise of the Option
are not registered under the Securities Act and may not be sold or otherwise
transferred unless the Shares have been registered under the Securities Act in
connection with the sale or other transfer thereof, or that counsel satisfactory
to the Company has issued an opinion satisfactory to the Company that the sale
or other transfer of such Shares is exempt from registration under the
Securities Act, and unless said sale or transfer is in compliance with all other
applicable laws, rules and regulations, including all applicable federal and
state securities laws, rules and regulations. Additionally, the Shares, when
issued upon the exercise of an Option, shall be subject to other transfer
restrictions, rights of first refusal and rights of repurchase as set forth in
or incorporated
-12-
<PAGE>
by reference into the applicable Stock Purchase Agreement. The certificates
representing the Shares shall contain the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SHARES HAVE NOT BEEN ACQUIRED WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED
OF, BY GIFT OR OTHERWISE, OR IN ANY WAY ENCUMBERED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS, OR
A SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO CARESIDE, INC. THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS. MOREOVER, THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO AND RESTRICTED BY THE PROVISIONS OF A CERTAIN STOCK
PURCHASE AND RESTRICTION AGREEMENT BETWEEN CARESIDE, INC. AND THE
STOCKHOLDER, A COPY OF WHICH AGREEMENT WILL BE FURNISHED BY CARESIDE,
INC. UPON WRITTEN REQUEST AND WITHOUT CHARGE, AND ALL OF THE
PROVISIONS OF SUCH AGREEMENT ARE INCORPORATED BY REFERENCE IN THIS
CERTIFICATE.
Section 14. Transferability.
---------------
No Option shall be assignable or transferable otherwise than by will
or by the laws of descent and distribution. During the lifetime of the
Optionee, his Options shall be exercisable only by him, or, in the event of his
legal incapacity or Disability, by his legal guardian or representative.
Section 15. Other Provisions.
----------------
The Option Agreement and Stock Purchase Agreement may contain such
other provisions as the Board in its discretion deems advisable and which are
not inconsistent with the provisions of this Plan, including, without
limitation, restrictions upon or conditions precedent to the exercise of the
Option.
Section 16. Amendment of the Plan.
---------------------
Insofar as permitted by law and the Plan, the Board may from time to
time suspend, terminate or discontinue the Plan or revise or amend it in any
respect whatsoever with
-13-
<PAGE>
respect to any Shares at the time not subject to an Option; provided, however,
that without approval of the stockholders, no such revision or amendment may
change the aggregate number of Shares for which Options may be awarded
hereunder, change the designation of the class of Employees eligible to receive
Options or decrease the price at which Options may be awarded.
Any other provision of this Section 16 notwithstanding, the Board
specifically is authorized to adopt any amendment to this Plan deemed by the
Board to be necessary or advisable to assure that the Incentive Stock Options or
the non-qualified stock Options available under the Plan continue to be treated
as such, respectively, under all applicable laws.
Section 17. Application of Funds.
--------------------
The proceeds received by the Company from the sale of Shares pursuant
to the exercise of Options shall be used for general corporate purposes.
Section 18. No Obligation to Exercise Option.
--------------------------------
The awarding of an Option shall impose no obligation upon the Optionee
to exercise such Option.
Section 19. Approval of Stockholders.
------------------------
This Plan shall become effective on the date that it is adopted by the
Board; provided, however, that it shall become limited to a non-qualified stock
option plan if it is not approved by the holders of a majority of the Company's
outstanding voting stock within one year (365 days) of its adoption by the
Board. The Board may award Options hereunder prior to approval of the Plan or
any material amendments thereto by the holders of a majority of the Company's
outstanding voting stock; provided, however, that any and all Options so awarded
automatically shall be converted into non-qualified stock options if the Plan is
not approved by such stockholders within 365 days of its adoption or material
amendment.
Section 20. Conditions Upon Issuance of Shares.
----------------------------------
(a) Options awarded under the Plan are conditioned upon the Company
obtaining any required permit or order from appropriate governmental agencies,
authorizing the Company to issue such Options and Shares issuable upon the
exercise thereof.
(b) Shares shall not be issued pursuant to the exercise of an Option
unless the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
-14-
<PAGE>
(c) As a condition to the exercise of an Option, the Board may require
the person exercising such Option to execute an agreement with, and/or may
require the person exercising such Option to make any representation and/or
warranty to the Company as may be, in the judgment of counsel to the Company,
required under applicable law or regulation, including but not limited to a
representation and warranty that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation and
warranty is appropriate under any of the aforementioned relevant provisions of
law.
Section 21. Reservation of Shares.
---------------------
The Company, during the term of this Plan, shall at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
The Company, during the term of this Plan, shall use its best efforts
to seek to obtain from appropriate regulatory agencies any requisite
authorization in order to issue and sell such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain from any such regulatory agency having jurisdiction the
requisite authorization(s) deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any Shares hereunder, or the inability of the
Company to confirm to its satisfaction that any issuance and sale of any Shares
hereunder will meet applicable legal requirements, shall relieve the Company of
any liability with respect to the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
Section 22. Stock Option and Stock Purchase Agreements.
------------------------------------------
Options shall be evidenced by an Option Agreement in such form or
forms as the Board shall approve from time to time. Upon the exercise of an
Option, the Optionee shall sign and deliver to the Company a Stock Purchase
Agreement in such form or forms as the Board shall approve from time to time.
Section 23. Taxes, Fees, Expenses and Withholding of Taxes.
----------------------------------------------
(a) The Company shall pay all original issue and transfer taxes (but
not income taxes, if any) with respect to the Award of Options and/or the issue
and transfer of Shares pursuant to the exercise thereof, and all other fees and
expenses necessarily incurred by the Company in connection therewith, and will
from time to time use its best efforts to comply with all laws and regulations
which, in the opinion of counsel for the Company, shall be applicable thereto.
(b) The Award of Options hereunder and the issuance of Shares pursuant
to the exercise thereof is conditioned upon the Company's reservation of the
right to withhold in accordance with any applicable law, from any compensation
or other amounts payable to the
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<PAGE>
Optionee, any taxes required to be withheld under federal, state or local law as
a result of the Award or exercise of such Option or the sale of the Shares
issued upon exercise thereof. To the extent that compensation or other amounts,
if any, payable to the Optionee is insufficient to pay any taxes required to be
so withheld, the Company may, in its sole discretion, require the Optionee (or
such other person entitled herein to exercise the Option), as a condition of the
exercise of an Option, to pay in cash to the Company an amount sufficient to
cover such tax liability or otherwise to make adequate provision for the
Company's satisfaction of its withholding obligations under federal, state and
local law.
Section 24. Notices.
-------
Any notice to be given to the Company pursuant to the provisions of
this Plan shall be addressed to the Company in care of its Secretary (or such
other person as the Company may designate from time to time) at its principal
executive office, and any notice to be given to an Optionee shall be delivered
personally or addressed to him or her at the address given beneath his or her
signature on his or her Option Agreement, or at such other address as such
Optionee or his or her permitted transferee (upon the transfer of the Shares)
may hereafter designate in writing to the Company. Any such notice shall be
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service. It shall be the
obligation of each Optionee and each permitted transferee holding Shares
purchased upon exercise of an Option to provide the Secretary of the Company, by
letter mailed as provided herein, with written notice of his or her direct
mailing address.
Section 25. No Enlargement of Employee Rights.
---------------------------------
This Plan is purely voluntary on the part of the Company, and the
continuance of the Plan shall not be deemed to constitute a contract between the
Company and any Employee, or to be consideration for or a condition of the
employment or service of any Employee. Nothing contained in this Plan shall be
deemed to give any Employee the right to be retained in the employ or service of
the Company, its Parent, any Subsidiary or a successor corporation, or to
interfere with the right of the Company or any such corporation to discharge or
retire any Employee thereof at any time. No Employee shall have any right to or
interest in Options authorized hereunder prior to the Award thereof to such
Employee, and upon such Award he shall have only such rights and interests as
are expressly provided herein, subject, however, to all applicable provisions of
the Company's Certificate of Incorporation, as the same may be amended from time
to time.
-16-
<PAGE>
Section 26. Information to Optionees.
------------------------
The Company, upon request, shall provide without charge to each
Optionee copies of such annual and periodic reports as are provided by the
Company to its stockholders generally.
Section 27. Availability of Plan.
--------------------
A copy of this Plan shall be delivered to the Secretary of the Company
and shall be shown by him to any eligible person making reasonable inquiry
concerning it.
Section 28. Invalid Provisions.
------------------
In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein as invalid or unenforceable, and all such other provisions
shall be given full force and effect to the same extent as though the invalid or
unenforceable provision was not contained herein.
Section 29. Applicable Law.
--------------
This Plan shall be governed by and construed in accordance with the
laws of the State of Delaware.
Section 30. Board Action.
------------
Notwithstanding anything to the contrary set forth in this Plan, any
and all actions of the Board or Committee, as the case may be, taken under or in
connection with this Plan and any agreements, instruments, documents,
certificates or other writings entered into, executed, granted, issued and/or
delivered pursuant to the terms hereof, shall be subject to and limited by any
and all votes, consents, approvals, waivers or other actions of all or certain
stockholders of the Company or other persons required pursuant to (i) the
Company's Certificate of Incorporation (as the same may be amended and/or
restated from time to time), (ii) the Company's Bylaws (as the same may be
amended and/or restated from time to time), and (iii) any agreement, instrument,
document or writing now or hereafter existing, between or among the Company and
its stockholders or other persons (as the same may be amended from time to
time).
-17-
<PAGE>
EXHIBIT 10.12
CARESIDE, INC.
1996 KEY EXECUTIVE STOCK OPTION PLAN
(AS AMENDED AND RESTATED)
EFFECTIVE SEPTEMBER 9, 1998
Section 1. Purposes.
--------
The purposes of the Plan are (a) to promote the long-term growth and
profitability of the Company by providing key executives with incentive to
improve shareholder value; (b) to contribute to the growth and financial success
of the Company; and (c) to enable the Company to attract, retain and award the
best available persons for positions of substantial responsibility. The Plan is
intended to comply with the conditions and requirements for employee benefit
plans under Rule 16b-3, promulgated under Section 16 of the Exchange Act. The
Options issued pursuant to the Plan are intended to constitute either Incentive
Stock Options, or non-qualified stock options, as determined by the Committee,
or the Board, if no Committee has been appointed, at the time of Award. The type
of Options awarded will be specified in the Option Agreement between the Company
and the Optionee. The terms of this Plan shall be incorporated into the Option
Agreement to be executed by the Optionee.
Section 2. Definitions.
-----------
(a) "Administrator" shall be the Board or a Committee appointed by
the Board pursuant to Section 4 of the Plan, which shall administer the Plan.
(b) "Award" shall mean a grant of Options to an Employee pursuant to
the provisions of this Plan. Each separate grant of Options to an Employee and
each group of Options which matures on a separate date is treated as a separate
Award.
(c) "Board" shall mean the Board of Directors of the Company, as
constituted from time to time.
(d) "Change of Control" shall mean the happening of an event, which
shall be deemed to have occurred upon the earliest to occur of the following
events: (i) the date the stockholders of the Company (or the Board, if
stockholder action is not required) approve a plan or other arrangement pursuant
to which the Company will be dissolved or liquidated, or (ii) the date the
stockholders of the Company (or the Board, if stockholder action is not
required) and the stockholders of the other constituent corporations (or their
respective boards of directors, if and to the extent that stockholder action is
not required) have approved a definitive agreement to merge or consolidate the
Company with or into another corporation, other than, in either case, a merger
or consolidation of the Company in which holders of shares of the Company's
voting capital stock immediately prior to the merger or consolidation will have
at least 30% of the ownership of voting capital stock of the surviving
corporation immediately after the merger or
<PAGE>
consolidation (on a fully diluted basis), which voting capital stock is to be
held in the same proportion (on a fully diluted basis) as such holders'
ownership of voting capital stock of the Company immediately before the merger
or consolidation, or (iii) the date any entity, person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than
(A) the Company, or (B) any of its Subsidiaries, or (C) any of the holders of
the capital stock of the Company, as determined on the date that this Plan is
adopted by the Board, or (D) any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its Subsidiaries or (E) any
Affiliate (as such term is defined in Rule 405 promulgated under the Securities
Act) of any of the foregoing, shall have acquired beneficial ownership of, or
shall have acquired voting control over, more than 70% of the outstanding shares
of the Company's voting capital stock (on a fully diluted basis), unless the
transaction pursuant to which such person, entity or group acquired such
beneficial ownership or control resulted from the original issuance by the
Company of shares of its voting capital stock and was approved by at least a
majority of directors who shall have been either members of the Board on the
date that this Plan is adopted by the Board or members of the Board for at least
twelve (12) months prior to the date of such approval, or (iv) the first day
after the date of this Plan when directors are elected such that there shall
have been a change in the composition of the Board such that a majority of the
Board shall have been members of the Board for less than twelve (12) months,
unless the nomination for election of each new director who was not a director
at the beginning of such twelve (12) month period was approved by a vote of at
least sixty percent (60%) of the directors then still in office who were
directors at the beginning of such period, or (v) the date upon which the Board
determines (in its sole discretion) that based on then current available
information, the events described in clause (iii) are reasonably likely to
occur.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Committee" shall mean the Committee appointed by the Board in
accordance with Section 4 of the Plan, if one is appointed, in which event the
Committee shall possess the power and authority of the Board.
(g) "Company" shall mean CARESIDE, Inc., a Delaware corporation.
(h) "Common Stock" shall mean common stock of the Company, $.01 par
value per share.
(i) "Disability" or "Disabled" shall mean the inability of an
Optionee to perform his or her normal employment duties for the Company, its
Parent, any of its Subsidiaries or its successors, as the case may be, resulting
from a mental or physical illness, impairment or any other similar occurrence
which can be expected to result in death or which has lasted or can be expected
to last for a period of twelve (12) consecutive months, as determined by the
Board; provided, however, that a Disability shall not be determined to occur any
earlier than it would under the provisions of any employment agreement
applicable to the Optionee.
-2-
<PAGE>
(j) "Employee" shall mean key executive officers employed by the
Company, its Parent, any of its Subsidiaries or its successors.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" shall mean the fair market value of a share
of Common Stock, as determined pursuant to Section 8 hereof.
(m) "Incentive Stock Option" shall mean an Option which is an
incentive stock option as described in Section 422 of the Code.
(n) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and Exchange
Commission; provided, however, that the Administrator may, to the extent the
Administrator deems it necessary or desirable to comply with Section 162(m) of
the Code and applicable regulations thereunder, ensure that each Non-Employee
Director also qualifies as an "outside director" as that term is defined in the
regulations under Section 162(m) of the Code.
(o) "Option" shall mean an Incentive Stock Option or a non-qualified
stock option to purchase Shares that is awarded pursuant to the Plan.
(p) "Option Agreement" shall mean a written agreement executed by the
Optionee and the Company in such form as the Board (subject to the terms and
conditions of this Plan) may from time to time approve evidencing and reflecting
the terms of an Option.
(q) "Optionee" shall mean an Employee to whom an Option is awarded.
(r) "Parent" shall mean a "parent corporation" whether now or
hereafter existing, as defined in Sections 424(e) and (g) of the Code.
(s) "Plan" shall mean the CARESIDE, Inc. 1996 Key Executive Stock
Option Plan, as amended from time to time.
(t) "Pool" shall mean the pool of shares of Common Stock subject to
the Plan, as described and set forth in Section 6 hereof.
(u) "Private Asset Sale" shall mean a transaction which constitutes a
sale of all or substantially all of the Company's assets, which transaction
shall be deemed to have occurred upon the date the stockholders of the Company
(or the Board, if stockholder action is not required) approve a definitive
agreement to sell or otherwise dispose of all or substantially all of the assets
of the Company.
-3-
<PAGE>
(v) "Public Offering" shall mean the consummation of a firm
commitment underwritten public offering of equity securities of the Company
registered under the Securities Act.
(w) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(x) "Shares" shall mean shares of Common Stock contained in the Pool,
as adjusted in accordance with Section 9 of the Plan.
(y) "Stock Purchase Agreement" shall mean an agreement in such form
as the Board (subject to the terms and conditions of this Plan) may from time to
time approve, which an Optionee shall be required to execute as a condition of
purchasing Shares upon the exercise of an Option.
(z) "Subsidiary" shall mean a subsidiary corporation, whether now or
hereafter existing, as defined in Sections 424(f) and (g) of the Code.
Section 3. Participation.
-------------
Participants in the Plan shall be selected by the Board or the
Committee from the Employees (including Employees who also may be members of the
Board) of the Company, its Parent and its Subsidiaries or their successors. The
Board, or the Committee, may make Awards at any time and from time to time to
Employees on terms and conditions described in Section 7. Any Award may include
or exclude any Employee, as the Board or the Committee shall determine in its
sole discretion.
Section 4. Administration.
--------------
(a) Procedure. The Plan shall be administered by the Board or by a
---------
Committee consisting of not less than two (2) persons appointed by the Board,
which shall be the Administrator. In the event the Company has a class of equity
securities registered under the Exchange Act, the Board shall administer the
Plan; provided that it may appoint a Committee in accordance with Section 4(b).
(b) Committees. If a Committee is appointed by the Board, then the
----------
Committee shall possess the power and authority of the Board in administering
the Plan on behalf of the Board, subject to the terms and conditions as the
Board may prescribe. Members of the Committee shall be members of the Board and
shall serve for such period of time as the Board may determine. From time to
time, the Board may increase the size of the Committee and appoint additional
members thereto, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan. Notwithstanding
the foregoing, in the event the
-4-
<PAGE>
Company has a class of equity securities registered under the Exchange Act, the
Committee shall be composed solely of two (2) or more Non-Employee Directors.
(c) Powers of the Board. Subject to the provisions of the Plan, the
-------------------
Board or its Committee shall have the authority, in its discretion: (i) to make
Awards of Options; (ii) to determine, upon review of relevant information and in
accordance with Section 8 of the Plan, the Fair Market Value per Share; (iii) to
determine the exercise price of the Options to be awarded in accordance with
Sections 7 and 8 of the Plan; (iv) to determine the Employees to whom, and the
time or times at which, Options shall be awarded, and the number of Shares to be
subject to each Option; (v) to prescribe, amend and rescind rules and
regulations relating to the Plan; (vi) to determine the terms and provisions of
each Option awarded under the Plan, each Option Agreement and each Stock
Purchase Agreement (which need not be identical with the terms of other Options,
Option Agreements and Stock Purchase Agreements) and, with the consent of the
Optionee, to modify or amend an outstanding Option, Option Agreement or Stock
Purchase Agreement; (vii) to accelerate the vesting or exercise date of any
Option; (viii) to determine whether any Optionee will be required to execute a
stock repurchase agreement or other agreement as a condition to the exercise of
an Option, and to determine the terms and provisions of any such agreement
(which need not be identical with the terms of any other such agreement) and,
with the consent of the Optionee, to amend any such agreement; (ix) to interpret
the Plan or any agreement entered into with respect to the Award or exercise of
Options; (x) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the Award of an Option previously awarded by
the Board or to take such other actions as may be necessary or appropriate with
respect to the Company's rights pursuant to Options or agreements relating to
the Award or exercise thereof; and (xi) to make such other determinations and
establish such other procedures as it deems necessary or advisable for the
administration of the Plan.
(d) Effect of the Board's or Committee's Decision. All decisions,
---------------------------------------------
determinations and interpretations of the Board or the Committee shall be final
and binding with respect to all Options and Optionees.
(e) Limitation of Liability. Notwithstanding anything herein to the
-----------------------
contrary (with the exception of Section 30 hereof), no member of the Board or of
the Committee shall be liable for any good faith determination, act or failure
to act in connection with the Plan or any Option awarded hereunder.
-5-
<PAGE>
Section 5. Eligibility.
-----------
Options may be awarded only to Employees. An Employee who has been
awarded an Option, if he or she is otherwise eligible, may be awarded additional
Options.
Section 6. Stock Subject to the Plan.
-------------------------
Subject to the provisions of Section 9 of the Plan, the maximum
aggregate number of Shares which may be awarded and sold under the Plan is
1,500,000 (collectively, the "Pool"). Options awarded from the Pool may be
either Incentive Stock Options or non-qualified stock options, as determined by
the Board. The maximum aggregate number of Shares with respect to which Options
may be granted under the Plan to any Employee during any calendar year is 50,000
Shares. If an Option should expire or become unexercisable for any reason
without having been exercised in full, or, if Shares are subsequently
repurchased by the Company, the unpurchased or repurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, return to the
Plan and become available for future Awards under the Plan.
Section 7. Terms and Conditions of Options Awarded.
---------------------------------------
Each Option awarded pursuant to the Plan shall be authorized by the
Board and shall be evidenced by an Option Agreement in such form as the Board
may from time to time determine. Each Option Agreement shall incorporate by
reference all other terms and conditions of the Plan, including the following
terms and conditions:
(a) Number of Shares. The number of Shares subject to the Option,
----------------
which may not include fractional Shares.
(b) Option Price. The price per Share payable on the exercise of any
------------
Option which is an Incentive Stock Option shall be stated in the Option
Agreement and shall be no less than the Fair Market Value per share of the
Common Stock on the date such Option is awarded, without regard to any
restriction other than a restriction which by its terms will never lapse.
Notwithstanding the foregoing, if an Option which is an Incentive Stock Option
shall be awarded under this Plan to any Employee who, at the time of the Award
of such Option, owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of the stock of the Company (or its Parent
or Subsidiaries), the price per Share payable upon exercise of such Option shall
be no less than one hundred ten percent (110%) of the Fair Market Value of the
stock on the date such Option is awarded. The price per Share payable on the
exercise of an Option which is a non-qualified stock option shall be stated in
the Option Agreement.
(c) Consideration. The consideration to be paid for the Shares to be
-------------
issued upon the exercise of an Option, including the method of payment, shall be
determined by the Board and may consist entirely of cash, check or shares of
Common Stock having a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said
-6-
<PAGE>
Option shall be exercised, or any combination of such methods of payment, or
such other consideration and method of payment permitted under any laws to which
the Company is subject and which is approved by the Board, provided that shares
of Common Stock may be surrendered in satisfaction of the exercise price only if
the Optionee has held such shares for more than six months (or such shorter time
as shall not, in the Board's sole discretion have an adverse effect on the
Company's financial statements). In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company. If the
consideration for the exercise of an Option is the surrender of previously
acquired and owned shares of Common Stock, the Optionee will be required to make
representations and warranties satisfactory to the Company regarding his title
to the shares of Common Stock used to effect the purchase, including without
limitation, representations and warranties that the Optionee has good and
marketable title to such shares of Common Stock free and clear of any and all
liens, encumbrances, charges, equities, claims, security interests, options or
restrictions, and has full power to deliver such shares of Common Stock without
obtaining the consent or approval of any person or governmental authority other
than those which have already given consent or approval in a manner satisfactory
to the Company. Further, to the extent that Optionee surrenders Common Stock
previously acquired pursuant to an Incentive Stock Option, the Optionee will be
required (i) to certify that the applicable holding period with respect thereto
required for favorable tax treatment under Section 422 of the Code has been met
or (ii) to acknowledge the income tax consequences in the event the holding
period has not been met. The value of the shares of Common Stock used to effect
the purchase shall be the Fair Market Value of such shares of Common Stock on
the date of exercise as determined by the Board in its sole discretion,
exercised in good faith.
(d) Form of Option. The Option Agreement will state whether the
--------------
Option awarded is an Incentive Stock Option or a non-qualified stock Option, and
will constitute a binding determination as to the form of Option awarded.
(e) Exercise of Options. Any Option awarded hereunder shall be
-------------------
exercisable only after it shall have vested in accordance with the Plan and then
only at such times and under such conditions as may be determined by the Board
and as shall be permissible under the terms of the Plan, including performance
criteria with respect to the Company and/or the Optionee, and as shall be
permissible under the terms of the Plan.
An Option may be exercised in accordance with the provisions of
this Plan as to all or any portion of the Shares then exercisable under an
Option from time to time during the term of the Option. An Option may not be
exercised solely for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company at its principal executive office in
accordance with the terms of the Option Agreement by the person entitled to
exercise the Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company, accompanied by an executed
Stock Purchase Agreement and any other agreements required by
-7-
<PAGE>
the terms of the Plan and/or Option Agreement. Full payment may consist of such
consideration and method of payment allowable under Section 7 of the Plan. No
adjustment shall be made for a dividend or other right for which the record date
is prior to the date the Option is exercised, except as provided in Section 9 of
the Plan.
As soon as practicable after any proper exercise of an Option in
accordance with the provisions of the Plan, the Company shall, without transfer
or issue tax to the Optionee, deliver to the Optionee at the principal executive
office of the Company or such other place as shall be mutually agreed upon
between the Company and the Optionee, a certificate or certificates representing
the Shares for which the Option shall have been exercised. The time of issuance
and delivery of the certificate(s) representing the Shares for which the Option
shall have been exercised may be postponed by the Company for such period as may
be required by the Company, with reasonable diligence, to comply with any
applicable listing requirements of any national or regional securities exchange
or any law or regulation applicable to the issuance or delivery of such Shares.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for Award under the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(f) Term and Vesting of Options.
---------------------------
(i) In general, Options granted pursuant to each Award are
exercisable based on the performance of the Company. Fifty percent (50%) of each
Award is exercisable as of the date the Food and Drug Administration approves
the P1 Prototype. The remaining fifty percent (50%) of each Award is exercisable
as of the date it is determined that the gross revenues of the Company have
exceeded fifty million dollars ($50,000,000) in any fiscal year of the Company.
(ii) Vesting shall be accelerated, and Optionees shall become
fully vested in any and all Awards under the Plan upon (A) a Public Offering
which results in a valuation of the Company of forty million dollars
($40,000,000) or more, determined on the basis of the number of outstanding
Shares immediately preceding the Public Offering multiplied by the Public
Offering price per Share, (B) a Private Sale which results in a valuation of the
Company of forty million dollars ($40,000,000) or more, or (C) the occurrence of
a Change of Control. Further, vesting may be accelerated, in the sole discretion
of the Board, in the event an Optionee dies or becomes Disabled while still
employed by the Company.
(iii) In any event, each Option granted under the Plan shall
become exercisable nine (9) years after the date of grant if not already
otherwise vested, exercised or canceled under the terms of the Plan.
-8-
<PAGE>
(iv) Notwithstanding any other provision of this Plan, no
Incentive Stock Option shall be (A) awarded under this Plan after ten (10) years
from the date on which this Plan is adopted by the Board, or (B) exercisable
more than ten (10) years from the date of Award; provided, however, that if an
Incentive Stock Option shall be awarded under this Plan to any Employee who, at
the time of the Award of such Option, owns stock possessing more than ten
percent (10%) of the total combined voting power for all classes of the stock of
the Company (or its Parent or Subsidiaries), the foregoing clause (B) shall be
deemed modified by substituting "five (5) years" for the term "ten (10) years"
that appears therein.
(v) No Option awarded to any Optionee shall be treated as an
Incentive Stock Option to the extent such Option would cause the aggregate Fair
Market Value of all Shares with respect to which Incentive Stock Options are
exercisable by such Optionee for the first time during any calendar year
(determined as of the date of Award of each such Option) to exceed $100,000. For
purposes of determining whether an Incentive Stock Option would cause such
aggregate Fair Market Value to exceed the $100,000 limitation, such Incentive
Stock Options shall be taken into account in the order awarded. For purposes of
this subsection, Incentive Stock Options include all incentive stock options
under all plans of the Company and its Parent and Subsidiaries that are
incentive stock option plans as described in Section 422 of the Code. Options
awarded hereunder shall mature and become exercisable in whole or in part, in
accordance with such vesting schedule as the Board shall determine, which
schedule shall be stated in the Option Agreement. Options may be exercised in
any order elected by the Optionee whether or not the Optionee holds any
unexercised Options under this Plan or any other plan of the Company.
(g) Termination of Options.
----------------------
(i) Unless sooner terminated as provided in this Plan, each
Option shall be exercisable for the period of time as shall be determined by the
Board and set forth in the Option Agreement, and shall be void and unexercisable
thereafter.
(ii) Except as otherwise provided herein or in the Option
Agreement, upon the termination of the Optionee's employment with the Company
for any reason, Options exercisable on the date of termination of employment
shall be exercisable by the Optionee (or in the case of the Optionee's death
subsequent to termination of employment by the Optionee's executor(s) or
administrator(s)) for a period of three (3) months from the date of the
Optionee's termination of employment.
(iii) Upon the Disability or death of an Optionee while in the
employ of the Company, Options held by such Optionee which are exercisable on
the date of Disability or death shall be exercisable for a period of twelve (12)
months commencing on the date of the Optionee's Disability or death, by the
Optionee or his legal guardian or representative or, in the case of death, by
his executor(s) or administrator(s); provided, however, that if such disabled
Optionee shall commence any employment or engagement during such one (1) year
period with or
-9-
<PAGE>
by a competitor of the Company (including, but not limited to, full or part-time
employment or independent consulting work), as determined solely in the judgment
of the Board, all Options held by such Optionee which have not yet been
exercised shall terminate immediately upon the commencement thereof.
(iv) Options may be terminated at any time by agreement between
the Company and the Optionee.
(h) Forfeiture. Notwithstanding any other provision of this Plan, if
----------
the Optionee's employment or engagement is terminated for "cause" (as such term
is defined in the Optionee's employment agreement or non-disclosure agreement
with the Company, if any, and if the Optionee is not a party to any such
agreement, then, as such term is defined in the Stock Purchase Agreement) or if
the Board makes a determination that the Optionee (i) has engaged in any type of
disloyalty to the Company, including without limitation, fraud, embezzlement,
theft, or dishonesty in the course of his employment or engagement, or has
otherwise breached any fiduciary duty owed to the Company, or (ii) has been
convicted of a felony or (iii) has disclosed trade secrets or confidential
information of the Company or (iv) has breached any agreement with or duty to
the Company in respect of confidentiality, non-disclosure, non-competition or
otherwise, all unexercised Options shall terminate upon the date of such a
finding, or, if earlier, the date of termination of employment or engagement for
"cause". In the event of such a finding, in addition to immediate termination of
all unexercised Options, the Optionee shall forfeit all Shares for which the
Company has not yet delivered share certificates to the Optionee and the Company
shall refund to the Optionee the Option purchase price paid to it, if any, in
the same form as it was paid (or in cash at the Company's discretion).
Notwithstanding anything herein to the contrary, the Company may withhold
delivery of share certificates pending the resolution of any inquiry that could
lead to a finding resulting in forfeiture.
Section 8. Determination of Fair Market Value of Common Stock.
---------------------------------------------------
(a) Except to the extent otherwise provided in this Section 8, the
Fair Market Value of a share of Common Stock shall be determined by the Board in
its sole discretion.
(b) Notwithstanding the provisions of Section 8(a), in the event that
shares of Common Stock are traded in the over-the-counter market, the Fair
Market Value of a share of Common Stock, other than for purposes of determining
the price per Share payable on the exercise of an Option which is an Incentive
Stock Option, shall be the average of the bid and asked prices for a share of
Common Stock for a period of ten (10) consecutive trading days ending on the
relevant valuation date as reported in The Wall Street Journal (or, if not so
-----------------------
reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotations ("NASDAQ") System). In the event shares of Common
Stock are listed on a national or regional securities exchange or traded through
the NASDAQ National Market, the Fair Market Value of a share of Common Stock
shall be the average of the closing price for a share of Common Stock on the
exchange or on the NASDAQ National Market, as reported in The Wall
--------
-10-
<PAGE>
Street Journal for a period of ten (10) consecutive trading days ending on the
- --------------
relevant valuation date.
(c) Notwithstanding the provisions of Section 8(a), in the event that
shares of Common Stock are traded in the over-the-counter market, the Fair
Market Value of a share of Common Stock for purposes of determining the price
per Share payable on the exercise of an Option which is an Incentive Stock
Option shall be the mean of the bid and asked prices for a share of Common Stock
on the relevant valuation date as reported in The Wall Street Journal (or, if
-----------------------
not so reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotations ("NASDAQ") System), as applicable or, if there is
no trading on such date, on the next trading date. In the event shares of
Common Stock are listed on a national or regional securities exchange or traded
through the NASDAQ National Market, the Fair Market Value of a share of Common
Stock shall be the closing price for a share of Common Stock on the exchange or
on the NASDAQ National Market, as reported in The Wall Street Journal on the
-----------------------
relevant valuation date, or if there is no trading on that date, on the next
trading date.
Section 9. Adjustments.
-----------
(a) Subject to required action by the stockholders, if any, the number of
Shares as to which Options may be awarded under this Plan and the number of
Shares subject to outstanding Options and the option prices thereof shall be
adjusted proportionately for any increase or decrease in the number of
outstanding shares of Common Stock of the Company resulting from stock splits,
reverse stock splits, stock dividends, reclassifications and recapitalizations.
(b) No fractional Shares shall be issuable on account of any action
aforesaid, and the aggregate number of Shares into which Shares then covered by
an Option, when changed as the result of such action, shall be reduced to the
number of whole Shares resulting from such action, and any right to a fractional
share shall be satisfied in cash, based on the Fair Market Value thereof.
Section 10. Rights as a Stockholder.
-----------------------
The Optionee shall have no rights as a stockholder of the Company and shall
not have the right to vote nor receive dividends with respect to any Shares
subject to an Option until such Option has been exercised and a certificate with
respect to the Shares purchased upon such exercise has been issued to him.
-11-
<PAGE>
Section 11. Time of Awarding Options.
------------------------
The date of Award of an Option shall, for all purposes, be the date on
which the Board makes the determination awarding such Option. Notice of the
determination shall be given to each Employee to whom an Option is so awarded
within a reasonable time after the date of such Award.
Section 12. Modification, Extension and Renewal of Option.
---------------------------------------------
Subject to the terms and conditions of the Plan, the Board may modify,
extend or renew an Option, or accept the surrender of an Option (to the extent
not theretofore exercised). Notwithstanding the foregoing, (a) no modification
of an Option which adversely affects the Optionee shall be made without the
consent of the Optionee, and (b) no Incentive Stock Option may be modified,
extended or renewed if such action would cause it to cease to be an "incentive
stock option" as described in Section 422 of the Code.
Section 13. Purchase for Investment and Other Restrictions.
----------------------------------------------
The issuance of Shares on the exercise of an Option shall be conditioned on
obtaining such appropriate representations, warranties, restrictions and
agreements of the Optionee as set forth in the applicable Stock Purchase
Agreement. Among other representations, warranties, restrictions and
agreements, the Optionee shall represent and agree that the purchase of Shares
under the applicable Option Agreement shall be for investment, and not with a
view to the public resale or distribution thereof, unless the Shares subject to
the Option are registered under the Securities Act and the transfer or sale of
such Shares complies with all other laws, rules and regulations applicable
thereto. Unless the Shares are registered under the Securities Act, the
Optionee shall acknowledge that the Shares purchased on exercise of the Option
are not registered under the Securities Act and may not be sold or otherwise
transferred unless the Shares have been registered under the Securities Act in
connection with the sale or other transfer thereof, or that counsel satisfactory
to the Company has issued an opinion satisfactory to the Company that the sale
or other transfer of such Shares is exempt from registration under the
Securities Act, and unless said sale or transfer is in compliance with all other
applicable laws, rules and regulations, including all applicable federal and
state securities laws, rules and regulations. Additionally, the Shares, when
issued upon the exercise of an Option, shall be subject to other transfer
restrictions, rights of first refusal and rights of repurchase as set forth in
or incorporated by reference into the applicable Stock Purchase Agreement. The
certificates representing the Shares shall contain the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SHARES HAVE NOT BEEN ACQUIRED WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
MORTGAGED,
-12-
<PAGE>
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF, BY GIFT
OR OTHERWISE, OR IN ANY WAY ENCUMBERED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS, OR A
SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO CARESIDE, INC. THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS. MOREOVER, THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO AND RESTRICTED BY THE PROVISIONS OF A CERTAIN STOCK
PURCHASE AND RESTRICTION AGREEMENT BETWEEN CARESIDE, INC. AND THE
STOCKHOLDER, A COPY OF WHICH AGREEMENT WILL BE FURNISHED BY CARESIDE,
INC. UPON WRITTEN REQUEST AND WITHOUT CHARGE, AND ALL OF THE
PROVISIONS OF SUCH AGREEMENT ARE INCORPORATED BY REFERENCE IN THIS
CERTIFICATE.
Section 14. Transferability.
---------------
No Option shall be assignable or transferable otherwise than by will
or by the laws of descent and distribution. During the lifetime of the
Optionee, his Options shall be exercisable only by him, or, in the event of his
legal incapacity or Disability, by his legal guardian or representative.
Section 15. Other Provisions.
----------------
The Option Agreement and Stock Purchase Agreement may contain such
other provisions as the Board in its discretion deems advisable and which are
not inconsistent with the provisions of this Plan, including, without
limitation, restrictions upon or conditions precedent to the exercise of the
Option.
Section 16. Amendment of the Plan.
---------------------
Insofar as permitted by law and the Plan, the Board may from time to
time suspend, terminate or discontinue the Plan or revise or amend it in any
respect whatsoever with respect to any Shares at the time not subject to an
Option; provided, however, that without approval of the stockholders, no such
revision or amendment may change the aggregate number of Shares for which
Options may be awarded hereunder, change the designation of the class of
Employees eligible to receive Options or decrease the price at which Options may
be awarded.
Any other provision of this Section 16 notwithstanding, the Board
specifically is authorized to adopt any amendment to this Plan deemed by the
Board to be necessary or
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<PAGE>
advisable to assure that the Incentive Stock Options or the non-qualified stock
Options available under the Plan continue to be treated as such, respectively,
under all applicable laws.
Section 17. Application of Funds.
--------------------
The proceeds received by the Company from the sale of Shares pursuant
to the exercise of Options shall be used for general corporate purposes.
Section 18. No Obligation to Exercise Option.
--------------------------------
The awarding of an Option shall impose no obligation upon the Optionee
to exercise such Option.
Section 19. Approval of Stockholders.
------------------------
This Plan shall become effective on the date that it is adopted by the
Board; provided, however, that it shall become limited to a non-qualified stock
option plan if it is not approved by the holders of a majority of the Company's
outstanding voting stock within one year (365 days) of its adoption by the
Board. The Board may award Options hereunder prior to approval of the Plan or
any material amendments thereto by the holders of a majority of the Company's
outstanding voting stock; provided, however, that any and all Options so awarded
automatically shall be converted into non-qualified stock options if the Plan is
not approved by such stockholders within 365 days of its adoption or material
amendment.
Section 20. Conditions Upon Issuance of Shares.
----------------------------------
(a) Options awarded under the Plan are conditioned upon the Company
obtaining any required permit or order from appropriate governmental agencies,
authorizing the Company to issue such Options and Shares issuable upon the
exercise thereof.
(b) Shares shall not be issued pursuant to the exercise of an Option
unless the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(c) As a condition to the exercise of an Option, the Board may
require the person exercising such Option to execute an agreement with, and/or
may require the person exercising such Option to make any representation and/or
warranty to the Company as may be, in the judgment of counsel to the Company,
required under applicable law or regulation, including but not limited to a
representation and warranty that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of
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<PAGE>
counsel for the Company, such a representation and warranty is appropriate under
any of the aforementioned relevant provisions of law.
Section 21. Reservation of Shares.
---------------------
The Company, during the term of this Plan, shall at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
The Company, during the term of this Plan, shall use its best efforts
to seek to obtain from appropriate regulatory agencies any requisite
authorization in order to issue and sell such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain from any such regulatory agency having jurisdiction the
requisite authorization(s) deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any Shares hereunder, or the inability of the
Company to confirm to its satisfaction that any issuance and sale of any Shares
hereunder will meet applicable legal requirements, shall relieve the Company of
any liability with respect to the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
Section 22. Stock Option and Stock Purchase Agreements.
------------------------------------------
Options shall be evidenced by an Option Agreement in such form or
forms as the Board shall approve from time to time. Upon the exercise of an
Option, the Optionee shall sign and deliver to the Company a Stock Purchase
Agreement in such form or forms as the Board shall approve from time to time.
Section 23. Taxes, Fees, Expenses and Withholding of Taxes.
----------------------------------------------
(a) The Company shall pay all original issue and transfer taxes (but
not income taxes, if any) with respect to the Award of Options and/or the issue
and transfer of Shares pursuant to the exercise thereof, and all other fees and
expenses necessarily incurred by the Company in connection therewith, and will
from time to time use its best efforts to comply with all laws and regulations
which, in the opinion of counsel for the Company, shall be applicable thereto.
(b) The Award of Options hereunder and the issuance of Shares
pursuant to the exercise thereof is conditioned upon the Company's reservation
of the right to withhold in accordance with any applicable law, from any
compensation or other amounts payable to the Optionee, any taxes required to be
withheld under federal, state or local law as a result of the Award or exercise
of such Option or the sale of the Shares issued upon exercise thereof. To the
extent that compensation or other amounts, if any, payable to the Optionee is
insufficient to pay any taxes required to be so withheld, the Company may, in
its sole discretion, require the Optionee (or such other person entitled herein
to exercise the Option), as a condition of the exercise of an Option, to pay in
cash to the Company an amount sufficient to cover such tax
-15-
<PAGE>
liability or otherwise to make adequate provision for the Company's satisfaction
of its withholding obligations under federal, state and local law.
Section 24. Notices.
-------
Any notice to be given to the Company pursuant to the provisions of
this Plan shall be addressed to the Company in care of its Secretary (or such
other person as the Company may designate from time to time) at its principal
executive office, and any notice to be given to an Optionee shall be delivered
personally or addressed to him or her at the address given beneath his or her
signature on his or her Option Agreement, or at such other address as such
Optionee or his or her permitted transferee (upon the transfer of the Shares)
may hereafter designate in writing to the Company. Any such notice shall be
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service. It shall be the
obligation of each Optionee and each permitted transferee holding Shares
purchased upon exercise of an Option to provide the Secretary of the Company, by
letter mailed as provided herein, with written notice of his or her direct
mailing address.
Section 25. No Enlargement of Employee Rights.
---------------------------------
This Plan is purely voluntary on the part of the Company, and the
continuance of the Plan shall not be deemed to constitute a contract between the
Company and any Employee, or to be consideration for or a condition of the
employment or service of any Employee. Nothing contained in this Plan shall be
deemed to give any Employee the right to be retained in the employ or service of
the Company, its Parent, any Subsidiary or a successor corporation, or to
interfere with the right of the Company or any such corporation to discharge or
retire any Employee thereof at any time. No Employee shall have any right to or
interest in Options authorized hereunder prior to the Award thereof to such
Employee, and upon such Award he shall have only such rights and interests as
are expressly provided herein, subject, however, to all applicable provisions of
the Company's Certificate of Incorporation, as the same may be amended from time
to time.
Section 26. Information to Optionees.
------------------------
The Company, upon request, shall provide without charge to each
Optionee copies of such annual and periodic reports as are provided by the
Company to its stockholders generally.
Section 27. Availability of Plan.
--------------------
A copy of this Plan shall be delivered to the Secretary of the Company
and shall be shown by him to any eligible person making reasonable inquiry
concerning it.
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<PAGE>
Section 28. Invalid Provisions.
------------------
In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein as invalid or unenforceable, and all such other provisions
shall be given full force and effect to the same extent as though the invalid or
unenforceable provision was not contained herein.
Section 29. Applicable Law.
--------------
This Plan shall be governed by and construed in accordance with the
laws of the State of Delaware.
Section 30. Board Action.
------------
Notwithstanding anything to the contrary set forth in this Plan, any
and all actions of the Board or Committee, as the case may be, taken under or in
connection with this Plan and any agreements, instruments, documents,
certificates or other writings entered into, executed, granted, issued and/or
delivered pursuant to the terms hereof, shall be subject to and limited by any
and all votes, consents, approvals, waivers or other actions of all or certain
stockholders of the Company or other persons required pursuant to (i) the
Company's Certificate of Incorporation (as the same may be amended and/or
restated from time to time), (ii) the Company's Bylaws (as the same may be
amended and/or restated from time to time), and (iii) any agreement, instrument,
document or writing now or hereafter existing, between or among the Company and
its stockholders or other persons (as the same may be amended from time to
time).
-17-
<PAGE>
EXHIBIT 10.13
This 1998 Incentive and Non-Qualified Stock Option Plan shall take effect only
upon consummation of an initial public offering of the Company's Common Stock.
CARESIDE, INC.
1998 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
EFFECTIVE ______________
Section 1. Purposes.
--------
The purposes of the Plan are (a) to promote the long-term growth and
profitability of the Company by providing key personnel with incentive to
improve shareholder value; (b) to contribute to the growth and financial success
of the Company; and (c) to enable the Company to attract, retain and award the
best available persons for positions of substantial responsibility. The Plan is
intended to comply with the conditions and requirements for employee benefit
plans under Rule 16b-3, promulgated under Section 16 of the Exchange Act. The
Options issued pursuant to the Plan are intended to constitute either Incentive
Stock Options, or non-qualified stock options, as determined by the Committee,
or the Board, if no Committee has been appointed, at the time of Award. The
type of Options awarded will be specified in the Option Agreement between the
Company and the Optionee. The terms of this Plan shall be incorporated into the
Option Agreement to be executed by the Optionee.
Section 2. Definitions.
-----------
(a) "Administrator" shall be the Board or a Committee appointed by the
Board pursuant to Section 3 of the Plan, which shall administer the Plan.
(b) "Award" shall mean a grant of Options to an Employee pursuant to the
provisions of this Plan. Each separate grant of Options to an Employee and each
group of Options which matures on a separate date is treated as a separate
Award.
(c) "Board" shall mean the Board of Directors of the Company, as
constituted from time to time.
(d) "Change of Control" shall mean the happening of an event, which shall
be deemed to have occurred upon the earliest to occur of the following events:
(i) the date the stockholders of the Company (or the Board, if stockholder
action is not required) approve a plan or other arrangement pursuant to which
the Company will be dissolved or liquidated, or (ii) the date the stockholders
of the Company (or the Board, if stockholder action is not required) and the
stockholders of the other constituent corporations (or their respective boards
of directors, if and to the extent that stockholder action is not required) have
approved a definitive agreement to merge or consolidate the Company with or into
another corporation, other than, in either case, a merger or consolidation of
the Company in which holders of shares of the Company's voting
<PAGE>
capital stock immediately prior to the merger or consolidation will have at
least 30% of the ownership of voting capital stock of the surviving corporation
immediately after the merger or consolidation (on a fully diluted basis), which
voting capital stock is to be held in the same proportion (on a fully diluted
basis) as such holders' ownership of voting capital stock of the Company
immediately before the merger or consolidation, or (iii) the date any entity,
person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act), other than (A) the Company, or (B) any of its Subsidiaries,
or (C) any of the holders of the capital stock of the Company, as determined on
the date that this Plan is adopted by the Board, or (D) any employee benefit
plan (or related trust) sponsored or maintained by the Company or any of its
Subsidiaries or (E) any Affiliate (as such term is defined in Rule 405
promulgated under the Securities Act) of any of the foregoing, shall have
acquired beneficial ownership of, or shall have acquired voting control, over
more than 70% of the outstanding shares of the Company's voting capital stock
(on a fully diluted basis), unless the transaction pursuant to which such
person, entity or group acquired such beneficial ownership or control resulted
from the original issuance by the Company of shares of its voting capital stock
and was approved by at least a majority of directors who shall have been either
members of the Board on the date that this Plan is adopted by the Board or
members of the Board for at least twelve (12) months prior to the date of such
approval, or (iv) the first day after the date of this Plan when directors are
elected such that there shall have been a change in the composition of the Board
such that a majority of the Board shall have been members of the Board for less
than twelve (12) months, unless the nomination for election of each new director
who was not a director at the beginning of such twelve (12) month period was
approved by a vote of at least sixty percent (60%) of the directors then still
in office who were directors at the beginning of such period, or (v) the date
upon which the Board determines (in its sole discretion) that based on then
current available information, the events described in clause (iii) are
reasonably likely to occur.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Committee" shall mean the Committee appointed by the Board in
accordance with Section 4 of the Plan, if one is appointed, in which event the
Committee shall possess the power and authority of the Board.
(g) "Company" shall mean CARESIDE, Inc., a Delaware corporation.
(h) "Common Stock" shall mean common stock of the Company, $.01 par value
per share.
(i) "Disability" or "Disabled" shall mean the inability of an Optionee to
perform his or her normal employment duties for the Company, its Parent, any of
its Subsidiaries or its successors, as the case may be, resulting from a mental
or physical illness, impairment or any other similar occurrence which can be
expected to result in death or which has lasted or can be expected to last for a
period of twelve (12) consecutive months, as determined by the Board;
-2-
<PAGE>
provided, however, that a Disability shall not be determined to occur any
earlier than it would under the provisions of any employment agreement
applicable to the Optionee.
(j) "Employee" shall mean any person, including officers, employed by the
Company, its Parent, any of its Subsidiaries or its successors, but excluding
directors of the Company who are not otherwise employees. The payment of
directors' fees by the Company, its Parent, any of its Subsidiaries or its
successors, as the case may be, shall not be sufficient to constitute
employment. Additionally, and notwithstanding the foregoing sentence, solely
for purposes of determining those persons eligible under the Plan to be
recipients of Awards of Options, which Options shall be limited to non-qualified
stock options, and not for the purpose of affecting the status of the
relationship between such person and the Company, the term "Employee" shall
include independent contractors and consultants to the Company.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" shall mean the fair market value of a share of
Common Stock, as determined pursuant to Section 8 hereof.
(m) "Grant Date" means (i) the effective date of registration under Section
12 of the Exchange Act of a class of equity securities of the Company and (ii)
each date thereafter prescribed under the Company's Articles of Incorporation
and By-laws for the election of directors which falls before the earlier of (A)
the date six months after the termination of such registration, or (B) the tenth
anniversary of the date on which this Plan is adopted by the Board.
(n) "Incentive Stock Option" shall mean an Option which is an incentive
stock option as described in Section 422 of the Code.
(o) "Non-Employee Director" shall have the meaning set forth in Rule 16b-
3(b)(3)(i) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and Exchange
Commission; provided, however, that the Administrator may, to the extent the
Administrator deems it necessary or desirable to comply with Section 162(m) of
the Code and applicable regulations thereunder, ensure that each Non-Employee
Director also qualifies as an "outside director" as that term is defined in the
regulations under Section 162(m) of the Code.
(p) "Option" shall mean an Incentive Stock Option or a non-qualified stock
option to purchase Shares that is awarded pursuant to the Plan.
(q) "Option Agreement" shall mean a written agreement executed by an
Optionee and the Company as in such form or forms as the Board (subject to the
terms and conditions of this Plan) may from time to time approve evidencing and
reflecting the terms of an Option.
-3-
<PAGE>
(r) "Optionee" shall mean an Employee to whom an Option is awarded.
(s) "Parent" shall mean a "parent corporation" whether now or hereafter
existing, as defined in Sections 424(e) and (g) of the Code.
(t) "Plan" shall mean the CARESIDE, Inc. 1998 Incentive and Non-Qualified
Stock Option Plan, as amended from time to time.
(u) "Pool" shall mean the pool of shares of Common Stock subject to the
Plan, as described and set forth in Section 6 hereof.
(v) "Private Asset Sale" shall mean a transaction which constitutes a sale
of all or substantially all of the Company's assets, which transaction shall be
deemed to have occurred upon the date the stockholders of the Company (or the
Board, if stockholder action is not required) approve a definitive agreement to
sell or otherwise dispose of all or substantially all of the assets of the
Company.
(w) "Securities Act" shall mean the Securities Act of 1933, as amended.
(x) "Shares" shall mean shares of Common Stock contained in the Pool, as
adjusted in accordance with Section 9 of the Plan.
(y) "Stock Purchase Agreement" shall mean an agreement in such form as the
Board (subject to the terms and conditions of this Plan) may from time to time
approve, which an Optionee shall be required to execute as a condition of
purchasing Shares upon the exercise of an Option.
(z) "Subsidiary" shall mean a subsidiary corporation, whether now or
hereafter existing, as defined in Sections 424(f) and (g) of the Code.
Section 3. Participation. Options may be granted at any time and from
-------------
time to time to any Employee who shall be selected by the Administrator. Any
grant of Options may include or exclude any Employee as the Administrator shall
determine in its sole discretion. Employees who are consultants or independent
contractors not employed by the Company are eligible to be granted Non-Qualified
Stock Options under the Plan but are not eligible to be granted Incentive Stock
Options under the Plan.
-4-
<PAGE>
Section 4. Administration.
--------------
(a) Procedure. The Plan shall be administered by the Board or a Committee
---------
consisting of not less than two (2) persons appointed by the Board, which shall
be the Administrator. In the event the Company has a class of equity securities
registered under the Exchange Act, the Board shall administer the Plan; provided
that it may appoint a Committee in accordance with Section 4(b).
(b) Committees. If a Committee is appointed by the Board, then the
----------
Committee shall possess the power and authority of the Board in administering
the Plan on behalf of the Board, subject to the terms and conditions as the
Board may prescribe.
Members of the Committee shall be members of the Board and shall serve for
such period of time as the Board may determine. From time to time, the Board
may increase the size the Committee and appoint additional members thereto,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members of the Committee
and thereafter directly administer the Plan. Notwithstanding the foregoing, in
the event the Company has a class of equity securities registered under the
Exchange Act, the Committee shall be composed solely of two (2) or more Non-
Employee Directors.
(c) Powers of the Administrator. Subject to the provisions of the Plan
---------------------------
(and, in the case of the Committee, the specific duties delegated by the Board
to such Committee), the Administrator shall have the authority, in its sole
discretion: (i) to make Awards of Options; (ii) to determine, upon review of
relevant information and in accordance with Section 8 of the Plan, the Fair
Market Value per Share; (iii) to determine the exercise price of the Options to
be awarded in accordance with Sections 7 and 8 of the Plan; (iv) to determine
the Employees to whom, and the time or times at which, Options shall be awarded,
and the number of Shares to be subject to each Option; (v) to prescribe, amend
and rescind rules and regulations relating to the Plan; (vi) to determine the
terms and provisions of each Option awarded under the Plan, each Option
Agreement and each Stock Purchase Agreement (which need not be identical with
the terms of other Options, Option Agreements and Stock Purchase Agreements)
and, with the consent of the Optionee, to modify or amend an outstanding Option,
Option Agreement or Stock Purchase Agreement; (vii) to accelerate the vesting
or exercise date of any Option; (viii) to determine whether any Optionee will
be required to execute a stock repurchase agreement or other agreement as a
condition to the exercise of an Option, and to determine the terms and
provisions of any such agreement (which need not be identical with the terms of
any other such agreement) and, with the consent of the Optionee, to amend any
such agreement; (ix) to interpret the Plan or any agreement entered into with
respect to the Award or exercise of Options; (x) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the Award
of an Option previously awarded by the Board or to take such other actions as
may be necessary or appropriate with respect to the Company's rights pursuant to
Options or agreements relating to the Award or exercise thereof; and (xi) to
make such other determinations and
-5-
<PAGE>
establish such other procedures as it deems necessary or advisable for the
administration of the Plan.
(d) Effect of the Board's or Committee's Decision. All decisions,
---------------------------------------------
determinations and interpretations of the Board or the Committee shall be final
and binding with respect to all Options and Optionees.
(e) Limitation of Liability. Notwithstanding anything herein to the
-----------------------
contrary (with the exception of Section 30 hereof), no member of the Board or of
the Committee shall be liable for any good faith determination, act or failure
to act in connection with the Plan or any Option awarded hereunder.
Section 5. Eligibility.
-----------
Options may be awarded only to Employees. An Employee who has been awarded
an Option, if he or she is otherwise eligible, may be awarded additional
Options.
Section 6. Stock Subject to the Plan.
-------------------------
Subject to the provisions of Section 9 of the Plan, the maximum aggregate
number of Shares which may be awarded and sold under the Plan is 540,000
(collectively, the "Pool"). The maximum aggregate number of Shares with respect
to which Options may be granted under the Plan to any Employee under the Plan
during any calendar year is 10,000 Shares. Options awarded from the Pool may be
either Incentive Stock Options or non-qualified stock options, as determined by
the Board. If an Option should expire or become unexercisable for any reason
without having been exercised in full, or, if Shares are subsequently
repurchased by the Company, the unpurchased or repurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, return to the
Plan and become available for future Awards under the Plan.
Section 7. Terms and Conditions of Options Awarded to Employees,
-----------------------------------------------------
Consultants and Independent Contractors.
- ---------------------------------------
Each Option awarded pursuant to the Plan shall be authorized by the Board
and shall be evidenced by an Option Agreement in such form as the Board may from
time to time determine. Each Option Agreement shall incorporate by reference
all other terms and conditions of the Plan, including the following terms and
conditions:
(a) Number of Shares. The number of Shares subject to the Option, which
----------------
may not include fractional Shares.
(b) Option Price. The price per Share payable on the exercise of any
------------
Option which is an Incentive Stock Option shall be stated in the Option
Agreement and shall be no less
-6-
<PAGE>
than the Fair Market Value per share of the Common Stock on the date such Option
is awarded, without regard to any restriction other than a restriction which by
its terms will never lapse. Notwithstanding the foregoing, if an Option which is
an Incentive Stock Option shall be awarded under this Plan to any Employee who,
at the time of the Award of such Option, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of the stock of
the Company (or its Parent or Subsidiaries), the price per Share payable upon
exercise of such Option shall be no less than one hundred ten percent (110%) of
the Fair Market Value of the stock on the date such Option is awarded. The
price per Share payable on the exercise of an Option which is a non-qualified
stock option shall be stated in the Option Agreement.
(c) Consideration. The consideration to be paid for the Shares to be
-------------
issued upon the exercise of an Option, including the method of payment, shall be
determined by the Board and may consist entirely of cash, check or shares of
Common Stock having a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, or any combination of such methods of payment, or such other
consideration and method of payment permitted under any laws to which the
Company is subject and which is approved by the Board, provided that shares of
Common Stock may be surrendered in satisfaction of the exercise price only if
the Optionee has held such shares for more than six months (or such shorter time
as shall not, in the Board's sole discretion have an adverse effect on the
Company's financial statements). In making its determination as to the type of
consideration to accept, the Board shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company. If the
consideration for the exercise of an Option is the surrender of previously
acquired and owned shares of Common Stock, the Optionee will be required to make
representations and warranties satisfactory to the Company regarding his title
to the shares of Common Stock used to effect the purchase, including without
limitation, representations and warranties that the Optionee has good and
marketable title to such shares of Common Stock free and clear of any and all
liens, encumbrances, charges, equities, claims, security interests, options or
restrictions, and has full power to deliver such shares of Common Stock without
obtaining the consent or approval of any person or governmental authority other
than those which have already given consent or approval in a manner satisfactory
to the Company. Further, to the extent that Optionee surrenders Common Stock
previously acquired pursuant to an Incentive Stock Option, the Optionee will be
required (i) to certify that the applicable holding period with respect thereto
required for favorable tax treatment under Section 422 of the Code has been met
or (ii) to acknowledge the income tax consequences in the event the holding
period has not been met. The value of the shares of Common Stock used to effect
the purchase shall be the Fair Market Value of such shares of Common Stock on
the date of exercise as determined by the Board in its sole discretion,
exercised in good faith.
(d) Form of Option. The Option Agreement will state whether the Option
--------------
awarded is an Incentive Stock Option or a non-qualified stock Option, and will
constitute a binding determination as to the form of Option awarded.
-7-
<PAGE>
(e) Exercise of Options. Any Option awarded hereunder shall be exercisable
-------------------
only after it shall have vested in accordance with the Plan and then only at
such times and under such conditions as may be determined by the Board and as
shall be permissible under the terms of the Plan, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
An Option may be exercised in accordance with the provisions of this
Plan as to all or any portion of the Shares then exercisable under an Option
from time to time during the term of the Option. An Option may not be exercised
solely for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company at its principal executive office in
accordance with the terms of the Option Agreement by the person entitled to
exercise the Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company, accompanied by an executed
Stock Purchase Agreement and any other agreements required by the terms of the
Plan and/or Option Agreement. Full payment may consist of such consideration
and method of payment allowable under Section 7 of the Plan. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the Option is exercised, except as provided in Section 9 of the
Plan.
As soon as practicable after any proper exercise of an Option in
accordance with the provisions of the Plan, the Company shall, without transfer
or issue tax to the Optionee, deliver to the Optionee at the principal executive
office of the Company or such other place as shall be mutually agreed upon
between the Company and the Optionee, a certificate or certificates representing
the Shares for which the Option shall have been exercised. The time of issuance
and delivery of the certificate(s) representing the Shares for which the Option
shall have been exercised may be postponed by the Company for such period as may
be required by the Company, with reasonable diligence, to comply with any
applicable listing requirements of any national or regional securities exchange
or any law or regulation applicable to the issuance or delivery of such Shares.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for Award under the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(f) Term and Vesting of Options.
---------------------------
(i) Except as provided otherwise in an Option Agreement, options
granted pursuant to each Award shall vest over a five (5) year period, at a rate
of twenty percent (20%) each year. The Administrator may specify additional
vesting conditions, including performance vesting conditions.
-8-
<PAGE>
(ii) Vesting shall be accelerated, and Optionees shall become
fully vested in any and all Awards under the Plan, upon the occurrence of any
one of the following events: (A) a Change of Control; (B) a Private Sale; (C)
the Optionee's death or Disability while in the employ of or engagement by the
Company; or (D) the retirement of the Optionee from the employ of the Company at
or after age 65; provided, however, that vesting shall not be accelerated in the
-----------------
event of a Change of Control, Private Sale, death, Disability or retirement with
respect to that portion of any Option which is subject to performance vesting
criteria which have not been satisfied as of the date of such event.
(iii) Notwithstanding any other provision of this Plan, no
Incentive Stock Option shall be (A) awarded under this Plan after ten (10) years
from the date on which this Plan is adopted by the Board, or (B) exercisable
more than ten (10) years from the date of Award; provided, however, that if an
Incentive Stock Option shall be awarded under this Plan to any Employee who, at
the time of the Award of such Option, owns stock possessing more than ten
percent (10%) of the total combined voting power for all classes of the stock of
the Company (or its Parent or Subsidiaries), the foregoing clause (B) shall be
deemed modified by substituting "five (5) years" for the term "ten (10) years"
that appears therein.
(iv) No Option awarded to any Optionee shall be treated as an
Incentive Stock Option to the extent such Option would cause the aggregate Fair
Market Value of all Shares with respect to which Incentive Stock Options are
exercisable by such Optionee for the first time during any calendar year
(determined as of the date of Award of each such Option) to exceed $100,000. For
purposes of determining whether an Incentive Stock Option would cause such
aggregate Fair Market Value to exceed the $100,000 limitation, such Incentive
Stock Options shall be taken into account in the order awarded. For purposes of
this subsection, Incentive Stock Options include all incentive stock options
under all plans of the Company and its Parent and Subsidiaries that are
incentive stock option plans as described in Section 422 of the Code. Options
awarded hereunder shall mature and become exercisable in whole or in part, in
accordance with such vesting schedule as the Board shall determine, which
schedule shall be stated in the Option Agreement. Options may be exercised in
any order elected by the Optionee whether or not the Optionee holds any
unexercised Options under this Plan or any other plan of the Company.
(g) Termination of Options.
----------------------
(i) Unless sooner terminated as provided in this Plan, each
Option shall be exercisable for the period of time as shall be determined by the
Board and set forth in the Option Agreement, and shall be void and unexercisable
thereafter.
(ii) Except as otherwise provided herein or in the Option
Agreement, upon the termination of the Optionee's employment or other
relationship with the Company for any reason, Options exercisable on the date of
termination of employment or such other relationship shall be exercisable by the
Optionee (or in the case of the Optionee's death
-9-
<PAGE>
subsequent to termination of employment or such other relationship, by the
Optionee's executor(s) or administrator(s)) for a period of three (3) months
from the date of the Optionee's termination of employment or such other
relationship.
(iii) Upon the Disability or death of an Optionee while in
the employ of or engagement by the Company, Options held by such Optionee which
are exercisable on the date of Disability or death shall be exercisable for a
period of twelve (12) months commencing on the date of the Optionee's Disability
or death, by the Optionee or his legal guardian or representative or, in the
case of death, by his executor(s) or administrator(s); provided, however, that
if such disabled Optionee shall commence any employment or engagement during
such one (1) year period with or by a competitor of the Company (including, but
not limited to, full or part-time employment or independent consulting work), as
determined solely in the judgment of the Board, all Options held by such
Optionee which have not yet been exercised shall terminate immediately upon the
commencement thereof.
(iv) Options may be terminated at any time by agreement
between the Company and the Optionee.
(v) Forfeiture. Notwithstanding any other provision of
----------
this Plan, if the Optionee's employment or engagement is terminated for "cause"
(as such term is defined in the Optionee's employment agreement or non-
disclosure agreement with the Company, if any, and if the Optionee is not a
party to any such agreement, then, as such term is defined in the Stock Purchase
Agreement) or if the Board makes a determination that the Optionee (i) has
engaged in any type of disloyalty to the Company, including without limitation,
fraud, embezzlement, theft, or dishonesty in the course of his employment or
engagement, or has otherwise breached any fiduciary duty owed to the Company, or
(ii) has been convicted of a felony or (iii) has disclosed trade secrets or
confidential information of the Company or (iv) has breached any agreement with
or duty to the Company in respect of confidentiality, non-disclosure, non-
competition or otherwise, all unexercised Options shall terminate upon the date
of such a finding, or, if earlier, the date of termination of employment or
engagement for "cause." In the event of such a finding, in addition to immediate
termination of all unexercised Options, the Optionee shall forfeit all Shares
for which the Company has not yet delivered share certificates to the Optionee
and the Company shall refund to the Optionee the Option purchase price paid to
it, if any, in the same form as it was paid (or in cash at the Company's
discretion). Notwithstanding anything herein to the contrary, the Company may
withhold delivery of share certificates pending the resolution of any inquiry
that could lead to a finding resulting in forfeiture.
Section 8. Determination of Fair Market Value of Common Stock.
---------------------------------------------------
(a) Except to the extent otherwise provided in this Section 8, the
Fair Market Value of a share of Common Stock shall be determined by the Board in
its sole discretion.
-10-
<PAGE>
(b) Notwithstanding the provisions of Section 8(a), in the event that
shares of Common Stock are traded in the over-the-counter market, the Fair
Market Value of a share of Common Stock, other than for purposes of determining
the price per Share payable on the exercise of an Option which is an Incentive
Stock Option, shall be the average of the bid and asked prices for a share of
Common Stock for a period of ten (10) consecutive trading days ending on the
relevant valuation date as reported in The Wall Street Journal (or, if not so
-----------------------
reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotations ("NASDAQ") System). In the event shares of Common
Stock are listed on a national or regional securities exchange or traded through
the NASDAQ National Market, the Fair Market Value of a share of Common Stock
shall be the average of the closing price for a share of Common Stock on the
exchange or on the NASDAQ National Market, as reported in The Wall Street
---------------
Journal for a period of ten (10) consecutive trading days ending on the relevant
- -------
valuation date.
(c) Notwithstanding the provisions of Section 8(a), in the event that
shares of Common Stock are traded in the over-the-counter market, the Fair
Market Value of a share of Common Stock for purposes of determining the price
per Share payable on the exercise of an Option which is an Incentive Stock
Option shall be determined by the Board in its sole discretion.
Section 9. Adjustments.
-----------
(a) Subject to required action by the stockholders, if any, the number of
Shares as to which Options may be awarded under this Plan and the number of
Shares subject to outstanding Options and the option prices thereof shall be
adjusted proportionately for any increase or decrease in the number of
outstanding shares of Common Stock of the Company resulting from stock splits,
reverse stock splits, stock dividends, reclassifications and recapitalizations.
(b) No fractional Shares shall be issuable on account of any action
aforesaid, and the aggregate number of Shares into which Shares then covered by
an Option, when changed as the result of such action, shall be reduced to the
number of whole Shares resulting from such action, and any right to a fractional
share shall be satisfied in cash, based on the Fair Market Value thereof.
Section 10. Rights as a Stockholder.
-----------------------
The Optionee shall have no rights as a stockholder of the Company and shall
not have the right to vote nor receive dividends with respect to any Shares
subject to an Option until such Option has been exercised and a certificate with
respect to the Shares purchased upon such exercise has been issued to him.
Section 11. Time of Awarding Options.
------------------------
-11-
<PAGE>
The date of Award of an Option shall, for all purposes, be the date on
which the Board makes the determination awarding such Option. Notice of the
determination shall be given to each Employee to whom an Option is so awarded
within a reasonable time after the date of such Award.
Section 12. Modification, Extension and Renewal of Option.
---------------------------------------------
Subject to the terms and conditions of the Plan, the Board may modify,
extend or renew an Option, or accept the surrender of an Option (to the extent
not theretofore exercised). Notwithstanding the foregoing, (a) no modification
of an Option which adversely affects the Optionee shall be made without the
consent of the Optionee, and (b) no Incentive Stock Option may be modified,
extended or renewed if such action would cause it to cease to be an "incentive
stock option" as described in Section 422 of the Code.
Section 13. Purchase for Investment and Other Restrictions.
----------------------------------------------
The issuance of Shares on the exercise of an Option shall be
conditioned on obtaining such appropriate representations, warranties,
restrictions and agreements of the Optionee as set forth in the applicable Stock
Purchase Agreement. Among other representations, warranties, restrictions and
agreements, the Optionee shall represent and agree that the purchase of Shares
under the applicable Option Agreement shall be for investment, and not with a
view to the public resale or distribution thereof, unless the Shares subject to
the Option are registered under the Securities Act and the transfer or sale of
such Shares complies with all other laws, rules and regulations applicable
thereto. Unless the Shares are registered under the Securities Act, the Optionee
shall acknowledge that the Shares purchased on exercise of the Option are not
registered under the Securities Act and may not be sold or otherwise transferred
unless the Shares have been registered under the Securities Act in connection
with the sale or other transfer thereof, or that counsel satisfactory to the
Company has issued an opinion satisfactory to the Company that the sale or other
transfer of such Shares is exempt from registration under the Securities Act,
and unless said sale or transfer is in compliance with all other applicable
laws, rules and regulations, including all applicable federal and state
securities laws, rules and regulations. Additionally, the Shares, when issued
upon the exercise of an Option, shall be subject to other transfer restrictions,
rights of first refusal and rights of repurchase as set forth in or incorporated
by reference into the applicable Stock Purchase Agreement. The certificates
representing the Shares shall contain the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SHARES HAVE NOT BEEN ACQUIRED WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED
OF, BY GIFT OR OTHERWISE, OR IN ANY WAY
-12-
<PAGE>
ENCUMBERED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES LAWS, OR A SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO
CARESIDE, INC. THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND
UNDER APPLICABLE STATE SECURITIES LAWS. MOREOVER, THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND RESTRICTED BY THE
PROVISIONS OF A CERTAIN STOCK PURCHASE AND RESTRICTION AGREEMENT
BETWEEN CARESIDE, INC. AND THE STOCKHOLDER, A COPY OF WHICH AGREEMENT
WILL BE FURNISHED BY CARESIDE, INC. UPON WRITTEN REQUEST AND WITHOUT
CHARGE, AND ALL OF THE PROVISIONS OF SUCH AGREEMENT ARE INCORPORATED
BY REFERENCE IN THIS CERTIFICATE.
Section 14. Transferability.
---------------
No Option shall be assignable or transferable otherwise than by will
or by the laws of descent and distribution. During the lifetime of the
Optionee, his Options shall be exercisable only by him, or, in the event of his
legal incapacity or Disability, by his legal guardian or representative.
Section 15. Other Provisions.
----------------
The Option Agreement and Stock Purchase Agreement may contain such
other provisions as the Board in its discretion deems advisable and which are
not inconsistent with the provisions of this Plan, including, without
limitation, restrictions upon or conditions precedent to the exercise of the
Option.
Section 16. Amendment of the Plan.
---------------------
Insofar as permitted by law and the Plan, the Board may from time to
time suspend, terminate or discontinue the Plan or revise or amend it in any
respect whatsoever with respect to any Shares at the time not subject to an
Option; provided, however, that without approval of the stockholders, no such
revision or amendment may change the aggregate number of Shares for which
Options may be awarded hereunder, change the designation of the class of
Employees eligible to receive Options or decrease the price at which Options may
be awarded.
Any other provision of this Section 16 notwithstanding, the Board
specifically is authorized to adopt any amendment to this Plan deemed by the
Board to be necessary or advisable to assure that the Incentive Stock Options or
the non-qualified stock Options available under the Plan continue to be treated
as such, respectively, under all applicable laws.
-13-
<PAGE>
Section 17. Application of Funds.
--------------------
The proceeds received by the Company from the sale of Shares pursuant
to the exercise of Options shall be used for general corporate purposes.
Section 18. No Obligation to Exercise Option.
--------------------------------
The awarding of an Option shall impose no obligation upon the Optionee
to exercise such Option.
Section 19. Approval of Stockholders.
------------------------
This Plan shall become effective, on the date that both (i) it has
been adopted by the Board, and (ii) the Company has consummated an initial
public offering of its Common Stock; provided, however, that it shall become
limited to a non-qualified stock option plan if it is not approved by the
holders of a majority of the Company's outstanding voting stock within one year
(365 days) of its adoption by the Board. The Board may award Options hereunder
prior to approval of the Plan or any material amendments thereto by the holders
of a majority of the Company's outstanding voting stock; provided, however, that
any and all Options so awarded automatically shall be converted into non-
qualified stock options if the Plan is not approved by such stockholders within
365 days of its adoption or material amendment.
Section 20. Conditions Upon Issuance of Shares.
----------------------------------
(a) Options awarded under the Plan are conditioned upon the Company
obtaining any required permit or order from appropriate governmental agencies,
authorizing the Company to issue such Options and Shares issuable upon the
exercise thereof.
(b) Shares shall not be issued pursuant to the exercise of an Option
unless the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(c) As a condition to the exercise of an Option, the Board may require
the person exercising such Option to execute an agreement with, and/or may
require the person exercising such Option to make any representation and/or
warranty to the Company as may be, in the judgment of counsel to the Company,
required under applicable law or regulation, including but not limited to a
representation and warranty that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation and
warranty is appropriate under any of the aforementioned relevant provisions of
law.
-14-
<PAGE>
Section 21. Reservation of Shares.
---------------------
The Company, during the term of this Plan, shall at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
The Company, during the term of this Plan, shall use its best efforts
to seek to obtain from appropriate regulatory agencies any requisite
authorization in order to issue and sell such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain from any such regulatory agency having jurisdiction the
requisite authorization(s) deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any Shares hereunder, or the inability of the
Company to confirm to its satisfaction that any issuance and sale of any Shares
hereunder will meet applicable legal requirements, shall relieve the Company of
any liability with respect to the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
Section 22. Stock Option and Stock Purchase Agreements.
------------------------------------------
Options shall be evidenced by an Option Agreement in such form or
forms as the Board shall approve from time to time. Upon the exercise of an
Option, the Optionee shall sign and deliver to the Company a Stock Purchase
Agreement in such form or forms as the Board shall approve from time to time.
Section 23. Taxes, Fees, Expenses and Withholding of Taxes.
----------------------------------------------
(a) The Company shall pay all original issue and transfer taxes (but
not income taxes, if any) with respect to the Award of Options and/or the issue
and transfer of Shares pursuant to the exercise thereof, and all other fees and
expenses necessarily incurred by the Company in connection therewith, and will
from time to time use its best efforts to comply with all laws and regulations
which, in the opinion of counsel for the Company, shall be applicable thereto.
(b) The Award of Options hereunder and the issuance of Shares pursuant
to the exercise thereof is conditioned upon the Company's reservation of the
right to withhold in accordance with any applicable law, from any compensation
or other amounts payable to the Optionee, any taxes required to be withheld
under federal, state or local law as a result of the Award or exercise of such
Option or the sale of the Shares issued upon exercise thereof. To the extent
that compensation or other amounts, if any, payable to the Optionee is
insufficient to pay any taxes required to be so withheld, the Company may, in
its sole discretion, require the Optionee (or such other person entitled herein
to exercise the Option), as a condition of the exercise of an Option, to pay in
cash to the Company an amount sufficient to cover such tax liability or
otherwise to make adequate provision for the Company's satisfaction of its
withholding obligations under federal, state and local law.
-15-
<PAGE>
Section 24. Notices.
-------
Any notice to be given to the Company pursuant to the provisions of
this Plan shall be addressed to the Company in care of its Secretary (or such
other person as the Company may designate from time to time) at its principal
executive office, and any notice to be given to an Optionee shall be delivered
personally or addressed to him or her at the address given beneath his or her
signature on his or her Option Agreement, or at such other address as such
Optionee or his or her permitted transferee (upon the transfer of the Shares)
may hereafter designate in writing to the Company. Any such notice shall be
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, registered or certified, and deposited, postage and
registry or certification fee prepaid, in a post office or branch post office
regularly maintained by the United States Postal Service. It shall be the
obligation of each Optionee and each permitted transferee holding Shares
purchased upon exercise of an Option to provide the Secretary of the Company, by
letter mailed as provided herein, with written notice of his or her direct
mailing address.
Section 25. No Enlargement of Employee Rights.
---------------------------------
This Plan is purely voluntary on the part of the Company, and the
continuance of the Plan shall not be deemed to constitute a contract between the
Company and any Employee, or to be consideration for or a condition of the
employment or service of any Employee. Nothing contained in this Plan shall be
deemed to give any Employee the right to be retained in the employ or service of
the Company, its Parent, any Subsidiary or a successor corporation, or to
interfere with the right of the Company or any such corporation to discharge or
retire any Employee thereof at any time. No Employee shall have any right to or
interest in Options authorized hereunder prior to the Award thereof to such
Employee, and upon such Award he shall have only such rights and interests as
are expressly provided herein, subject, however, to all applicable provisions of
the Company's Certificate of Incorporation, as the same may be amended from time
to time.
Section 26. Information to Optionees.
------------------------
The Company, upon request, shall provide without charge to each
Optionee copies of such annual and periodic reports as are provided by the
Company to its stockholders generally.
Section 27. Availability of Plan.
--------------------
A copy of this Plan shall be delivered to the Secretary of the Company
and shall be shown by him to any eligible person making reasonable inquiry
concerning it.
Section 28. Invalid Provisions.
------------------
-16-
<PAGE>
In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein as invalid or unenforceable, and all such other provisions
shall be given full force and effect to the same extent as though the invalid or
unenforceable provision was not contained herein.
Section 29. Applicable Law.
--------------
This Plan shall be governed by and construed in accordance with the
laws of the State of Delaware.
Section 30. Board Action.
------------
Notwithstanding anything to the contrary set forth in this Plan, any
and all actions of the Board or Committee, as the case may be, taken under or in
connection with this Plan and any agreements, instruments, documents,
certificates or other writings entered into, executed, granted, issued and/or
delivered pursuant to the terms hereof, shall be subject to and limited by any
and all votes, consents, approvals, waivers or other actions of all or certain
stockholders of the Company or other persons required pursuant to (i) the
Company's Certificate of Incorporation (as the same may be amended and/or
restated from time to time), (ii) the Company's Bylaws (as the same may be
amended and/or restated from time to time), and (iii) any agreement, instrument,
document or writing now or hereafter existing, between or among the Company and
its stockholders or other persons (as the same may be amended from time to
time).
-17-
<PAGE>
EXHIBIT 10.14
This Director Stock Option Plan shall take effect only upon
consummation of an initial public offering of the Company's Common Stock.
CARESIDE, INC.
DIRECTOR STOCK OPTION PLAN
1. PURPOSE
The purpose of this Director Stock Option Plan (the "Plan") of
CARESIDE, Inc. (the "Company"), is to encourage ownership in the Company by
outside directors of the Company whose services are considered essential to the
Company's continued progress and thus to provide them with a further incentive
to continue to serve as directors of the Company. The Plan is also intended to
assist the Company through utilization of the incentives provided by the Plan to
attract and retain experienced and qualified candidates to fill vacancies in the
Board which might occur in the future.
2. ADMINISTRATION
The Plan will be administered by a committee of the Board of Directors
consisting of those Directors who are not Eligible Directors as defined below.
The Committee shall mean the Chief Executive Officer and the Chief Financial
Officer of the Company. Subject to the express provisions of the Plan, the
Committee will have complete authority: to interpret the Plan; to prescribe,
amend, and rescind rules and regulations relating to it; to determine the terms
and provisions of the respective option agreements (which need not be
identical); and to make all other determinations necessary or advisable for the
administration of the Plan. The Committee's determination on the matters
referred to in this Section 2 will be conclusive.
3. PARTICIPATION IN THE PLAN
Persons who are now or who hereafter become incumbent directors of the
Company who are not at the time employees of the Company or any subsidiary of
the Company and who have not been nominated to serve as directors pursuant to an
agreement with the Company ("Eligible Directors") shall be eligible to
participate in the Plan. A director of the Company shall not be deemed to be an
employee of the Company solely by reason of the existence of a consulting
contract between such director and the Company or any subsidiary thereof
pursuant to which the director agrees to provide consulting services as an
independent consultant to the Company or its subsidiaries on a regular or
occasional basis for a stated consideration.
4. STOCK SUBJECT TO THE PLAN
The stock subject to the Plan shall consist of 60,000 shares of
Company's Common Stock, $.01 par value ("Common Stock"). Such shares may, as
the Committee shall from time to time determine, be either authorized and
unissued shares of Common Stock or issued shares of Common Stock which have been
reacquired by the Company. If an option shall
<PAGE>
expire or terminate for any reason without having been exercised in full, the
shares represented by the portion thereof not so exercised shall (unless the
Plan shall have been terminated) become available for other Options to be
granted under the Plan.
5. STOCK OPTIONS
(a) Option Agreements. Each option granted under this Plan shall be
evidenced by a written agreement in such form as the Committee shall from time
to time approve, which agreements shall comply with and be subject to the terms
and conditions set forth in the Plan.
(b) Issuance and Vesting of Options. Each Eligible Director shall be
granted under this Plan an option to purchase 2,000 shares of Common Stock in
respect of each calendar year of service as a director commencing before or
after, and ending after, the effective date of the Plan, commencing with the
calendar year ending December 31, 1998. Options hereunder shall be granted by
the Board either after conclusion of or during the year of service as a director
to which they relate and if not granted prior to such date in respect of service
for the most recently completed calendar year shall be automatically awarded for
such prior year as of the date of the Company's annual shareholder's meeting.
In the event a person becomes a director in the middle of a calendar year, such
person's option award for such first partial year shall be prorated so as to
relate to the period such person served as a director in such year. Options
granted after conclusion of a calendar year shall vest upon grant if relating to
service as a director in the calendar year just concluded. Options granted
during the year of service as a director to which they relate shall vest upon
December 31 of that year.
(c) Option Price per Share. All options granted hereunder shall be
exercisable at a price per share equal to the Fair Market Value (as hereafter
defined) of a share of Common Stock on the Date of Grant. For purposes of the
Plan, the term "Fair Market Value" of a share of Common Stock shall mean, as of
the date on which such fair market value is to be determined, the fair market
value as determined by the Committee in such manner as it, in good faith, may
deem appropriate. "Date of Grant" shall mean the earlier of the date an award
for a year of service under the Plan is authorized by the Board or the date of
the Company's annual shareholder's meeting, if no award for the most recently
completely calendar year has been made by the Board prior to such date. If the
Common Stock is at the time of reference publicly traded, the fair market value
shall be the closing price of a share of Common Stock as reported in the Wall
----
Street Journal (or a publication or reporting service deemed equivalent to the
- --------------
Wall Street Journal for such purpose by the Committee) for the over-the-counter
- -------------------
market or any national securities exchange and other securities market which at
the time are included in the stock price quotations of such publication. If no
such sale is so reported for such date, fair market value shall mean the average
of the latest bid and asked prices so reported for such date. In the event that
the Committee shall determine such stock price quotation is not representative
of fair market value, the Committee may determine fair market value in such a
manner as it shall deem
-2-
<PAGE>
appropriate under the circumstances. In no event shall the fair market value of
any share of Common Stock be less than its par value.
(d) Options Nontransferable. Each option granted under the Plan by
its terms shall not be transferable by the optionee otherwise than by will, or
by the laws of descent and distribution, or pursuant to a qualified domestic
relations order as defined by the Internal Revenue Code of 1986, as amended, or
Title I of the Employee Retirement Income Security Act, or the rules thereunder,
and shall be exercisable during the lifetime of the optionee only by him. No
option or interest therein may be transferred, assigned, pledged, or
hypothecated by the optionee during his lifetime, whether by operation of law or
otherwise, or be made subject to execution, attachment, or similar process.
(e) Accelerated Vesting. Notwithstanding the provisions hereof
specifying the installments in which options shall be exercisable, options shall
become exercisable in full (i) upon the retirement of the director in accordance
with any mandatory retirement policy for members of the Board, which policy may
be established by the Board, (ii) upon the total and permanent disability or
death of the director, or (iii) if any of the following events shall occur: (a)
the Company shall execute a definitive agreement to merge or consolidate with or
into another corporation and the Company shall not be the surviving corporation
in the merger (or shall become a subsidiary of any other corporation party to
such merger agreement, unless such transaction shall involve no significant
change in beneficial ownership of the Company) and the stockholders of the
Company shall have approved the terms of such agreement; (b) the Company shall
enter into a definitive agreement to sell or otherwise dispose of all or
substantially all of its assets and the stockholders of the Company shall have
approved the terms of such agreement; or (c) any person or group shall acquire,
or increase its ownership to, more than 20% of the Company's then outstanding
voting stock.
(f) Expiration of Options. No option shall be exercisable after the
expiration of the earlier of (i) five years from the date when such option was
granted or (ii) three years following (x) the retirement or resignation of the
optionee as a director of the Company, or (y) the failure of the optionee to be
reelected a director of the Company, or (z) the total and permanent disability
or death of the optionee.
(g) Exercise of Options. Options may be exercised only by notice to
the Company, accompanied by payment of the full purchase price for the shares as
to which they are exercised, as well as any federal, state, and/or local income
tax withholding required in connection with the exercise. Such purchase price,
together with any income tax withholding amount required, shall be paid in full
upon any exercise of an option (i) by cash including a personal check payable to
the order of the Company or (ii) by delivering an amount having an aggregate
Fair Market Value (as of the date of delivery) equal to the aggregate exercise
price of Common Stock already owned by the optionee, or (iii) by any combination
of (i) and (ii). Shares which otherwise would be delivered to the holder of an
option exercise may, at the election of the holder, be retained by the Company
in payment of any federal, state, and/or local income tax
-3-
<PAGE>
withholding due in connection with an exercise, and shall be valued at fair
market value as of the date of exercise; provided, however, that the payment of
any amount of withholding tax by an optionee with shares of Common Stock
(whether already owned by the optionee or retained by the Company from the
number of shares otherwise deliverable to the optionee upon exercise) shall be
subject to any restrictions set forth in the related option agreement.
(h) Nonstatutory Options. No option granted under the Plan shall
constitute an "incentive stock option" as that term is defined in the Internal
Revenue Code of 1986.
6. MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS
The Committee shall have the power to modify, extend or renew
outstanding options and authorize the grant of new options in substitution
therefor, provided that such power may not be exercised in a manner which would
(i) alter or impair any rights or obligations under any option previously
granted without the written consent of the optionee or (ii) adversely affect the
qualification of the Plan or any other stock-related plan of the Company under
Rule 16b-3 under the Securities Exchange Act of 1934 or any successor provision.
7. ASSIGNMENT
The rights and benefits under this Plan may not be assigned and any
attempted assignment of such rights and benefits shall be null and void.
8. LIMITATION OF RIGHTS
(a) No Right to Continue as a Director. Neither the Plan, nor the
granting of an option nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain a director for any period of time, or at any
particular rate of compensation.
(b) No Stockholder's Rights for Optionees. An optionee or his
representative shall have no rights as a stockholder with respect to the shares
covered by his option until the date of the issuance to him or his
representative of a stock certificate therefor, and no adjustment will be made
for dividends or other rights for which the record date is prior to the date
such certificate is issued.
9. CHANGES IN PRESENT STOCK
In the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or other change in the corporate
structure or capitalization affecting the Company's present Common Stock,
appropriate adjustment shall be made by the Committee in the number and kind of
shares which are or may become subject to options granted or to be granted
hereunder and the per share option price to be paid therefor.
-4-
<PAGE>
10. EFFECTIVE DATE AND DURATION OF THE PLAN
Options shall be granted under the Plan, subject to its authorization
and adoption by the Stockholders of the Company, at any time or from time to
time after its adoption by the Board of Directors, but no option shall be
exercisable under the Plan until the Plan shall have been adopted and approved
at the annual meeting of stockholders of the Company next following adoption of
the Plan by the Board. In the event the Plan is not so adopted by stockholders,
all options which may have been granted shall be null and void. The Plan shall
terminate on August 31, 2008 (unless earlier discontinued by the Board) but such
termination shall not affect the rights of the holder of any option outstanding
on such date of termination.
11. AMENDMENT OF THE PLAN
The Board may suspend or discontinue the Plan or revise or amend it in
any respect whatever; provided, however, that without approval of the
Stockholders no revision or amendment shall change the number of shares subject
to the Plan (except as provided in Section 9), change the definition of the
class of directors eligible to receive options, or materially increase the
benefits accruing to participants under the Plan.
12. COMPLIANCE WITH LAW, ETC.
Notwithstanding any other provision of this Plan or agreements made
pursuant hereto, the Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock under this Plan prior to
fulfillment of all of the following conditions:
(a) Effectiveness of any registration or other qualification of such
shares or the Company under any state or federal law or regulation which the
Board shall, in its absolute discretion or upon the advice of counsel, deem
necessary or advisable; and
(b) Grant of any other consent, approval or permit from any state or
federal governmental agency or securities exchange which the Board shall, in its
absolute discretion or upon the advice of counsel, deem necessary or advisable.
13. NOTICE
Any notice to the Company required by this Plan shall be in writing
addressed to the Secretary of the Company at its principal office, and shall be
deemed delivered only when it is received by the Secretary.
-5-
<PAGE>
14. GOVERNING LAW
This Plan and all determinations made and actions taken pursuant
hereto shall be governed by the law of the State of Delaware, and construed
accordingly.
15. EFFECTIVE DATE
This Director Stock Option Plan shall be effective from and after the
date of the initial public offering of the Company's Common Stock.
-6-
<PAGE>
EXHIBIT 10.15
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET
(Do not use this form for Multi-Tenant Property)
1. Basic Provisions ("Basic Provisions")
1.1. Parties: This Lease ("Lease"), dated for reference purposes only,
October 14, 1996, is made by and between FOX HILLS BUSINESS PARK, a California
-------------------------------------
limited partnership ("Lessor") and EXIGENT DIAGNOSTICS, INC. ("Lessee"),
- ------------------- -------------------------
collectively the "Parties," or individually a "Party").
1.2. Premises: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known by the street address of 6100 Bristol Parkway, Culver City located in the
---------------------------------
County of Los Angeles, State of California and generally described as (describe
----------- ----------
briefly the nature of the property) approximately 16,023 rentable square feet in
--------------------------------------------
a single-story building. (See paragraph 2 for further provisions.)
- -----------------------
1.3. Term: Five (5) years and no months ("Original Term") commencing
-------- --
October 14, 1996 ("Commencement Date") and ending October 13, 2001 ("Expiration
----------------
Date"). (See Paragraph 3 for further provisions.)
1.4. Early Possession: ("Early Possession Date"). (See Paragraphs 3.2
and 3.3 for further provisions).
1.5. Base Rent: $6,000.00 per month ("Base Rent"), payable on the first
--------- -----
day of each month commencing October 14, 1996 (See Paragraph 4 for further
----------------
provisions.)
[X] If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted.
1.6. Base Rent Paid Upon Execution: $6,000.00 as Base Rent for the period
---------
October 14, 1996 through November 13, 1996.
- ------------------------------------------
1.7. Security Deposit: $15,000.00 ("Security Deposit"). (See Paragraph 5
----------
for further provisions.)
1.8. Permitted Use: A FACILITY TO DEVELOP AND MANUFACTURE MEDICAL
---------------------------------------------
DIAGNOSTIC TESTING DEVICES FOR USE AT THE POINT OF PATIENT CARE (See Paragraph 6
- ---------------------------------------------------------------
for further provisions.)
1.9. Insuring Party: Lessor is the "Insuring Party" unless otherwise
stated herein. (See Paragraph 8 for further provisions.)
1.10. Real Estate Brokers: The following real estate brokers
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
<PAGE>
Lee & Associates Commercial Real Estate Services represents [X] Lessor
- ------------------------------------------------
exclusively ("Lessor's Broker"); [_] both Lessor and Lessee, and CB Commercial
-------------
represents [X] Lessee exclusively ("Lessee's Broker); [_] both Lessee and
Lessor. (See paragraph 15 for further provisions.)
1.11. Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by __________________________________________________________
("Guarantor"). (See Paragraph 37 for further provisions.)
1.12. Addenda. Attached hereto is an Addendum or Addenda consisting of
Paragraphs 49 through 84 and Exhibits A and B all of which constitute a part of
-- -- -------
this Lease.
2. Premises.
2.1. Letting. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which Lessor
and Lessee agree is reasonable and the rental based thereon is not subject to
revision whether or not the actual square footage is more or less.
2.2. Condition. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, fire sprinkler system, lighting, air conditioning, heating, and
loading doors, if any, in the Premises, other than those constructed by Lessee,
shall be in good operating condition on the Commencement Date. If a non-
compliance with said warranty exists as of the Commencement Date, Lessor shall,
except as otherwise provided in this Lease, promptly after receipt of written
notice from Lessee setting forth with specificity the nature and extent of such
non-compliance, rectify same at Lessor's expense. If Lessee does not give
Lessor written notice of a non-compliance with this warranty within thirty (30)
days after the Commencement Date, correction of that non-compliance shall be the
obligation of Lessee at Lessee's sole cost and expense.
2.3. Compliance with Covenants, Restrictions and Building Code. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Commencement Date. Said warranty
does not apply to the use to which Lessee will put the Premises or to any
Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to
be made by Lessee. If the Premises do not comply with said warranty, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify the same at Lessor's expense.
2.4. Acceptance of Premises. Lessee hereby acknowledges:
(1) that is has been advised by the Brokers to satisfy itself with
respect to the condition of the Premises (including but not limited to the
electrical and fire sprinkler systems,
<PAGE>
security, environmental aspects, compliance with Applicable Law, as defined in
Paragraph 6.3) and the present and future suitability of the Premises for
Lessee's intended use;
(2) that Lessee has made such investigation as it deems necessary
with reference to such matters and assumes all responsibility therefor as the
same relate to Lessee's occupancy of the Premises and/or the term of this Lease,
and
(3) that neither Lessor, nor any of Lessor's agents, has made any
oral or written representations or warranties with respect to the said matters
other than as set forth in this Lease.
2.5. Lessee Prior Owner/Occupant. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee's sole cost and expense, correct any non-
compliance of the Premises with said warranties.
3. Term.
3.1. Term. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.
3.2. Early Possession. If Lessee totally or partially occupies the Premises
prior to the Commencement Date, the obligation to pay Base Rent shall be abated
for the period of such early possession. All other terms of this Lease, however,
(including but not limited to the obligations to pay Real Property Taxes and
Insurance premiums and to maintain the Premises) shall be in effect during such
period. Any such early possession shall not affect nor advance the Expiration
Date of the Original Term.
3.3. Delay in Possession. If for any reason . . . illegible. If one is
specified in Paragraph 1.4 or, if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as otherwise provided herein, be obligated to pay rent or perform any
other obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days
thereafter, cancel this Lease, in which event the Parties shall be discharged
from all obligations hereunder; provided, however, that if such written notice
by Lessee is not received by Lessor within said ten (10) day period, Lessee's
right to cancel this Lease shall terminate and be of no further force or effect.
Except as may be otherwise provided, and regardless of when the term actually
commences, if possession is not tendered to Lessee when required by this Lease
and Lessee does not terminate this Lease, as aforesaid, the period free of the
obligation to pay Base Rent, if any, that Lessee would otherwise have enjoyed
shall run from the date of delivery of possession and continue for a period
equal to what Lessee would otherwise have enjoyed
Page 3
<PAGE>
under the terms hereof, but minus any days of delay caused by the acts, changes
or omissions of Lessee.
4. Rent.
4.1. Base Rent. Lessee shall cause payment of Base Rent and other rent or
charges, as the same may be adjusted from time to time, to be received by Lessor
in lawful money of the Untied States, without offset or deduction, on or before
the 5th day of the month. Base Rent and all other rent and charges for any
period during the term hereof which is for less than one (1) full calendar month
shall be prorated based upon the actual number of days of the calendar month
involved. Payment of Base Rent and other charges shall be made to Lessor at its
address stated herein or to such other persons or at such other addresses as
Lessor may from time to time designate in writing to Lessee.
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use upon 5 days
prior written notice to Lessee, apply or retain all or any portion of said
Security Deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability, cost, expense, loss or damage (including
attorneys' fees) which Lessor may suffer or incur by reason thereof. If Lessor
uses or applies all or any portion of said Security Deposit, Lessee shall within
ten (10) days after written request therefor deposit moneys with Lessor
sufficient to restore said Security Deposit to the full amount required by this
Lease. Lessor shall not be required to keep all or any part of the Security
Deposit separate from its general accounts. Lessor shall, at the expiration or
earlier termination of the term hereof and after Lessee has vacated the
Premises, return to Lessee (or, at Lessor' option, to the last assignee, if any,
of Lessee's interest herein), that portion of the Security Deposit not used or
applied by Lessor. Unless otherwise expressly agreed in writing by Lessor, no
part of the Security Deposit shall be considered to be held in trust, to bear
interest or other increment for its use, or to be prepayment for any moneys to
be paid by Lessee under this Lease.
6. Use.
6.1. Use. Lessee shall use and occupy the Premises for the purposes set
forth in Paragraph 1.8, or any other use which is comparable thereto, and for no
other purpose. Lessee shall not use or permit the use of the Premises in a
manner that creates waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to, neighboring premises or properties. Lessor
hereby agrees to not unreasonably withhold or delay its consent to any written
request by Lessee. Lessees assignees or subtenants, and by prospective assignees
and subtenants of the Lessee, its assignees and subtenants, for a modification
of said permitted purpose for which the premises may be used or occupied, so
long as the same will not impair the structural integrity of the Improvements on
the Premises, the mechanical or electrical systems therein, is not significantly
more burdensome to the Premises and the improvements thereon, and is
Page 4
<PAGE>
otherwise permissible pursuant to this Paragraph 6. If Lessor elects to withhold
such consent, Lessor shall within five (5) business days give a written
notification of same, which notice shall include an explanation of Lessor's
reasonable objections to the change in use.
6.2. Hazardous Substances.
(1) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect; either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for liability of Lessor to any governmental agency
of third party under any applicable statute or common law theory. Hazardous
Substance shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, crude oil or any products, by-products or fractions thereof. Lessee
shall not engage in any activity in, on or about the Premises which constitutes
a Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Law (as defined in Paragraph
6.3). "Reportable Use" shall mean (i) the installation or use of any above or
below ground storage tank, (ii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority. Reportable Use shall
also include Lessee's being responsible for the presence in, on or about the
Premises of a Hazardous Substance with respect to which any Applicable Law
requires that a notice be given to persons entering or occupying the Premises or
neighboring properties. Notwithstanding the foregoing, Lessee may, without
Lessor's prior consent, but in compliance with all Applicable Law, use any
ordinary and customary materials reasonably required to be used by Lessee in the
normal course of Lessee's business permitted on the Premises, so long as such
use is not a Reportable Use and does not expose the Premises or neighboring
properties to any meaningful risk of contamination or damage or expose Lessor to
any liability therefor. In addition, Lessor may (but without any obligation to
do so) condition its consent to the use or presence of any Hazardous Substance,
activity or storage tank by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefrom or therefor, including, but
not limited to, the installation (and removal on or before Lease expiration or
earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit under Paragraph 5 hereof.
(2) Duty to inform Lessor. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance, or a condition involving or resulting
from same, has come to be located in, on, under or about the Premises, other
than as previously consented to by Lessor, Lessee shall immediately give written
notice of such fact to Lessor. Lessee shall also immediately give Lessor a copy
of any statement, report, notice, registration, application, permit,
Page 5
<PAGE>
business plan, license, claim, action or proceeding given to, or received from,
any governmental authority or private party, or persons entering or occupying
the Premises, concerning the presence, spill, release, discharge of, or exposure
to, any Hazardous Substance or contamination in, on, or about the Premises,
including but not limited to all such documents as may be involved in any
Reportable Uses involving the Premises.
(3) Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, permits and
attorney's and consultant's fees arising out of or involving any Hazardous
Substances or storage tank brought onto the Premises by or for Lessee or under
Lessee's control. Lessee's obligations under this Paragraph 6 shall include, but
not be limited to, the effects of any contamination or injury to person,
property or the environment created or suffered by Lessee, and the cost of
investigation (including consultant's and attorney's fees and testing), removal,
remediation, restoration and/or abatement thereof, or of any contamination
therein involved, and shall survive the expiration or earlier termination of
this Lease. No termination, cancellation or release agreement entered into by
Lessor and Lessee shall release Lessee from its obligations under this Lease
with respect to Hazardous Substances or storage tanks, unless specifically so
agreed by Lessor in writing at the time of such agreement.
6.3. Lessee's Compliance with Law. Except as otherwise provided in this
Lease, Lessee, shall, at Lessee's sole cost and expense, fully, diligently and
in a timely manner, comply with all "Applicable Law," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, relating in any
manner to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil, groundwater conditions, and (iii) the use, generation,
manufacture, production, installation, maintenance, removal, transportation,
storage, spill or release of any Hazardous Substance or storage tank), now in
effect or which may hereafter come into effect, and whether or not reflecting a
change in policy from any previously existing policy. Lessee shall, within five
(5) days after receipt of Lessor's written request, provide Lessor with copies
of all documents and information, including, but not limited to, permits,
registrations, manifests, applications, reports and certificates, evidencing
Lessee's compliance with any Applicable Law specified by Lessor, and shall
immediately upon receipt, notify Lessor in writing (with copies of any documents
involved) of any threatened or actual claim, notice, citation, warning,
complaint or report pertaining to or involving failure by Lessee or the Premises
to comply with any Applicable Law.
6.4. Inspection; Compliance. Lessor and Lessor's Lender(s) (as defined in
Paragraph shall have the right to enter the Premises at any time, in the case of
an emergency, and otherwise at reasonable times, for the purpose of inspecting
the condition of the Premises and for verifying compliance by Lessee with this
Lease and all Applicable Laws (as defined in Paragraph 6.3), and to employ
experts and/or consultants in connection therewith and/or to advise Lessor with
respect to Lessee's activities, including but not limited to the installation,
operation, use,
Page 6
<PAGE>
monitoring, maintenance, or removal of any Hazardous Substance or storage tank
on or from the Premises. The costs and expenses of any such inspections shall be
paid by the party requesting same, unless a Default or Breach of this Lease,
violation of Applicable Law, or a contamination, caused or materially
contributed to by Lessee is found to exist or be imminent, or unless the
inspection is requested or ordered by a governmental authority as the result of
any such existing or imminent violation or contamination. In any such case,
Lessee shall upon request reimburse Lessor or Lessor's Lender, as the case may
be, for the costs and expenses of such inspections. Lessor acknowledges that as
a result of an inspection, it may be exposed to confidential or proprietary
information of Lessee ("Confidential Information"), and the Lessor agrees that
neither its employees or its representatives shall use or disclose Confidential
Information for any purpose, except as required by law. This covenant shall
survive a termination of this Agreement and Lessee shall have the right to
obtain an injunction to enforce this covenant.
7. Maintenance; Repairs; Utility Installations; Trade Fixtures and
Alterations.
7.1. Lessee's Obligations.
(1) Subject to the provisions of Paragraphs 2.2 (Lessor's warranty as
to condition), 2.3 (Lessor's warranty as to compliance with covenants, etc.).
7.2. (Lessor's obligations to repair), 9 (damage and destruction), and 14
(condemnation), Lessee shall at Lessee's sole cost and expense and at all times,
keep the Premises and every part thereof in good order, condition and repair,
structural and non-structural (whether or not such portion of the Premises
requiring repairs, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a
result of Lessee's use, any prior use, the elements or the age of such portion
of the Premises ), including, without limiting the generality of the foregoing,
all equipment or facilities serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers, fired or
unfired pressure vessels, fire sprinkler and/or standpipe and hose or other
automatic fire extinguishing system, including fire alarm and/or smoke detection
systems and equipment, fire hydrants, fixtures, walls (interior and exterior),
foundations, ceilings, roofs, floors, windows, doors, plate glass, skylights,
landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalks
and parkways located in, on, about, or adjacent to the Premises. Lessee shall
not cause or permit any Hazardous Substance to be spilled or released in, on,
under or about the Premises (including through the plumbing or sanitary sewer
system) and shall promptly, at Lessee's expense, take all investigatory and/or
remedial action reasonably recommended, whether or not formally ordered or
required, for the cleanup of any contamination of, and for the maintenance,
security and/or monitoring of the Premises, the elements surrounding same, or
neighboring properties, that was caused or materially contributed to by Lessee,
or pertaining to or involving any Hazardous Substance and/or storage tank
brought onto the Premises by or for Lessee or under its control. Lessee, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices. Lessee's obligations shall include
restorations, replacements or renewals when necessary to keep the Premises and
all improvements thereon or a part thereof in good order, condition and state of
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repair. If Lessee occupies the Premises for seven (7) years or more, Lessor may
require Lessee to repaint the exterior of the buildings on the Premises as
reasonably required, but not more frequently than once every seven (7) years.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain contracts, with copies to Lessor, in customary form and substance for,
and with contractors specializing and experienced in, the inspection,
maintenance and service of the following equipment and improvements, if any,
located on the Premises: (i) heating, air conditioning and ventilation
equipment, (ii) boiler, fired or unfired pressure vessels, (iii)fire sprinkler
and/or standpipe and hose or other automatic fire extinguishing systems,
including fire alarm and/or smoke detection, (iv) landscaping and irrigation
systems, (v) roof covering and drain maintenance and (vi) asphalt and parking
lot maintenance.
7.2 Lessor's Obligations. Except for the warranties and agreements of
Lessor contained in Paragraphs 2.2 (relating to condition of the Premises), 2.3
(relating to compliance with covenants, restrictions and building code), 9
(relating to destruction of the Premises) and 14 (relating to condemnation of
the Premises), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises, the
improvements located thereon, or the equipment therein, whether structural or
non-structural, all of which obligations are intended to be that of the Lessee
under Paragraph 7.1 hereof. It is the intention of the Parties that the terms of
this Lease govern the respective obligations of the Parties as to maintenance
and repair of the Premises. Lessee and Lessor expressly waive the benefit of any
statute now or hereafter in effect to the extent it is inconsistent with the
terms of this Lease with respect to, or which affords Lessee the right to make
repairs at the expense of Lessor or to terminate this Lease by reason of any
needed repairs.
7.3. Utility Installations; Trade Fixtures; Alterations.
(1) Definitions; Consent Required. The term "Utility Installations"
is used in this Lease to refer to all carpeting, window coverings, air lines,
power panels, electrical distribution, security, fire protection systems,
communication systems, lighting fixtures, heating, ventilating, and air
conditioning equipment, plumbing, and fencing in, on or about the Premises. The
term "Trade Fixtures" shall mean Lessee's machinery and equipment that can be
removed without doing material damage to the Premises. The term "Alterations"
shall mean any modification of the improvements on the Premises from that which
are provided by Lessor under the terms of this Lease, other than Utility
Installations or Trade Fixtures, whether by addition or deletion. "Lessee Owned
Alterations and/or Utility Installations" are defined as Alterations and/or
Utility Installations made by Lessee that are not yet owned by Lessor as defined
in Paragraph 7.4(a). Lessee shall not make any Alterations or Utility
Installations in, on, under or about the Premises without Lessor's prior written
consent. Lessee may, however, make non-structural Utility Installations to the
interior of the Premises (excluding the roof), as long as they are not visible
from the outside, do not involve puncturing, relocating or removing the roof or
any existing walls, and the cumulative cost thereof during the term of this
Lease as extended does not exceed $25,000.
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(2) Consent. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon: (i) Lessee's acquiring all applicable
permits required by governmental authorities, (ii) the furnishing of copies of
such permits together with a copy of the plans and specifications for the
Alteration or Utility Installation to Lessor prior to commencement of the work
thereon, and (iii) the compliance by Lessee with all conditions of said permits
in a prompt and expeditious manner. Any Alterations or Utility Installations by
Lessee during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and in compliance with all
Applicable Law. Lessee shall promptly upon completion thereof furnish Lessor
with as-built plans and specifications therefor. Lessor may (but without
obligation to do so) condition its consent to any requested Alteration or
Utility Installation that costs $10,000 or more upon Lessee's providing Lessor
with a lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation and/or upon Lessee's
posting an additional Security Deposit with Lessor under Paragraph 36 hereof.
(3) Indemnification. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall at its sole expense defend and protect itself, Lessor
and the Premises against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement thereof against the
Lessor or the Premises. If Lessor shall require, Lessee shall furnish to Lessor
a surety bond satisfactory to Lessor in an amount equal to one and one-half
times the amount of such contested lien claim or demand, indemnifying Lessor
against liability for the same, as required by law for the holding of the
Premises free from the effect of such lien or claim. In addition, Lessor may
require Lessee to pay Lessor's attorney's fees and costs in participating in
such action if Lessor shall decide it is to its best interest to do so.
7.4. Ownership; Removal; Surrender; and Restoration.
(1) Ownership. Subject to Lessor's right to require their removal or
become the owner thereof as hereinafter provided in this Paragraph 7.4, all
Alterations and Utility Additions made to the Premises by Lessee shall be the
property of and owned by Lessee, but considered a part of the Premises. Lessor
may, at any time and at its option, elect in writing to Lessee to be the owner
of all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per subparagraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
earlier termination of this Lease, become the property of Lessor and remain upon
and be surrendered by Lessee with the Premises.
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(2) Removal. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease, notwithstanding their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Lessee Owned Alterations or
Utility Installations made without the required consent of Lessor.
(3) Surrender/Restoration. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, with all
of the improvements, parts and surfaces thereof clean and free of debris and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have been prevented by good maintenance practice or by Lessee
performing all of its obligations under this Lease. Except as otherwise agreed
or specified in writing by Lessor, the Premises, as surrendered, shall include
the Utility Installations. The obligation of Lessee shall include the repair of
any damage occasioned by the installation, maintenance or removal of Lessee's
Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may be required by Applicable Law
and/or good service practice. Lessee's Trade Fixtures shall remain the property
of Lessee and shall be removed by Lessee subject to its obligation to repair and
restore the Premises per this Lease.
8. Insurance; Indemnity.
8.1. Payment For Insurance. Regardless of whether the Lessor or Lessee is
the Insuring Party, Lessee shall pay for all insurance required under this
Paragraph 8 except to the extent of the cost attributable to liability insurance
carried by Lessor in excess of $1,000,000 per occurrence. Premiums for policy
periods commencing prior to or extending beyond the Lease term shall be prorated
to correspond to the Lease term. Payment shall be made by Lessee to Lessor
within ten (10) days following receipt of an invoice for any amount due.
8.2. Liability Insurance.
(1) Carried by Lessee. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy or maintenance of the Premises and
all areas appurtant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less than $1,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises"
Endorsement and contain the "Amendment of the Pollution Exclusion" for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intro-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease as an "insured
contract" for the performance of Lessee's indemnity obligations under this
Lease. The limits of
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said insurance required by this Lease or as carried by Lessee shall not,
however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and or
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.
(2) Carried By Lessor. In the event Lessor is the Insuring Party,
Lessor shall also maintain liability insurance described in Paragraph 8.2(a)
above, in addition to, and not in lieu of, the insurance required to be
maintained by Lessee. Lessee shall not be named as an additional insured
therein.
8.3. Property Insurance - Building, Improvements and Rental Value.
(1) Building and Improvements. The Insuring Party shall obtain and
keep in force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and to the holders of any mortgages, deeds
of trustor ground leases on the Premises ("Lender(s)"), insuring loss or damage
to the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature or age of the improvements involved, such latter amount is less than full
replacement cost. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations shall be insured by Lessee under Paragraph
8.4 rather than by Lessor. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender), including coverage for any additional costs resulting
from debris removal and reasonable amounts of coverage for the enforcement of
any ordinance or law regulating the reconstruction or replacement of any
undamaged sections of the Premises required to be demolished or removed by
reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located. If such insurance coverage has a
deductible clause, the deductible amount shall not exceed $1,000 per occurrence,
and Lessee shall be liable for such deductible amount in the event of an insured
Loss, as defined Paragraph 9.1(c).
(2) Rental Value. The Insuring Party shall, in addition, obtain and
keep in force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and Lender(s) insuring the loss of the full
rental and other charges payable by Lessee to Lessor under this Lease for one
(1) year (including all real estate taxes, insurance costs, and any scheduled
rental increases). Said insurance shall provide that in the event the Lease is
terminated by reason of an insured loss, the period of indemnity for such
coverage shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an
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agreed valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income,
property taxes, insurance premium costs and other expenses, if any, otherwise
payable by Lessee, for the next twelve (12) month period. Lessee shall be liable
for any deductible amount in the event of such loss.
(3) Adjacent Premises. If the Premises are part of a larger building,
or if the Premises are part of a group of buildings owned by Lessor which are
adjacent to the Premises, the Lessee shall pay for any increase in the premiums
for the property insurance of such building or buildings if said increase is
caused by Lessee's acts, omissions, use or occupancy of the Premises.
(4) Tenant's Improvements. If the Lessor is the Insuring Party, the
Lessor shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease. If Lessee is the Insuring Party, the policy
carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned Alterations
and Utility Installations.
8.4. Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Lessee Owned Alterations and Utility
Installations in, on, or about the Premises similar in coverage to that carried
by the insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal property or the restoration of Lessee Owned Alterations
and Utility Installations. Lessee shall be the Insuring Party with respect to
the insurance required by this Paragraph 8.4 and shall provide Lessor with
written evidence that such insurance is in force.
8.5. Insurance Policies. Insurance required hereunder shall be in companies
duly licensed to transact business in the state where the Premises are located,
and maintaining during the policy term a "General Policyholders Rating" of at
least B+, V, or such other rating as may be required by a Lender having a lien
on the Premises, as set forth in the most current issue of "Best's Insurance
Guide." Lessee shall not do or permit to be done anything which shall invalidate
the insurance policies referred to in this Paragraph 8. If Lessee is the
Insuring Party, Lessee shall cause to be delivered to Lessor certified copies of
policies of such insurance or certificates evidencing the existence and amounts
of such insurance with the insureds and loss payable clauses as required by this
Lease. No such policy shall be cancellable or subject to modification except
after thirty (30) days prior written notice to Lessor. Lessee shall at least
thirty (30) days prior to the expiration of such policies, furnish Lessor with
evidence of renewals or "insurance binders" evidencing renewal thereof, or
Lessor may order such insurance and charge the cost thereof to lessee, which
amount shall be payable by Lessee to Lessor upon demand. If the Insuring Party
shall fail to procure and maintain the insurance required to be carried by the
Insuring Party under this Paragraph 8, the other Party may, but shall not be
required to, procure and maintain the same, but at Lessee's expense.
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8.6. Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor ("Waiving Party") each hereby release and relieve the other,
and waive their entire right to recover damages (whether in contract or in tort)
against the other, for loss of or damage to the Waiving Party's property damages
shall not be limited by the amount of insurance carried or required or by any
deductibles applicable thereto.
8.7. Indemnity. Except for Lessor's negligence, willful misconduct and/or
breach of express warranties, Lessee shall indemnify, protect, defend and hold
harmless the Premises. Lessor and its agents, Lessor's master or ground lessor,
partners and Lenders, from and against any and all claims, loss of rents and/or
damage, costs, liens, judgments, penalties, permits, attorney's and consultant's
fees, expenses and/or liabilities arising out of, involving, or in dealing with
the occupancy of the Premises by Lessee, the conduct of Lessee's business, any
act, omission or neglect of Lessee, its agents, contractors, employees, or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment, and whether well founded or not. In case any action or proceeding be
brought against Lessor by reason of any of the foregoing matters, Lessee upon
notice from Lessor shall defend the same at Lessee's expense by counsel
reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such
defense. Lessor need not have first paid any such claim in order to be so
indemnified.
8.8. Exemption of Lessor from Liability. Except in the event of Lessor's
gross negligence or willful misconduct, Lessor shall not be liable for injury or
damage to the person or goods, wares, merchandise or other property of Lessee,
Lessee's employees, contractors, invitees, customers, or any other person in or
about the Premises, whether such damage or injury is caused by or results from
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not,
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor. Notwithstanding Lessor's negligence or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss or income or profit therefrom.
9. Damage or Destruction.
9.1. Definitions.
(1) "Premises Partial Damage" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations,
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the repair cost of which damage or destruction is less than 50% of the then
Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(2) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility Installations the
repair cost of which damage or destruction is 50% or more of the then
Replacement Cost of the Premises Immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(3) "Insured Loss" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations,
which was caused by an event required to be covered by the Insurance described
in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits
involved.
(4) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(5) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on or under the
Premises.
9.2. Partial Damage - Insured Loss. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect. Notwithstanding the foregoing, if the required insurance
was not in force or the insurance proceeds are not sufficient to effect such
repair, the Insuring Party shall promptly contribute the shortage in proceeds
(except as to the deductible which is Lessee's responsibility) as and when
required to complete said repairs. In the event, however, the shortage in
proceeds was due to the fact that, by reason of the unique nature of the
improvements, full replacement cost insurance coverage was not commercially
reasonable and available, Lessor shall have no obligation to pay for the
shortage in insurance proceeds or to fully restore the unique aspects of the
Premises unless Lessee provides Lessor with the funds to cover same, or adequate
assurance thereof, within ten (10) days following receipt of written notice of
such shortage and request therefor. If Lessor receives said funds or adequate
assurance thereof within said ten (10) day period, the party responsible for
making the repairs shall complete them as soon as reasonably possible and this
Lease shall remain in full force and effect. If Lessor does not receive such
funds or assurance within said period, Lessor may nevertheless elect by written
notice to Lessee within ten (10) days thereafter to make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect. If in
such case Lessor
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does not so elect, then this Lease shall terminate sixty (60) days following the
occurrence of the damage or destruction. Unless otherwise agreed, Lessee shall
in no event have any right to reimbursement from Lessor for any funds
contributed by Lessee to repair any such damage or destruction. Premises Partial
Damage (illegible) Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that
there may be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either Party.
9.3. Partial Damage - Uninsured Loss. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, either: (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written notice
to Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such damage of Lessor's desire to terminate this Lease as of the
date sixty (60) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage totally at Lessee's expense and without reimbursement from Lessor.
Lessee shall provide Lessor with the required funds or satisfactory assurance
thereof within thirty (30) days following Lessee's said commitment. In such
event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the funds
or assurance thereof within the times specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.4. Total Destruction. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 8.6.
9.5. Damage Near End of Term. If at any time during the last six (6) months
of the term of this Lease there is damage for which the cost to repair exceeds
one (1) month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, within twenty (20) days following the occurrence of the damage, or
before the expiration of the time provided in such option for its exercise,
whichever is earlier ("Exercise Period"), (i) exercising such option, in such
case the provisions of 9.2, 9.3 and 9.4 shall be applicable.
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9.6. Abatement of Rent; Lessee's Remedies.
(1) In the event of damage described in Paragraph 9.2 (Partial
Damage -Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues (not to exceed the period for
which rental value insurance is required under Paragraph 8.3(b)), shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement of Base Rent, Real Property Taxes, insurance
premiums, and other charges, if any, as aforesaid, all other obligations of
Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such repair or
restoration unless the damage is a result of Lessor's willful misconduct.
(2) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue. Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after receipt of such notice, this Lease shall
continue in full force and effect. "Commence" as used in this Paragraph shall
mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first
occurs.
9.7. Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the Investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor and at Lessor's option either (i) investigate
and remediate such Hazardous Substance Condition, if required, as soon as
reasonably possible at Lessor's expenses, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to investigate
and remediate such condition exceeds twelve (12) times the then monthly Base
Rent or $100,000, whichever is greater, give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
Hazardous Substance Condition of Lessor's desire to terminate this Lease as of
the date sixty (60) days following the giving of such notice. In the event
Lessor elects to give such notice of Lessor's intention to terminate this Lease.
Lessee shall have the right within ten (10) days after the receipt of such
notice to give written notice to Lessor of Lessee's commitment to pay for the
investigation and remediation of such Hazardous Substance Condition totally at
Lessee's expense and without reimbursement from Lessor except to the extent of
an amount equal to twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance thereof within thirty
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(30) days following Lessee's said commitment. In such event this Lease shall
continue in full force and effect, and Lessor shall proceed to make such
investigation and remediation as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the
required funds or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Lessor's notice of termination. If a
Hazardous Substance Condition occurs for which Lessee is not legally
responsible, there shall be abatement of Lessee's obligations under this Lease
to the same extent as provided in Paragraph 9.6(a) for a period of not to exceed
twelve (12) months.
9.8. Termination - Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit
as has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9. Waive Statutes. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.
10. Real Property Taxes.
10.1. (a) Payment of Taxes. Lessee shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises during the term of this
Lease. Subject to Paragraph 10.1(b), all such payments shall be made at least
ten (10) days prior to the delinquency date of the applicable installment.
Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes
have been paid. If any such taxes to be paid by Lessee shall cover any period of
time prior to or after the expiration or earlier termination of the term hereof.
Lessee's share of such taxes shall be equitably prorated to cover only the
period of time within the tax fiscal year this Lease is in effect, and Lessor
shall reimburse Lessee for any overpayment after such proration. If Lessee shall
fail to pay any Real Property Taxes required by this Lease to be paid by Lessee,
Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor
therefor upon demand.
(b) Advance Payment. In order to insure payment when due or before
delinquency of any or all Real Property Taxes, Lessor reserves the right, at
Lessor's option, to estimate the current Real Property Taxes applicable to the
Premises, and to require such current year's Real Property Taxes to be paid in
advance to Lessor by Lessee, either: (i) in a lump sum amount equal to the
installment due, at least twenty (20) days prior to the applicable delinquency
date, or (ii) monthly in advance with the payment of the Base Rent. If Lessor
elects to require payment monthly in advance, the monthly payment shall be that
equal monthly amount which, over the number of months remaining before the month
in which the applicable tax installment would become delinquent (and without
interest thereon), would provide a fund large enough to fully discharge before
delinquency the estimated installment of taxes to be paid. When the actual
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amount of the applicable tax bill is known, the amount of such equal monthly
advance payment shall be adjusted as required to provide the fund needed to pay
the applicable taxes before delinquency. If the amounts paid to Lessor by Lessee
under the provisions of this Paragraph are insufficient to discharge the
obligations of Lessee to pay such Real Property Taxes as the same become due,
Lessee shall pay to Lessor, upon Lessor's demand, such additional sums as are
necessary to pay such obligations. All moneys paid to Lessor under this
Paragraph may be intermingled with other moneys of Lessor and shall not bear
interest. In the event of a Breach by Lessee in the performance of the
obligations of Lessee under this Lease, then any balance of funds paid to Lessor
under the provisions of this Paragraph may, subject to proration as provided in
Paragraph 10.1(a), at the option of Lessor, be treated as an additional Security
Deposit under Paragraph 5.
10.2. Definition of "Real Property Taxes". As used herein, the term "Real
Property Taxes" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part. Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "Real Property Taxes" shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring, or changes in applicable law taking
effect, during the term of this Lease, including but not limited to a change in
the ownership of the Premises or in the improvements thereon, the execution of
this Lease, or any modification, amendment or transfer thereof, and whether or
not contemplated by the Parties. Notwithstanding the foregoing, Lessee shall not
be responsible for taxes caused solely as a result of the transfer of the
Premises. Including but not limited to transfer taxes or capital gains or income
taxes. This in no way modifies Lessee's responsibility to pay the "Joint
Consolidated Annual Tax Bill" as levied by the Los Angeles County Assessor's
office.
10.3. Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the asssessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4. Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures, furnishings, equipment and all other personal property
to be assessed and billed separately from the real property of Lessor. If any of
Lessee's said personal property shall be assessed with Lessor's real property.
Lessee shall
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pay Lessor the taxes attributable to Lessee within ten (10) days after receipt
of a written statement setting forth the taxes applicable to Lessee's property
or, at Lessor's option, as provided in Paragraph 10.1(b).
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises.
12. Assignment and Subletting.
12.1. Lessor's Consent Required.
(1) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"assignment") or sublet all or any part of any Lessee's interest in this Lease
or in the Premises without Lessor's prior written consent given under and
subject to the terms of Paragraph 36.
(2) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose. Notwithstanding the foregoing, a public offering of
securities by Lessee shall not constitute a "change of control."
(3) The involvement of Lessee of its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of the execution
by Lessor of this Lease or at the time of the most recent assignment to which
Lessor has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, at whichever time said Net Worth of
Lessee was or is greater, shall be considered an assignment of this Lease by
Lessee to which Lessor may reasonably withhold its consent. "Net Worth of
Lessee" for purposes of this Lease shall be the net worth of Lessee (excluding
any guarantors) established under generally accepted accounting principles
consistently applied.
(4) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1(c), or a noncurable Breach
without the necessity of any notice and grace period. If Lessor elects to treat
such unconsented to assignment or subletting as a noncurable Breach, Lessor
shall have the right to either: (i) terminate this Lease, or (ii) upon thirty
(30) days written notice ("Lessor's Notice"), increase the monthly Base Rent to
fair market rental value or one hundred ten percent (110%) of the Base Rent then
in effect, whichever is greater. Pending
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determination of the new fair market rental blue, if disputed Lessee, Lessee
shall pay the amount set forth in Lessor's Notice, with any overpayment credited
against the next installment(s) of Base Rent coming due, and any underpayment
for the period retroactively to the effective date of the adjustment being due
and payable immediately upon the determination thereof. Further, in the event of
such Breach and market value adjustment, (i) the purchase price of any option to
purchase the Premises held by Lessee shall be subject to similar adjustment to
the then fair market value (without the Lease being considered an encumbrance or
any deduction for depreciation or obsolescence, and considering the Premises at
its highest and best use and in good condition), or one hundred ten percent
(110%) of the price previously in effect, whichever is greater, (ii) any index-
oriented rental or price adjustment formulas contained in this Lease shall be
adjusted to require that the base index be determined with reference to the
index applicable to the time of such adjustment, and (iii) any fixed rental
adjustments scheduled during the remainder of the Lease term shall be increased
in the same ratio as the new market rental bears to the Base Rent in effect
immediately prior to the market value adjustment.
(5) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and injunctive relief.
12.2. Terms and Conditions Applicable to Assignment and Subletting.
(1) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(2) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(3) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee. However,
Lessor may consent to subsequent sublettings and assignments of the sublease or
any amendments or modifications thereto without notifying Lessee or anyone else
liable on the Lease or sublease and without obtaining their consent, and such
action shall not relieve such persons from liability under this Lease or
sublease.
(4) In the event of any Default or Breach of Lessee's obligations
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
any one else responsible for the performance of the Lessee's obligations under
this Lease, including the sublessee, without
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first exhausting Lessor's remedies against any other person or entity
responsible therefor to Lessor, or any security held by Lessor or Lessee.
(5) Each request for consent to an assignment or subletting shall
be in writing, accompanied by information relevant to Lessor's determination as
to the financial and operational responsibility and appropriateness of the
proposed assignee or sublessee, including but not limited to the intended use
and/or required modification of the Premises, if any. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(6) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed,
for the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
12.3. Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(1) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of this or any
other assignment of such sublease to Lessor, nor by reason of the collection of
the rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such sublessee
under such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee's obligations under this Lease, to pay to
Lessor the rents and other charges due and to become due under the sublease.
Sublessee shall rely upon any such statement and request from Lessor and shall
pay such rents and other charges to Lessor without any obligation or right to
inquire as to whether such Breach exists and notwithstanding any notice from or
claim from Lessee to the contrary. Lessee shall have no right or claim against
said sublessee, or, until the Breach has been cured, against Lessor, for any
such rents and other charges so paid by said sublessee to Lessor.
(2) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the
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sublessor under such sublease from the time of the exercise of said option to
the expiration of such sublease; provided, however, Lessor shall not be liable
for any prepaid rents or security deposit paid by such sublessee to such
sublessor or for any other prior Defaults or Breaches of such sublessor under
such sublease.
(3) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(4) No sublessee shall further assign or sublet all or any part of
the Premises without lessor's prior written consent.
(5) Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to cure the Default of
Lessee within the grace period, if any, specified in such notice. The sublessee
shall have a right of reimbursement and offset from and against Lessee for any
such Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1. A "Default" is defined as a failure by the Lessee to observe, comply
with or perform any of the terms, covenants, conditions or rules applicable to
Lessee under this Lease. A "Breach" is defined as the occurrence of any one or
more of the following Defaults, and, where a grace period for cure after notice
is specified herein, the failure by Lessee to cure such Default prior to the
expiration of the applicable grace period, shall entitle Lessor to pursue the
remedies set forth in Paragraphs 13.2 and/or 13.3:
(1) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(2) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by lessee hereunder, whether to Lessor or to a third party,
as and when due, the failure by Lessee to provide Lessor with reasonable
evidence of insurance or surely bond required under this Lease, or the failure
of Lessee to fulfill any obligation under this Lease which endangers or
threatens life or property, where any such failure continues for a period of
three (3) days following written notice thereof by or on behalf of Lessor to
Lessee.
(3) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with Applicable Law per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the recission of an unauthorized assignment or
subletting per Paragraph 12.1(b), (iv) a Tenancy Statement per Paragraphs 16 or
37, (v) the subordination or non-subordination of this Lease per Paragraph 30,
(vi) the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii)
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any other documentation or information which Lessor may reasonably require of
Lessee under the terms of this Lease, where any such failure continues for a
period of ten (10) days following written notice by or on behalf of Lessor to
Lessee.
(4) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
that are to be observed, complied with or performed by Lessee, other than those
described in subparagraphs (a), (b) or (c), above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such sure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(5) The occurrence of any of the following events: (i) The making
by lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. (S)101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days, provided, however, in the
event that any provision of this subparagraph (e) is contrary to any applicable
law, such provision shall be of no force or effect, and not affect the validity
of the remaining provisions.
(6) The discovery by Lessor that any financial statement given to
Lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.
(7) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a guarantor, (ii) the termination of a guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a guarantor's refusal to honor the guaranty, or (v) a
guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of lessor to Lessee of any such event, to provide Lessor with written
alternative assurance or security, which when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the guarantors that existed at the time of execution of this Lease.
13.2. Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses , permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon
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invoice therefor. If at least three checks given to Lessor by Lessee shall not
be honored by the bank upon which it is drawn, Lessor, at its option, may
require all future payments to be made under this Lease by Lessee to be made
only by cashier's check. In the event of a Breach of this Lease by Lessee, as
defined in Paragraph 13.1, with or without further notice or demand, and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such Breach, Lessor may:
(1) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of the leasing commission paid by lessor applicable to the unexpired
term of this Lease. The worth at the time of award of the amount referred to in
provision (iii) of the prior sentence shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%). Efforts by Lessor to mitigate damages
caused by Lessee's Default or Breach of this Lease shall not waive Lessor's
right to recover damages under this Paragraph. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall have
the right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Lessor may reserve therein the right to recover all or
any part thereof in a separate suit for such rent and/or damages. If a notice
and grace period required under subparagraphs 13.1(b), (c) or (d) was not
previously given, a notice to pay rent or quit, or to perform or quit, as the
case may be, given to Lessee under any statute authorizing the forfeiture of
leases for unlawful detainer shall also constitute the applicable notice for
grace period purposes required by subparagraphs 13.1(b), (c) or (d). In such
case, the applicable grace period under subparagraphs 13.1(b), (c) or (d) and
under the unlawful detainer statute shall run concurrently after the one such
statutory notice and the failure of Lessee to cure the Default within the
greater of the two such grace periods shall constitute both an unlawful detainer
and a Breach of this Lease entitling Lessor to the remedies provided for in this
Lease and/or by said statute. Lessor shall use its best efforts to mitigate its
damages in the event of a Breach by attempting to relet the premises at the best
rate of rent obtainable.
(2) Continue the Lease and Lessee's right to possession in effect
(in California under California Civil Code Section 1951.4) after Lessee's Breach
and abandonment and recover the rent as it becomes due, provided Lessee has the
right to sublet or assign, subject only to
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reasonable limitations. See Paragraphs 12 and 36 for the limitations on
assignment and subletting which limitations Lessee and Lessor agree are
reasonable. Acts of maintenance or preservation, efforts to relet the Premises,
or the appointment of a receiver to protect the Lessor's interest under the
Lease, shall not constitute a termination of the Lessee's right to possession.
(3) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(4) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3. Inducement Recapture In Event of Breach. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions," shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach of this Lease by Lessee, as defined in Paragraph 13.1, any such
inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph shall not be deemed a waiver by Lessor of the provisions of this
Paragraph unless specifically so stated in writing by Lessor at the time of such
acceptance.
13.4. Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within five (5) days
after such amount shall be due, then, without any requirement for notice to
Lessee, Lessee shall pay to Lessor a late charge equal to six percent (6%) of
such overdue amount. The parties hereby agree that such late charge represents
a fair and reasonable estimate of the costs Lessor will incur by reason of late
payment by Lessee. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's Default or Breach with respect to such overdue
amount, nor prevent Lessor from exercising any of the other rights and remedies
granted hereunder. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) consecutive installments of Base Rent,
then
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notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5. Breach by Lessor. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, Lessor
shall be deemed to have responded within a reasonable time if, within 3 days
after receipt of written notice from Lessee specifying the obligation not
performed, Lessor commences action to fulfill its obligation and thereafter
proceeds diligently until the obligation is fully performed.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the land area
not occupied by any building, is taken by condemnation, Lessee may, at Lessee's
option, to be exercised in writing within ten (10) days after Lessor shall have
given Lessee written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the total
rentable floor area of the building located on the Premises. No reduction of
Base Rent shall occur if the only portion of the Premises taken is land on which
there is no building. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that Lessee
shall be entitled to any compensation separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of its net severance damages received, over and above the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation, except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall be responsible
for the payment of any amount in excess of such net severance damages required
to complete such repair.
15. Broker's Fee.
15.1. The Brokers named in Paragraph 1.10 are the procuring causes of this
Lease.
15.2. Upon execution of this Lease by both Parties, Lessor shall pay to
said Brokers jointly, or in such separate shares as they may mutually designate
in writing, a fee as set forth in a separate written agreement between Lessor
and said Brokers (or in the event there is no
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separate written agreement between Lessor and said Brokers, the sum of $as
--
agreed) for brokerage services rendered by said Brokers to Lessor in this
- ------
transaction.
15.3. Unless Lessor and Brokers have otherwise agreed in writing, Lessor
further agrees that: (a) if Lessee exercises any Option (as defined in Paragraph
39.1) or any Option subsequently granted which is substantially similar to an
Option granted to Lessee in this Lease, or (b) if Lessee acquires any rights to
the Premises or other premises described in this Lease which are substantially
similar to what Lessee would have acquired had an Option herein granted to
Lessee been exercised, or (c) if Lessee remains in possession of the Premises,
with the consent of Lessor, after the expiration of the term of this Lease after
having failed to exercise an Option, or (d) if said Brokers are the procuring
cause of any other lease or sale entered into between the Parties pertaining to
the Premises and/or any adjacent property in which Lessor has an interest, or
(e) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then as to any of said transactions, Lessor shall pay
said Brokers a fee in accordance with the schedule of said Brokers in effect at
the time of the execution of this Lease.
15.4. Any buyer or transferee of Lessor's interest in this Lease, whether
such transfer is by agreement or by operation of law, shall be deemed to have
assumed Lessor's obligation under this Paragraph 15. Each Broker shall be a
third party beneficiary of the provisions of this Paragraph 15. Each Broker
shall be a third party beneficiary of the provisions of this Paragraph 15 to the
extent of its interest in any commission arising from this Lease and may enforce
that right directly against Lessor and its successors.
15.5. Lessee and Lessor each represent and warrant to the other that it
has had no dealings with any person, firm, broker or finder (other than the
Brokers, if any named in Paragraph 1.10) in connection with the negotiation of
this Lease and/or the consummation of the transaction contemplated hereby, and
that no broker or other person, firm or entity other than said named Brokers is
entitled to any commission or finder's fee in connection with said transaction.
Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold
the other harmless from and against liability for compensation or charges which
may be claimed by any such unnamed broker, finder or other similar party by
reason of any dealings or actions of the Indemnifying Party, including any
costs, expenses, attorneys' fees reasonably incurred with respect thereto.
15.6. Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. Tenancy Statement.
16.1. Each Party (as "Responding Party") shall within ten (10) days after
written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "Tenancy Statement" form published by the
American Industrial Real Estate Association, plus such
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additional information, confirmation and/or statements as may be reasonably
requested by the Requesting Party.
16.2. If Lessor desires to finance, refinance, or sell the Premises, any
part thereof, or the building of which the Premises are a part, Lessee and all
Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor such financial statements of Lessee and
such Guarantors as may be reasonably required by such lender or purchaser,
including but not limited to Lessee's financial statements for the past three
(3) years. All such financial statements shall be received by Lessor and such
lender or purchaser in confidence and shall be used only for the purposes herein
set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if this
is a sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or in this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor at the time of such transfer or assignment.
Except as provided in Paragraph 15, upon such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.
18. Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. Interest on Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty (30)
days following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.
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23. Notices.
23.1. All notices required or permitted by this Lease shall be in writing
and may be delivered in person (by hand or by messenger or courier service) or
may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notice purposes. Either Party may by
written notice to the other specify a different address for notice purposes,
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for the purpose of mailing or delivering notices to
Lessee. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate by written notice
to Lessee.
23.2. Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given forty-eight (48) hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone confirmation of receipt of the transmission thereof,
provided a copy is also delivered via delivery or mail. If notice is received
on a Sunday or legal holiday, it shall be deemed received on the next business
day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any preceding Default or
Breach by Lessee of any provision hereof, other than the failure of Lessee to
pay the particular rent so accepted. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording
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purposes. The Party requesting recordation shall be responsible for payment of
any fees or taxes applicable thereto.
26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located. Any litigation between the Parties
hereto concerning this Lease shall be initiated in the county in which the
Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1. Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default and
allow such Lender thirty (30) days following receipt of such notice for the cure
of said default before invoking any remedies Lessee may have by reason thereof.
If any Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative dates of the documentation or
recordation thereof.
30.2. Attornment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one (1) month's rent.
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30.3. Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term thereof, will not be disturbed so long as Lessee is not in Breach
hereof and attorns to the record owner of the Premises.
30.4. Self-Executing. The agreements contained in this paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that, upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. Attorney's Fees. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) or Broker in any such proceeding, action or appeal thereon,
shall be entitled to reasonable attorney's fees. Such fees may be awarded in
the same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term, "Prevailing Party"
shall include, without limitation, a Party or Broker who substantially obtains
or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment or the abandonment by the other Party or Broker of its
claim or defense. The attorney's fees award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorney's fees reasonably incurred. Lessor shall be entitled to attorney's
fees, costs and expenses incurred in the preparation and service of notices of
Default and consultations in connection therewith, whether or not a legal action
is subsequently commenced in connection with such Default or resulting Breach.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the building of which
they are a part, as Lessor may reasonably deem necessary. Lessor may at any time
place on or about the Premises or building any ordinary "For Sale" signs and
Lessor may at any time during the last one hundred twenty (120) days of the term
hereof place on or about the Premises any ordinary "For Lease" signs. All such
activities of Lessor shall be without abatement of rent or liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
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34. Signs. Lessee shall not place any sign upon the Premises, except that
Lessee may, with Lessor's prior written consent, install (but not on the roof)
such signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to
the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations). Unless otherwise expressly agreed herein,
Lessor reserves all rights to the use of the roof and the right to install, and
all revenues from the installation of, such advertising signs on the Premises,
including the roof, as do not unreasonably interfere with the conduct of
Lessee's business.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor by Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. Consents.
(1) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's consent to any act, assignment of this Lease or subletting
of the Premises by Lessee shall not constitute an acknowledgment that no Default
or Breach by Lessee of this Lease exists, nor shall such consent be deemed a
waiver of any then existing Default or Breach, except as may be otherwise
specifically stated in writing by Lessor at the time of such consent.
(2) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to the Lessor's consent shall not preclude the imposition
by Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. Guarantor.
37.1. If there are to be any Guarantors of this Lease per Paragraph 1.11,
the form of the guaranty to be executed by each such Guarantor shall be in the
form most recently published by the American Industrial Real Estate Association,
and each said Guarantor shall have the same obligations as Lessee under this
Lease, including but not limited to the obligation to provide the Tenancy
Statement and Information called for by Paragraph 16.
37.2. It shall constitute a Default of the Lessee under this Lease if any
such Guarantor fails or refuses, upon reasonable request by Lessor to give: (a)
evidence of the due execution of
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the guaranty called for by this Lease, including the authority of the Guarantor
(and of the party signing on Guarantor's behalf) to obligate such Guarantor on
said guaranty, and including in the case of a corporate Guarantor, a certified
copy of a resolution of its board of directors authorizing the making of such
guaranty, together with a certificate of incumbency showing the signature of the
persons authorized to sign on its behalf, (b) current financial statements of
Guarantor as may from time to time be requested by Lessor, (c) a Tenancy
Statement, or (d) written confirmation that the guaranty is still in effect.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises and
the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. Options.
39.1. Definition. As used in this Paragraph 39 the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.3. Multiple Options. In the event that Lessee has any Multiple Options
to extend or renew this Lease, a later Option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.
39.4. Effect of Default on Options.
(1) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid (without
regard to whether notice thereof is given Lessee), or (iii) during the time
Lessee is in Breach of this Lease, or (iv) in the event that Lessor has given to
Lessee three (3) or more notices of Default under Paragraph 13.1, whether or not
the Defaults are cured, during the twelve (12) month period immediately
preceding the exercise of the Option.
(2) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
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(3) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of Default under Paragraph 13.1 during any
twelve (12) month period, whether or not the Defaults are cured, or (iii) if
Lessee commits a Breach of this Lease.
40. Multiple Buildings. If the Premises are part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of such other buildings and their
invitees, and that Lessee will pay its fair share of common expenses incurred in
connection therewith.
41. Security Measures. Lessee hereby acknowledges that the rental payment to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to any
amount of sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, Party shall be entitled to recover such sum or so much thereof
as it was not legally required to pay under the provisions of this Lease.
44. Authority. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
delivery this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
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45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. The parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonably non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. Multiple Parties. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such Multiple Parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF
ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
OR BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR EMPLOYEES AS TO THE
LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE
TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE
ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE. IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN
CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD
BE CONSULTED.
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The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
Executed at Newport Beach Executed at _________________________
----------------------------
on 10/96 on __________________________________
-------------------------------------
by LESSOR: by LESSEE:
FOX HILLS BUSINESS PARTY EXIGENT DIAGNOSTICS, INC.
- ---------------------------------------- -------------------------------------
a California Limited Partnership
- ---------------------------------------- _____________________________________
By: /s/ David M. Denholm By: /s/ W.V. Stoughton
------------------------------------ ----------------------------------
Name Printed: David M. Denholm Name Printed: Vick Stoughton
------------------------- ------------------------
Title: General Partner Title: President and CEO
--------------------------------- ------------------------------
By: ____________________________________ By: _________________________________
Name Printed: __________________________ Name Printed: _______________________
Title: _________________________________ Title: ______________________________
Address: 500 Newport Center Drive, Address: 6100 Bristol Parkway,
Suite #620, Newport Beach, CA 92660 Culver City, California
Tel. No. (714) 720-9797 Tel. No. (___) ______________________
-------------------------------
Fax No. (714) 721-1152 Fax No. (___) _______________________
-------------------------------
NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form: American Industrial Real Estate Association, 345 South Figueroa
Street, Suite M-1, Los Angeles, CA 90071. (213) 687-8777. Fax. No. (213) 687-
8616.
(C)Copyright 1990-By American Industrial Real Estate Association. All rights
reserved. No part of these works may be reproduced in any form without
permission in writing.
FORM 204N-R-12/91
Page 36
<PAGE>
ADDENDUM TO STANDARD
INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET
dated October 14, 1996
by and between
Fox Hills Business Park, Ltd.,
collectively as LESSOR
and
Exigent Diagnostics, Inc., as LESSEE
19. Rent Escalations. The rent shall be increased as follows:
----------------
a) On January 1, 1997 through July 31, 1997 rent, shall be: $ 9,000.00
per month.
b) On August 1, 1997 through July 31, 1998 rent shall be: $12,000.00
per month;
c) On August 1, 1998 through July 31, 1999 rent shall be: $13,620.00
per month;
d) On August 1, 1999 through July 31, 2000 rent shall be: $14,420.00
per month;
e) On August 1, 2000 through October 13, 2001 rent shall be: $15,220.00
per month;
50. Commencement Date. Notwithstanding that Lessee is not entitled to
-----------------
possession of the Premises or any part thereof until the "Early Possession
Date," Lessee shall be permitted limited access, prior to the Commencement
Date and during reasonable hours, to that portion of the Premises commonly
known as 6100 Bristol Parkway. Lessee's access shall be limited to Lessee
--------------------
and its consultants, engineers, architects and other agents, employees or
independent contractors (but not the general public) for purposes of
inspection and planning and removing fixtures, abandoned property and
debris from the designated portion of the Premises; in no event shall
Lessee be permitted to install any Utility Installations or Trade Fixtures
(as defined in this Lease) or perform any Alterations (as defined in this
Lease) (other than as set forth in this Paragraph), prior to the
Commencement Date. Lessee's right to access described in this Paragraph 49
is expressly subject to and conditioned upon Lessor's prior receipt of the
insurance policies and/or certificates required under Paragraph 8 of this
Lease.
51. Tenant Improvements. Lessee shall construct the Tenant Improvements in
-------------------
accordance with the approved working drawings.
52. Floorplan. Lessor and Lessee shall mutually agree upon the floorplan.
---------
Page 37
<PAGE>
53. Floorplan Changes. Lessor and Lessee will make no changes or deviations
-----------------
from the approved plans and specifications without the prior written
approval of Lessor. Any changes required by any governmental authority or
its agents are deemed approved by Lessee.
54. Working Drawings. Upon completion of working drawings, Lessee shall
----------------
deliver copies of the working drawings to Lessor or any authorized agent of
Lessor. Lessor or any authorized agent of Lessor shall, by signing the
working drawings no later than fifteen (15) business days following
Lessor's receipt of said working drawings, authorize Lessee to complete the
Premises in accordance with the Plans.
55. Parking. During the term of this Lease, Lessor shall make available
-------
twenty-four (24) hours a day, seven days a week, to Lessee, its employees
and visitors, free parking for fifty six (56) automobiles with in and out
privileges. Said fifty six parking spaces shall be generally available for
Lessee's use in the vicinity of the Premises within a common parking area.
Lessor shall provide night lighting standards to illuminate the parking
area at night and the cost of operating and maintaining said lighting shall
be the responsibility of Lessee.
56. Utilities. If the utility services including but not limited to the
---------
illumination of said parking area, electricity and/or gas, water, sewer,
heating, ventilation and air conditioning for the premises are not
separately metered to Lessee, Lessee agrees to pay, a reasonable
proportion, as determined by Lessor, of all charges jointly metered with
other premises. In the event that the trash disposal service does not
lend itself to separate trash containers, Lessee shall pay a reasonable
proportion of same.
57. Common Area Maintenance. Notwithstanding anything contained to the contrary
-----------------------
in this Lease, including but not limited to paragraph 7 hereof, Lessor
shall at Lessee's expense, provide landscape and gardening services and
walkway and parking lot for the Premises. Lessee agrees to reimburse Lessor
promptly upon demand for Lessee's proportionate share of all landscaping,
gardening and maintenance expenses incurred by Lessor. Lessor shall
maintain these areas in keeping with its present quality and standards.
Lessee's proportionate share of said common area maintenance shall be
21.00%. The phrase "Common Area" means all areas and facilities outside the
Premises that are provided and designated for general use and convenience
of Lessee and other tenants in Fox Hills Business Park and their respective
officers, agents and employees, customers, and invitees. Common Areas
include (but are not limited to) pedestrian sidewalks, landscaped areas,
roadways and parking areas. Lessor reserves the right from time to time to
make changes in the shape, size location, number and extent of the land and
improvements constituting the Common Areas.
58. Building Signage. Lessee shall have the right to "monument signage"
----------------
located in front of the building.
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<PAGE>
59. Insurance.
---------
(a) Increases in Premiums. Lessee agrees that it will not keep, use, sell
---------------------
or offer for sale in or upon the Premises any article which may be prohibited by
any insurance policy in force at an time during the term hereof covering the
Premises. If Lessee's occupancy or conduct of business in the Premises, whether
or not Lessor has consented to the same, results in any increase in premiums for
the insurance carried from time to time by Lessor hereunder, Lessee shall pay
any such increase in premiums within 10 days after being billed therefor by
Lessor. In determining whether increased premiums are a result of Lessee's use
or occupancy of the Premises, a schedule issued by the organization computing
the insurance rate on the Premises showing the various components of such rate
shall be conclusive evidence of the several items and charges which make up the
rate. Lessee shall promptly comply with all reasonable requirements of the
insurance authority or of any insurer now or hereafter in effect relating to the
Premises.
(b) Cancellation. If any insurance policy carried by Lessor hereunder
------------
shall be cancelled or cancellation shall be threatened or the coverage
thereunder reduced or threatened to be reduced in any way by reason of Lessee's
use or occupation of any portion of the Premises, or by any assignee or
sublessee of Lessee or by anyone permitted by Lessee to be upon the Premises,
and if Lessee fails to remedy the condition giving rise to such cancellation,
threatened cancellation or reduction of coverage within 48 hours after notice
thereof, Lessor may, at its option, either terminate this Lease or enter upon
the Premises and attempt to remedy such conditions and Lessee shall forthwith
pay the cost thereof to Lessor as additional rent. Lessor shall not be liable
for any damage or injury caused to Lessee's personal property or any other
property located in the Premises as a result of such entry. In the event that
Lessor shall be unable to remedy such condition, then Lessor shall have all of
the remedies provided for herein in the event of a Default by Lessee.
Notwithstanding the foregoing, Lessor shall have no obligation to remedy such
default.
(c) Liability Insurance. The liability insurance policy limits set forth
-------------------
in Paragraph 8 of this Lease shall be adjusted from time to time, as follows:
If the CPI shall, at any time after the first year of the Original Term hereof,
exceed the CPI in effect for the calendar month which is two (2) months prior
to the calendar month in which the Commencement Date occurs (the "Base CPI") by
more than ten percent (10%), said insurance policy limits shall be increased, in
the same proportion as (i) the excess of the CPI then in effect over the Base
CPI bears to (ii) the Base CPI. Thereafter, each time the CPI shall exceed the
Base CPI by an additional ten percent (10%), said insurance policy limits shall
be further increased in the same manner. If said insurance policy limits shall
have been increased from time to time or at any time in accordance with this
Paragraph and thereafter the CPI decreases by more than ten percent (10%) of the
Base CPI, Lessee may from time to time as such decreases occur, proportionately
reduce said insurance policy limits; provided, however, that in no event shall
said insurance policy limits at any time be in amounts less than those required
at the commencement of the Original Term.
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<PAGE>
60. Indemnification of Lessor. As a material part of the consideration to
-------------------------
Lessor for entering into this Lease, Lessee hereby assumes all risk of damage or
destruction to property or injury to or the death of persons in or about the
Premises arising from any act, omission or cause by any person, and Lessee
hereby waives all claims in respect thereof against Lessor, except for any claim
arising out of Lessor's willful misconduct or gross negligence.
61. Excessive Damage or Destruction. If there is either "Premises Total
-------------------------------
Destruction" as defined in Paragraph 9.1(b) or if Lessor determines that it
cannot, with reasonable diligence, fully repair or restore any partial damage to
the Premises within 180 days after the date of the damage or destruction,
notwithstanding Lessee's exercise of any right to repair, Lessor may terminate
this Lease. Lessor shall determine whether there is Premises Total Destruction
or whether full repair or restoration can be made within the 180-day period, and
Lessor's good faith determination shall be binding upon Lessee. Lessor shall
notify Lessee of its determination, in writing, within 45 days after the date of
the damage or destruction. If Lessor determines that the Premises can be fully
repaired or restored within the 180-day period, or if it is determined that such
repair or restoration cannot be made within said period or there is Premises
Total Destruction but Lessor does not elect to terminate within 45 days from the
date of said determination, this Lease shall remain in full force and effect and
Lessor shall repair and restore the damage as soon as reasonably possible,
subject to the provisions of Paragraph 9.5. Provided that Lessee was not a cause
of the destruction, in the event that there occurs Premises Total Destruction,
Lessee may terminate the Lease upon written notice to Lessor no later than 30
days after such Premises Total Destruction.
62. Assignment and Subletting.
-------------------------
(a) Bonus Rental. If for any assignment or sublease, Lessee receives rent
------------
or other consideration, either initially or over the term of the assignment or
sublease, in excess of the Base Rent called for hereunder, or in the event of
the sublease of a portion of the Premises, in excess of such Base Rent fairly
allocable to such portion (and actual out of pocket brokerage fees expended by
Lessee in obtaining such assignment or sublease), Lessee shall pay to Lessor,
monthly as additional rent hereunder, 50% of the excess of each such payment of
rent or other consideration received by Lessee within 10 days after its receipt.
For purposes of this Paragraph 62, the term "rent or other consideration" shall
include, without limitation, all monies or other consideration of any kind, if
such sums are related to Lessee's interest in this Lease or in the Premises,
including but not limited to, bonus money, key money and payments (in excess of
book value thereof) for Lessee's assets, fixtures, inventory, accounts, good
will, equipment, furniture, general intangibles and any capital stock or other
equity ownership of Lessee.
(b) Scope. Unless Lessor requires an attornment in the event of a sublease
-----
pursuant to Paragraph 12.3 (b), at Lessor's option, any sublease shall terminate
upon termination of the Lease due to Lessee's Breach and such subtenant shall
immediately vacate the Premises upon such termination. If Lessee's obligations
under this Lease have been guaranteed by third parties, then at Lessor's option
a sublease, and Lessor's consent thereto, shall not be effective unless and
until said guarantors give their written consent to such sublease and the terms
thereof. Lessee
Page 40
<PAGE>
immediately and irrevocably assigns to Lessor, as security for Lessee's
obligations under this Lease, all rent from any subletting of all or a part of
the Premises as permitted by this Lease, and Lessor, as assignee and as
attorney-in-fact for Lessee, or a receiver for Lessee appointed on Lessor's
application, may collect such rent and apply it toward Lessee's obligations
under this Lease; provided that, until the occurrence of an act of default by
Lessee, Lessee shall have the right to collect such rent; and provided further
that no such collection shall be construed to constitute a novation or release
of Lessee from the further performance of Lessee's obligations hereunder.
63. Limitation of Lessor's Liability. The obligations of Lessor under this
--------------------------------
Lease shall not constitute personal obligations of the individuals constituting
Lessor or any partners, directors, officers or shareholders of an entity
hereinafter constituting Lessor, and Lessee shall look solely to the real estate
that is the subject of this Lease and to no other assets of Lessor for
satisfaction of any liability in respect of this Lease.
64. Right to Rents, Issues and Profits. In the event this Lease is terminated
----------------------------------
pursuant to the provisions of Paragraph 13, all of the right, title, estate and
interest of Lessee in and to (a) the Premises, (b) all rents, issues and profits
of the Premises whether then accrued or to accrue, (c) all insurance policies
and all insurance monies paid or payable thereunder, and (d) at the election of
Lessor, all subleases then in existence for any part or parts of the Premises,
shall, without compensation being paid or required therefor, pass unto and vest
in and become the property of Lessor, free of any trust or claim thereto by
Lessee. Lessee hereby assigns to Lessor all subrents and other sums falling due
from subtenants, licensees and concessionaires during any period in which Lessor
has the right under this Lease, whether exercised or not, to re-enter the
Premises upon Lessee's breach of this Lease, and Lessee shall have no right,
interest or claim in or to such sums during any such period. Each such
sublessee, licensee or concessionaire shall agree (i) to make directly to
Lessor, upon written notice from Lessor that Lessee has breached this lease, all
payments of subrents, which payments shall be received by Lessor without any
liability or obligation to such subtenant or otherwise (except to credit such
payments against the rents and other sums due under this Lease from Lessee), and
(ii) to attorn to Lessor, at the election of Lessor at its sole discretion, in
the event this Lease is terminated as the result of Lessee's breach; provided,
however, that nevertheless Lessor shall not a. be liable for any previous act or
omission of Lessee under such sublease, b. be subject to any defense or offset
previously accrued in favor of the subtenant against Lessee, or c. be bound by
any previous modification of such sublease made without Lessor's written consent
or by any previous prepayment of more than one month's rent.
65. Indemnification.
---------------
(a) Lessor's Obligation. Lessor shall indemnify, defend and hold harmless
-------------------
Lessee, its officers, agents and employees from and against any claims, damages,
expenses, including an amount equal to reasonable attorney's fees, or
liabilities arising out of or in any way connected with this Lease including,
without limitation, claims, damages, expenses, or liabilities for loss or damage
to any property, or for death or injury to any person or persons in proportion
to and to
Page 41
<PAGE>
the extent that such claims, damages, expenses, or liabilities arise from the
negligence or willful acts or omissions of Lessor, its officers, agents, or
employees.
(b) Lessee's Obligation. Lessee shall indemnify, defend and hold harmless
-------------------
Lessor, its officers, agents and employees from and against claims, damages,
expenses, including an amount equal to reasonable attorney's fees, or
liabilities arising out of or in any way connected with this Lease including,
without limitation, claims;, damages, expenses, or liabilities for loss or
damage to any property or for death or injury to any person or persons in
proportion to and to the extent that such claims,, damages, expenses, or
liabilities arise from the negligence or willful acts or omissions of Lessee,
its officers, agents, or employees.
66. Waiver of Subrogation. To the extent permitted by law and without
---------------------
affecting the coverage provided by insurance required to be maintained hereunder
or under the Lease, Lessor and Lessee each waive any right to recover against
the other (1) damages for injury to or death of person, (2) damages to property,
(3) damage to the demised Premises or any part thereof, and (4) claims arising
by reason of any of the foregoing, but only to the extent that any of the
foregoing damages and/or claims are covered (and then only to the extent of such
coverage) by insurance actually carried by either Lessor or Lessee or, if
greater than the amount of such actual coverage, to the extent that any of the
foregoing damages or claims are required by this Lease to be covered (and then
only to the extent of the required coverage) . This provision is intended to
waive fully, and for the benefit of each party, any rights and/or claims which
might give rise to a right of subrogation in any insurer. Each party shall
cause each insurance policy obtained by it to permit such waiver of subrogation
or to provide that the insurer waives all rights of recovery by way of
subrogation against either party in connection with any damage covered by such
policy. If any insurance policy cannot be obtained permitting or providing for
a waiver of subrogation, or is obtainable only by the payment of an additional
premium charge above that charged by insurers issuing policies not permitting or
providing for a waiver of subrogation, the party undertaking to obtain such
insurance shall notify the other party in writing of this fact. The other party
shall have a period of fifteen (15) days after receiving notice either to place
the insurance with an insurer which is reasonably satisfactory to the other
party and which will carry the insurance permitting or providing for a waiver of
subrogation, or to agree to pay the additional premium if such a policy is
obtainable at additional cost. If such insurance cannot be obtained or the
party in whose favor a waiver of subrogation is desired refuses to pay the
additional premium charged, the other party shall be relieved of the obligation
to obtain a waiver of subrogation rights with respect to the particular
insurance involved during the policy period of such insurance, but such
obligation shall revive (subject to the provisions of this Paragraph) upon the
expiration of such policy period.
67. Triple Net. This Lease is a triple net (net, net, net) Lease. In addition
----------
to Base Rent, as additional rent Lessee shall also be responsible for and shall
pay all insurance, maintenance and repair costs, property taxes, utilities and
other costs associated with the Premises, all as more fully set forth in this
Lease. Lessee shall also be responsible for all reasonable costs, fees and
expenses related to and/or to be paid to any management company retained or
employed by Lessor, at any time and from time to time, to manage the Premises or
any part thereof.
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<PAGE>
68. Seismic Reinforcement. If at any time or from time to time Lessor is
---------------------
required by the Lender(s) or any other governmental entity to perform any
seismic related retrofitting or reinforcement of the whole or any part of the
Premises ("Seismic Work"), Lessor shall be solely responsible for the cost of
such Seismic Work; provided, however, and notwithstanding any other provision of
this Lease, Lessor shall not be responsible or liable for any loss or injury
suffered by Lessee or related to Lessee's business on the Premises, or for any
loss of income or profit therefrom, as a result of or in any way relating to the
Seismic Work. The provisions Paragraph 84 of this Lease shall specifically
apply to the Seismic Work.
69. Plate Class Insurance. The property insurance required to be maintained
---------------------
pursuant to Paragraph 8.3 of this Lease shall include all-risk coverage of all
plate glass on the Premises, with a deductible amount of no more than $250.00
per incident or loss.
70. Additional Rent/Payments Due. In addition to the monthly Base Rent, Lessee
----------------------------
shall also pay as additional rent, without deduction or offset, all other
charges, fees, costs, taxes, impositions, expenses and other sums required to be
paid by Lessee under this Lease whether or not the same is designated as
additional rent. Unless otherwise set forth in this Lease, any and all amounts
required to be paid by Lessee to Lessor, whether or not defined as additional
rent, shall be due no later than the date that is ten (10) days following the
date Lessor gives written notice to Lessee of the amount due. In the event of
nonpayment of any additional rent or other sums when due, Lessor shall have all
of the rights and remedies provided hereunder or by law for the nonpayment of
rent.
72. Heating Ventilation and Air-Conditioning (HVAC). For the first twelve (12)
-----------------------------------------------
months following the Commencement Date, Lessor shall be responsible for any and
all repairs, if any, relating to the HVAC of the Premises (unless such need for
repair is caused by or attributable to Lessee or Lessee's acts or omissions
relating to the Premises).
73. Roof. Lessor shall install a new roof prior to Lease commencement.
----
74. Service Companies. Within thirty (30) days after occupancy of the Premises
-----------------
by Lessee, Lessor shall give Lessee notice of the name, address and telephone
number of an agency or person convenient to Lessee as a local source of service
with regard to Lessor's responsibilities under this Lease as to repairs,
maintenance, and servicing of the premises and any or all related equipment,
fixtures and appurtenances. If Lessor fails to provide such notice, Lessee may
choose service companies as needed and without penalty from Lessor.
75. Holding Over. If Lessee, with Lessor's consent, remains in possession of
------------
the Premises after the Lease Term or any Extended Term, this Lease shall
automatically be extended on a month-to-month basis at a monthly rent equal to
150% of the rent in the last month of the Lease Term or Extended Term, subject
to termination upon thirty (30) days' written notice by either party. All
other terms and conditions shall remain in full force and effect.
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<PAGE>
76. Waiver. The waiver by Lessor or Lessee of any term, covenant or condition
------
herein contained shall not be deemed to be a waiver of any other term, covenant
or condition, nor shall either party's consent to any breach of any term,
covenant or condition be deemed to constitute or imply its consent to any
subsequent breach of the same or other term, covenant or condition herein
contained.
77. Quiet Possession. As long as Lessee keeps and performs the covenants in
----------------
this Lease, Lessee shall at all times during the term of this Lease peaceable
and quietly have, hold and enjoy the Premises, without suit, trouble or
hindrance from Lessor or any person claiming under Lessor.
78. Estoppel Certificate. Within thirty (30) days of written notice by one
--------------------
party to the other, each will execute, acknowledge and deliver to the other an
estoppel certificate in writing declaring any modifications, defaults or advance
payments and whether the Lease, as may be modified, is in full force and effect.
Any such certificate may be conclusively relied upon for the intended
transaction for which the statement was requested.
79. Option To Extend Term.
---------------------
(a) Lessor hereby grants to Lessee one (1) option to extend the
Original Term of this Lease for a period of five (5) years (the "Option Term")
subject to all of the same terms and conditions as those set forth for the
Original Term of this Lease, except Base Rent shall be adjusted as set forth
below, and provided that:
(b) (i) Lessee is not or has not been in default at any time for any
reason whatsoever during the initial term of this Lease, that Lessee or its
permitted assigned has physically occupied the leased premises during the full
initial term of the Lease, and is currently in physical occupancy.
(c) (ii) Subject to the terms and conditions hereinafter set forth, if
Lessee exercises the options as herein provided, the term of this Lease shall be
automatically extended for the Option Term without the execution of an extension
or renewal lease, and during the Option Term, Lessor and Lessee shall be bound
by all of the terms, covenants and conditions of this Lease except that (A) the
Base Rent for the option periods shall be ninety-five percent (95%) of the Fair
Market Rental Value determined as hereinafter provided.
(ii) The "Fair Market Rental Value" shall be determined as follows:
"Fair Market Rental Value" shall mean the fair market rental for
the entire Premises as of the commencement of the Option Term, taking into
account the value of all leasehold improvements in the Premises for a Lessee
proposing to sign a lease for a similar term and having financial qualifications
similar to Lessee and using as a guide equivalent space of similar age,
construction, quality, use and location. In determining the "Fair Market Rental
Value", the parties shall negotiate in good faith in order to reach agreement;
and in the event the
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<PAGE>
parties are unable to reach agreement during the period that is not more than
six (6) months and not less than four (4) months prior to the commencement of
the Option Term, the Lessee and lessor shall each select an appraiser within 5
days. If the two appraisers cannot agree on the Fair Market Rental Value of the
Premises within 30 days, the two appraisers shall select a mutually agreeable
independent appraiser, whose determination of Fair Market Rental Value shall be
binding on the Lessee and Lessor. Each party shall be responsible for the cost
and expense of the appraiser it selects. If a third appraiser must be appointed
because the Lessee's appraiser and Lessor's appraiser cannot reach an agreement,
the Lessee and Lessor shall equally split the cost of the third, independent
appraiser.
(iii) In no event, and notwithstanding anything to the contrary,
shall the Base Rent payable during the Option Term be less than the monthly
Base Rent payable during the last year of the Original Term of this Lease.
(c) Lessee must give written notice to Lessor of Lessee's exercise of each
option not less than nine (9) months prior to the last day of the respective
Term of this Lease.
(d) Lessee's option to extend the term of this Lease must be exercised as
to the entirely of the Premises.
(e) If after exercising the option granted herein and before the
commencement of the Option Term, Lessee defaults under this Lease, Lessor
(without prejudice to any of its other rights and remedies) may, at Lessor's
option, nullify the option herein granted by written notice and this Lease shall
terminate at the expiration of the Original Term, unless earlier terminated.
80. Interruption of Lessee's Business. Lessor shall not be liable in any
---------------------------------
manner for the interruption of, or damage or injury to, Lessee or any of its
subleases, or its or their respective businesses on the Premises arising form,
indirectly or directly relating to, or because of any construction, repair or
maintenance work by Lessor.
81. Counterparts. This Addendum may be executed in any number of counterparts,
------------
each of which shall be treated as an original and all of which together shall be
deemed one document.
32. Conflict. In the event of any conflict between the provisions of this
--------
Addendum and the provisions of the form lease to which it is attached, the
provisions of this Addendum shall control.
83. Entry by Lessor. Lessee shall permit Lessor and Lessor's agents to enter
---------------
the Premises, with reasonable advance written notice (except in the case of
emergency), provided such entry is made in a reasonable manner and does not
unreasonably interfere with the conduct of Lessee's business.
84. Miscellaneous Provisions.
------------------------
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<PAGE>
(a) No Amendments. No amendment of this lease shall be valid unless made
-------------
in writing and signed by the parties hereto, and no oral understanding or
agreement not incorporated herein shall be binding on either party hereto.
(b) Time of the Essence. Time is of the essence of each term and provision
-------------------
of this Lease.
(c) Binding Effect. Subject to any provision hereof restricting
---------------
assignment or subletting by Lessee, this lease shall bind the parties, their
personal representatives, successors, and assigns.
(d) The invalidity of any provision of this Lease as determined by a court
of competent jurisdiction shall in no way affect the validity of any other
provision hereof.
(e) Addendum. In the event of conflict between this Lease and any Addendum
--------
or Exhibit attached hereto, the provisions of such Addendum or Exhibit shall
control.
The Parties hereto have executed this Addendum as of 10/96, 1996.
"Lessor" "Lessee"
________________________________ ________________________________
Fox Hills Business Park, Ltd., Exigent Diagnostics, Inc.
a California corporation
By: /s/ David M. Denholm By: /s/ W.V. Stoughton
---------------------------- -----------------------------
David M. Denholm
General Partner
By:____________________________ Title: Chairman and CEO
--------------------------
Timothy H. Harris
General Partner
Page 46
<PAGE>
EXHIBIT 10.16
AGREEMENT
This Agreement made and entered into the 23rd day of August, 1996 by
and between Fuji Photo Film Co., Ltd., a corporation duly organized and existing
under the laws of Japan and having its principal office at 26-30, Nishiazabu 2-
chome, Minato-ku, Tokyo, Japan (hereinafter referred to as "FUJI") and Exigent
Diagnostics, Inc., a corporation duly organized and existing under the laws of
State of Delaware and having its principal office at 709 Swedeland Road, King of
Prussia, Pennsylvania, the United States of America (hereinafter referred to as
"EXIGENT"),
WITNESSETH:
Whereas FUJI has been engaged in, among other businesses, developing
and manufacturing DRI-CHEM films and has proprietary technology and know-how
related thereto;
Whereas EXIGENT has been engaged in commercial lab business' in
clinical diagnostic field and in developing a human diagnostic testing so-called
Point of Care Testing system and has proprietary technology and know-how related
thereto;
Whereas FUJI and SmithKline Beecham Corporation, which is the
predecessor of EXIGENT have executed the Letter of Intent dated March 19, 1996
to confirm the parties' intent to enter into a definitive agreement concerning
supply of DRI-CHEM films, film-based chemistry tests and immunodiagnostic tests
and exchange of various technology for use in Point of Care Testing system;
NOW, THEREFORE, in consideration of the premises and their mutual
covenants hereinafter set forth, the parties hereto agree as follows:
Article 1 Definitions
-----------
1.1. "POCT (Point of Care Testing)" shall mean a human or animal
diagnostic testing performed in the immediate vicinity of the patient at the
time a test sample is obtained. POCT shall exclude any diagnostic testing, which
is performed at a central fixed laboratory within hospitals, other health care
facilities or commercial laboratories.
1.2. "FDC Film" shall mean films used in FUJI DRI-CHEM system applicable
to the tests listed in Schedules A and B.
1.3. "FUJI Technology" shall mean FUJI's technology, know-how and
technical assistance relating to the use of FDC Film, including but not limited
to the specifications of FDC Film, its quality assurance and other information
listed in Schedule B, as may be amended from time to time by agreement of the
parties.
1.4. "EXIGENT POCT System" shall collectively mean a system and products
thereof developed by EXIGENT for POCT, including but not limited to chemistry,
immunochemistry, coagulation, and optionally hematology tests, test cartridge
for separating blood and metering samples, analyzer(s) for said tests including
data management components and software and a mobile cart.
1.5. "EXIGENT Materials" shall mean the immunodiagnostic testing reagents,
which utilize any of the technology EXIGENT has developed, or develops or
acquires in the future, including but not limited to technology as to tests in
Hemoglobin Alc, Digoxin and HCG.
<PAGE>
1.6. "Competing Instruments" shall mean diagnostic instruments and the
disposables they use, which instruments and disposables are designed for use in
POCT and which directly compete with the EXIGENT POCT System.
1.7. "Southeast Asia" shall mean the People's Republic of China, the
Republic of China, South Korea, Vietnam, Thailand, Myanmar, India, the
Philippines, Indonesia, Malaysia and Singapore.
Article 2 Supply of FDC Film
------------------
2.1. FUJI shall supply EXIGENT with and EXIGENT shall purchase from FUJI
FDC Film for the development of EXIGENT POCT System in accordance with the terms
and conditions detailed in Schedules D and E. The terms and conditions for
supply of FDC Film to be required for marketing of EXIGENT POCT System shall be
separately agreed upon between the parties hereto. The FDC Film applicable to
the tests in Sodium, Potassium and Chloride shall be supplied to EXIGENT by FUJI
in a slide form on which such FDC Film is mounted.
2.2. EXIGENT shall supply FUJI with and FUJI shall purchase from EXIGENT
EXIGENT Materials under the terms and conditions of a separate supply/purchase
agreement in which the EXIGENT Materials shall be priced as the highest at cost
plus fifty percent (50%) on CIF TOKYO basis.
2.3. FUJI shall supply EXIGENT exclusively with FDC Film until December
31, 2003, provided that such exclusive supply shall be changed to non-exclusive
supply if EXIGENT fails to obtain by December 31, 1999 approvals from the Food
and Drug Administration ("FDA") which should be necessary for distribution of
EXIGENT POCT system using FDC Film in the United States of America to
professional market for more than eighty percent (80%) of the tests listed in
Schedule A, B and G.
2.4. In the event that exclusive supply is changed to non-exclusive supply
under Article 2.3, FUJI shall supply EXIGENT with FDC Film in accordance with
the terms and conditions to be separately agreed upon between the parties
hereto.
2.5. During the period of exclusive supply of FDC Film as provided in
Article 2.3, FUJI shall not supply FDC Film to any third party which the both
parties hereto agree may develop and sell Competing Instruments.
2.6. EXIGENT shall use FDC Film supplied by FUJI hereunder only for
development of EXIGENT POCT System and shall not supply FDC Film to or use for
any third party for any purpose.
2.7. EXIGENT agrees that it shall use only FDC Film in its POCT System for
those tests listed in Schedule A and B and shall not use other reagents or
technologies for carrying out said tests and shall not be supplied with by any
third party any chemistry reagents for development of EXIGENT POCT System or
performance of the tests listed in Schedules A and B. For POCT Systems tests
other than those listed in Schedules A and B, EXIGENT shall have
<PAGE>
the right to manufacture or purchase from others its needs for reagents or
technologies for carrying out those tests.
2.8. Nothing in this Article shall be construed to prohibit or otherwise
affect FUJI's development for or distribution to any third party of FDC Film and
FUJI Technology for use with any products other than Competing Instruments.
FUJI and EXIGENT further confirms that FUJI DRI-CHEM systems and their
disposables shall in no event be construed as Competing Instruments and that
FUJI shall in no way be restricted to market FUJI DRI-CHEM systems and their
disposables.
Article 3 Inspection and Acceptance of FDC Film
-------------------------------------
Upon the receipt of FDC Film supplied by FUJI, EXIGENT shall promptly
inspect the FDC Film in accordance with the standards mutually agreed upon
between the parties as provided in Schedule D. Such inspection by EXIGENT shall
be considered as final. In the event that EXIGENT finds during the inspection
any defects in FDC Film that could be caused prior to the receipt thereof and it
notifies FUJI to that effect within thirty (30) days of the receipt and returns
such defective FDC Film to FUJI, FUJI shall replace such defective FDC Film with
non-defective FDC Film without cost to EXIGENT. It is expressly agreed and
understood that for such defective FDC Film FUJI shall assume no other or
further liability of any kind whatsoever other than that expressly undertaken by
it in Article 3.
Article 4 License Exchange
----------------
4.1. FUJI shall from time to time during the term of this Agreement
disclose to EXIGENT on a non-exclusive basis FUJI Technology, written or oral,
to the extent that both EXIGENT and FUJI consider such disclosure is necessary
for EXIGENT to develop test cartridge of EXIGENT POCT System which incorporates
FDC Film supplied by FUJI (hereinafter referred to as "EXIGENT POCT
Cartridge(s)"). EXIGENT shall use FUJI Technology so disclosed only for
EXIGENT's development, manufacture and sale of EXIGENT POCT Cartridges and shall
not use it for any other purpose than such development, manufacture and sale.
4.2. FUJI shall grant EXIGENT a fully paid-up, non-exclusive license in the
world excluding Japan to make, have made, use, sell and offer to sell EXIGENT
POCT Cartridges under FUJI's patents directed to FDC Film and under FUJI's other
rights directed to FUJI Technology disclosed to EXIGENT.
4.3. In exchange for the rights and licenses granted by FUJI in accordance
with Article 4.1 and 4.2 above, EXIGENT shall grant FUJI:
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<PAGE>
(1) a fully paid-up, irrevocable, worldwide, exclusive license
during the term of this Agreement, and a royalty-bearing, worldwide, exclusive
license thereafter, to make, have made, use, sell and offer to sell any dry
reagents under EXIGENT's patents which are directed to the tests listed in
Schedule A and B and which are applied and issued based on inventions made
during EXIGENT's development and/or manufacture of EXIGENT POCT Cartridges. The
royalty of the royalty-bearing license above shall be established in good faith
negotiation by the parties hereto; provided, however, that an amount of the
royalty shall be reasonable and favorable to FUJI compared with a similar
license to the others. In spite of FUJI's exclusive license, EXIGENT itself
shall be able to make, have made, use, sell and offer to sell any dry reagents
under EXIGENT's said patents;
(2) a fully paid-up, exclusive sub-license in Japan and a fully
paid-up, non-exclusive sub-license in the rest of the world during the term of
this Agreement, and a royalty-bearing, exclusive sub-license in Japan and a
royalty-bearing, non-exclusive sub-license in the rest of the world thereafter,
to make, have made, use, sell and offer to sell any dry reagents for
immunoassays under EXIGENT's right to grant such sublicense which right EXIGENT
has acquired, acquires or will acquire from any third party(s) under such third
party(s)'s patent(s). The royalty of the royalty-bearing license above shall be
established in good faith negotiation by the parties hereto; provided, however,
that an amount of the royalty shall be reasonable and favorable to FUJI compared
with a similar license to the others. EXIGENT shall make best efforts to acquire
such right from such third party(s) in case EXIGENT acquires a license under
such patent(s); and
(3) upon FUJI's request, a royalty-bearing, world-wide license
to make, have made, use, sell and offer to sell any dry reagents for coagulation
under EXIGENT's patent(s) and/or know-how applied or acquired before termination
of this Agreement. In case that EXIGENT acquires before termination of this
Agreement from any third party(s) a right to grant sub-licenses under such third
party(s)'s patents and/or know-how regarding coagulation, EXIGENT also shall
grant FUJI a sub-license under such right, upon FUJI's request. Other terms and
conditions of the license and/or the sub-license shall be established in good
faith negotiation by the parties hereto; provided, however, that an amount of
royalty shall be reasonable and favorable to FUJI compared with a similar
license to the others.
Article 5 Development of EXIGENT POCT System
----------------------------------
EXIGENT shall make best efforts to develop and complete EXIGENT POCT
System which incorporates FDC Film and/or FUJI Technology supplied hereunder in
accordance with the time schedule provided in Schedule H. During the term of
this Agreement, EXIGENT shall submit to FUJI a report in writing every three
months that describes the progress of development of EXIGENT POCT System. FUJI
and EXIGENT shall discuss the schedule of development of EXIGENT POCT System if
FUJI considers it necessary.
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<PAGE>
Article 6 Distribution Rights
-------------------
EXIGENT shall grant FUJI right of the first refusal to distribute
EXIGENT POCT System exclusively in Japan and non-exclusively in Southeast Asia
subject to a distribution agreement to be negotiated separately. Such
distribution agreement shall include, among other terms and conditions, an
indemnification by EXIGENT with regard to EXIGENT POCT System which
indemnification shall be the same as that provided in Articles 7.4 and 7.5
below.
Article 7 Indemnification
---------------
7.1. FUJI shall indemnify and hold EXIGENT harmless from and against any
damages and costs incurred by EXIGENT which arises out of any claim or legal
action threatened or taken by any third party alleging that EXIGENT's use and/or
sale of FDC Film supplied by FUJI under this Agreement constitutes an
infringement of any intellectual property right of such third party, provided
that EXIGENT shall promptly notify FUJI of such claim or legal action in
writing, give FUJI sole control and authority with respect to the defense or
settlement of any such claim or legal action, and give FUJI reasonable
assistance with respect to the defense or settlement of any such claim or legal
action. FUJI shall have the right, with respect to any FDC Film supplied to
EXIGENT under this Agreement which becomes or is likely to become the subject of
such claim or legal action, to replace or modify such FDC Film, or in case
injunction is granted by court or FDC to withhold further shipment of such FDC
Film. The indemnification above shall be applied also to any claim or legal
action threatened or taken by any third party alleging that EXIGENT's use and/or
sale of FDC Film which is to be supplied by FUJI to EXIGENT under a separate
agreement regarding supply of FDC Film to be required for marketing of EXIGENT
POCT System.
7.2. The provision of Article 7.1 shall not apply in case where the
infringement exists as a result of:
(1) any combination of FDC Film with other material(s), part(s)
or product(s) which is not supplied by FUJI;
(2) any use of FDC Film which is not intended by FUJI;
(3) any modification of FDC Film made by any party other than
FUJI; or
(4) EXIGENT's breach of this Agreement, or any act or negligence
of EXIGENT, its employee or agent.
7.3. Notwithstanding the provision of Article 7.1, FUJI shall in no event
be liable for:
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<PAGE>
(1) consequential or incidental damages; or
(2) labor costs or lost profits.
7.4. EXIGENT shall indemnify and hold FUJI harmless from and against any
damages and costs incurred by FUJI which arises out of any claim or legal action
threatened or taken by any third party alleging that FUJI's use and/or sale of
EXIGENT Materials supplied by EXIGENT under this Agreement constitutes an
infringement of any intellectual property right of such third party, provided
that FUJI shall promptly notify EXIGENT of such claim or legal action in
writing, give EXIGENT sole control and authority with respect to the defense or
settlement of any such claim or legal action, and give EXIGENT reasonable
assistance with respect to the defense or settlement of any such claim or legal
action. EXIGENT shall have the right, with respect to any EXIGENT Materials
supplied to EXIGENT under this Agreement which become or are likely to become
the subject of such claim or legal action, to replace or modify such EXIGENT
Materials or to withhold further shipment of such EXIGENT Materials.
7.5. The provision of Article 7.4 shall not apply in case where the
infringement exists as a result of:
(1) any combination of EXIGENT Materials with other materials,
part(s) or product(s) which is not supplied by EXIGENT;
(2) any use of EXIGENT Materials which is not intended by
EXIGENT;
(3) any modification of EXIGENT Materials made by any party
other than EXIGENT; or
(4) FUJI's breach of this Agreement, or any act or negligence of
FUJI, its employee or agent.
7.6. Notwithstanding the provision of Article 7.4, EXIGENT shall in no
event be liable for:
(1) consequential or incidental damages; or
(2) labor costs or lost profits.
Article 8 Regulatory Approvals
--------------------
8.1. FUJI shall comply with FDA's Good Manufacturing Practices in
manufacturing and supplying FDC Films to EXIGENT hereunder.
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<PAGE>
8.2. If FUJI is granted an exclusive right to distribute the EXIGENT POCT
System in a country, FUJI shall obtain all regulatory approvals required for
marketing EXIGENT POCT System in any country.
8.3. EXIGENT shall obtain all regulatory approvals required for marketing
EXIGENT POCT System in any other countries or areas than those for which FUJI
shall do under Article 8.2.
Article 9 Confidentiality
---------------
9.1. Each party shall hold in confidence this Agreement and any and all
proprietary technical and business information furnished or disclosed by the
other party hereunder, and shall not use such information for any other purpose
than that provided herein.
9.2. The confidential obligation provided in Article 14.1 shall not apply
to:
(1) information which is known to the public or generally
available to the public prior to the date it is received;
(2) information which is known to the receiving party prior to
the date it is received from the other party;
(3) information which becomes known to the public or generally
available to the public after the date it is received through no fault of the
receiving party;
(4) information which the receiving party obtains without
restriction on disclosure from a third party having a bona fide right to
disclose such information; or
(5) information which must be disclosed by law or regulation in
order to obtain approval to sell EXIGENT POCT System, or otherwise required to
be disclosed by law, regulation or court order.
Article 10 Term
----
This Agreement shall continue in full force and effect until
December 31, 2003 from the date first above written, and will automatically be
renewed for additional periods of one (1) year, unless either party notifies the
other party of its intention not to renew this Agreement in writing at least six
(6) months before the expiration of the initial term or any successive renewal
term of this Agreement.
Article 11 Termination
-----------
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<PAGE>
11.1. In the event that FUJI decides to discontinue manufacturing and
marketing FDC Film, FUJI may terminate this Agreement by giving a written one
year notice to EXIGENT, provided that, to protect the welfare of the customers
of EXIGENT POCT Systems sold by EXIGENT before such termination, FUJI shall
consult with EXIGENT and establish the necessary measures to be taken, to ensure
that EXIGENT has continued access to FDC Film and FUJI Technology, before such
termination.
11.2. In the event that either party is adjudicated bankrupt or insolvent,
or enters into an agreement for the benefit of creditors, or in the event that a
petition in bankruptcy or for corporate reorganization or for any similar relief
shall be filed by or against either party hereto or receiver is appointed with
respect to any of the assets of either party, or if all or a significant part of
the assets of either party are transferred to a third party, then the other
party hereto may immediately terminate this Agreement by giving written notice
to that effect.
11.3. In the event that there arises a material change in control or
ownership of either party which would adversely affect the transaction hereunder
between the parties hereto, specifically as regards an acquisition by a
competitor whose resulting access to the trade secrets, confidential
information, know-how or patent rights licensed hereunder would result in a loss
of competitive advantage, or a competitor that sells competing dry film
technology for chemistry tests, the other party may, at its sole discretion,
immediately terminate this Agreement by giving a written notice to such party.
11.4. In the event that either party breaches or fails to perform any of
material obligations, terms or conditions of this Agreement or Individual
Agreement and fails to cure such breach or default within thirty (30) days after
its receipt from the other party of written notice specifying the nature of such
breach or default, the other party may, without prejudice to any other remedies
available to it hereunder or under law or otherwise, terminate this Agreement
effective immediately by giving the defaulting party written notice to that
effect.
11.5. Termination of this Agreement shall not affect or diminish in any
way either party's rights, duties or obligations under any other agreements
between the parties, nor shall the breach or cancellation of any other
agreements between the parties affect or diminish in any way either party's
rights, duties or obligations under this Agreement.
Article 12 Force Majeure
-------------
Neither party hereto shall in any way be held liable to the other
party for any loss or damage sustained by the other party due to any failure or
delay on its part in performance of this Agreement caused by force majeure, such
as but not limited to strikes, lock outs, sabotage, fires, explosions, floods,
elements, acts of God, wars, hostilities, civil commotions, riots, acts,
regulations or orders of any governmental agency or authority, epidemics, and
any other
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<PAGE>
circumstances, whether similar or dissimilar to any at the foregoing, beyond
reasonable control of the first party.
Article 13 Surviving Clauses
-----------------
The provisions of Article 4.3(i), (ii) and (iii), 6, 7, 9, 14.4,
14.5, 14.6 and 14.7 shall survive any termination or expiration of this
Agreement.
Article 14 General Provisions
------------------
14.1. If any provision of this Agreement is held to be ineffective,
unenforceable or illegal for any reason, such decision shall not affect the
validity or enforceability of any or all of the remaining portions hereof.
14.2. This Agreement constitutes the entire agreement between the parties
as to the subject matter hereof, and supersedes and replaces all prior or
contemporaneous agreement, written or oral, regarding such subject matter.
14.3. No amendment or modification of this Agreement shall be valid unless
set forth in a writing stating that it is such an amendment or modification and
signed by an authorized representative of each of the parties hereto.
14.4. This Agreement shall inure to the benefit of and be binding upon any
successors or assigns of either party hereto; however neither party may transfer
or assign this Agreement or any of its rights or obligations hereunder without
the prior written consent of the other party.
14.5. Any and all disputes, controversies or differences arising between
the parties hereto out of or in relation to this Agreement or for any breach
thereof which cannot be amicably settled between the parties hereto shall be
finally settled by arbitration in Tokyo, Japan in accordance with the Rules of
Conciliation and Arbitration of the International Chamber of Commerce. Any
award of the arbitration shall be final and conclusive and binding upon the
parties hereto.
14.6. This Agreement and its validity, performance and interpretation
shall be governed by the laws of Japan.
14.7. Any notice required or permitted by either party hereunder shall be
made in writing and shall be delivered in person, sent by registered mail or
sent by facsimile with confirmation by registered mail within ten (10) days to
the respective party as follows:
FUJI: Fuji Photo Film Co., Ltd.
11-46, Senzui 3-chome
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<PAGE>
Asaka-shi, Saitama 351, Japan
Attention : Mr. Junichi Matsuyama
(Associate Director)
Fax number: 81-468-468-2307
EXIGENT: Exigent Diagnostics, Inc.
709 Swedeland Road
King of Prussia, PA 19406, USA
Attention : Mr. W. Vickery Stoughton
(Chairman & C.E.O.)
Fax number: 1-610-270-6150
IN WITNESS WHEREOF the parties have caused this Agreement to be
executed by their authorized representatives.
Fuji Photo Film, Co., Ltd. Exigent Diagnostics, Inc.
Title: Associate Director Title: Chairman & C.E.O.
By: /s/ Junichi Matsuyama By:/s/ W. Vickery Stoughton
------------------------------ ----------------------------
Junichi Matsuyama W. Vickery Stoughton
Date: September 10, 1996 Date: August 23, 1996
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<PAGE>
EXHIBIT 10.17
UNITED MEDICAL MANUFACTURING COMPANY
hereinafter called
UMM
and
SMITHKLINE BEECHAM CORPORATION
hereinafter called
CLIENT
UMM agrees to provide Client with services for the development and manufacture
of a multi-analyte reflectance diagnostic instrument substantially in accordance
with UMM's proposal dated May 10, 1995 (the "Proposal"), which is incorporated
herein, subject to the following terms and conditions (the "Project"):
1. TERM
UMM will begin work on the Project within thirty (30) days of receipt of this
Agreement executed by Client and will continue for a period of three (3) months
through Phases I and II of the Proposal (unless extended by mutual written
agreement), subject to the terms and conditions of this Agreement.
2. PAYMENT
UMM estimates that the price to the Client for performance of the Project will
be Two Hundred Thirteen Thousand Eight Hundred Dollars ($213,800.00) and Client
agrees to provide UMM with a purchase order within fifteen (15) days of signing
this Agreement. Client shall not be required to reimburse, and UMM shall not be
required to incur, any charges for performance in excess of the above price,
unless mutually agreed upon in writing. Client, through its representative Dr.
Thomas Grove or his designee, shall approve in advance any equipment purchases
or significant material purchases. Upon termination of the Project, and after
all costs are available, any balance of payments by Client in excess of actual
costs and fees incurred shall be credited or refunded to Client, unless said
refund shall be less than One Hundred Dollars ($100.00). Client shall authorize
in advance the incurrence of expenses listed in Appendix C to the Proposal and
attached hereto, which expenses shall be invoiced separately when incurred in
accordance with the terms and conditions set forth in Appendix C.
<PAGE>
3. OWNERSHIP
The parties agree that all Work (which shall include for purposes of this
Section all ideas, processes, methodologies, software, algorithms, formulae,
notes, outlines, photographs, inventions, improvements and other information and
work product developed or generated by or on behalf of UMM during the course of
its performance of the Project pursuant to this Agreement) shall be considered
"works made for hire" within the meaning of the Copyright Act of 1976, 17 U.S.
C. (s)101, and that Client is and shall be the sole author of the Work, and the
sole owner of all rights therein, including but not limited to all rights of
copyright. In the event any of the Work is deemed not to be a "work made for
hire," then UMM hereby transfers to Client, without further consideration, all
right, title, and interest to such Work, including any and all patents,
copyrights, trade secrets and other proprietary rights related thereto. UMM
agree to promptly execute and deliver, or cause to be promptly executed and
delivered, all documents and instruments requested by Client to evidence the
foregoing assignment, UMM hereby irrevocably appoints Client as UMM's
attorney-in-fact for the purpose of executing such documents and instruments in
UMM's name. UMM represents and warrants that it has the right to grant to Client
sole right, title and interest in and to the Work, and that ownership or use of
the Work by Client will not constitute an infringement of any third-party
patent, copyright, trade secret or other proprietary right.
4. INVENTIONS
If UMM employees conceive and first actually reduce to practice an invention
within the scope of the Project while working on the Project, UMM will promptly
notify Client of the invention and shall be deemed to have assigned to Client
any and all of its rights to such invention. Upon request, within sixty (60)
days of the notification, UMM will also assist Client in preparing and
prosecuting an application for Letters Patent. The costs of providing such
assistance are not included in the Project estimate stated in Section 2 above,
and Client agrees to pay such costs in addition to any other amounts payable
under this Agreement.
5. CONFIDENTIALITY
UMM acknowledges that it may be exposed or have access to trade secrets and
other confidential business information of Client or other entities with which
Client has business relationships. Such information, referred to hereinafter as
"Confidential Data," shall include all information concerning the business or
affairs or Client that is not known by or generally available to third parties,
including, without limitation, existing systems and programs and those in
development, customer lists, customer needs and requirements, employee lists,
salaries and benefits, and all data received in confidence by Client from third
parties. UMM agrees that during its business dealings with Client and thereafter
(i) it will hold all Confidential Data in the strictest confidence and will not
copy or disclose any portion thereof to any person or entity, except its
employees who
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<PAGE>
have a need to know, without the prior written consent of Client; (ii) it will
comply, and cause each of its employees to comply, with Client's policies on
data and information security; (iii) it will not make any use whatsoever of any
Confidential Data except to perform services in connection with the Work
pursuant to this Agreement; and (iv) upon termination of its business dealings
with Client or at any time upon Client's request, it will immediately return to
Client all Confidential Data in its possession or in the possession of its
employees.
6. REPORTS AND USE OF RESULTS BY CLIENT
UMM agrees to render to Client written reports of its findings and progress made
during the term of the Agreement, at intervals agreed upon by the parties.
Client may use the results of the Project as Client sees fit.
UMM will provide a high standard of professional service. UMM warrants that
services provided hereunder shall be performed in a competent and workmanlike
manner and that each item of Work furnished to Client pursuant to this Agreement
shall conform with its description and specifications as set forth in the
Proposal. UMM further warrants that it is, and will be, in compliance with good
manufacturing practices as required by the Food & Drug Administration.
7. INDEPENDENT CONTRACTORS
Client and UMM are independent contractors, are not related and shall not be
construed as co-employers, joint venturers, partners or otherwise. UMM shall be
responsible for payment of all wages and/or salaries and benefits due to its
employees. Notwithstanding the above, Client will, if appropriate, deduct
applicable taxes from UMM's compensation for services performed under this
Agreement. Upon Client's request, UMM will provide Client with certificates of
insurance evidencing that its employees are covered by: (i) general liability
insurance with a minimum limit of $1 million combined single limit bodily injury
and property damage; and (ii) workmen's compensation insurance in the state in
which each UMM employee is employed.
8. FORCE MAJEURE
Neither Client nor UMM shall be liable in any way for failure to perform any
provision of this Agreement (except the payment of monetary obligations) if such
failure is caused by any law, rule or regulation, or any cause beyond the
control of the party in default.
9. EARLY TERMINATION
Either party shall have the right to terminate this contract upon thirty (30)
days' written notice. In the event of early termination, UMM agrees to: (i)
provide Client with all reports, materials, or other deliverable items available
as of the date of termination, and
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<PAGE>
(ii) refund the applicable pro rata portion of the estimated payment as set
forth in Section 2. In any event, Client agrees to pay all appropriate and
reasonable costs incurred or committed by UMM including costs of termination,
within thirty (30) days of receipt of a final invoice, which invoice is subject
to review and approval by Client.
10. FURTHER ASSURANCES
Each of UMM and Client agree to work in good faith to execute a formal Supplier
Agreement between the parties prior to termination of the initial term of this
Agreement.
11. GENERAL
This Agreement and the Proposal incorporated herein represent the entire
Agreement of the parties, and may be modified or amended only by mutual
agreement in writing. This Agreement shall not be assigned by either party
without the prior written consent of the other party, except that Client may
assign this Agreement to an affiliate without the prior written consent of UMM.
This Agreement shall be governed by and is to be construed in accordance with
the laws of and enforced within the jurisdiction of Pennsylvania.
SMITHKLINE BEECHAM CORPORATION UNITED MEDICAL
MANUFACTURING COMPANY
By /s/ W. V. Stoughton By /s/ Mark A. Gregory
---------------------------- ----------------------------
Title Title President
--------------------------- -------------------------
Date Date December 12, 1995
--------------------------- --------------------------
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<PAGE>
EXIGENT DIAGNOSTICS, INC.
W. VICKERY STOUGHTON
CHAIRMAN AND CEO
CONSENT TO ASSIGNMENT
The undersigned hereby consents to the assignment by SmithKline
Beecham Corporation, a Pennsylvania corporation ("SB"), to Exigent Diagnostics,
Inc., a Delaware corporation ("Assignee"), of all of the rights of SB under the
Preliminary Agreement by and between the undersigned and SB dated as of May 10,
-------
1995 (the "Agreement"). For purposes of this consent, "Effective Time of the
- ----
Assignment" means the effective time of the closing of Assignee's purchase of
the assets of SmithKline Beecham Diagnostic Systems Co., a Pennsylvania limited
liability company. In executing this consent, the undersigned agrees that SB
will be responsible for obligations arising under the Agreement prior to the
Effective Time of the Assignment and Assignee will be responsible for any
obligations arising under the Agreement after the Effective Time of the
Assignment.
UNITED MEDICAL MANUFACTURING COMPANY
By:/s/ Mark A. Gregory
----------------------------------
Name: Mark A. Gregory
Title: President
<PAGE>
CONSENT TO ASSIGNMENT
The undersigned hereby consents to the assignment by SmithKline
Beecham Corporation, a Pennsylvania corporation ("SB"), to Exigent Diagnostics,
Inc., a Delaware corporation ("Assignee"), of all of the rights of SB under the
Preliminary Agreement by and between the undersigned and SB dated as of August
------
27, 1996, (the "Agreement"). For purposes of this consent, "Effective Time of
- --------
the Assignment" means the effective time of the closing of Assignee's purchase
of the assets of SmithKline Beecham Diagnostic Systems Co., a Pennsylvania
limited liability company. In executing this consent, the undersigned agrees
that SB will be responsible for obligations arising under the Agreement prior to
the Effective Time of the Assignment and Assignee will be responsible for any
obligations arising under the Agreement after the Effective Time of the
Assignment.
UNITED MEDICAL MANUFACTURING COMPANY
By:/s/ Mark A. Gregory
----------------------------
Name: Mark A. Gregory
Title: President
<PAGE>
EXHIBIT 10.18
PRODUCT DEVELOPMENT AND SUPPLY AGREEMENT
This Agreement dated as of July 18, 1997, by and between Exigent
Diagnostics, Inc., a Delaware corporation, having an office at 5 Radnor
Corporate Center, Suite 300, Radnor, Pennsylvania 19087 (hereinafter referred to
as "EXIGENT"), and UMM Electronics Inc., a Delaware Corporation, having an
office at 6911 Hillsdale Court, Indianapolis, Indiana 46250, (hereinafter
referred to as "UMM");
WITNESSETH
WHEREAS, EXIGENT is in the business of developing, making and selling
diagnostic tests to be used in point-of-care testing;
WHEREAS, UMM is engaged in the business of manufacturing electronic
equipment including instruments used in diagnostic testing;
WHEREAS, EXIGENT has determined that its business interests would best
be served by working with UMM in connection with the design and development of a
point-of-care diagnostic test instrument;
WHEREAS, UMM is willing to work with EXIGENT in connection with the
design, manufacture and supply of the Instrument:
NOW, THEREFORE, the parties agree as follows:
<PAGE>
1. DEFINITIONS
1.1. "Confidential Information" shall mean all information, data and
know-how which is marked "confidential", "restricted", or "proprietary" or which
concerns the business affairs of either party that is not known by or generally
available to third parties, including, without limitation, existing systems and
programs and those in development, customer lists, customer needs and
requirements, employee lists and all data received (whether orally or in
writing, provided, however, if the information is transmitted orally the
transmitter shall confirm the information in writing within five (5) days after
transmission thereof) in confidence from a third party. The term Confidential
Information shall not mean any information which is previously known to the
receiving party without obligation of confidence, as shown by its written
records, or without breach of this Agreement, is publicly disclosed either prior
or subsequent to receipt by the receiving party of such Confidential
Information, or is subsequently rightfully received by the receiving party from
a third party without obligation of confidence, or which is independently
developed by a party without violation of any confidentiality requirements or
intellectual property rights hereunder, or disclosure of which is required by
subpoena or other legal, administrative, or arbitral process or by law.
1.2. "Date of Market Introduction" shall mean date of the first sale for
end use or consumption of the product after the receipt and acceptance by
EXIGENT of 25 Instruments meeting the production specifications.
1.3. "Development Services" shall mean the design and development by UMM
of the Instrument meeting the specifications attached in Appendix A (the
"Specifications") as such Appendix may, from time to time, be amended by mutual
agreement of the parties hereto, Instrument tooling, manufacturing
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equipment and processes and associated Manufacturing Documentation in order to
bring the Instrument into commercial production as set forth in attachments to
this Agreement or otherwise mutually agreed to in writing by the parties hereto.
1.4. "Instrument" shall mean a device developed by UMM for EXIGENT which
conducts blood and blood related diagnostic tests for chemistry,
electrochemistry, coagulation and immunoassay tests which works with a Test
Cartridge, separates blood, meters samples, doses the Test Cartridge and uses
computer software to accelerate the test process and facilitate user
interaction.
1.5. "Instrument Technology" shall mean all the intellectual property
embodied in the Instrument and required to manufacture the Instrument, all
technical information, ideas, processes, methodologies, software, algorithms,
formulae, notes, outlines, photographs, inventions, improvements, data,
know-how and trade secrets, patentable and otherwise, which arise as part of the
Development Services, including any patents embodying the same, including
without limitation, the Manufacturing Documentation, other than UMM Core
Technology.
1.6. "Manufacturing Documentation" shall mean the package of
specifications, drawings, manufacturing instructions, and the prototype device
reasonably required to enable UMM or a third party skilled in the operation of
the Instrument to manufacture the Instrument including, as applicable, software,
all software source codes (which shall be in magnetic media form), software
assembly, linkage and validation protocols and software validation results,
service and training information and set of quality parameters, manufacturing
specifications for the Instruments, as well as all preliminary or
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working drafts of all such materials, and documentation developed by UMM in
order to produce such materials.
1.7. "Point-of-Care Testing" shall mean a human or animal diagnostic test
performed in the immediate vicinity of the patient promptly after a test sample
is obtained.
1.8. "Product Liability" shall mean any and all claims, including, but not
limited to, claims based on strict liability in tort, negligence or breach of
express or implied warranty and claims for exemplary and consequential damage,
in cases in which it is alleged that personal injury, death or property damage
was caused by a defect in design, material, manufacture or workmanship.
1.9. "Specifications" shall have the meaning given it in Section 1.3.
1.10. "UMM Core Technology" shall mean (a) all technical information,
ideas, processes, methodologies, software, algorithms, formulae, notes,
outlines, photographs, inventions, improvements, data, know-how and trade
secrets, patentable and otherwise, to the extent that the same relate to optical
instrument systems used to measure color changes in diagnostic tests through
reflectance or transmissive means (except when used to make such measurements
while the test samples are in motion) and (b) all software (other than the user
interface of the Instrument and the algorithms used in the calculation of
results) which is possessed by UMM, including any patents embodying the same.
The Test Cartridge is not included in the definition of "UMM Core Technology."
1.11. "Test Cartridge" shall mean a diagnostic disposable cartridge which
is a family of products that incorporate chemistry, coagulation,
immunochemistry, and electrochemistry assay technologies suitable for
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analyzing human and animal body fluids. The disposable cartridge will be
configured in single or multiple tests, except for sodium, potassium and
chloride which are all combined on a single disposable cartridge. The cartridge
is intended to be used in conjunction with a portable instrument for performing
point of care testing. The cartridge is a single-patient, single-use disposable
device. The disposable cartridge will be capable of separating blood cells from
plasma or formed elements from urine, if necessary. The cartridge will also be
capable of metering sample, reagents or standard into the testing area.
2. DEVELOPMENT
2.1. UMM shall provide Development Services to EXIGENT and UMM shall use
all commercially reasonable efforts to provide Development Services in
accordance with the schedule in Appendix B. To facilitate development of the
Instrument, EXIGENT shall (a) provide all such information and technology as is
reasonably required to assist UMM to produce the Instrument which will operate
and meet the Specifications using the Test Cartridge, and (b) use all
commercially reasonable efforts to accomplish the specific tasks assigned to it
in accordance with Appendix C. Upon completion of each significant step in the
development process, UMM shall allow EXIGENT to inspect, test and review all
developments and shall provide to EXIGENT all information which is reasonably
required to enable EXIGENT to conduct such inspections and tests, and evaluate
the performance of the Instrument. As the Specifications are more fully defined
during the development phase, UMM shall keep EXIGENT fully informed of its
projected price to EXIGENT for the Instrument.
2.2. EXIGENT and UMM shall each appoint a technical coordinator
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possessing appropriate technical credentials and knowledge who shall be
responsible for maintaining technical liaison between the parties and for
determining on behalf of their respective companies the adequacy, acceptability
and fitness of the Development Services described in this Article 2.0. The
technical coordinators shall meet as frequently as necessary to monitor progress
with respect to Development Services.
3. SUPPLY SERVICES
3.1. UMM shall manufacture exclusively for and sell the Instrument
exclusively to EXIGENT at prices established by the parties pursuant to
paragraph 4.2. for EXIGENT's exclusive resale throughout the world.
3.2. During the term of this Agreement UMM shall be EXIGENT's sole and
exclusive source for Instruments provided that (a) UMM provides an adequate and
timely supply of Instruments to EXIGENT in accordance with this Agreement and
(b) UMM maintains the quality assurance level agreed upon by the parties. UMM
shall not manufacture and sell the Instruments to any person other than EXIGENT.
3.3. EXIGENT shall submit quarterly to UMM, on or before the first day of
each quarter, a twelve (12) month rolling forecast of its requirements of
Instruments, beginning with that quarter. The first quarter of such forecast
shall constitute firm orders which may not be canceled or rescheduled without
written approval in advance from UMM. The next three (3) months (months 4
through 6) of the forecast shall constitute firm orders which may not be
canceled, but may be rescheduled up to three months beyond the forecasted
delivery date. The last six (6) months of the forecast (months 7 through 12) are
to be used for UMM planning purposes and shall not be considered firm orders;
provided, however (a) UMM shall inform EXIGENT of all items which
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have lead times of six (6) months or more ("Long Lead Time Items") which UMM
will have to order to meet any forecast, and (b) EXIGENT shall be responsible
for all Long Lead Time Items which EXIGENT approves UMM ordering in order to
meet the forecast; and provided, further, UMM shall have no liability hereunder
for failure to deliver timely any Instruments ordered by EXIGENT under a firm
Purchase Order if EXIGENT shall have refused to approve purchase by UMM of any
Long Lead Time Items therefor in accordance with this Section 3.4. EXIGENT shall
submit its first rolling forecast two quarters prior to desired delivery date of
the first production units. If any such forecasts exceed UMM's manufacturing
capacity at time of receipt of the forecast by UMM, UMM will provide a schedule
within 30 days after its receipt of the rolling forecast setting forth its
estimate of time to meet such capacity requirements, and the delivery schedule
shall be modified accordingly. UMM is obligated to supply EXIGENT with all
Instruments that become the subject of firm orders in accordance with the
foregoing.
3.4. EXIGENT shall place purchase orders ("Purchase Orders") setting forth
the delivery date against the forecasts of paragraph 3.3 for the supply of
Instruments. In case of conflict between the general terms and conditions of an
EXIGENT issued Purchase Order, and this Agreement, the terms and conditions of
this Agreement shall take precedence unless otherwise agreed to in writing by
the parties. Payment for product shipped shall be net 30 days, F.O.B. shipping
point (UMM's dock). Past-due payments shall bear interest at the rate of 1% per
month.
3.5. Prior to releasing Instruments for production, EXIGENT shall have the
right to order, purchase, and receive from UMM up to fifty (50) initial
production units ("Preproduction Units") and to approve the quality thereof,
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which approval shall not be unreasonably withheld. UMM shall not produce
Instruments for EXIGENT until such approval has been given. EXIGENT shall have
the right to test, inspect and approve the quality of the Preprodcution Units
within a reasonable time frame and report the results of such inspection and
testing to UMM. If modifications in the Instrument are required based on
EXIGENT's report, UMM shall make such modifications within a reasonable time
frame.
3.6. EXIGENT shall prepare the artwork necessary for printing labels for
the Instruments and shall deliver it to UMM at least ten (10) weeks prior to the
scheduled delivery time from UMM of the first shipment ordered by EXIGENT. UMM
shall supply the boxes and product inserts for the Instrument in EXIGENT's or
its trade name used, and apply the labels so provided by EXIGENT to the
Instruments. After the first year of this Agreement, the parties will review the
cost of UMM supplying the boxes and product inserts and applying the labels and
determine its competitiveness. EXIGENT may elect to obtain such boxes and
product inserts and labeling services elsewhere if UMM's cost therefor is not
competitive.
3.7. UMM shall obtain the written approval of EXIGENT prior to making
any changes, substitutes or modifications to the Instrument or the Manufacturing
Documentation in accordance with the Change Notification Protocol as defined in
the Manufacturing Documentation. EXIGENT will promptly respond to any such
request for changes.
3.8. EXIGENT may, at any time, request UMM in writing to change the
Manufactured Product Final Specification as defined in the Manufacturing
Documentation. If such a change is requested by EXIGENT, UMM shall advise
EXIGENT whether there will be a change in the lead time for the Instrument
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resulting from the requested change and the cost of making such change. Promptly
after receipt of such information, EXIGENT will notify UMM whether
implementation should proceed. Any change in price will be agreed upon in
advance. If no response is received from UMM within thirty (30) days after
receipt by it of the requested change, then the change shall be deemed accepted
with no change in the purchase price prevailing at the time.
4. COST AND PAYMENT
4.1. DEVELOPMENT SERVICES
4.1.1. EXIGENT shall bear and shall reimburse UMM for all out-
of-pocket costs and expenses reasonably incurred by UMM in the development of
the Instrument. UMM shall use reasonable efforts to insure that such costs
incurred after February 1, 1997 do not exceed $2,700,000.00 in the aggregate. In
the event that it appears such costs will exceed $3,000,000.00, the technical
coordinators shall meet to make a determination of the estimated additional
costs and to obtain approval from the Vice President, Research and Development
of EXIGENT for the additional work.
4.1.2. EXIGENT shall remiburse UMM for (a) development labor
at the rate of (i) $65 per hour through May 31, 1997, (ii) $70 per hour from
June 1, 1997 through August 31, 1997, (iii) $75 per hour thereafter; and (b)
other development expenses, including, without limitation, product specific
tooling, outside services and prototype material, at cost plus a 15% handling
charge. UMM shall invoice EXIGENT promptly after the end of each month for all
the development costs incurred by UMM during that month. EXIGENT should have the
right to audit UMM's books to confirm the development costs. EXIGENT shall pay
such invoices within thirty (30) days after receipt thereof.
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Past due payments shall bear interest at the rate of 1% per month. UMM reserves
the right to stop development activities until payments are made current, and to
adjust the development schedule as necessary to reflect any such delays.
4.1.3. Product specific tooling shall be paid for and will be owned by
EXIGENT. UMM shall obtain written approval from EXIGENT before committing to
purchase any product specific tooling. EXIGENT will issue purchase orders to UMM
for tooling as needed.
4.2. INSTRUMENT PRODUCTION
4.2.1 Not later than thirty (30) days before the first day of each
calendar quarter during the term of this Agreement, the parties shall agree upon
the volume of Instruments to be produced by UMM and purchased by EXIGENT during
such quarter.
4.2.2. EXIGENT agrees to purchase 100 Instruments in the first
quarter, beginning January 1, 1999, and 125 in each subsequent quarter. Orders
on a quarter-by-quarter basis in excess of 125 Instruments and in excess of 100
instruments in the first quarter, shall be counted against Exigent minimum
requirements in subsequent quarters (up to 25 units per quarter) at Exigent's
discretion. Both parties agree to negotiate in good faith the price of the
Instrument by November 1, 1997 for the first year of production. Both parties
agree to negotiate in good faith prior to October 1, 1999 and October 1 of each
year of the term of this Agreement thereafter the price of the Instrument for
the following calender year. The minimum requirements for the Instrument shall
be used to establish a base price per Instrument. Annual purchases in excess of
the minimum requirements shall result in volume discounts.
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<PAGE>
5. INSPECTION AND QUALITY CONTROL
5.1. UMM shall provide to EXIGENT with each shipment of Instruments a
certificate from UMM's quality control department indicating that Instruments
contained in the shipment, which shall be identified by their serial numbers,
have passed the quality control parameters which shall be contained in the
Manufacturing Documentation after they have been developed by UMM and agreed to
in writing by EXIGENT. UMM shall keep complete written records of such
inspections and shall, upon request, furnish EXIGENT with inspection reports for
Instruments delivered to EXIGENT.
5.2. Within one (1) month after receipt of Instruments, EXIGENT may conduct
its own acceptance inspection thereof in which samples of Instruments will be
compared with the specifications and quality control parameters, which are a
part of the Manufacturing Documentation, and shall inform UMM of the results of
such inspection. Such inspection shall, upon mutual agreement between the
parties, be undertaken either at EXIGENT facilities or at UMM's manufacturing
facilities. If inspection occurs at UMM's plant, UMM shall provide EXIGENT with
such access and facilities as EXIGENT shall reasonable require. In the event
such inspection by EXIGENT reveals unacceptable variances from the Acceptance
Inspection Procedure in the Manufacturing Documentation, EXIGENT shall notify
UMM (which notice shall specify the manner in which the defective Instruments
fail to meet the specifications), and UMM shall have fifteen (15) days in which
to verify the variances. Upon the earlier of (a) verification by UMM or (b) the
expiration of thirty (30) days from the date of said notice, EXIGENT shall have
the right to refuse acceptance of the defective or deficient shipment(s) and to
require, at the option of UMM, that said lot(s) be replaced or corrected free of
charge to
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Exigent or that UMM at its own expense make a 100% inspection of the lots with
respect to the defective function. If UMM's inspection results in a finding
that Instruments are not defective or deficient, UMM shall immediately notify
EXIGENT of the same and shall resubmit the lots for acceptance. The remedies of
this paragraph which shall accrue to EXIGENT prior to acceptance of Instruments
shall be in lieu of rights accruing under Article 8 (WARRANTIES), which shall
accrue to EXIGENT after acceptance of Instruments. Failure of EXIGENT to
complete the above-mentioned acceptance inspection with respect to a lot within
said one (1) month period shall constitute acceptance by EXIGENT of the lot.
6. CONFIDENTIAL INFORMATION
6.1. For a period of five (5) years from the date of this Agreement, UMM
and EXIGENT agree to hold all Confidential Information in confidence for the
disclosing party and not to disclose the Confidential Information of the other
party to any third party, except for Exigent's legal and accounting
representatives and those who have a need to know such Confidential Information
for purposes of carrying out the terms of this Agreement and are bound by a
similar obligation of confidentiality and non-use, and not to use such
Confidential Information for any purpose other than for the purposes of this
Agreement. Thereafter, upon request, UMM shall return to EXIGENT all
Confidential Information in its possession or in the possession of its
employees.
6.2. Each party represents to the other that its employees are governed by
company regulations which prohibit the disclosure of confidential and
proprietary information which may belong to the other party and that such
internal regulations will enable it to comply with all of the items of this
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Agreement.
6.3. Except as provided in Article 7, all Confidential Information
disclosed by one party to the other shall remain the intellectual property of
the disclosing party. In the event that a court or other legal or administrative
tribunal, directly or through an appointed master, trustee or receive or assumes
partial or complete control over the assets of a party to this Agreement based
on the insolvency or bankruptcy of such party, the bankrupt or insolvent party
shall promptly notify the court or other tribunal (a) that Confidential
Information received from the other party under this Agreement remains the
property of the other party and (b) of the confidentiality obligations under
this Agreement. In addition, the bankrupt or insolvent party shall, to the
extent permitted by law, take all steps necessary or desirable to maintain the
confidentiality of the other party's Confidential Information and to insure that
the court, other tribunal or appointee maintains such information in confidence
in accordance with the terms of this Agreement.
7. RIGHTS IN INTANGIBLE PROPERTY
7.1. EXIGENT shall have the entire right, title and interest in all
Instrument Technology. Any portion of the Instrument Technology subject to
copyright shall be deemed a "work made for hire" within the meaning of the
Copyright Act of 1976, 17 U.S.C. Section 101. In the event that any such
Instrument Technology is not deemed to be a work for hire, then UMM hereby
transfers to EXIGENT, without further consideration, all right, title and
interest to such Instrument Technology, including any and all patents,
copyrights, trade secrets and other proprietary rights related thereto. UMM
agrees promptly to execute and deliver to, or cause to be promptly executed and
delivered to,
<PAGE>
EXIGENT all documents and other instruments reasonably requested by EXIGENT to
evidence the foregoing assignment or otherwise to evidence EXIGENT's rights
in the Instrument Technology.
7.2. UMM shall have the entire right, title and interest in all UMM Core
Technology. EXIGENT hereby transfers to UMM, without further consideration, all
right, title and interest to any improvements to UMM Core Technology resulting
from this agreement, including any and all patents, copyrights, trade secrets
and other proprietary rights related thereto. EXIGENT agrees promptly to execute
and deliver to, or cause to be promptly executed and delivered to, UMM all
documents and other instruments reasonably requested by UMM to evidence the
foregoing assignment.
7.3. Each party shall be responsible for obtaining patent protection in
connection with inventions included in technology owned by it in countries of
its choice. Each party shall give the other party all reasonable assistance in
connection with the preparation of any patent applications related to such
inventions and shall cause to be executed all such assignments and other
instruments and documents as may be necessary and appropriate to carry out the
intent of this Section.
7.4. EXIGENT shall have a paid up irrevocable worldwide license to use,
copy, modify, and create derivative works based upon the object code and source
code of software included in the UMM Core Technology.
7.5. UMM reserves all rights to manufacturing processes and procedures
used in the manufacture of the Instrument, as well as the right to design,
manufacture and sell other products based upon or derived from the Manufacturing
Documentation, subject to the restriction of Article 3.2 and provided that no
intellectual property owned by EXIGENT is used without the
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prior written consent of EXIGENT. UMM agrees that UMM Core Technology will not
be used to design or manufacture an Instrument for any other person designed to
provide a measurement from an Exigent test cartridge, or from any competitive
diagnostic device that combines any two or more of the following test types:
chemistry (including electrochemistry), coagulation, or immunochemistry, into a
point-of-care testing device.
8. WARRANTIES
8.1. UMM warrants to EXIGENT that all Instruments to be supplied hereunder
will upon shipment meet the agreed upon specifications therefor and will be free
from defects in materials and workmanship, and will be properly packed,
labeled and fit for their intended purposes as set forth in Appendix A. UMM
further warrants to EXIGENT that all Instruments supplied hereunder will be free
from design defects and shall be in compliance with Good Manufacturing Practice
21 CFR 820. This warranty shall apply for a period terminating thirty (30)
months after the date of shipment by UMM. UMM shall satisfy this warranty
requirement by repairing or replacing at UMM's option each defective Instrument
returned. The thirty (30) month warranty period does not include major
components of the Instrument supplied to UMM by other manufacturers. Such
components and their warranty will be identified by UMM to EXIGENT, and approved
by EXIGENT, prior to their inclusion in the Instrument.
8.2. In addition to the procedures set forth in Section 5.2., UMM shall
conduct a failure analysis as required by the US Food and Drug Administration
("FDA") regulations, i.e. 21 CFR Parts 820.115 and 820.198(b) at its own expense
with respect to defective Instrument(s) returned to it under paragraph 8.1.
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Such analysis shall be conducted promptly upon receipt by UMM of the subject
Instrument(s) and a results report shall be returned to EXIGENT no later than
forty-five (45) days after UMM's receipt of the defective Instrument(s).
8.3. UMM shall be liable for and shall indemnify, defend and hold EXIGENT,
its officers, directors, employees, shareholders and agents harmless against any
and all claims, suits, proceedings, demands, recoveries, and damages, expense or
losses including, without limitation, attorney's fees, costs, interest and
penalties, and costs and expenses of total or partial recall of Instruments,
whether initiated voluntarily by EXIGENT and agreed to by UMM, or at the
direction of the FDA (collectively "Claims") for Product Liability, whether
groundless or not, arising out of, based on, or caused by defects in material,
workmanship, design, packaging or packing of the Instruments (other than the
Test Cartridge), but in no event shall UMM be liable for or be required to
indemnify EXIGENT for or hold it harmless to the extent any Claims for Product
Liability arise from or are based on, or caused by omissions or misstatements in
literature supplied by EXIGENT for use with the Instruments. UMM shall promptly
notify EXIGENT of any situation which may affect a decision to recall
Instruments; however, EXIGENT shall have the final authority to institute a
voluntary recall, which authority shall not be exercised unreasonably. UMM shall
notify EXIGENT in the event it knows of omissions or misstatements in literature
supplied by EXIGENT.
8.4. Except for the literature supplied by EXIGENT for use with
Instruments, UMM represents and warrants the originality of the Manufacturing
Documentation and represents that no portion of the Manufacturing Documentation,
or use thereof, or EXIGENT distribution
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thereof violates or is protected by any copyrights, patents, trademarks or
similar right of any third party other than the UMM background patents.
8.5. UMM shall identify and hold EXIGENT, its officers, directors,
shareholders, and agents harmless from and against any Claims based upon the
alleged infringement of any patent, utility models and registered designs
copyrights, trademarks or other intellectual property rights, now or hereafter
existing in the United States of America relating to the Instrument or its
components, including without limitation, the UMM patents as manufactured by or
on behalf of UMM, provided, however UMM shall have no such obligation with
respect to Claims ("Excluded Claims") arising as a result of the literature
supplied by EXIGENT for use with the Instrument.
8.6. EXIGENT shall indemnify, defend and save UMM, its officers,
directors, shareholders and agents harmless from any and all Claims for Product
Liabilities arising out of, caused by, or based on the Test Cartridge or
omissions or misstatements in literature supplied by EXIGENT, groundless or not.
8.7. EXIGENT will indemnify and hold UMM, its officers, directors,
shareholders and agents, harmless from and against any Claims based upon alleged
infringement of any patent, utility models and registered design copyright or
other intellectual property rights relating to the Instrument Technology, or any
features of the Instrument described in any literature supplied by EXIGENT for
use with the Instruments other than Instrument Technology developed by UMM
pursuant to this Agreement.
8.8 In the event that UMM or EXIGENT becomes aware of actual or
threatened infringement of a patent which potentially affects the rights
relating to the Instruments granted to EXIGENT under this Agreement that would
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affect the indemnity obligations under this Agreement, that party shall promptly
notify the other party in writing. EXIGENT shall have the first right but not
the obligation to bring, at its own expense, an infringement action against any
third party and to use UMM's name in connection therewith and to include UMM as
a party thereto. If EXIGENT does not commence a particular infringement action
within ninety (90) days after such notice, UMM, after notifying EXIGENT in
writing, shall be entitled to bring such infringement action at its own expense.
The party conducting such action shall have full control over its conduct,
including settlement thereof subject to this Section 8.8. In any event, UMM and
EXIGENT shall assist one another and cooperate in any such litigation at the
other's request without expense to the requesting party, provided, however, that
in any action pursuant to this Section 8.8, the party bringing the action shall
indemnify the other party, its officers, directors, shareholders, employees,
successors and assigns from any loss, damage or liability, including reasonable
attorneys' fees resulting from such action. In any action concerning the
Instrument in which both UMM and EXIGENT shall recover their respective actual
out-of-pocket expenses associated with such litigation, any excess amount
recovered in such action shall be shared between EXIGENT and UMM, with each
receiving fifty percent (50%) of such excess. The parties shall keep one another
informed of the status of their respective activities regarding any litigation
or settlement thereof concerning the Instrument; provided, that no settlement or
consent judgment or other voluntary final disposition of any suit defended or
action brought by one party pursuant to this Section 8.8 may be entered into
without consent of the other party if such settlement would require the
non-settling party to be subject to an injunction or to make a monetary payment
or would adversely affect the
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non-settling party's rights under this Agreement.
8.9. If, during the term of this Agreement, EXIGENT and UMM jointly deem
it necessary to seek a license from any third party in order to avoid
infringement by the Instrument design during the existence of the license herein
granted, fifty percent (50%) of any royalties or other fees paid to such a third
party under such license shall be paid by UMM and fifty percent (50%) of such
royalties or fees shall be paid by EXIGENT.
8.10. In the event any party seeking indemnification hereunder
("Indemnified Party") should have a claim hereunder against the other party
hereto ("Indemnifying Party"), involving a claim or demand being asserted
against or sought to be collected from such Indemnified Party by a third party,
the Indemnified Party shall notify the Indemnifying Party in writing of said
claim, and, if then determinable, a reasonable estimate of the amount thereof,
which in such party's good faith opinion, might be sustained in connection with
such claim. In such event, the Indemnifying Party shall have the right,
exercisable by giving written notice to the Indemnified Party within thirty (30)
days after the giving of such notice by the Indemnified Party, to assume and
control the contest and defense or settlement of such claim, at its own expense,
with counsel of its own choice, which counsel shall be reasonably satisfactory
to the Indemnified Party; provided that the Indemnifying Party shall not agree
to any settlement without the consent of the Indemnified Party (which consent
will not be reasonably withheld) unless such settlement (a) requires no more
than a monetary payment for which the Indemnifying Party has irrevocably agreed
to indemnify such Indemnified Party under this Agreement, and (b) includes a
full, unconditional and complete release of such Indemnified Party.
8.11. If the Indemnifying Party agrees to defend such claim, the
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Indemnifying Party will have full control of such defense, including any
settlement thereof (subject to the rights of the Indemnified Party as set forth
in the immediately preceding paragraph), and if requested by the Indemnifying
Party, the Indemnified Party agrees to cooperate fully with the Indemnifying
Party and its attorneys with respect to such contest and defense at the expense
of the Indemnifying Party. The Indemnified Party shall have the right to engage
its own counsel and to participate in, but not control, such defense, but the
Indemnified Party shall be solely responsible for all fees and expenses of its
own counsel.
8.12. If the Indemnifying Party does not agree to defend such claim or
fails to notify the Indemnified Party of its election as herein provided, the
Indemnifying Party agrees to pay the reasonable costs and expenses of the
Indemnified Party, including, without limitation, reasonable attorneys' and
paralegals' fees, interest and penalties incurred in connection with such
contest and defense, monthly, against the receipt of invoices with supporting
documentation and will promptly pay any final judgment rendered against or
settlement reached by such Indemnified Party with respect to any such claim;
provided, however, that the Indemnifying Party will not be liable hereunder for
any settlement made by any Indemnified Party without its prior written consent,
which consent will not be unreasonably withheld. If the Indemnifying Party has
timely disputed its liability with respect to such third party claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved by negotiations
within thirty(30) days after receipt by the Indemnified Party of such dispute
notice, such dispute shall be resolved by arbitration pursuant to Section 13.9.
8.13. Notwithstanding anything contained herein to the contrary, the
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<PAGE>
Indemnified Party shall have the right to engage separate counsel reasonably
satisfactory to the Indemnifying Party at the Indemnified Party's expense and to
control its own defense of such asserted liabilities if, in the reasonable
opinion of counsel to the Indemnified Party, a conflict or potential conflict
exists between the Indemnifying Party and the Indemnified Party that would make
representation of both parties by such counsel inadvisable under generally
accepted standards of professional conduct.
8.14. Each of EXIGENT and UMM agrees in conjunction with its obligations
under this Agreement to avoid knowingly designing and/or developing any item
that infringes any patent.
9. BACKGROUND PATENTS
9.1. UMM shall notify EXIGENT of its background patents or patent
applications, those of its affiliates and any patents or applications of others
of which UMM is aware or becomes aware which are to be used in the Development
Services or supply services described in Article 3.0.
9.2. UMM hereby grants EXIGENT a royalty-free license under any applicable
background patents to sell Instruments and to develop, market, and use the
Instruments.
10. EMPLOYEES
10.1. Personnel assigned by UMM to perform services under this Agreement
will be employees of UMM and will not for any purpose be considered employees or
agents of EXIGENT. UMM assumes full responsibility for the actions of such
personnel while performing services hereunder and shall be solely responsible
for their supervision, daily direction
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and control, payment of salary (including withholding of income taxes and social
security), worker's compensation, disability benefits and the like.
10.2. Personnel assigned by EXIGENT to perform services under this
Agreement will be employees of EXIGENT and will not for any purpose be
considered employees or agents of UMM. EXIGENT assumes full responsibility for
the actions of such personnel while performing services under this Agreement as
well as promotion, distribution, and any sales activities with respect to the
Instruments and EXIGENT shall be solely responsible for their daily supervision,
daily direction and control, payment of salary (including withholding of income
taxes and social security), worker's compensation, disability benefits and the
like.
11. CHANGES
11.1. Either party may request, in writing, changes to the Development
Services, work scope or to the manufacturing or design specifications for the
Instrument. The party receiving the request for the change shall submit within a
reasonable time a report to the other party setting forth its best judgment as
to the probable effect on the Development Services or Supply Services and their
cost. Neither party shall proceed with any changes without the prior written
consent of the other.
12. TERM, TERMINATION AND CANCELLATION
12.1. The term of this Agreement shall begin with the Effective Date and
shall continue for four (4) years from the Date of Market Introduction (the
"Initial Term") as defined above, and shall be automatically extended
thereafter for one (1) year periods unless terminated by one of the parties in
accordance
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with this Article. After the Initial Term, either party may terminate this
Agreement upon at least one (1) year's written notice.
12.2. Either UMM or EXIGENT may terminate this Agreement for cause. A
material breach or repeated non-material breaches of this Agreement which are
not cured by the breaching party as quickly as reasonably possible, but in no
event longer than sixty (60) days after receipt of written notice demanding
such breaches be cured shall constitute cause.
12.2.1. In the event of termination by UMM for cause, UMM agrees it
will not sell the Instrument to any third party.
12.2.3. In the event that UMM loses its right to exclusivity under
Section 3.2 hereof, or this Agreement is terminated, UMM hereby grants to
EXIGENT or its nominee a perpetual royalty-free license under any applicable UMM
background patents, including UMM Core Technology including components of the
device, Confidential Information and trade secrets to make, have made, use and
sell Instruments.
12.2.4. Upon termination of this Agreement, EXIGENT agrees to
purchase all of UMM's inventory (at full value) associated with the Instrument.
12.2.5. At any time prior to the date of Market Introduction,
EXIGENT shall have the right, for compelling business reasons, (such as failure
by EXIGENT to raise additional capital prior to Market Introduction) to
terminate the development effort. If such a termination occurs, EXIGENT shall
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bear and pay for all costs incurred by UMM and not fully compensated plus an
additional fee equal to 15% (fifteen percent) of total invoiced project cost,
less any associated costs for instruments and tooling.
12.2.6. In the event that Exigent has the opportunity to complete a
sale of its business to another company, Exigent shall have the right to
negotiate the terms on which this Agreement will be terminated, and the terms on
which all tooling being used by UMM which has been paid for by Exigent will be
transferred to the purchaser of Exigent.
12.2.7 In the event that this Agreement is terminated, UMM shall
transfer, to Exigent within 30 days, all tooling used in the manufacturing of
the Instrument owned by EXIGENT.
13. GENERAL PROVISIONS
13.1. The rights and obligations of Articles 6 (Confidential Information),
7 (Rights in Intangible Property), 8 (Warranties), and 13 (General Provisions)
shall survive any termination of this Agreement and shall bind the parties and
their legal representatives, successors and assigns.
13.2. UMM and EXIGENT shall do all the things necessary to comply with all
applicable Federal, State, and local laws, regulations and ordinances, including
but not limited to the Regulations of the United States Department of Commerce
relating to the export of Technical Data, insofar as they relate to the services
to be performed under this Agreement. UMM shall obtain any required government
documents and approvals in the event of export of Instrument manufactured for
EXIGENT hereunder and for any technical data disclosed to UMM by EXIGENT. UMM
agrees to maintain an FDA-approved facility which is operated in compliance with
Good Manufacturing Practices, to
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<PAGE>
be found in 21 CFR 820. UMM will provide documentation that such facility
complies with FDA published guidelines (as defined in 21 CFR 10.90b) and upon
request by EXIGENT to demonstrate compliance. EXIGENT shall obtain and shall own
the necessary governmental registrations and permits for marketing the
Instrument in locations outside the United States.
13.3. Each of the parties hereto shall be excused from the performance of
its obligations hereunder in the event such performance is prevented by force
majeure and such excuse shall continue as long as the condition constituting
such force majeure continues, plus thirty (30) days after the termination of
such condition. For purposes of this Agreement, force majeure is defined as
follows:
Causes beyond the control of UMM or EXIGENT, including, without
limitation, regulations, laws or acts of any government,
destruction of production facilities or material by fire, or
failure of public utilities or common carriers or embargo.
13.4. This Agreement and its appendices embody the entire understanding
and agreement among the parties and supersedes all previous negotiations,
representations, writings and agreements, written or oral, with respect to the
development and sale of the Instrument. This Agreement shall in no way preclude
UMM or EXIGENT (or any of their affiliates) from entering into any agreements in
the future which are not specifically limited or precluded hereunder.
13.5. All notices, demands and communications provided for in this
Agreement shall be in writing and shall be deemed effective by a party upon hand
delivery or when mailed, postage prepaid, by registered or certified mail,
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<PAGE>
or by telecopy when received to the other party or its copy designee at the
respective addresses listed below, unless and until such address is changed by
giving written notice thereof in like manner.
To EXIGENT:
Exigent Diagnostics, Inc.
5 Radnor Corporate Center, Suite 300
Radnor, PA 19087
Attention: Mr. W. Vickery Stoughton, President
Telecopy No: (610) 971-9814
To UMM:
UMM Electronics Inc.
6911 Hillsdale Court
Indianapolis, IN 46250
Attention: Mark A. Gregory, President
Telecopy No: (317) 576-5044
With a copy to:
Curtis, Mallet-Prevost, Colt & Mosle
101 Park Avenue
New York, NY 10178
Attention: David R. Lindskog
Telecopy No: (212) 697-1559
13.6. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Indiana. The invalidity or
unenforceability of any provision of this Agreement shall not affect or limit
the validity or enforceability of any other provision hereof.
13.7. UMM shall make its records (but not its production costs and profit
and loss information) and facilities involved in the performance of this
Agreement available to EXIGENT personnel at reasonable and mutually convenient
times during normal business hours for audit purposes and shall take any
reasonable actions required by EXIGENT to facilitate such audit.
13.8. No modification, amendment, extension or waiver of this Agreement
or any provision hereof shall be binding or effective unless in writing and
signed by the President or a Vice President of each of the parties.
13.9. All disputes arising under or in connection with this Agreement
shall be finally settled by arbitration under the rules of the American
Arbitration Association by one arbitrator appointed in accordance with said
rules. The arbitration shall be conducted in the city in which the principal
office of the respondent is located. The costs of said arbitration shall be
borne by the losing party. Judgment may be entered on the award by any court
having jurisdiction thereof.
13.10. This Agreement may not be assigned or otherwise transferred, nor,
except as expressly provided hereunder, may any right or obligations hereunder
be assigned or transferred, by either party without the consent of the other
party, which consent shall not be unreasonably withheld, provided that EXIGENT
may assign this Agreement to any person acquiring all or substantially all of
EXIGENT's assets. Any permitted assignee shall assume all obligations of its
assignor under this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. Vickery Stoughton
---------------------------
Title: Chairman and CEO
UMM ELECTRONICS INC.
By: /s/ Mark A. Gregory
---------------------------
Title: President
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<PAGE>
EXHIBIT 10.19
AGREEMENT
Between
HAUSER, INC.
hereinafter called
HAUSER
and
SMITHKLINE BEECHAM CORPORATION
hereinafter called
CLIENT
Hauser agrees to provide Client with services for the design and development of
a Point of Care Diagnostic Analyzer substantially in accordance with Hauser's
proposal dated September 15, 1995 (the "Proposal"), which is incorporated
herein, subject to the following terms and conditions (the "Project"):
1. TERM
Hauser will begin work on the Project within thirty (30) days of receipt of this
Agreement executed by Client and will continue for a period of seven (7) months,
from Phase 0 through Phase 4, subject to the terms and conditions of this
Agreement.
2. PAYMENT
Hauser estimates that the price to the Client for performance of the Project
will be One Hundred Sixty-Seven Thousand Five Hundred Dollars ($167,500.00) as
set forth in the Fee Schedule. To initiate the Project, Client shall advance
Eight Thousand Dollars ($8,000) which amount shall be deducted from the final
invoice and Client shall provide Hauser with a purchase order and executed
Authorization to Proceed. Prior to each Phase, Client shall provide Hauser with
a purchase order or, to the extent same is not feasible, an Authorization to
Proceed executed by an authorized officer of Client. Hauser shall present
invoices at the earlier of the end of each month or the end of each Phase which
shall be payable fifteen (15) days from the invoice date. If Client shall not
have paid any invoice twenty-two (22) days from the invoice date, Hauser may
discontinue the Project until such invoice is paid in full and Hauser's
commitment to delivery dates shall be adjusted accordingly. In the event Client
fails to make payment with the applicable twenty-two (22) day period with
respect to at least two invoices, Hauser may re-evaluate the noted payment
terms. Client shall not be required to
<PAGE>
reimburse, and Hauser shall not be required to incur, any charges for
performance in excess of the above price, unless mutually agreed upon in
writing. If Client or Hauser requests activities that constitute a change of
scope from the Proposal or if additional information is discovered which
increases the complexity of the Project, Hauser shall provide a work change
order ("WCO") which must be approved by Client. Pending approval of the WCO,
Hauser shall not implement a change of scope. Upon termination of the Project,
and after all costs are available, any balance of payments by Client in excess
of actual costs and fees incurred shall be credited or refunded to Client,
unless said refund shall be less than One Hundred Dollars ($100.00). Certain
designated expenses are not included in the above estimated price and, when
authorized by Client, will be invoiced seperately when incurred as follows: (i)
travel time at a 50% rate, (ii) travel expenses at cost, (iii) marketing
expenses at cost, and (iv) materials and outside services at cost plus 15%.
3. OWNERSHIP
The parties agree that all Work (which shall include for purposes of this
Section all ideas, processes, methodologies, software, algorithms, formulae,
notes, outlines, paragraphs, inventions, improvements and other information and
work product developed or generated by or on behalf of Hauser during the course
of its performance of the Project pursuant to this Agreement) shall be
considered "works made for hire" within the meaning of the Copyright Act of
1976, 17 U.S.C.(SS)101, and that Client is and shall be the sole author of the
Work, and the sole owner of all rights therein, including but not limited to all
rights of copyright. In the event any of the Work is deemed not to be a "work
made for hire," then Hauser hereby transfers to Client, without further
consideration, all right, title, and interest to such Work, including any and
all patents, copyrights, trade secrets and other proprietary rights related
thereto. Hauser agrees to promptly execute and deliver, or cause to be promptly
executed and delivered, all documents and instruments requested by Client to
evidence the foregoing assignment. Hauser hereby irrevocably appoints Client as
Hauser's attorney-in-fact for the purpose of executing such documents and
instruments in Hauser's name. Hauser represents and warrants that it has the
right to grant to Client sole right, title and interest in and to the Work, and
that ownership or use of the Work by Client will not constitute an infringement
of any third-party patent, copyright, trade secret or other proprietary right.
4. INVENTIONS
If Hauser employees conceive and first actually reduce to practice an invention
within the scope of the Project while working on the Project, Hauser will
promptly notify Client of the invention and shall be deemed to have assigned to
Client any and all of its rights to such invention. Upon request, within sixty
(60) days of the notification, Hauser will also assist Client in preparing and
prosecuting an application for Letters Patent. The costs of providing such
assistance are not included in the Project estimate stated in Section 2
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above, and Client agrees to pay such costs in addition to any other amounts
payable under this Agreement.
5. CONFIDENTIALITY
Hauser acknowledges that it may be exposed or have access to trade secrets and
other confidential business information of Client or other entities with which
Client has business relationships. Such information, referred to hereinafter as
"Confidential Data," shall include all information concerning the business or
affairs or Client that is not known by or generally available to third parties,
including, without limitation, existing systems and programs and those in
development, customer lists, customer needs and requirements, employee lists,
salaries and benefits, and all data received in confidence by Client from third
parties. Hauser agrees that during its business dealings with Client and
thereafter (i) it will hold all Confidential Data in the strictest confidence
and will not copy or disclose any portion thereof to any person or entity,
except its employees who have a need to know, without the prior written consent
of Client; (ii) it will comply, and cause each of its employees to comply, with
Client's policies on data and information security; (iii) it will not make any
use whatsoever of any Confidential Data except to perform services in connection
with the Work pursuant to this Agreement; and (iv) upon termination of its
business dealings with Client or at any time upon Client's request, it will
immediately return to Client all Confidential Data in its possession or in the
possession of its employees.
6. REPORTS AND USE OF RESULTS BY CLIENT
Hauser agrees to render to Client written reports of its findings and progress
made during the term of the Agreement, at intervals agreed upon by the parties.
Client may use the results of the Projects as Client sees fit.
Hauser will provide a high standard of professional service. Hauser warrants
that services provided hereunder shall be performed in a competent and
workmanlike manner and that each item of Work furnished to Client pursuant to
this Agreement shall conform with its description and specifications as set
forth in the Proposal.
7. INDEPENDENT CONTRACTORS
Client and Hauser are independent contractors, are not related and shall not be
construed as co-employers, joint venturers, partners or otherwise. Hauser shall
be responsible for payment of all wages and/or salaries and benefits due to its
employees. Notwithstanding the above, Client will, if appropriate, deduct
applicable taxes from Hauser's compensation for services performed under this
Agreement. Upon Client's request, Hauser will provide Client with certificates
of insurance evidencing that its employees are covered by; (i) general liability
insurance with a minimum limit of $1
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million combined single limit bodily injury and property damage; and (ii)
workmen's compensation insurance in the state in which each Hauser employee is
employed.
8. INDEMNITY
Client agrees to indemnify and hold Hauser harmless from any and all claims or
suits, and all costs and expenses in connection therewith, for or arising out of
Hauser's performance under this Agreement, other than for injury or damage
occurring (i) as a result of a breach of this Agreement by Hauser, or (iii) as a
result of the negligence or improper act or omission of Hauser or any employee
or agent thereof. Notwithstanding the foregoing, Client's indemnity of Hauser is
contingent upon Hauser promptly notifying Client of any claim and/or suit
whereby Client may conduct and control the defense thereof with the cooperation
of Hauser and may defend or settle such suit or claim in its discretion.
9. FORCE MAJEURE
Neither Client nor Hauser shall be liable in any way for failure to perform any
provision of this Agreement (except the payment of monetary obligations) if such
failure is caused by any law, rule or regulation, or any cause beyond the
control of the party in default.
10. EARLY TERMINATION
Either party shall have the right to terminate this contract upon thirty (30)
days' written notice. In the event of early termination, Hauser agrees to: (i)
provide Client with all reports, materials, or other deliverable items available
as of the date of termination, and (ii) refund the applicable pro rata portion
of the estimated payment as set forth in Section 2. In any event, Client agrees
to pay all appropriate and reasonable costs incurred or committed by Hauser
including costs of termination, within thirty (30) days of receipt of a final
invoice, which invoice is subject to review and approval by Client.
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11. GENERAL
This Agreement and the Proposal incorporated herein represent the entire
Agreement of the parties, and may be modified or amended only by mutual
agreement in writing. This Agreement shall not be assigned by either party
without the prior written consent of the other party, except that Client may
assign this Agreement to an affiliate without the prior written consent of
Hauser. This Agreement shall be governed by and is to be construed in accordance
with the laws of and enforced within the jurisdiction of Pennsylvania.
SMITHKLINE BEECHAM HAUSER,INC.
CORPORATION
By /s/ W. Vickery Stoughton By /s/ Ronald Pierce
--------------------------- ---------------------------
Title President Title Vice President
------------------------ --------------------
Date 2/28/96 Date 12/7/95
-------------------- --------------------
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CONSENT TO ASSIGNMENT
The undersigned hereby consents to the assignment by SmithKline Beecham
Corporation, a Pennsylvania corporation ("SB"), to Exigent Diagnostics, Inc., a
Delaware corporation ("Assignee"), of all of the rights of SB under the
Agreement by and between the undersigned and SB dated as of February 28, 1996,
(the "Agreement"). For purposes of this consent, "Effective Time of the
Assignment" means the effective time of the closing of Assignee's purchase of
the assets of SmithKline Beecham Diagnostic Systems Co., a Pennsylvania limited
liability company. In executing this consent, the undersigned agrees that SB
will be responsible for obligations arising under the Agreement prior to the
Effective Time of the Assignment and Assignee will be responsible for any
obligations arising under the Agreement after the Effective Time of the
Assignment.
HAUSER.INC
By: /s/ Stephen G. Hauser
------------------------
Name: Stephen G. Hauser
Title: President
Hauser. Inc.
<PAGE>
EXHIBIT 10.20
AGREEMENT NUMBER CPO32284
COST TYPE
Between
BATTELLE MEMORIAL INSTITUTE
through its
BATTELLE COLUMBUS OPERATIONS
hereinafter called
BATTELLE
and
EXIGENT DIAGNOSTICS, INC.
hereinafter called
CLIENT
BATTELLE agrees to provide CLIENT with services on the concept development for a
diagnostic disposable and pilot production line substantially in accordance with
BATTELLE's Proposal No. CPO32284, which is incorporated herein, subject to the
following terms and conditions (the "PROJECT"):
1.TERM
BATTELLE will begin work on the PROJECT within thirty (30) days of receipt of
this Agreement executed by CLIENT and will continue for a period of five (5)
months, subject to the terms and conditions of this Agreement.
2.PAYMENT
BATTELLE estimates that the price to the CLIENT for performance of the PROJECT
will be Five Hundred Thousand Dollars ($500,000.00) payable upon receipt of
monthly invoices for costs incurred. CLIENT shall not be required to reimburse,
and BATTELLE shall not be required to incur, any charges for performance in
excess of the above price, unless mutually agreed upon in writing.
Travel expenses are not included in the above estimate and, when authorized by
CLIENT, will be invoiced separately when incurred.
<PAGE>
3. OWNERSHIP
The parties agree that all Work (which shall include for purposes of this
Section all ideas, processes, methodologies, software, algorithms, formulae,
notes, outlines, photographs, inventions, improvements and other information and
work product developed or generated by or on behalf of BATTELLE during the
course of its performance of the PROJECT pursuant to this Agreement) shall be
considered "works made for hire" within the meaning of the Copyright Act of
1976, 17 U. S.C. (S)101, and that Client is and shall be the sole author of the
Work, and the sole owner of all rights therein, including but not limited to all
rights of copyright. In the event any of the Work is deemed not to be a "work
made for hire," then BATTELLE hereby transfers to CLIENT, without further
consideration, all right, title, and interest to such Work, including any and
all patents, copyrights, trade secrets and other proprietary rights related
thereto. BATTELLE agrees to promptly execute and deliver, or cause to be
promptly executed and delivered, all documents and instruments requested by
CLIENT to evidence the foregoing assignment.
4. INVENTIONS
If BATTELLE employees conceive and first actually reduce to practice an
invention within the scope of the PROJECT while working on the PROJECT, BATTELLE
will promptly notify CLIENT of the invention and shall be deemed to have
assigned to CLIENT any and all of its rights to such invention. Upon request,
within sixty (60) days of the notification, BATTELLE will also assist CLIENT in
CLIENT's preparation and prosecution of applications for Letters Patent. The
costs of providing such assistance are not included in the PROJECT estimate
stated in Section 2 above, and CLIENT agrees to pay such costs in addition to
any other amounts payable under this Agreement.
5. CONFIDENTIALITY
BATTELLE acknowledges that it may be exposed or have access to trade secrets and
other confidential business information of CLIENT or other entities with which
CLIENT has business relationships. Such information, referred to hereinafter as
"Confidential Data," shall include all information concerning the business or
affairs or CLIENT that is not known by or generally available to third parties,
including, without limitation, existing systems and programs and those in
development, customer lists, customer needs and requirements, employee lists,
salaries and benefits, and all data received in confidence by CLIENT from third
parties. BATTELLE agrees that during its business dealings with CLIENT and
thereafter for a period of five (5) years (i) it will hold all Confidential Data
in the strictest confidence and will not copy or disclose any portion thereof to
any person or entity, except its employees who have a need to know, without the
prior written consent of CLIENT; (ii) it will comply, and cause each of its
employees to comply, with CLIENT's policies on data and information security;
(iii) it will not make any use whatsoever of any Confidential Data except to
perform services in connection with the Work pursuant to this Agreement; and
(iv) upon termination of its business dealings with CLIENT or at any time upon
CLIENT's request, it will immediately return to CLIENT all Confidential Data in
its possession or in the possession of its employees.
<PAGE>
6. REPORTS AND USE OF RESULTS BY CLIENT
BATTELLE agrees to render CLIENT written reports of its findings and progress
made during the term of the Agreement, at intervals agreed upon by the parties.
CLIENT may use the results of the PROJECT AS CLIENT sees fit, subject to the
following:
a. CLIENT agrees not to use or imply the BATTELLE name for advertising,
promotional purposes, raising capital, recommending investments, or in
any way that implies endorsement by BATTELLE without the written consent
of BATTELLE. CLIENT or BATTELLE may publicly disclose, in a news context,
the fact that an agreement has been entered into, including the name of
the CLIENT or BATTELLE and the general nature of the PROJECT.
b. CLIENT agrees not to use any PROJECT results in any dispute, litigation,
or other legal action.
BATTELLE agrees to provide a high standard of professional service and shall
exert its best efforts within time and funds provided toward achievement of the
technical objectives of the PROJECT authorized pursuant to this Agreement.
However, as the results of the PROJECT will be developmental in nature, in no
event shall BATTELLE or its employees and agents have any obligation or
liability for damages, including but not limited to consequential damages,
arising out of or in connection with CLIENT'S use or inability to use the
PROJECT results. BATTELLE PROVIDES NO WARRANTY OR GUARANTEE OF RESULTS,
INCLUDING WARRANTIES OF FITNESS FOR PURPOSE OR OF MERCHANTABILITY FOR ANY ITEM
OR RESULT THAT MAY BE DELIVERED UNDER THIS AGREEMENT. BATTELLE agrees that
services provided hereunder shall be performed in a competent and workmanlike
manner and that each item of Work furnished to CLIENT pursuant to this Agreement
shall conform with its description and specifications as set forth in Proposal
No. CPO32284.
7. INDEPENDENT CONTRACTORS
CLIENT and BATTELLE are independent contractors are not related and shall not be
construed as co-employers, joint venturers, partners or otherwise. BATTELLE
shall be responsible for payment of all wages and/or salaries and benefits due
to its employees. Upon CLIENT'S request, BATTELLE will provide CLIENT with
certificates of insurance evidencing that its employees are covered by: (I)
general liability insurance with a minimum limit of $1 million combined single
limit bodily injury and property damage; and (ii) workmen's compensation
insurance in the state in which each BATTELLE employee is employed.
8. INSURANCE AND INDEMNITY
CLIENT agrees to maintain adequate product liability insurance coverage for any
CLIENT products that may be developed based in whole or in part on BATTELLE'S
work, and CLIENT agrees to provide evidence of such insurance upon written
request.
<PAGE>
CLIENT agrees to indemnify and hold BATTELLE harmless from any and all
liability, claims, demands, and damages, and all costs and expenses in
connection therewith, for or arising out of BATTELLE's performance under this
Agreement, other than for injury or damage occurring (i) during performance of
the Agreement on BATTELLE-owned premises, except to the extent of CLIENT's
contribution to such injury or damage, or (ii) as a result of the gross
negligence or willful misconduct of BATTELLE. contributing cause.
9. NATURE OF SERVICES
CLIENT agrees that BATTELLE's performance of services on PROJECTS pursuant to
this Agreement is that of a professional service provider, and not a
manufacturer or supplier. CLIENT shall retain all final decision-making
authority and responsibility for the formulation, manufacturing, marketing,
design and selling of CLIENT's products. BATTELLE shall not have any
responsibility for providing product labels, warnings, or instructions for the
users of CLIENT's products and shall have no responsibility for obtaining FDA
premarket approval for any product or device unless mutually agreed upon in
writing.
10. FORCE MAJEURE
Neither CLIENT nor BATTELLE shall be liable in any way for failure to perform
any provision of this Agreement (except the payment of monetary obligations) if
such failure is caused by any law, rule or regulation, or any cause beyond the
control of the party in default.
11. EARLY TERMINATION
Either party shall have the right to terminate this contract upon fifteen (15)
days' written notice. In the event of early termination, BATTELLE agrees to: (i)
provide CLIENT with all reports, materials, or other deliverable items available
as of the date of termination, and (ii) refund the applicable pro rata portion
of the estimated payment as set forth in Section 2. In any event, CLIENT agrees
to pay all appropriate and reasonable costs incurred or committed by BATTELLE
including costs of termination, within thirty (30) days of receipt of a final
invoice.
12. LATEST DATE OF ACCEPTANCE
This agreement will become effective upon receipt of a fully executed copy by
BATTELLE, except that it will be void if not executed and received by BATTELLE
within sixty (60) days of the date of signature by BATTELLE.
<PAGE>
13. GENERAL
This Agreement and Proposal No. CPO32284 incorporated herein represent the
entire Agreement of the parties, and may be modified or amended only by mutual
agreement in writing. This Agreement shall not be assigned by either party
without the prior written consent of the other party, except that the CLIENT may
assign this Agreement to an affiliate without the prior written consent of
BATTELLE. This Agreement shall be governed by and is to be construed in
accordance with the laws of and enforced within the jurisdiction of Ohio.
EXIGENT DIAGNOSTICS, INC. BATTELLE MEMORIAL INSTITUTE
Columbus Operations
By: /s/ Thomas H. Grove By: /s/ Leslie F. Nikodem Jr.
-------------------------------- ----------------------------
Leslie F. Nikodem Jr.
Title V.P. of R.D Contracting Officer
-----------------------------
Date 12/12/96 Date December 5, 1996
------------------------------ -------------------------------
<PAGE>
EXHIBIT 10.24
ASSET PURCHASE AGREEMENT
AMONG
SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC.,
SMITHKLINE BEECHAM DIAGNOSTIC SYSTEMS CO.,
AND
EXIGENT DIAGNOSTICS, INC.,
NOVEMBER 7, 1996
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I - DEFINITIONS..................................................... 2
ARTICLE II - PURCHASE AND SALE OF ASSETS.................................... 7
2.1. Purchase and Sale of Assets................................. 7
2.2. Purchased Assets............................................ 7
2.3. Excluded Assets............................................. 8
ARTICLE III - ASSUMPTION OF LIABILITIES..................................... 9
3.1. Assumption of Assumed Liabilities........................... 9
3.2. Assumed Liabilities......................................... 9
3.3. No Other Liabilities Assumed................................ 10
ARTICLE IV - CLOSING........................................................ 10
4.1. Closing Date................................................ 10
4.2. Deliveries at the Closing................................... 10
ARTICLE V - PURCHASE PRICE AND PAYMENT...................................... 12
5.1. Purchase Price Payment...................................... 12
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF THE SELLER................... 12
6.1. Representations and Warranties of SBD....................... 13
(a) Due Incorporation........................................... 13
(b) Power and Authority of SBD.................................. 13
(c) Financial Statements........................................ 13
(d) Tax Matters................................................. 14
(e) Good Title Conveyed, Etc.................................... 15
(f) Consents and Approvals...................................... 16
(g) No Violation................................................ 16
(h) Absence of Certain Changes.................................. 17
6.2. Representations and Warranties of SBCL...................... 17
(a) Due Incorporation........................................... 18
(b) Power and Authority of SBCL................................. 18
(c) Good Title Conveyed, Etc.................................... 18
(d) Consents and Approvals...................................... 19
(e) No Violation................................................ 19
ARTICLE VII - REPRESENTATIONS AND WARRANTIES OF THE BUYER................... 20
7.1. Due Incorporation........................................... 20
7.2. Power and Authority of the Buyer............................ 20
7.3. Consents and Approvals...................................... 21
7.4. No Violation................................................ 21
</TABLE>
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<TABLE>
<S> <C>
7.5. Condition of Purchased Assets.............................. 21
7.6. Nonreliance................................................ 22
7.7. Interim Activities......................................... 22
7.8. Outstanding Securities..................................... 23
ARTICLE VIII - COVENANTS OF THE PARTIES.................................... 23
8.1. Antidilution of the Seller's Equity
in the Buyer............................................... 23
8.2. Tax Matters................................................ 24
8.3. Employee Matters........................................... 25
8.4. Pension and Section 401(k) Matters......................... 28
8.5. Employee Plan Obligations.................................. 29
8.6. Vesting of Employee Stock Options.......................... 32
8.7. Consummation of Transactions............................... 32
8.8. Cooperation................................................ 32
8.9. Books and Records.......................................... 32
8.10. Consents................................................... 33
8.11. The Seller's Agreement Regarding
Confidentiality............................................ 34
8.12. The Buyer's Agreement Regarding
Confidentiality............................................ 36
8.13. Public Announcements....................................... 38
8.14. Use of the Seller's Facilities............................. 38
8.15. Credit Facility............................................ 39
8.16. Funding of Operating Expenses.............................. 39
8.17. Payments to Immunomatrix................................... 40
8.18. Stockholders Agreement..................................... 40
8.19. Further Assurances......................................... 40
8.20. Notice of Financing........................................ 41
8.21. Use of Name................................................ 41
ARTICLE IX - SURVIVAL; INDEMNIFICATION..................................... 42
9.1. Survival of Representations and Warranties................. 42
9.2. Indemnification............................................ 43
9.3. Third-Party Claims......................................... 45
ARTICLE X - MISCELLANEOUS PROVISIONS....................................... 47
10.1. Expenses................................................... 47
10.2. Payment of Taxes Upon Transfer of
Purchased Assets........................................... 47
10.3. Execution in Counterparts.................................. 48
10.4. Notices.................................................... 48
10.5. Waivers.................................................... 49
10.6. Amendment.................................................. 49
10.7. Entire Agreement........................................... 49
10.8. Applicable Law............................................. 49
10.9. Relationship of the Parties................................ 50
10.10. Headings................................................... 50
</TABLE>
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<TABLE>
<S> <C>
10.11. Assignments................................................ 50
10.12. Binding Effect; Benefits................................... 50
</TABLE>
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") dated as of the 7th day of
November, 1996, among SmithKline Beecham Clinical Laboratories, Inc., a company
organized under the laws of the Commonwealth of Pennsylvania, having a principal
place of business at 1201 South Collegeville Road, Collegeville, PA 19426
("SBCL"), SmithKline Beecham Diagnostic Systems Co., a limited liability company
organized under the laws of the Commonwealth of Pennsylvania, having a principal
place of business at 1201 South Collegeville Road, Collegeville, PA 19426
("SBD") (SBCL and SBD collectively, the "Seller"), and Exigent Diagnostics,
Inc., a company organized under the laws of the State of Delaware, having a
principal place of business at 6100 Bristol Parkway, Culver City, CA 90230 (the
"Buyer"),
WITNESSETH:
WHEREAS, SBD is engaged in the research and development of point-of-
care diagnostic tests, and owns certain assets for use in such business; and
WHEREAS, SBCL owns certain assets used by SBD in conducting such
business; and
WHEREAS, the Buyer desires to purchase and the Seller desires to sell,
on the terms and conditions set forth in this
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<PAGE>
Agreement, the assets used by SBD in conducting such business; and
WHEREAS, the Seller desires to assign and the Buyer desires to assume,
on the terms and conditions set forth in this Agreement, certain liabilities;
and
WHEREAS, the Buyer and the Seller agree to take certain other actions,
as set forth below, in light of the Seller's intended withdrawal from direct
involvement in the point-of-care diagnostic test business.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration described herein, the
Seller and the Buyer agree as follows:
ARTICLE I
DEFINITIONS
-----------
The following terms shall have the following respective meanings when
used in this Agreement, unless the context shall require otherwise:
1.1. "Affiliate" shall mean any corporation, firm, partnership or
other entity, whether de jure or de facto, which directly or indirectly owns, is
-- ---- -- -----
owned by or is under common ownership with a party to this Agreement to the
extent of at least fifty percent (50%) of the equity (or such lesser percentage
which is the maximum allowed to be owned by a foreign corporation in a
particular jurisdiction) having the power to
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<PAGE>
vote on or direct the affairs of the entity and any person, firm, partnership,
corporation or other entity actually controlled by, controlling or under common
control with a party to this Agreement.
1.2. "Agreement" shall have the meaning set forth in the preamble
hereof.
1.3. "Assigned Contracts" shall mean the contracts to be assigned
by the Seller to the Buyer pursuant to this Agreement, as listed in Schedule 1
hereto.
1.4. "Assumed Liabilities" shall have the meaning set forth in
Section 3.2 hereof.
1.5. "Assumption Agreement" shall have the meaning set forth in
Section 4.2(b)(I) hereof.
1.6. "Base Balance Sheet" shall have the meaning set forth in
Section 2.2(a) hereof.
1.7. "Base Date" shall have the meaning set forth in Section 2.2(a)
hereof.
1.8. "Bill of Sale" shall have the meaning set forth in Section
4.2(a)(I) hereof.
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1.9. "Business" shall mean the business of research and development
of point-of-care diagnostic testing products conducted within SBD prior to the
Closing Date; provided, however, that the Business shall not include any
-------- -------
contractual relations or other dealings between SBD (or its Affiliates) and
Immunomatrix, Inc.
1.10. "Buyer" has the meaning set forth in the preamble hereof.
1.11. "Buyer Group" shall have the meaning set forth in Section
9.2(a) hereof.
1.12. "Claim" shall have the meaning set forth in Section 9.1
hereof.
1.13. "Closing" shall have the meaning set forth in Section 4.1
hereof.
1.14. "Closing Date" shall have the meaning set forth in Section 4.1
hereof.
1.15. "Code" shall have the meaning set forth in Section 6.1(d)(3)
hereof.
1.16. "Common Stock" shall mean the common stock of the Buyer, par
value $.01 per share.
1.17. "Consents" shall have the meaning set forth in Section 8.10
hereof.
1.18. "Damages" shall have the meaning set forth in Section 9.2(a)
hereof.
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1.19. "Distribution and Supply Agreement" shall have the meaning set
forth in Section 4.2(a)(iii) hereof.
1.20. "Employees" shall have the meaning set forth in Section 8.3(a)
hereof.
1.21. "Excluded Assets" shall have the meaning set forth in Section
2.3 hereof.
1.22. "Financing" shall have the meaning set forth in Section
8.12(a) hereof.
1.23. "Immunomatrix License" shall have the meaning set forth in
Section 2.3(b) hereof.
1.24. "Indemnified Party" shall have the meaning set forth in
Section 9.3(a) hereof.
1.25. "Indemnifying Party" shall have the meaning set forth in
Section 9.3(a) hereof.
1.26. "Liens" shall have the meaning set forth in 6.1(h)(1) hereof.
1.27. "Loan Agreement" shall have the meaning set forth in Section
8.15 hereof.
1.28. "NASDAQ" shall mean the National Association of Securities
Dealers Automatic Quotation System.
1.29. "1934 Act" shall have the meaning set forth in Section 8.11(a)
hereof.
1.30. "Note" shall have the meaning set forth in Section 8.16
hereof.
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<PAGE>
1.31. "Operating Expenses" shall have the meaning set forth in
Section 8.16 hereof.
1.32 "Principals" shall mean W. Vickery Stoughton and Thomas H.
Grove.
1.33. "Purchased Assets" shall have the meaning set forth in Section
2.2 hereof.
1.34. "Registration Rights Agreement" shall have the meaning set
forth in Section 4.2(a)(iv) hereof.
1.35. "SBCL" shall have the meaning set forth in the preamble
hereof.
1.36 "SBCL Assets" shall have the meaning set forth in Section 2.2
hereof.
1.37. "SBD" shall have the meaning set forth in the preamble hereof.
1.38. "SBD Assets" shall have the meaning set forth in Section 2.2
hereof.
1.39. "Seller" shall have the meaning set forth in the preamble
hereof.
1.40. "Seller Group" shall have the meaning set forth in Section
9.2(c) hereof.
1.41. "Services Agreement" shall have the meaning set forth in
Section 4.2(a)(vii) hereof.
1.42. "Shareholders Agreement" shall have the meaning set forth in
Section 4.2(a)(v) hereof.
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<PAGE>
1.43. "Taxes" shall have the meaning set forth in Section 6.1(d)(3)
hereof.
1.44. "Tax Return" shall have the meaning set forth in Section
6.1(d)(3) hereof.
1.45. "Termination Date" shall have the meaning set forth in Section
9.1 hereof.
1.46. "Third-Party Claims" shall have the meaning set forth in
Section 9.3 hereof.
ARTICLE II
PURCHASE AND SALE OF ASSETS
---------------------------
2.1. Purchase and Sale of Assets. Subject to the terms and
---------------------------
conditions of this Agreement, on the Closing Date, the Seller shall sell,
transfer, convey, assign and deliver (or will cause to be sold, transferred,
conveyed, assigned and delivered) to the Buyer and the Buyer shall purchase,
acquire and accept (or cause to be purchased, acquired and accepted) from the
Seller, the Purchased Assets.
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<PAGE>
2.2. Purchased Assets. The Purchased Assets shall mean the
----------------
following rights, properties, assets, claims, and contracts (but only, in the
case of the contracts, if the liabilities associated with such assets or under
such contracts are assumed by the Buyer in accordance with the provisions of
Article III hereof) of the Seller relating to the Business: (a) all fixed and
intangible assets that are reflected on the pro forma balance sheet of SBD dated
--- -----
as of June 27, 1996 (the "Base Date"), a copy of which is attached hereto as
Schedule 2 (the "Base Balance Sheet"); (b) such items of capital equipment owned
by SBD as are listed in Schedule 3 hereto, and such other assets, tangible or
intangible, as SBD shall have acquired in the ordinary course of business
between the Base Date and the Closing Date (collectively, the "SBD Assets"); (c)
the Assigned Contracts, subject to receipt by SBD of all third-party consents
and approvals required therefor; (d) computer hardware, other office equipment,
and other assets owned by SBCL and used by or for the benefit of SBD in the
Business as of the Base Date, as listed in Schedule 4 hereto (collectively, the
"SBCL Assets"); (e) all books and records currently in the possession or under
the control of the Seller relating exclusively to the research and development
activities conducted by the Seller in connection with the Business; and (f) the
Trademark Use Application filed by SmithKline Beecham Corporation and any
trademark registered
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<PAGE>
pursuant thereto, relating to the mark "Exigent Diagnostics"; provided, however,
-------- -------
that the Purchased Assets shall not include any Excluded Assets (as defined in
Section 2.3 hereof).
2.3. Excluded Assets. Notwithstanding anything contained in
---------------
Section 2.2 hereof, the Purchased Assets shall not include any of the following
assets (the "Excluded Assets"): (a) all proprietary software and related data,
as more specifically listed in Schedule 5 hereto, used in connection with the
computer hardware and equipment listed in Schedule 4 hereto; (b) that certain
Amended and Restated Distribution and Supply Agreement by and between the Seller
and Immunomatrix, Inc. (the "Immunomatrix License"); and (c) that certain
Amended and Restated Option Agreement, by and between the Seller and
Immunomatrix, Inc.
ARTICLE III
ASSUMPTION OF LIABILITIES
-------------------------
3.1. Assumption of Assumed Liabilities. Subject to the terms and
---------------------------------
conditions of this Agreement, on the Closing Date, the Seller shall assign to
the Buyer, and the Buyer shall assume, the Assumed Liabilities (as defined in
Section 3.2 hereof). The Buyer agrees that, from and after such assumption, the
Seller will be completely released and discharged from any and all obligations
of any kind whatsoever relating to or arising out of the Assumed Liabilities.
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<PAGE>
3.2. Assumed Liabilities. The liabilities of the Seller to be
-------------------
transferred and assumed (the "Assumed Liabilities") by the Buyer shall be: (a)
all liabilities that are reflected on the Base Balance Sheet, other than the
accrued liability for Employee vacation pay; (b) such obligations relating to
the Business as shall have been incurred by or behalf of the Seller between the
Base Date and the Closing Date in the ordinary course of the Business or with
the authorization (or under the supervision) of the Principals, and all
liabilities relating to or arising out of such obligations and out of any other
events that have occurred between the Base Date and the Closing Date; and (c)
certain obligations of the Seller relating to Employees, to the extent
specifically provided in Sections 8.3 and 8.4 hereof.
3.3. No Other Liabilities Assumed. Except as and to the extent
----------------------------
otherwise expressly provided in this Agreement, the Buyer has not agreed to pay,
shall not be required to assume and shall not have any liability or obligation,
direct or indirect, absolute or contingent, of the Seller or any other person,
including without limitation any intercompany obligations of SBD or SBCL to any
other entity in connection with taxes or otherwise.
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<PAGE>
ARTICLE IV
CLOSING
-------
4.1. Closing Date. Subject to the terms and conditions of this
------------
Agreement, the closing of the purchase and sale of the Purchased Assets and the
assumption of the Assumed Liabilities (the "Closing") shall be conducted at the
offices of Pepper, Hamilton & Scheetz, 3000 Two Logan Square, Philadelphia,
Pennsylvania 19103 at 10:00 A.M. on the date first above written (the "Closing
Date").
4.2. Deliveries at the Closing.
-------------------------
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(a) At the Closing the Seller shall deliver or cause to be
delivered to the Buyer: (i) a duly- executed bill of sale for all personal
property that comprises part of the Purchased Assets (the "Bill of Sale"); (ii)
a duly-executed counterpart of an assignment and assumption agreement (the
"Undertaking and Assumption Agreement"); (iii) a duly-executed counterpart of a
distribution and supply agreement (the "Distribution and Supply Agreement");
(iv) a duly-executed counterpart of a registration rights agreement (the
"Registration Rights Agreement"); (v) a duly-executed counterpart of a trademark
assignment agreement (the "Trademark Assignment"); (vi) all such other deeds,
endorsements, assignments and other instruments as are necessary to transfer to
the Buyer good and marketable title to the Purchased Assets at the Closing;
(vii) any payments required to be made by the Seller to the Buyer at the Closing
pursuant to Sections 8.15 and 8.16 hereof; and (viii) all other previously
undelivered documents required hereby to be delivered by the Seller to the Buyer
at or prior to the Closing in connection with the transactions contemplated by
this Agreement.
(b) At the Closing, the Buyer shall deliver or cause to be
delivered to the Seller: (i) a duly- executed counterpart of the Undertaking and
Assumption Agreement; (ii) a certificate representing the shares of Common Stock
referred to
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in Section 5.1 hereof; (iii) a duly-executed counterpart of the Distribution and
Supply Agreement; (iv) a duly-executed counterpart of the Registration Rights
Agreement; (v) a duly-executed counterpart of the Trademark Assignment; (vi) a
copy of a signed commitment letter, reasonably satisfactory to the Seller, with
respect to the Financing; (vii) a copy of a signed commitment letter, reasonably
satisfactory to the Seller, with respect to the $1 million bridge loan facility
provided to the Buyer by Exigent Partners, L.P. (the "Bridge Loan"); (viii) a
certificate signed by W. Vickery Stoughton stating that all conditions to
drawdown under the Bridge Loan have been met as of the Closing Date; and (ix)
all other previously undelivered documents required hereby to be delivered by
the Buyer to the Seller at or prior to the Closing in connection with the
transactions contemplated by this Agreement.
ARTICLE V
PURCHASE PRICE AND PAYMENT
--------------------------
5.1. Purchase Price Payment. On the Closing Date, the Buyer shall
----------------------
issue or cause to be issued to the Seller a certificate representing such number
of shares of Common Stock as will, after the issuance thereof, comprise five
percent (5%) of all issued and outstanding shares of Common Stock as
consideration (in addition to the Buyer's assumption of the Assumed Liabilities)
for the sale of the Purchased Assets.
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<PAGE>
ARTICLE VI
REPRESENTATIONS AND
WARRANTIES OF THE SELLER
------------------------
6.1. Representations and Warranties of SBD. SBD represents and
-------------------------------------
warrants to the Buyer as follows:
(a) Due Incorporation. SBD is a limited liability company
-----------------
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the full corporate power and lawful
authority to carry on its business as it is now being conducted and to own the
properties and assets it now owns.
(b) Power and Authority of SBD. SBD has the full legal right
--------------------------
and power and all authority and approval required to enter into, execute and
deliver this Agreement, and to perform fully its obligations under this
Agreement. This Agreement is a valid and binding agreement of SBD enforceable in
accordance with its terms, except that (I) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
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<PAGE>
(c) Financial Statements. SBD has delivered to the Buyer a
--------------------
copy of the Base Balance Sheet, which has been prepared from the books and
records of SBD in conformity with generally-accepted accounting principles and
SBD's accounting principles, which have been consistently applied, and fairly
presents as of the date thereof the results of operation of the Business for the
period then ended and the book value of the Purchased Assets and the Assumed
Liabilities reflected therein.
(d) Tax Matters.
-----------
(1) SBD has filed or caused to be filed with the appropriate
governmental agencies all Tax Returns (as hereinafter defined) and reports
required to be filed, and has maintained, or caused to be maintained, all
required records with respect to Taxes (as hereinafter defined), with respect to
or covering the Business and the Purchased Assets, and has paid in full all
Taxes, if any, shown to be due on such Tax Returns and reports, or otherwise due
or claimed to be due from them by any taxing authority for all periods up to and
including the date of this Agreement.
(2) All Taxes that SBD is required by law to withhold or collect
in connection with, or related to, the Purchased Assets or the Business through
the Closing Date have been or will be duly withheld or collected and, to the
extent
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<PAGE>
required, have been or will be paid to the proper governmental authorities or
properly deposited as required by applicable laws.
(3) "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, income, excise, property, sale and
franchise taxes (including any interest, penalties or additions attributable to
or imposed on or with respect to any such assessment) imposed by the United
States or any other jurisdiction in which SBD conducts activities with respect
to the Purchased Assets and the Business or is subject to taxing jurisdiction
with respect to the Purchased Assets and the Business, and any state, province,
county, local or other government, taxing authority, or subdivision thereof.
"Code" shall mean the United States Internal Revenue Code of 1986, as amended.
"Tax Return" shall mean any return, report, information return or other document
(including any related or supporting information) filed or required to be filed
with any governmental entity or other authority in connection with the
determination, assessment or collection of any Tax (whether or not such Tax is
imposed on SBD) or the administration of any laws, regulations or administrative
requirements relating to any Tax.
(e) Good Title Conveyed, Etc. SBD has complete and unrestricted
------------------------
power and the unqualified right to sell, assign, transfer and deliver to the
Buyer, and upon consummation of the transactions contemplated by this Agreement,
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<PAGE>
the Buyer will acquire, good, valid and marketable title to, the SBD Assets,
free and clear of all Liens, except for (I) Liens which, either individually or
in the aggregate, are not material to the Business or the Purchased Assets, or
(ii) those Liens listed in Schedule 6 hereto. The Bill of Sale and the deeds,
endorsements, assignments and other instruments to be executed and delivered to
the Buyer by SBD at the Closing will be valid and binding obligations of the
Seller enforceable in accordance with their terms, and will effectively vest in
the Buyer good, valid and marketable title to the SBD Assets.
(f) Consents and Approvals. Except with respect to the Assigned
----------------------
Contracts, no material consent, approval, license, permit or authorization of,
or material declaration, filing or registration with, any third party or any
governmental or regulatory authority is required in connection with the
execution and delivery of this Agreement by SBD, or the consummation by SBD of
the transactions contemplated hereby.
(g) No Violation. Neither the execution and delivery of this
------------
Agreement nor the consummation of the transactions contemplated hereby will
violate any provisions of the certificate of incorporation or by-laws of SBD, or
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or governmental authority, or result in a breach of the terms,
conditions or provisions of, or constitute a
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<PAGE>
default under, any instrument, agreement, mortgage, judgment, order, award,
decree, or other restriction to which it is a party or by which it is bound.
(h) Absence of Certain Changes. The officers of SBD (other
--------------------------
than the Principals) have not, with respect to the operation of the Business
since the Base Date:
(1) Permitted or allowed any of the Purchased Assets (real or
personal, tangible or intangible) to be subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind ("Liens"),
except for Liens for current taxes not yet due and Liens that have arisen by
operation of law for amounts not yet payable;
(2) Sold, transferred, or otherwise disposed of any of its
properties or assets (real or personal, tangible or intangible) used or useful
in the Business, except in the ordinary course of the Business and consistent
with past practice;
(3) Incurred any liability in connection with the Business other
than in the ordinary course of the Business consistent with past practice;
(4) Conducted the Business other than in the ordinary course and
consistent with past practice, except as disclosed in this Agreement; or
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(5) Agreed, whether in writing or otherwise, to take any action
described in this Section 6.1(h).
6.2. Representations and Warranties of SBCL. SBCL represents and
--------------------------------------
warrants to the Buyer as follows:
(a) Due Incorporation. SBCL is a corporation duly organized,
-----------------
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has the full corporate power and lawful authority to carry on
its business as it is now being conducted and to own the properties and assets
it now owns.
(b) Power and Authority of SBCL. SBCL has the full legal right
---------------------------
and power and all authority and approval required to enter into, execute and
deliver this Agreement, and to perform fully its obligations under this
Agreement. This Agreement is a valid and binding agreement of SBCL enforceable
in accordance with its terms, except that (I) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(c) Good Title Conveyed, Etc. SBCL has complete and
------------------------
unrestricted power and the unqualified right to
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<PAGE>
sell, assign, transfer and deliver to the Buyer, and upon consummation of the
transactions contemplated by this Agreement, the Buyer will acquire, good, valid
and marketable title to, the SBCL Assets, free and clear of all Liens, except
for (I) Liens which, either individually or in the aggregate, are not material
to the Business or the SBCL Assets, or (ii) those Liens listed in Schedule 6
hereto. The Bill of Sale and the deeds, endorsements, assignments and other
instruments to be executed and delivered to the Buyer by SBCL at the Closing
will be valid and binding obligations of the Seller enforceable in accordance
with their terms, and will effectively vest in the Buyer good, valid and
marketable title to the SBCL Assets.
(d) Consents and Approvals. Except with respect to the Assigned
----------------------
Contracts, no material consent, approval, license, permit or authorization of,
or material declaration, filing or registration with, any third party or any
governmental or regulatory authority is required in connection with the
execution and delivery of this Agreement by SBCL, or the consummation by SBCL of
the transactions contemplated hereby.
(e) No Violation. Neither the execution and delivery of this
------------
Agreement nor the consummation of the transactions contemplated hereby will
violate any provisions of the certificate of incorporation or by-laws of SBCL,
or violate any statute or law or any judgment, decree, order, regulation or
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<PAGE>
rule of any court or governmental authority, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any instrument,
agreement, mortgage, judgment, order, award, decree, or other restriction to
which it is a party or by which it is bound.
ARTICLE VII
REPRESENTATIONS AND
WARRANTIES OF THE BUYER
-----------------------
The Buyer represents and warrants to the Seller as follows :
7.1. Due Incorporation. The Buyer is a corporation duly
-----------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has the full corporate power and lawful authority to carry on its
business as it is now being conducted and to own the properties and assets it
now owns.
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<PAGE>
7.2. Power and Authority of the Buyer. The Buyer has the full
--------------------------------
legal right and power and all authority and approval required to enter into,
execute and deliver this Agreement, and to perform fully its obligations under
this Agreement. This Agreement is a valid and binding agreement of the Buyer
enforceable in accordance with its terms, except that (I) such enforcement may
be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights, and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
7.3. Consents and Approvals. Except with respect to the Assigned
----------------------
Contracts, no material consent, approval, license, permit or authorization of,
or material declaration, filing or registration with, any third party or any
governmental or regulatory authority is required in connection with the
execution and delivery of this Agreement by the Buyer, or the consummation by
the Buyer of the transactions contemplated hereby.
7.4. No Violation. Neither the execution and delivery of this
------------
Agreement nor the consummation of the transactions contemplated hereby will
violate any provisions of the certificate of incorporation or by-laws of the
Buyer, or
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<PAGE>
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or governmental authority, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any instrument,
agreement, mortgage, judgment, order, award, decree, or other restriction to
which it is a party or by which it is bound.
7.5. Condition of Purchased Assets. EXCEPT AS OTHERWISE
----------------------------- -------------------
EXPRESSLY STATED HEREIN, THE BUYER UNDERSTANDS AND AGREES THAT THE PURCHASED
- ----------------------------------------------------------------------------
ASSETS WILL BE SOLD, ASSIGNED, CONVEYED, TRANSFERRED AND DELIVERED TO THE
- -------------------------------------------------------------------------
BUYER IN AN "AS IS" CONDITION ON A "WHERE IS" BASIS, WITHOUT ANY WARRANTY OF
- ----------------------------------------------------------------------------
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY,
- --------------------------------------------------------------------------
EXPRESS OR IMPLIED.
- ------------------
7.6. Nonreliance. In connection with its decision to acquire the
-----------
Purchased Assets, the Buyer acknowledges that it is not relying upon any
financial projections, budgets or other forward-looking financial data with
respect to the Purchased Assets or the Business prepared by or furnished to it
by or on behalf of the Seller and that the Seller is making no representation or
warranty with respect thereto.
7.7. Interim Activities. Except as otherwise expressly provided
------------------
in this Agreement, between the Base Date and the Closing Date, the Buyer has
used its best efforts to cause the Principals to cause the Employees to conduct
the Business in
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<PAGE>
the ordinary course consistent with past practice, subject to the terms and
conditions of this Agreement, and not to enter into any third-party contracts
relating to the Business, or make any capital expenditures or incur or assume
any liabilities, in the name of or on behalf of SBD or SBCL, other than (i)
expenditures for the capital equipment listed in Schedule 3 hereto and (ii) such
other contracts incidental to the conduct of the Business as the Seller has
approved in writing. To the best knowledge of the Buyer, during such period, the
Employees have conducted the Business and refrained from entering into third-
party contracts, in conformity with the preceding sentence.
7.8. Outstanding Securities. As of the Closing, the Buyer has
----------------------
issued and outstanding the number of shares of Common Stock and other
securities, including without limitation, options, warrants, notes, bonds or
other equity or debt securities, listed in Annex E hereto. The beneficial owners
of such securities as of the Closing are as listed in Annex E.
ARTICLE VIII
COVENANTS OF THE PARTIES
------------------------
The Seller and the Buyer hereby covenant and agree as follows:
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<PAGE>
8.1. Antidilution of the Seller's Equity in the Buyer. In the
------------------------------------------------
event that, after the Closing, the Buyer shall issue additional shares of Common
Stock (including without limitation any shares issued upon the exercise of
warrants held by Spencer Trask Securities Incorporated), securities exercisable
or convertible into shares of Common Stock or any other form of equity security
with voting rights to any third party in consideration or for capital
contributions, then in connection with such issuances, until such contributions
equal cumulatively Seven Million Dollars (US $7,000,000) (or, in the event that
the outstanding balance under the Loan Agreement and the Note is not converted
(mandatorily or otherwise) into Common Stock as contemplated therein, Five
Million Dollars (US $5,000,000))(the applicable dollar amount being herein
referred to as the "Financing Threshold"), the Buyer shall issue additional
shares of Common Stock to the Seller, without payment of additional
consideration (or for payment of $.01 per share of Common Share if required for
such shares to be deemed to be fully paid and non-assessable), as necessary in
order to avoid dilution of the Seller's percentage equity interest in the Buyer.
Thereafter, the Buyer may dilute the Seller's percentage equity interest in the
Buyer only on a pro rata basis, as the equity interests in the Buyer of other
--- ----
investors are diluted. Notwithstanding the foregoing, prior to achieving the
Financing Threshold the Buyer
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<PAGE>
may issue stock options to key employees (with or without consideration), in a
total amount to be mutually agreed by the Buyer and the Seller, which agreement
shall not be unreasonably withheld, delayed or conditioned, without triggering
the Seller's right to receive additional shares of Common Stock pursuant to this
Section 8.1; provided, however, that any consideration paid by such key with
-------- -------
employees respect to such stock options shall not be credited toward the
achievement of the Financing Threshold.
8.2. Tax Matters. The Seller shall be liable for all Taxes payable
-----------
with respect to the operations of the Business and the Purchased Assets through
the Closing Date, and the Seller shall be responsible for timely filing the
appropriate Tax Returns and reports with respect to the operations of the
Business and the Purchased Assets through and including the Closing Date. The
Buyer shall be liable for all Taxes payable with respect to the operations of
the Business and the Purchased Assets after the Closing Date, and the Buyer
shall be responsible for filing the necessary Tax Returns and reports with
respect to the operations of the Business after that date.
8.3. Employee Matters. The Buyer shall offer to hire substantially
----------------
all Employees as of the Closing Date, each at a rate of base salary or pay at
least equal to the rate of base salary or pay of such Employee immediately prior
to the Closing
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<PAGE>
Date, and with employee benefits comparable to the employee benefits provided to
such Employee immediately prior to the Closing Date. The Buyer shall not be
obligated to maintain a defined benefit pension plan or to provide any other
particular benefit, whether in nature or amount, as long as the total benefit
package that the Buyer provides to each Employee is comparable to the benefit
package provided to such Employee immediately prior to the Closing Date. Such
employment by the Buyer of individuals who are employed in the Business shall
occur on the terms and conditions provided herein.
(a) Schedule 7 hereto sets forth a list of the employees of
SBD who are employed in connection with the Business ("Employees"), together
with their respective titles and dates of employment.
(b) The Employees shall cease to be employees of SBD on the
Closing Date. The Buyer acknowledges the Seller's position that the Employees
shall not be entitled to any termination or severance pay as a result of the
termination of their employment with SBD, and the Buyer will cooperate with the
Seller to provide continuity of employment by providing the current compensation
and benefits described in this Section 8.3. The Seller will provide termination
or severance pay, in accordance with and subject to the terms of the Seller's
severance pay plan as in effect on the Closing Date, to any
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<PAGE>
Employee who does not receive an offer of employment from the Buyer, and to any
Employee who declines the Buyer's offer of employment (provided that, in the
case of an Employee who declines the Buyer's offer of employment, the Seller
shall provide termination or severance pay to the Employee only if the Buyer
agrees in writing not to hire the Employee during the twelve-month period
following the Closing Date).
(c) Except as otherwise expressly provided in this Section 8.3,
the Buyer shall have no obligation or liability with respect to any claims by
any Employees or former employees of SBD arising by reason of the sale or
purchase of the Purchased Assets pursuant to this Agreement or by reason of
their employment, or the termination of such employment, with SBD on or prior to
the Closing Date. Without limitation of the foregoing, the Buyer shall not
assume any obligation or liability with respect to, or receive any assets from,
any employee benefit plan with respect to the Employees, or with respect to any
employment practices or policies maintained by SBD with respect to the
Employees, to the extent that such obligations, liabilities, or assets relate to
the Employees' employment with SBD on or prior to the Closing Date.
(d) The Seller shall be responsible for all wages, salaries,
employee benefit plan costs and claims, vacation pay, workers' compensation
claims, and all other employment
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<PAGE>
benefits and costs incurred as a result of events occurring prior to and
including the Closing Date with respect to the Employees and their dependents
and related to their employment by SBD, except to the extent that such items are
reflected on the Base Balance Sheet as Assumed Liabilities or Section 8.5 hereof
otherwise provides. The Seller shall remain liable for retiree medical and life
insurance benefits, if any, with respect to all Employees retiring on or prior
to the Closing Date, in accordance with and subject to the terms of any retiree
medical or retiree life insurance plan maintained by the Seller that is
applicable to such Employee.
(e) With respect to those Employees who become employees of the
Buyer, the Buyer shall be responsible for (i) all wages, salaries, employee
benefit plan costs and claims, earned sales bonuses or management bonuses,
workers' compensation claims, and all other employment benefits and costs
incurred as a result of events occurring prior to and including the Closing Date
with respect to the Employees and their dependents and related to their
employment by SBD, to the extent that such items are reflected on the Base
Balance Sheet as Assumed Liabilities, and (ii) all wages, salaries, employee
benefit plan costs and claims, vacation pay, earned sales bonuses or management
bonuses, workers' compensation claims, severance or other termination
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<PAGE>
benefits, and all other employment benefits and costs incurred as a result of
events occurring after the Closing Date.
(f) After the Closing Date, the Seller agrees to cooperate
with the Buyer to enable the Buyer to have successorship status with respect to
the Business for the limited purpose of qualifying as a successor corporation
under the applicable provisions of the Federal Insurance Contributions Act, the
Federal Unemployment Tax Act, state unemployment insurance acts, and state
temporary disability acts. The Seller agrees to cooperate with the Buyer in all
filings necessary to obtain such successorship status.
8.4. Pension and Section 401(k) Matters. Effective as of the
----------------------------------
Closing Date, the Seller shall treat the Employees as fully vested in their
accrued pension benefits, and in their employee- and employer-derived account
balances under the Seller's section 401(k) plan, irrespective of whether they
were fully vested immediately prior to the Closing Date. No provision of this
Agreement shall require the Seller to treat the termination of the Employees'
employment with SBD on the Closing Date as a "separation from service" or as a
"termination of employment" for purposes of any pension plan, retirement savings
plan, or other retirement arrangement maintained by the Seller. Except as
provided above with respect to vesting, the Employees' rights under any
retirement arrangement maintained by the Seller
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<PAGE>
(including, but not limited to, any right to distributions) shall be determined
solely by the applicable provisions of the retirement arrangement, as in effect
on the Closing Date and as amended from time to time thereafter.
8.5. Employee Plan Obligations.
-------------------------
(a) With respect to Employees who are covered by the
Seller's health and dental insurance plans, and who become employees of the
Buyer as of the Closing Date, the Seller shall:
(I) at all times prior to the Closing Date and, if
requested in writing by the Buyer, for a period up to eighteen (18)
months from the Closing Date, maintain insurance coverage levels as in
effect under such plans on the date of this Agreement, and as amended
from time to time thereafter to comply with changes in applicable law,
with respect to such Employees and their beneficiaries; and
(ii) be responsible for any payments required by such
coverage with respect to claims incurred while such coverage remains
in effect and submitted by Employees or their beneficiaries within the
claims filing period provided under such plans.
The Seller's obligation to maintain the health and dental insurance coverage
described in this Section 8.5(a) shall
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<PAGE>
terminate as soon as the Buyer establishes the equivalent insurance coverage
described below in Section 8.5(b).
(b) With respect to Employees who are covered by the Seller's
health and dental insurance plans and who become employees of the Buyer as of
the Closing Date, the Buyer shall:
(I) Within eighteen (18) months of the Closing Date,
provide insurance coverage that is substantially equivalent to the
coverage provided by the plans identified in Section 8.5(a); and
(ii) be responsible for any payments required by such
substantially equivalent coverage with respect to claims incurred by
such Employees or their beneficiaries after the Buyer's insurance
coverage is established; and
(iii) reimburse the Seller for the cost of providing such
health and dental insurance following the Closing Date at a rate equal
to the cost charged by the Seller to the Business for active employee
coverage as of the Closing Date.
(c) If an Employee becomes an employee of the Buyer as of the
Closing Date, and the Employee (or a beneficiary of the Employee) incurs a
"qualifying event" after the Closing Date that entitles such individual to
health care
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<PAGE>
continuation ("COBRA") coverage under the Seller's plan, the following rules
shall apply:
(I) the Buyer shall use its best efforts to assume
the obligation to provide COBRA coverage to such individual under the
Buyer's plan on and after the date on which the Buyer establishes the
substantially equivalent coverage described in Section 8.5(b); and
(ii) to the extent that the Buyer is not able to
provide COBRA coverage to such individual, the Seller shall continue
to provide the coverage under the Seller's plan for the remainder of
the eighteen-month continuation coverage period; and
(iii) during any period in which an individual
receives COBRA coverage under the Seller's plan as a result of a
qualifying event described in this Section 8.5(c), the Seller may
charge the individual the full amount of the applicable COBRA premium.
8.6. Vesting of Employee Stock Options. The Seller agrees to treat
---------------------------------
as vested as of the Closing Date any and all stock options issued by the Seller
or one of its Affiliates pursuant to an Employee Stock Option Plan that are held
by
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<PAGE>
Employees who shall be terminated by SBD as of the Closing Date and shall enter
the employ of the Buyer as of such date.
8.7. Consummation of Transactions. Each party shall use its
----------------------------
commercially reasonable efforts to cause all conditions precedent to its
obligations to consummate the transactions contemplated by this Agreement to be
satisfied.
8.8. Cooperation. Each party shall cooperate fully with the
-----------
other in preparing and filing all notices, applications, reports and other
instruments and documents which are required by any statute, rule, regulation or
order in connection with the consummation of the transactions contemplated by
this Agreement.
8.9. Books and Records. The Seller agrees to permit the Buyer
-----------------
and its authorized representatives, including legal counsel and independent
accountants, upon reasonable notice, to have full access at reasonable business
hours to the books and records of the Seller relating to the Business and the
Purchased Assets (other than the books and records comprising part of the
Purchased Assets). The Buyer and the Seller each agree to preserve until
December 31, 2006, all records in their possession relating to any of the
Purchased Assets, Assumed Liabilities or the Business or the transactions
contemplated herein. In the event that any party hereto needs access to records
in the possession of another party hereto relating to any
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<PAGE>
of the Purchased Assets, Assumed Liabilities or the Business or the transactions
contemplated herein for any legitimate purpose, it will allow representatives of
such other party access to such records during regular business hours at its
place of business for the sole purpose of obtaining information for such use and
will permit such other party to make extracts and copies thereof (at their
expense) as may be necessary or convenient.
8.10. Consents. From and after the Closing Date, the Seller shall
--------
use its best reasonable efforts to obtain at the earliest practicable date all
consents or waivers of third parties to the Assigned Contracts and other
instruments (collectively, "Consents") necessary to the consummation of the
transactions contemplated hereby or to assign or transfer effectively to the
Buyer the Purchased Assets and will provide the Buyer with copies of each such
Consent after it is obtained. Anything contained in this Section 8.10 to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any contract, including without limitation the Assigned Contracts, if an
attempted assignment thereof without the consent of the other party thereto
would constitute a breach thereof. In the event that the Seller shall be unable
to secure any such Consent, then the Seller shall use reasonable efforts to make
available to the Buyer the economic benefits of the relevant Assigned Contract.
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<PAGE>
8.11. The Seller's Agreement Regarding Confidentiality. (a) The
------------------------------------------------
Seller covenants that, after the Closing, it will not, without the prior written
consent of the Buyer, disclose to any person confidential information relating
to or concerning the Purchased Assets, the Business, or the Buyer, except to its
officers, directors, employees and representatives who need to know such
information for purposes of taxes, accounting, pending litigation and other
matters necessary in respect of the Seller's ownership, prior to the Closing
Date, of the Purchased Assets or the Business, unless, in the unqualified
opinion of counsel to the Seller, disclosure is required to be made under the
Securities Act of 1933, the Securities Exchange Act of 1934, as amended (the
"1934 Act"), or other applicable law or the regulations of the New York Stock
Exchange. In the event that the Seller is requested or required by documents
subpoena, civil investigative demand, interrogatories, requests for information,
or other similar process to disclose any information supplied to the Seller in
the course of its ownership of the Purchased Assets, the Seller shall provide
the Buyer with prompt notice of such request or demands or other similar process
so that the Buyer may seek an appropriate protective order or, if such request,
demand or other similar process is not mandatory, waive the Seller's compliance
with the provisions of this Section 8.12(a) as appropriate.
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<PAGE>
(b) The term confidential information as used in this Section 8.11
does not include information which (I) becomes generally available to the public
other than as a result of disclosure by the Seller, (ii) was available on a non-
confidential basis prior to its disclosure by the Seller, or (iii) becomes
available to the Seller on a non-confidential basis from a source other than the
Buyer, provided that such source is not bound by a confidentiality agreement
with the Buyer or its representatives.
(c) For purposes of this Section 8.11, the Seller shall include
the Seller, its Affiliates, and any of their respective directors, officers,
employees and representatives.
(d) No failure or delay by the Buyer in exercising any right,
power or privilege under this Section 8.11 shall operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
8.12. The Buyer's Agreement Regarding Confidentiality. (a) The
-----------------------------------------------
Buyer covenants that, after the Closing, it will not, without the prior written
consent of the Seller, disclose to any person confidential information relating
to the Seller and its Affiliates which was acquired by the Buyer
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<PAGE>
in connection with the transaction contemplated herein, except to its officers,
directors, employees and representatives who need to know such information for
purposes of taxes, accounting, pending litigation and other matters, unless, in
the unqualified opinion of counsel to the Buyer, disclosure is required to be
made under the Securities Act of 1933, the 1934 Act, or other applicable law or
the regulations of a national securities exchange or NASDAQ, including without
limitation any disclosure required to be made in connection with the $7.5
million private placement of Common Stock to be underwritten by Spencer Trask
Securities Incorporated (the "Financing"). The Seller acknowledges having
received a copy of selected pages from the private placement memorandum draft
(the "PPM") prepared by the Buyer in connection with the Financing, attached
hereto as Annex D, and approves the disclosure therein of any Seller-related
information for purposes of the Financing. In the event that the Buyer is
requested or required by documents subpoena, civil investigative demand,
interrogatories, requests for information, or other similar process to disclose
any of such information supplied to the Buyer, the Buyer shall provide the
Seller with prompt notice of such request or demands or other similar process so
that the Seller may seek an appropriate protective order or, if such request,
demand or other similar process is not
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<PAGE>
mandatory, waive the Buyer's compliance with the provisions of this Section
8.12, as appropriate.
(b) The term confidential information as used in this Section 8.12
does not include information which (I) becomes generally available to the public
other than as a result of disclosure by the Buyer, (ii) was available on a non-
confidential basis prior to its disclosure by the Buyer, or (iii) becomes
available to the Buyer on a non-confidential basis from a source other than the
Seller, provided that such source is not bound by a confidentiality agreement
with the Seller or its representatives.
(c) For purposes of this Section 8.12 the Buyer shall include the
Buyer, its Affiliates, and any of their respective directors, officers,
employees and representatives.
(d) No failure or delay by the Seller in exercising any right,
power or privilege under this Section 8.12 shall operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
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<PAGE>
8.13. Public Announcements. The Buyer and the Seller agree not to,
--------------------
without the other's prior written consent (which consent shall not be
unreasonably withheld or delayed), issue any press releases or otherwise make
any public statements with respect to the transactions contemplated herein.
Each party agrees to furnish to the other at least three (3) business days in
advance of any public announcement drafts of any such disclosures which are in
written form and written statements of the substance of any disclosures which
are verbally communicated. Failure by the recipient party to provide the
furnishing party with written objections within three (3) business days after
receipt of any such draft shall constitute consent thereto. Notwithstanding
anything to the contrary in this Section 8.13, (I) the Buyer may distribute the
PPM in connection with the Financing without obtaining the Seller's prior
written approval and (ii) either party may issue any press release or make any
public statement without the approval of the other as may be required by law.
8.14. Use of the Seller's Facilities. From the date of this
------------------------------
Agreement through December 31, 1996, the Seller shall permit the Employees
(other than W. Vickery Stoughton) who become employees of the Buyer to maintain
their offices at the Seller's facility located in Van Nuys, California, and
shall permit W. Vickery Stoughton to maintain an office at the Seller's
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<PAGE>
facility located in King of Prussia, Pennsylvania, in each case at no charge to
the Buyer. The Buyer agrees to provide suitable offices for the Employees from
and after January 1, 1997, and agrees to use its best efforts to cause the
Employees to vacate the Seller's facilities not later than December 31, 1996
(except in the case of W. Vickery Stoughton, who may remain at the Seller's King
of Prussia facility until April 1, 1997).
8.15. Credit Facility. SmithKline Beecham Corporation and the
---------------
Buyer have executed and delivered a loan and security agreement in the form of
Annex A hereto (the "Loan Agreement") and the Buyer has executed and delivered a
promissory note in the form of Annex B hereto (the "Note"). At the Closing, and
notwithstanding the terms and conditions of the Loan Agreement setting forth
conditions to drawdowns of funds thereunder, the Seller shall cause SmithKline
Beecham Corporation to disburse to the Buyer any amounts undisbursed as of the
Closing Date under the Loan Agreement. The parties hereby acknowledge and agree
that the Loan Agreement shall be deemed amended in accordance with this Section
8.16, as of the date hereof.
8.16. Funding of Operating Expenses. At the Closing, the Seller
-----------------------------
shall disburse to the Buyer any amounts undisbursed as of the Closing Date of
the aggregate amount of One Million Eight Hundred Thousand Dollars (US
$1,800,000) of
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<PAGE>
Operating Expenses of SBD that the Seller agreed to fund during the months of
July through October, 1996. For purposes of this Agreement, "Operating
Expenses" shall mean expenses and costs incurred in the ordinary course in
conducting the Business, consistent with past practice.
8.17. Payments to Immunomatrix. In the event that the Buyer shall
------------------------
enter into an agreement with Immunomatrix, Inc., after the Closing Date, for the
commercialization of certain point-of-care diagnostic testing products, then the
Buyer shall notify the Seller thereof and provide the Seller with a summary of
the financial terms thereof, within five (5) business days after execution
thereof.
8.18. Stockholders Agreement. The parties agree to enter into a
----------------------
Stockholders Agreement substantially in the form of Annex A hereto prior to the
initial closing of the Financing (or such later date as the parties may mutually
agree), and to use their best efforts to cause the other prospective parties
thereto to do so.
8.19. Further Assurances. The Seller agrees to do, execute and
------------------
deliver, or cause to be done, executed and delivered, all such further acts and
instruments as the Buyer may reasonably request in order more fully to
effectuate the sale and assignment provided for in this Agreement. The Buyer
agrees to do, execute and deliver, or cause to be done, executed and delivered,
all
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<PAGE>
such further acts and instruments as the Seller may reasonably request in order
more fully to effectuate the purchase and assumption provided for in this
Agreement.
8.20. Notice of Financing. The Buyer agrees to give the Seller
-------------------
notice of the closing of the Financing in an aggregate amount of not less than
Four Million Dollars (U.S. $4,000,000), within five business days thereafter.
8.21. Use of Name. The Buyer agrees not to use or cause other to
-----------
use, or to make reference to for any purpose after the Closing in any publicly
disseminated document, the names "SmithKline Beecham," "SmithKline Beecham
Clinical Laboratories," "SmithKline Beecham Diagnostic Systems" or any variant
thereof. Exept as expressly set forth elsewhere in this Agreement, the Seller
does not grant to the Buyer any trademark license of any kind whatsoever.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
-------------------------
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<PAGE>
9.1. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made in Articles VI and VII hereof shall survive the Closing and
continue for two (2) years from the Closing Date; provided, however, that those
-------- -------
representations and warranties made by SBD in Section 6.1(e) hereof and those
representations and warranties made by SBCL in Section 6.2(c) hereof shall
survive the Closing and continue for a period of twenty (20) years from the
Closing Date. Any right of indemnification pursuant to this Section 9.1 with
respect to a claimed breach of a representation or warranty shall expire at the
date of termination of the representation or warranty claimed to be breached
(the "Termination Date"), unless on or prior to the Termination Date a Claim (as
defined herein) has been made to the party from whom indemnification is sought.
Provided that a Claim is timely made, it may continue to be asserted beyond the
Termination Date of the representation and warranty to which such Claim relates.
As used in this Agreement, a Claim means a written notice asserting a breach of
a representation, warranty, covenant, agreement or obligation specified in this
Agreement, which shall reasonably set forth, in light of the information then
known to the party giving such notice, a description of and estimate (if then
reasonable to make) of the amount of damages involved in such breach.
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<PAGE>
9.2. Indemnification. (a) After the Closing Date, SBD hereby agrees
---------------
to defend and, promptly upon the determination of the Damages (as defined below)
arising from or relating to any Claim, to indemnify and hold harmless the Buyer,
its Affiliates, and their respective directors, officers, shareholders and
employees (collectively, the "Buyer Group"), as the case may be, from and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, without limitation,
interest, penalties and attorneys' fees, disbursements and expenses
(collectively, the "Damages") asserted against, resulting to, or imposed upon or
incurred by any member of the Buyer Group, directly or indirectly, (I) by reason
of, or resulting from, or which constitutes, a breach of any representation,
warranty, covenant, agreement or other obligation of the Seller or SBD contained
in or made pursuant to this Agreement or (ii) by reason of, or resulting from,
any occurrence relating to the Excluded Assets.
(b) After the Closing Date, SBCL hereby agrees to defend and,
promptly upon the determination of the Damages arising from or relating to any
Claim, to indemnify and hold harmless the Buyer Group from and against all
Damages asserted against, resulting to, or imposed upon or incurred by any
member of the Buyer Group, directly or indirectly, by reason
-45-
<PAGE>
of, or resulting from, or which constitutes, a breach of any representation or
warranty of SBCL contained in or made pursuant to this Agreement.
(c) After the Closing Date, the Buyer hereby agrees to defend
and, promptly upon the determination of the Damages arising from or relating to
any Claim, to indemnify and hold harmless the Seller, its Affiliates, and each
of their respective directors, officers, shareholders, and employees
(collectively, the "Seller Group"), as the case may be, from and against all
Damages asserted against, resulting to, or imposed upon or incurred by any
member of the Seller Group, directly or indirectly, (I) by reason of, or
resulting from, or which constitutes a breach of any representation, warranty,
covenant, agreement or other obligation of the Buyer contained in or made
pursuant to this Agreement or (ii) by reason of, or resulting from the operation
of the Business or the Purchased Assets after the Closing Date.
(d) Nothing in this Article IX shall be construed to affect
the rights to reimbursement or indemnification under other provisions of this
Agreement, notwithstanding that the matter for which reimbursement or indemnity
is sought also constitutes a matter for which an indemnity could be sought under
this Article IX; provided,
--------
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<PAGE>
however, that there shall not be any duplication or reimbursement or
- -------
indemnification with respect to any such matter.
9.3. Third-Party Claims. The obligations and liabilities of any of
------------------
the parties to this Agreement under Section 9.2 hereof with respect to all items
indemnified against in Section 9.2 hereof and which are initiated by third
parties (the "Third-Party Claims") shall be subject to the following terms and
conditions:
(a) Upon receipt of written notice of any Third-Party Claim
asserted against, resulting to, imposed upon or incurred by any member of the
Buyer Group or the Seller Group, as the case may be (the "Indemnified Party"),
the party receiving such written notice (the "Indemnifying Party") will
undertake the defense thereof by counsel of its own choosing, which counsel
shall be reasonably satisfactory to the Indemnified Party, provided that if in
--------
the Indemnified Party's reasonable judgment a conflict of interest may exist
between such Indemnified Party and the Indemnifying Party with respect to such
Third-Party Claim, such Indemnified Party shall be entitled to select counsel of
its own choosing, in which event the Indemnified Party shall be obligated to pay
the fees and expenses of such counsel.
(b) If within a reasonable time after written notice of any
Third-Party Claim, the Indemnifying Party fails to defend the Indemnified Party
against whom such Third-
-47-
<PAGE>
Party Claim has been asserted, the Indemnified Party shall have the right to
undertake the defense, compromise or settlement of such Third-Party Claim on
behalf of and for the account and at the risk of the Indemnifying Party.
(c) Anything in this Section 9.3 to the contrary
notwithstanding, (I) if there is a reasonable probability in the Indemnified
Party's judgment that a claim may materially and adversely affect the
Indemnified Party or any of its Affiliates, directors, officers, shareholders or
employees against whom a Third-Party Claim is asserted other than as a result of
money damages or other money payments, the person against whom such Third-Party
Claim is asserted shall have the right to defend, co-defend, compromise or
settle such Third-Party Claim and (ii) the prior written consent of such person
against whom such Third-Party Claim is asserted, shall be required in connection
with the settlement or compromise of any claim or the entry of any judgment
relating to any such Third-Party Claim, only if such settlement, compromise or
judgment does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to such person against whom such Third-Party Claim is
asserted, of a release from all liabilities in respect of such Third-Party
Claim.
(d) The Indemnifying Party shall provide the Indemnified Party
or any of its Affiliates, directors, officers,
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<PAGE>
shareholders or employees against whom a Third-Party Claim is asserted with
access to all records and documents of the Indemnified Party relating to any
Third-Party Claim. The Indemnified Party will provide the Indemnifying Party
with access to all records and documents of the Indemnified party relating to
any Third-Party Claim.
ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
10.1. Expenses. Except as otherwise provided in this Agreement,
--------
whether or not the transactions contemplated hereby are consummated, all
expenses in connection with such transactions will be paid by the party
incurring said expenses.
10.2. Payment of Taxes Upon Transfer of Purchased Assets. The Buyer
--------------------------------------------------
agrees to bear all sales, use, transfer, recording and other similar taxes and
fees (but excluding any income, capital gains or similar taxes imposed on the
income or gain of the Seller, which will be borne solely by the Seller) arising
out of or in connection with the transactions contemplated by this Agreement,
without regard to whether such taxes and fees would otherwise be imposed on the
Seller. Each party shall use its best efforts to avail itself of any available
exemptions from any such taxes or fees, and shall cooperate with the other in
providing any information and documentation that may be necessary to obtain such
exemptions.
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<PAGE>
10.3. Execution in 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 document.
10.4. Notices. All notices, requests, demands and other
-------
communications which are required or may be given pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered by hand,
mailed by registered mail, postage prepaid, return receipt requested, or
transmitted by facsimile, as follows:
If to the Buyer:
Exigent Diagnostics, Incorporated
Seven Harford Lane
Radnor, Pennsylvania 19087
Attention: W. Vickery Stoughton
With a copy to:
Barry Abelson, Esquire
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Philadelphia, Pennsylvania 19103-2799
If to the Seller:
SmithKline Beecham Corporation
One Franklin Plaza (Mail Code FP 2225)
P. O. Box 7929
Philadelphia, Pennsylvania 19101
Attention: Chief Operating Officer
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<PAGE>
With a copy to:
SmithKline Beecham Corporation
One Franklin Plaza (Mail Code FP 2225)
P.O. Box 7929
Philadelphia, Pennsylvania 19101
Attention: General Counsel,
Corporate Law-U.S.
or to such other address as any party shall have designated by notice in writing
to the other parties.
10.5. Waivers. No waiver of any provision of this Agreement shall be
-------
effective as against the waiving party unless such waiver is in writing signed
by the waiving party. Waiver by a party as provided in this Section shall not be
construed as, or constitute either a continuing waiver or a waiver of any other
matter.
10.6. Amendment. This Agreement may only be modified, supplemented
---------
or amended by a written instrument executed by all of the parties to it.
10.7. Entire Agreement. This Agreement (together with the Schedules
----------------
and Annexes hereto and the other agreements expressly identified in this
Agreement) constitutes the entire agreement of the parties with respect to its
subject matter, and supersedes all prior agreements and understandings of the
parties, oral and written, with respect to its subject matter.
10.8. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the
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<PAGE>
Commonwealth of Pennsylvania without giving effect to any of the choice of law
rules thereof.
10.9. Relationship of the Parties. The relationship between the
---------------------------
Seller and the Buyer established by this Agreement is solely that of vendor and
vendee and nothing contained herein shall be deemed to create a joint venture
among the Buyer and the Seller.
10.10. Headings. The headings contained in this Agreement are for
--------
the sole purpose of convenience of reference, and shall not in any way limit or
affect the meaning or interpretation of any of the terms or provisions of this
Agreement.
10.11. Assignments. This Agreement may not be assigned or delegated
-----------
by either party without the prior written consent of the other party.
10.12. Binding Effect; Benefits. This Agreement shall inure to the
------------------------
benefit of, and be binding upon, the parties to it and their respective
successors, permitted assigns and other transferees. Nothing contained in this
Agreement, express or implied, is intended to confer upon any person other than
the parties to it and their respective successors, permitted assigns and other
transferees, any rights or remedies under or by reason of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by duly
authorized officers of each of the parties and the Secretary of each such party
has caused its corporate seal to be affixed, all as of the date first above
written.
SMITHKLINE BEECHAM CLINICAL EXIGENT DIAGNOSTICS, INC.
LABORATORIES, INC.
By: /s/ Edward J. Buthusiem By: /s/ W. Vickery Stoughton
--------------------------- ----------------------------
Edward J. Buthusiem W. Vickery Stoughton
Attorney-in-Fact Chairman and Chief
Executive Officer
[EXECUTIONS CONTINUED]
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<PAGE>
SMITHKLINE BEECHAM DIAGNOSTIC
SYSTEMS CO.
By: /s/ Edward J. Buthusiem
--------------------------
Edward J. Buthusiem
Attorney-in-Fact
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<PAGE>
EXHIBIT 10.25
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is entered into as of the
1st day of October 1996 by and between EXIGENT DIAGNOSTICS, INC., a Delaware
corporation ("Borrower") and SMITHKLINE BEECHAM CORPORATION, a Pennsylvania
corporation ("Lender").
WHEREAS, Lender and Borrower have entered into or are about to enter into
an agreement (the "Purchase Agreement") for the purchase by Borrower of all of
the assets and certain of the liabilities of the Point Of Care Business
currently operated by SMITHKLINE BEECHAM DIAGNOSTIC SYSTEMS, INC. (the "POC
Business"), all as set forth in the letter of intent and terms and conditions
attached hereto as Exhibit A executed by Lender and Borrower on the date hereof
(the "Terms and Conditions").
WHEREAS, pursuant to the Terms and Conditions, Lender has agreed to lend to
Borrower (the "Loan"), for use in the development of the POC Business in
anticipation of Borrower's purchase of the POC Business, up to One Million
Dollars ($1,000,000).
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Loan.
----
(a) Lender agrees to lend up to $1,000,000 to Borrower for (i) the
purchase of capital items, (ii) escrow funds and option payments in connection
with Borrower's office lease, and (iii) operating costs to the extent
hereinafter set forth. In all cases, such amounts shall be used in the
development of the POC Business as more particularly set forth herein and in
the Terms and Conditions. Borrower shall be entitled to borrow such amounts
(subject to Section 1(b)) at such times after the date hereof and until December
31, 1996 as Borrower may request in writing to Lender. Such requests shall be
forwarded to the attention of William J. Shulby, SmithKline Beecham, Corporate
Treasury Department, FP 2305, One Franklin Plaza, Philadelphia, PA 19101, with
a copy to: James Agnello, Controller, SmithKline Beecham Clinical Laboratories,
1201 South Collegeville Road, Collegeville, PA 19426. Such request shall state
the amount of the requested draw and the use of the proceeds so drawn, with
disbursement to be made by Lender substantially contemporaneously with
Borrower's payment to the applicable third party of the proceeds to be
disbursed. Borrower shall execute and deliver such documentation as Lender shall
reasonably request to evidence Lender's security interest in any such purchased
item.
(b) The amount of funding which Borrower may request pursuant to
Section 1(a) shall be reduced by any amount which Borrower directs Lender to
loan to the POC Business; provided that such amount shall not exceed that amount
which is both (i) necessary to fund operating expenses of the POC Business
<PAGE>
in excess of $450,000 per month (without proration in the case of any partial
month) and (ii), when added to all other amounts used to fund operating expenses
of the POC Business pursuant to this Section 1(b), not in excess of $200,000.
(c) Borrower shall execute and deliver to Lender a Promissory Note in
the form attached hereto as Exhibit B (the "Note"), evidencing Borrower's
obligation to repay borrowed funds to Lender. Each draw shall be recorded on the
schedule of notes and payments to the Note.
(d) If Borrower has not obtained a written, unconditional commitment
for the funding referred to in the last paragraph of the Terms and Conditions
(the "Funding") by October 31, 1996, Lender shall cease to be obligated by this
Agreement to loan any additional amounts to Borrower or to the POC Business or
to disburse any undisbursed funds to Borrowers for which a written request has
been submitted to Lender pursuant to Section 1(a) which is pending at October
31, 1996. If Borrower has not closed by November 30, 1996 pursuant to such a
commitment for Funding, Lender shall similarly cease to be obligated to loan or
disburse funds under this Agreement.
(e) If Borrower has closed such Funding on or prior to November 30,
1996, then Borrower may continue to draw down against the Credit Facility until
December 31, 1996.
2. Payment of Principal. The principal sum shall be due and payable in
--------------------
lawful money of the United States at the principle address of Lender or such
other place as Lender may designate, to the extent that the same shall not have
been sooner paid, at the demand of Lender made not earlier than December 31,
1996, as may be more particularly set forth in the Purchase Agreement, or (i) if
a written, unconditional commitment for the Funding has not been received on or
before October 31, 1996, then not earlier than October 31, 1996, or (ii) if a
written, unconditional commitment for the Funding has been received on or before
October 31, 1996, but if the closing of the Funding has not occurred on or
before November 30, 1996, then not earlier than November 30, 1996.
3. Payment of Interest. Interest on the principal outstanding under the
-------------------
Loan shall be payable monthly in arrears and shall continue until the entire
principal amount of the Loan is paid in full. With Borrower's prior approval,
Borrower and Lender may accrue such interest until the Closing Date.
4. Interest Rate. The outstanding principal balance of the Loan shall
-------------
bear simple interest at a rate per annum equal to eight percent (8%) per annum.
5. Nonrecourse Security. Borrower hereby grants to Lender a security
--------------------
interest in all of the capital assets of Borrower purchased with funds borrowed
hereunder. Such security
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<PAGE>
shall be the sole recourse to Lender in the event of default in the repayment of
amounts due hereunder and shall constitute the sole collateral securing
Borrower's obligations hereunder. The Loan and the Note shall otherwise be
nonrecourse to Borrower's other assets, or the assets of any affiliate of
Borrower, including without limitation Borrower's shareholders. Borrower shall
execute such documents, including without limitation UCC-1 statements, as Lender
may reasonably request to evidence or perfect such security interest.
6. Conversion. At any time and from time to time prior to repayment
----------
of all amounts due under the Note, Lender may convert, and, at such times and
under such conditions as specified in the Note, Lender shall convert, any or all
of the principal amount then due under the Note into fully paid and
nonassessable shares of Common Stock of Borrower at the conversion price and on
the terms and conditions set forth in the Note.
7. Use of Proceeds. Funds advanced under this Loan shall be used for
---------------
the purchase of capital items and, to the extent provided in Section 1 (b), for
operating expenses.
8. Remedies not Exclusive. The remedies of Lender provided herein or
----------------------
otherwise available to Lender at law or in equity shall be cumulative and
concurrent, and may be pursued singly, successively and together at the sole
discretion of Lender, and may be exercised as often as occasion therefor shall
occur; and the failure to exercise any such right or remedy shall in no event be
construed as a waiver or release of the same.
9. Continuing Enforcement of Agreement. If, after receipt of any
-----------------------------------
payment of any payment of all or any part of the obligations hereunder, Lender
is compelled or agrees, for settlement purposes, to surrender such payment to
any person or entity for any reason (including, without limitation, a
determination that such payment is void or voidable as a preference or
fraudulent conveyance, an impermissible setoff, or a diversion of trust funds),
then this Agreement shall continue in full force and effect, and Borrower shall
be liable for, and shall indemnify, defend and hold harmless Lender with
respect to the full amount so surrendered. The provisions of this Section shall
survive the termination of this Agreement and shall remain effective
notwithstanding the payment of such liabilities, the cancellation of the Note or
any other documents relating hereto or thereto, the release of any security
interest, lien or encumbrance securing the such liabilities or any other action
which Lender may have taken in reliance upon its receipt of such payment. Any
cancellation, release or other such action by Lender shall be deemed to have
been conditioned upon any payment of such liabilities having become final and
irrevocable.
10. Governing Law. This instrument shall be construed according to
-------------
and governed by the laws of the Commonwealth of Pennsylvania.
-3-
<PAGE>
11. Limitations of Applicable Law. Notwithstanding any provision
-----------------------------
contained herein, Borrower's liability for the payment of interest shall not
exceed the limits now imposed by any applicable usury law. If any provision of
this Loan requires interest payments in excess of the highest rate permitted by
law, the provision in question shall be deemed to required only the highest such
payment permitted by law. Any amounts theretofore received by Lender hereunder
in excess of the maximum amount of interest so permitted to be collected by
Lender shall be applied by Lender in reduction of the outstanding balance of
principal or, if this Loan shall theretofore been paid in full, the amount of
such excess shall be promptly returned by Lender to the Borrower.
12. Binding Effects; No Modification. This Agreement shall be
--------------------------------
binding upon and accrue to the benefit of the successors and assigns of each of
the parties hereto. No party may assign its rights or obligations hereunder
without the prior written consent of the other parties hereto; provided that any
party may assign its rights and obligations to any wholly owned subsidiary
which is a successor to substantially all of the assets of that party. This
agreement may not be modified or amended without the prior written consent of
all parties hereto.
13. No Implied Waiver. Lender shall not be deemed to have modified or
-----------------
waived any of its rights or remedies hereunder unless such modification or
waiver is in writing and signed by Lender, and then only to the extent
specifically set forth therein. A waiver in one event shall not be construed as
continuing or as a waiver of or bar to such right or remedy on a subsequent
event.
14. Partial Invalidity. The invalidity or unenforceability of any one
------------------
or more provisions of this Agreement shall not render any other provision
invalid or unenforceable. In lieu of any invalid or unenforceable provision,
there shall be added automatically a valid and enforceable provision as similar
in terms to such invalid or unenforceable provision as may be possible.
15. Notices. All notices and communications under this Agreement
-------
shall be in writing and shall be given by either (a) hand delivery, (b) first
class mail (postage prepaid), or (c) reliable overnight commercial courier
(charges prepaid) to the addresses listed in this Agreement. Notice shall be
deemed to have been given and received: (i) if by hand delivery, upon delivery;
(ii) if by mail, three (3) calendar days after the date first deposited in the
United States mail; and (iii) if by overnight courier, on the date scheduled for
delivery. A party may change its address by giving written notice to the other
party as specified herein.
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<PAGE>
16. Counterparts. This Agreement may be executed in counterparts, each
------------
counterpart to be considered an original hereof and all counterparts to
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
under seal as of the day and year first above mentioned.
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. Vickery Stoughton
----------------------------------
W. Vickery Stoughton
Chairman and Chief
Executive Officer
SMITHKLINE BEECHAM CORPORATION
By: /s/ Hugh R. Collum
----------------------------------
Name: Hugh R. Collum
Title: Chief Financial Officer
-5-
<PAGE>
EXHIBIT 10.26
PLACEMENT AGENCY AGREEMENT
--------------------------
December 10, 1996
Spencer Trask Securities Incorporated
535 Madison Avenue
18th Floor
New York, New York 10022
Ladies and Gentlemen:
Exigent Diagnostics, Inc., a Delaware corporation (the "Company"), hereby
confirms its agreement with Spencer Trask Securities Incorporated, a Delaware
corporation (the "Placement Agent"), as follows:
1. Offering. (a) The Company will offer (the "Offering") for sale through the
--------
Placement Agent and its selected dealers, as exclusive agent for the Company, up
to 75 units (the "Units"), plus an additional 11.25 Units to cover
oversubscriptions, if any. Each Unit will consist of 100,000 shares (the
"Shares") of the Company's common stock, $.01 par value per share (the "Common
Stock").
(b) Placement of the Units will be made on a "best efforts-all or none" basis
with respect to the first 40 Units (the "Minimum Amount") and on a "best
efforts" basis as to the remaining Units. The minimum subscription for Units
shall be one Unit, however, the Placement Agent may, in its discretion, offer
fractional Units. The Units will be offered commencing on the date of the
Memorandum (as defined below) for a period of 90 days, unless extended by the
Placement Agent and the Company for an additional 90 days or terminated earlier
as provided herein (the "Offering Period"). The date on which the Offering shall
terminate shall be referred to as the "Termination Date."
(c) Subscriptions for the Units will be accepted by the Company at a price of
$100,000 per Unit (the "Offering Price"); provided, however, that the Company
shall not accept subscriptions for, or sell Units to, any persons or entities
who do not qualify as "accredited investors," as such term is defined in Rule
501 of Regulation D promulgated under the Securities Act of 1933 (the "Act").
(d) The offering of the Units will be made by the Placement Agent on behalf of
the Company solely pursuant to the Memorandum, which at all times will be in
form and substance acceptable to the Placement Agent and its counsel and contain
such legends and other information as the Placement Agent and its counsel may,
from time to time, deem necessary and desirable to be set forth therein.
"Memorandum" as used in this Agreement means the Company's Confidential Private
Placement Memorandum dated December 4, 1996, inclusive of all exhibits, and all
amendments, supplements and appendices thereto. Unless otherwise defined, each
term used in this Agreement will have the same meaning as set forth in the
Memorandum.
2. Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Placement Agent that:
<PAGE>
(a) The Memorandum has been diligently prepared by the Company, in conjunction
with its legal counsel and independent accountants, in conformity with all
applicable law, including the Act and the requirements of all other applicable
rules and regulations of the Securities and Exchange Commission (the "SEC")
relating to offerings of the type contemplated by the Offering (the
"Regulations"), and the applicable securities laws and the rules and regulations
of those jurisdictions wherein the Units are to be offered and sold. The Units
will be offered and sold pursuant to the registration exemption provided by
Regulation D as promulgated under Section 4(2) of the Act or otherwise under
Section 4(2) of the Act as a transaction not involving a public offering and the
requirements of any other applicable state securities laws and the respective
rules and regulations thereunder in those jurisdictions in which the Placement
Agent notifies the Company that the Units are being offered for sale. The
Company has not taken nor will it take any action which conflicts with the
conditions and requirements of, or which would make unavailable with respect to
the Offering, the exemption(s) from registration available pursuant to
Regulation D or Section 4(2) of the Act and knows of no reason why any such
exemption would be otherwise unavailable to it. None of the Company, its
affiliates or, to its knowledge, its predecessors has been subject to any order,
judgement or decree of any court of competent jurisdiction temporarily,
preliminarily or permanently enjoining such person for failing to comply with
Section 503 of Regulation D.
(b) The Memorandum does not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the statements, documents, certificates or other
items prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
There is no fact which the Company has not disclosed to the Placement Agent and
its counsel and of which the Company is aware which materially and adversely
affects or could materially and adversely affect the business prospects,
financial condition, operations, property or affairs of the Company or any of
its subsidiaries.
(c) The Company and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Except as set forth in the Memorandum, the Company has no
subsidiaries and does not have an equity interest in any other firm,
partnership, association or other entity. The Company and each of its
subsidiaries is duly qualified to transact business as a foreign corporation and
is in good standing under the laws of each jurisdiction where the location of
its properties or the conduct of its business makes such qualification
necessary.
(d) The Company has all requisite power and authority (corporate and other) to
conduct its business as presently conducted and as proposed to be conducted (as
described in the Memorandum), to enter into and perform its obligations under
this Agreement and the other agreements contemplated hereby and by the
Memorandum (collectively, the "Transaction Documents") and to issue, sell and
deliver the Shares. Each of the Transaction Documents has been duly authorized.
This Agreement has been duly executed and delivered and constitutes, and each of
the other Transaction Documents, upon due execution and delivery, will
constitute, valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms.
2
<PAGE>
(e) None of the execution and delivery of, or performance by the Company under
any of the Transaction Documents or the consummation of the transactions herein
or therein contemplated conflicts with or violates, or will result in the
creation or imposition of, any lien, charge or other encumbrance upon any of the
assets of the Company under any agreement or other instrument to which the
Company is a party or by which the Company or its assets may be bound, or any
term of the charter or by-laws of the Company, or any license, permit,
judgment, decree, order, statue, rule or regulation applicable to the Company
or any of its assets.
(f) The Company has authorized and outstanding capital stock as set forth under
the heading "Capitalization" in the Memorandum. All outstanding shares of
capital stock of the Company are duly authorized, validly issued and
outstanding, fully paid and nonassessable. Except as set forth in the
Memorandum: (i) there are no outstanding options, stock subscription agreements,
warrants or other rights permitting or requiring the Company or others to
purchase or acquire any shares of capital stock or other equity securities of
the Company or to pay any dividend or make any other distribution in respect
thereof; (ii) there are no securities issued or outstanding which are
convertible into or exchangeable for any of the foregoing and there are no
contracts, commitments or understandings, whether or not in writing, to issue or
grant any such option, warrant, right or convertible or exchangeable security;
(iii) no shares of stock or other securities of the Company are reserved for
issuance for any purpose; (iv) there are no voting trusts or other contracts,
commitments, understandings, arrangements or restrictions of any kind with
respect to the ownership, voting or transfer of shares of stock or other
securities of the Company, including without limitation, any preemptive rights,
rights of first refusal, proxies or similar rights and (v) no person holds a
right to require the Company to register any securities of the Company under the
Act or to participate in any such registration. The issued and outstanding
shares of capital stock of the Company conform in all material respects to all
statements in relation thereto contained in the Memorandum and the Memorandum
describes all material terms and conditions thereof. All issuances by the
Company of its securities were exempt from registration under the Act and any
applicable state securities laws.
(g) The Shares and the Agent's Shares (as defined below) have been duly
authorized and, when issued and delivered against payment therefor as provided
in the Transaction Documents, will be validly issued, fully paid and
nonassessable, will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company other than as provided
in the Transaction Documents and no holder of any of the Shares or the Agent's
Securities (as defined below) will be subject to personal liability solely by
reason of being such a holder, and none of the Shares or the Agent's Securities
are subject to preemptive or similar rights of any stockholder or security
holder of the Company or, other than as described in the Memorandum, an
adjustment under the antidilution or exercise rights of any holders of any
outstanding shares of capital stock, options, warrants or other rights to
acquire any securities of the Company. A sufficient number of authorized but
unissued shares of Common Stock have been reserved for issuance upon the
exercise of the Agent's Warrants (as defined below).
(h) No consent, authorization or filing of or with any court or governmental
authority is required in connection with the issuance or the consummation of the
transactions contemplated herein or in the other Transaction Documents, except
for required filings with the SEC and applicable "Blue Sky" or state securities
commissions relating specifically to the Offering (all of which filings have
been made by, or on behalf of, the Company, other than those which are
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required to be made after the First Closing (as defined below), and which will
be duly made on a timely basis).
(i) The financial statements, together with the related notes, of the Company
included in the Memorandum present fairly in all material respects the financial
position of the Company as of the respective dates specified and the results of
its operations and changes in financial position for the respective periods
covered thereby. Such financial statements and related notes were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated. Except as set forth in such financial
statements or in the Memorandum, the Company has incurred no material
liabilities of any kind, whether accrued, absolute, contingent or otherwise or
entered into any material transactions. The other financial and statistical
information with respect to the Company and any pro forma information and
related notes included in the Memorandum or otherwise provided to the Placement
Agent present fairly the information shown therein on a basis consistent with
the audited and unaudited financial statements of the Company included in the
Memorandum.
(j) The conduct of business by the Company as presently and proposed to be
conducted (as described in the Memorandum) is not subject to continuing
oversight, supervision, regulation or examination by any governmental official
or body of the United States or any other jurisdiction wherein the Company
conducts or proposes to conduct such business, except as described in the
Memorandum and except such regulation as is applicable to commercial enterprises
generally. The Memorandum accurately describes, in all material respects, all
requisite licenses, permits and other governmental authorization to conduct its
business as presently, and as proposed to be, conducted (as described in the
Memorandum).
(k) No default by the Company or, to the best knowledge of the Company, any
other party exists in the due performance under any of the agreements referred
to in the Memorandum to which the Company is a party or to which any of its
assets is subject (collectively, the "Company Agreements") where such default
would have a material adverse effect upon the business, results of operations or
financial condition of the Company (a "Material Adverse Effect"). The Company
Agreements are the only material agreements to which the Company is bound or by
which its assets are subject, are accurately and fairly described in all
material respects in the Memorandum and are in full force and effect in
accordance with their respective terms.
(l) Except as set forth in the Memorandum, there are no actions, proceedings,
claims or investigations, before or by any court or governmental authority (or
any state of facts which management of the Company has concluded could give rise
thereto) pending or, to the best knowledge of the Company, threatened, against
the Company, or involving its assets or any of its officers or directors which,
if determined adversely to the Company or such officer or director, could result
in any Material Adverse Effect or adversely affect the transactions contemplated
by this Agreement or the other Transaction Documents or the enforceability
thereof.
(m) The Company is not in violation of: (i) its charter or by-laws; (ii) any
indenture, mortgage, deed of trust, note or other agreement or instrument to
which the Company is a party or by which it is or may be bound or to which any
of its assets may be subject; (iii) any statute, rule or regulation; or (iv) any
judgment, decree or order applicable to the Company, which violation or
violations individually, or in the aggregate, might result in any Material
Adverse Effect.
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(n) The Company does not own any real property in fee simple except as
disclosed in the Memorandum, and the Company has good and marketable title to
all property (real and personal, tangible and intangible) owned by it, free and
clear of all security interests, liens and encumbrances, except such as are
described in the Memorandum.
(o) Except as otherwise described in the Memorandum (collectively, the
"Intangibles"), the Company owns all right, title and interest in, or possesses
adequate and enforceable rights to use, all patents, patent applications,
trademarks, trade names, service marks, copyrights, rights, licenses,
franchises, trade secrets, confidential information, processes and formulations
described as owned by it in the Memorandum. Except as set forth in the
Memorandum, to the best knowledge of the Company it has not infringed upon the
rights of others with respect to the Intangibles and the Company has not
received notice that it has or may have infringed or is infringing upon the
rights of others with respect to the Intangibles, or any notice of conflict with
the asserted rights of others with respect to the Intangibles which could,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth in the Memorandum, to the best knowledge of the Company, no others have
infringed upon the Intangibles.
(p) Subsequent to the respective dates as of which information is given in the
Memorandum, the Company has operated its business diligently and only in the
ordinary course as theretofore conducted and, except as may otherwise be set
forth in the Memorandum, there has been no: (i) Material Adverse Effect; (ii)
transaction otherwise than in the ordinary course of business; (iii) issuance of
any securities (debt or equity) or any rights to acquire any such securities;
(iv) damage, loss or destruction, whether or not covered by insurance, with
respect to any asset or property of the Company; or (v) agreement to permit any
of the foregoing.
(q) The Company has filed, on a timely basis, each Federal, state, local and
foreign tax return which is required to be filed, or has requested an extension
therefor and has paid all taxes and all related assessments, penalties and
interest to the extent that the same have become due.
(r) The Company is not obligated to pay, and has not obligated the Placement
Agent to pay, a finder's or origination fee in connection with the Offering and
agrees to indemnify the Placement Agent from any such claim made by any other
person. The Company has not offered for sale or solicited offers to purchase the
Units except for negotiations with the Placement Agent. No other person has any
right, based upon acts of the Company, its officers, directors or
representatives, to participate in any offer, sale or distribution of the
Company's securities to which the Placement Agent's rights, described herein,
shall apply.
(s) The Company has and will maintain appropriate casualty and liability
insurance coverage, in scope and amounts reasonable and customary for similar
businesses.
3. Placement Agent Appointment and Compensation. (a) The Company hereby appoints
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the Placement Agent and its selected dealers as its exclusive agent in
connection with the Offering. The Company has not and will not make, or permit
to be made, any offers or sales of the Units other than through the Placement
Agent without its prior written consent. The Placement Agent has no obligation
to purchase any of the Units. The agency of the Placement Agent hereunder shall
continue until the later of the Termination Date or the Final Closing (as
defined below).
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<PAGE>
(b) The Company has caused to be delivered to the Placement Agent copies of the
Memorandum and has consented, and hereby consents, to the use of such copies for
the purposes permitted by the Act and applicable securities laws, and hereby
authorizes the Placement Agent and its agents, employees and selected dealers to
use the Memorandum in connection with the sale of the Units until the
Termination Date, and no other person or entity is or will be authorized to give
any information or make any representations other than those contained in the
Memorandum or to use any offering materials other than those contained in the
Memorandum in connection with the sale of the Units.
(c) The Company will cooperate with the Placement Agent by making available to
its representatives such information as may be requested in making a reasonable
investigation of the Company and its affairs and shall provide access to such
employees as shall be reasonably requested. Prior to the First Closing, the
Company shall provide, at its own expense, credit or similar reports on such key
management persons as the Placement Agent shall reasonably request.
(d) The Company shall pay to the Placement Agent at each closing a placement
fee equal to ten percent (10%) of the Offering Price of all the Units sold at
such Closing, which shall be distributed from escrow (the "Placement Agent's
Fee"), and all reasonable out-of-pocket expenses incurred by the Placement Agent
on the Company's behalf including mailing, telephone, travel costs and legal
fees ("Expenses"), to be paid from the gross proceeds of the Units sold at each
Closing up to a maximum of $75,000 for the Offering (the "Expense Allowance"), a
non-refundable $35,000 portion of which has been paid to the Placement Agent.
Payment of the proportional amount of the Placement Agent's Fee and payment of
Expenses will be made out of the proceeds of subscriptions for the Units sold at
each Closing.
(e) As additional compensation hereunder, at each Closing (as defined below),
the Company shall sell to the Placement Agent or its designees for an aggregate
purchase price of $1, warrants (the "Agent's Warrants") to purchase, at an
exercise price of $1.00 per share, a number of Shares equal to twenty percent
(20%) of the aggregate number of Shares contained in the Units sold in the
Offering (the "Agent's Shares"; and, collectively with the Agent's Warrants, the
"Agent's Securities"). The Agent's Warrants shall be exercisable until the later
of the date seven (7) years after the date of the Final Closing or the date
which is three (3) years after the closing date of the initial public offering
of the Company's securities within such seven year period, whichever is later
(the "Warrant Exercise Term"). If the Company at any time has any securities
registered under the Act or the Securities Exchange Act of 1934 (the "1934
Act"), the Company agrees to register the Agent's Securities promptly on two (2)
separate occasions, at the request of the holders of a majority of the Agent's
Securities made at any time during the Warrant Exercise Term. The Company shall
pay all expenses, other than underwriters' discounts and commissions, relating
to registering the Agent's Securities covered by the first request, and the
holder(s) of such Agent's Securities shall pay all expenses arising from the
second registration. Prior to the First Closing, the Company and Placement Agent
shall enter into a warrant agreement (the "Warrant Agreement") which shall
contain such terms and other customary provisions including piggyback
registration rights for a period of nine (9) years from the Final Closing, or
for the Warrant Exercise Term, whichever is longer, and anti-dilution
protections (including, but not limited to, stock splits, reclassifications,
mergers or acquisitions, or the sale of substantially all of the Company's
stock) applicable to the issuance of additional securities at a price below the
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<PAGE>
exercise or market price of the Agent's Warrants, other than the shares issued
to SmithKline Beecham Corporation.
(f) The Company shall also pay to the Placement Agent the Placement Agent's
Fee and Agent's Warrants with respect to, and based on, any investment by any
party ("Post Closing Investor") with which the Placement Agent has had
substantive discussions in connection with their investing in the Offering which
invests in the Company at any time on or before the first anniversary of the
later of the Termination Date or Final Closing.
(g) On or prior to the First Closing, the Company shall enter into an
Investment Banking Agreement (the "Investment Banking Agreement"), which will
provide that, in the event that at any time prior to the fifth anniversary of
the Final Closing the Company or any of its affiliates (other than SmithKline
(as defined in the Memorandum)) shall enter into any transaction (including,
without limitation, any sale or exchange of stock or assets, merger,
consolidation, acquisition, financing, joint venture or other arrangement) with
any party introduced to the Company by us, directly or indirectly, during such
period, we will be paid a finder's fee, payable at the closing thereof, equal to
a percentage of the consideration or value received by the Company and/or its
stockholders as follows: (i) 7% of the first $1 million, (ii) 6% of the next $1
million, (iii) 5% of the next $5 million, (iv) 4% of the next $1 million, (v) 3%
of the next $1 million and (vi) 2.5% of all amounts received in excess of 9
million.
(h) On or prior to the First Closing, the Company shall enter into a broker
agreement pursuant to which the Company shall agree that the Placement Agent, so
long as it provides pricing which the board of directors of the Company
reasonably believes is competitive with that available from independent third
parties, will act as the Company's exclusive broker representative for advising
the Company with respect to executive compensation benefits, insurance and
retirement planning and cash management needs.
4. Subscription and Closing Procedures. (a) Each prospective purchaser will be
-----------------------------------
required to complete and execute one original signature page of each of the
Subscription Agreement and Registration Rights Agreement and Shareholder's
Agreement in the forms annexed to the Memorandum ("Subscription Documents"),
which will be forwarded or delivered to the Placement Agent at the Placement
Agent's offices at the address set forth in Section 11 hereof, together with the
subscriber's check or good funds in the full amount of the Offering Price for
the number of Units desired to be purchased.
(b) All funds for subscriptions received from the offering of the Units will
be promptly forwarded by the Placement Agent or the Company, if received by it,
to and deposited into the escrow account (the "Escrow Account") established for
such purpose with United States Trust Company of New York (the "Escrow Agent").
All such funds for subscriptions will be held in the Escrow Account pursuant to
the terms of the Escrow Agreement among the Company, the Placement Agent and the
Escrow Agent. The Company will pay all fees related to the establishment and
maintenance of the Escrow Account. Any interest accruing on funds in the Escrow
Account shall be utilized first to reimburse the Company for such fees and the
balance shall be distributed one-half to the Company and one-half to the
Placement Agent. Subject to the receipt of such subscriptions for the Minimum
Amount, the Company will either accept or reject the Subscription Documents in a
timely fashion and at each Closing will countersign the Subscription Documents
and provide duplicate copies of such Agreements to the Placement Agent
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<PAGE>
for distribution to the subscribers. The Company will give notice to the
Placement Agent of its acceptance of each subscription. The Company will
promptly return to subscribers incomplete, improperly completed, improperly
executed and rejected subscriptions and give written notice thereof to the
Placement Agent upon such return.
(c) If subscriptions for at least the Minimum Amount have been accepted prior
to the Termination Date, the funds therefor have been collected by the Escrow
Agent and all of the conditions set forth elsewhere in this Agreement are
fulfilled, a closing shall be held promptly with respect to the Units sold
(the "First Closing"). Thereafter, the remaining Units will continue to be
offered and sold until the Termination Date. Additional closings ("Closings")
may from time to time be conducted at times mutually agreeable with respect to
additional Units sold with the final closing ("Final Closing") to occur
approximately 10 days from the earlier of the Termination Date or the sale of
all Units offered. Delivery of payment for the accepted subscriptions for Units
from the funds held in the Escrow Account will be made at each Closing at the
Placement Agent's offices against delivery of the Units by the Company at the
address set forth in Section 11 hereof (or at such other place as may be
mutually agreed upon between the Company and the Placement Agent). Executed
certificates for the Shares constituting the Units and the Agent's Warrants will
be in such authorized denominations and registered in such names as the
Placement Agent may reasonably request on or before the second (2nd) full
business day prior to the date of each Closing ("Closing Date"), and will be
made available to the Placement Agent for checking and packaging at the
Placement Agent's office at least one (1) full business day prior thereto.
(d) If Subscription Documents for the Minimum Amount have not been received and
accepted by the Company on or before the Termination Date for any reason, the
Offering will be terminated, no Units will be sold, and the Escrow Agent will,
at the request of the Placement Agent, cause all monies received from
subscribers for the Units to be promptly returned to such subscribers without
interest, penalty, expense or deduction.
5A. Further Covenants. The Company hereby covenants and agrees that:
-----------------
(a) Except with the prior written consent of the Placement Agent, the Company
shall not, at any time prior to the Final Closing, take any action which would
cause any of the representations and warranties made by it in this Agreement not
to be complete and correct on and as of each Closing Date with the same force
and effect as if such representations and warranties had been made on and as of
each such date, including, without limitation, incurring any material
indebtedness, disposing of any material assets or making any material
acquisition or change in its business or operations.
(b) If, at any time prior to the Final Closing, any event shall occur which
does or may materially affect the Company or as a result of which it might
become necessary to amend or supplement the Memorandum so that the
representations and warranties herein remain true, or in case it shall, in the
opinion of counsel to the Placement Agent, be necessary to amend or supplement
the Memorandum to comply with Regulation D or any other applicable securities
laws or regulations, the Company will promptly notify the Placement Agent and
shall, at its sole cost, prepare and furnish to the Placement Agent copies of
appropriate amendments and/or supplements in such quantities as the Placement
Agent may reasonably request. The Company will not at any time, whether before
or after the Final Closing, prepare or use any amendment or
8
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supplement to the Memorandum of which the Placement Agent will not previously
have been advised and furnished with a copy, or to which the Placement Agent or
its counsel will have objected in writing or orally (confirmed in writing within
24 hours), or which is not in compliance with the Act, the Regulations and other
applicable securities laws. As soon as the Company is advised thereof, the
Company will advise the Placement Agent and its counsel, and confirm the advice
in writing, of any order preventing or suspending the use of the Memorandum, or
the suspension of the qualification or registration of the Shares for offering
or the suspension of any exemption for such qualification or registration of the
Shares for offering in any jurisdiction, or of the institution or threatened
institution of any proceedings for any of such purposes, and the Company will
use commercially reasonably efforts (i) to prevent the issuance of any such
order and, (ii) if issued, to obtain as soon as reasonably possible the lifting
thereof.
(c) The Company shall comply with the Act and the Regulations so as to permit
the continuance of the sales of the Units, and will file with the SEC, and shall
promptly thereafter forward to the Placement Agent, any and all reports on Form
D as are required.
(d) The Company shall use its reasonable best efforts to qualify the Units for
sale under the securities laws of such jurisdictions as may be mutually agreed
to by the Company and the Placement Agent, and the Company will make such
applications and furnish information as may be required for such purposes,
provided that the Company will not be required to qualify as a foreign
corporation in any jurisdiction. The Company will, from time to time, prepare
and file such statements and reports as are or may be required to continue such
qualifications in effect for so long a period as the Placement Agent may
reasonably request.
(e) The Company shall place a legend on the certificates representing the
Shares issued to subscribers stating that the securities evidenced thereby have
not been registered under the Act or applicable state securities laws, setting
forth or referring to the applicable restrictions on transferability and sale of
such securities under the Act and applicable state laws.
(f) The Company shall apply the net proceeds from the sale of the Units to fund
its working capital requirements and for such other purposes as specifically
described under "Use of Proceeds" in the Memorandum. Except as specifically set
forth in the Memorandum, the net proceeds of the Offering shall not be used to
repay indebtedness to officers, directors or stockholders of the Company without
the prior written consent of the Placement Agent.
(g) During the Offering Period, the Company shall make available for review by
prospective purchasers of the Units during normal business hours at the
Company's offices, upon their request, copies of the Company Agreements to the
extent that such shall not violate any obligation on the part of the Company to
maintain the confidentiality thereof and shall afford each prospective purchaser
of Units the opportunity to ask questions of and receive answers from an
officer of the Company concerning the terms and conditions of the Offering and
the opportunity to obtain such other additional information necessary to verify
the accuracy of the Memorandum to the extent it possesses such information or
can acquire it without unreasonable expense.
(h) Except with the prior written consent of the Placement Agent, the Company
shall not, at any time prior to the Final Closing, engage in or commits to
engage in any transaction outside
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the scope of its business as described in the Memorandum, agree to issue or set
aside for issuance any securities (debt or equity) or any rights to acquire any
such securities except as contemplated by the Memorandum.
(i) For a period of five years from the Final Closing, the Company shall
deliver (i) to the Placement Agent and the Company's stockholders annual audited
financial statements setting forth fairly the financial position of the Company,
(ii) to the Placement Agent quarterly unaudited financial statements including
both a balance sheet and statement of income, (iii) to the Company's
stockholders a quarterly report, reviewed by the Placement Agent, of the
progress and status of the Company and an annual report setting forth fairly the
financial position of the Company, (iv) to the Placement Agent a copy of a list
of its stockholders as and when so requested and (v) to the Placement Agent such
additional information and documents concerning the business and financial
condition of the Company as the Placement Agent may from time to time reasonably
request, subject to such confidentiality agreements as the Company may
reasonably request.
(j) The Company shall pay all reasonable expenses incurred in connection with
the preparation and printing of all necessary offering documents and instruments
related to the Offering and the issuance of the Shares, the Agent's Shares and
the Agent's Warrants and will also pay the Company's own expenses for accounting
fees, legal fees and other costs involved with the Offering. The Company will
provide at its own expense such quantities of the Memorandum and other documents
and instruments relating to the Offering as the Placement Agent may reasonably
request. In addition, the Company will pay all reasonable filing fees, costs and
legal fees for Blue Sky services and related filings and expenses of counsel
with respect to Blue Sky qualifications. The Blue Sky filings shall be prepared
by the Placement Agent's counsel on behalf of the Company and all Blue Sky
filing fees shall be paid by the Company prior to any filing. At each Closing,
the Placement Agent may deduct from the proceeds of subscriptions for Units sold
at such Closing, all other fees and expenses of Blue Sky counsel outstanding as
of such date, and pay such amount directly to such counsel. Immediately
following the Final Closing, the Company will pay for an advertisement in The
---
Wall Street Journal announcing the Final Closing of the Offering in a format
- -------------------
determined by the Placement Agent at a cost not to exceed $8,000.
(k) Except as permitted by the Stockholder Agreement attached as Annex C to the
Memorandum, (i) until the Termination Date, neither the Company nor any person
or entity acting on its behalf will negotiate with any other placement agent or
underwriter with respect to a private or public offering of the Company's or any
subsidiary's debt or equity securities, (ii) until the Termination Date, neither
the Company nor anyone acting on its behalf will, without the prior written
consent of the Placement Agent, offer for sale to, or solicit offers to
subscribe for Units or other securities of the Company from, or otherwise
approach or negotiate in respect thereof with, any other person and (iii) prior
to the second anniversary of the Final Closing, the Company will not, without
the Placement Agent's prior written consent sell any securities, or any rights
to acquire any securities, of the Company or create any additional classes or
series of capital stock.
(l) The following officers of the Company will continue in their current
positions following the Offering, and prior to the First Closing, the Company
will enter into employment agreements with such persons: W. Vickery Stoughton,
Thomas H. Grove and Kenneth Asarch. Such
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agreements shall set forth terms of one (1) or two (2) years, reasonable
compensation and expense provisions, non-competition agreements and other
reasonable terms and conditions.
(m) The Company shall secure prior to the First Closing and thereafter maintain
"key man" life insurance in the amount of $3,000,000 on W. Vickery Stoughton the
Chairman and CEO of the Company and $2,000,000 on Thomas H. Grove.
(n) In accordance with Section 8 of the Stockholders Agreement attached as
Annex C to the Memorandum (the "Stockholders Agreement"), the Company shall
cause its Board of Directors to have at least three "independent" members who
are reasonably acceptable to the Placement Agent and who are unaffiliated with
the Placement Agent or the Company. In addition, the Placement Agent shall have
the right, for a period ending on the earlier of the effective date or five (5)
years from the Final Closing, to designate up to two (2) persons reasonably
acceptable to the Company to be, at the Placement Agent's sole discretion,
either nominees for director of the Company or advisors to the Board of
Directors of the Company. W. Vickery Stoughton shall be entitled to designate
such nominees for election to the board of directors as provided in Section 8 of
the Stockholders Agreement. All such nominees for directors shall be elected in
accordance with Section 8 of the Stockholders Agreement and the Company shall
use its best efforts (which shall include, without limitation, the solicitation
of proxies on behalf of such nominees) to cause the election of such nominees.
In the event such persons nominated by the Placement Agent are designated by the
Placement Agent to be advisors, such persons shall receive notice of and have
the right to attend all regular and special meetings of the Board of Directors
and shall be advised of all actions which the Board intends to adopt by written
consent, reasonably prior to the adoption thereof. Such advisors will receive
reimbursement of reasonable expenses and such compensation for attending
meetings equal to the compensation received by any outside director, but will
have no power to vote. The Company further agrees that it shall hold "in person"
directors' meetings no less frequently than quarterly. Thirty (30) days' advance
notice of regular meetings and such notice of special meetings as may be
required to be given to directors by statute or the Company's bylaws shall be
given to the Placement Agent. The Company agrees to indemnify and hold the
Placement Agent harmless against any and all claims, actions, awards and
judgments arising solely out of the attendance and participation of the
Placement Agent and its designated nominees or advisors at any such meeting
described herein. In the event the Company maintains a liability insurance
policy affording coverage for the acts of its officers and directors, it agrees,
if possible, to include the Placement Agent's designated advisors as insured
under such policy.
5B. Covenants of the Placement Agent. The Placement Agent hereby covenants and
--------------------------------
agrees that in connection with the making of offers to sell the Units:
(a) It will use only the Memorandum and such other written information as is
approved or supplied by the Company;
(b) It will not make any representation or warranty to any respective purchaser
of Units which is inconsistent with the Memorandum;
(c) It will not take any action which would constitute a general solicitation
or general advertising within the meaning of Rule 502 of Regulation D; and
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(d) It will make offer only to those potential purchasers which it reasonably
believes are "accredited investors" under Regulation D.
6. Conditions of Placement Agent's Obligations. The obligations of the
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Placement Agent hereunder are subject to the fulfillment, at or before each
Closing, of the following additional conditions:
(a) Each of the representations and warranties of the Company shall be true and
correct in all materials respects when made on the date hereof and as of each
Closing Date as though made on and as of each Closing Date.
(b) The Company shall have performed and complied with all agreements,
covenants and conditions required to be performed and complied with by it under
the Transaction Documents at or before each Closing.
(c) No order suspending the use of the Memorandum or enjoining the offering or
sale of the Units shall have been issued, and no proceedings for that purpose or
a similar purpose shall have been initiated or pending, or, to the best of the
Company's knowledge, are contemplated or threatened.
(d) As of the First Closing, the Company will have an authorized capitalization
as described in the Memorandum, of which not more than 7,500,000 shares of
Common Stock shall be issued and outstanding, not including any options,
warrants or similar rights outstanding or reserved for issuance as described in
the Memorandum.
(e) The Placement Agent shall have received a certificate of the Chief
Executive Officer of the Company, dated as of each Closing Date, certifying, in
such detail as Placement Agent may reasonably request, as to the fulfillment of
the conditions set forth in subparagraphs (a), (b), (c) and (d) above.
(f) The Company shall have delivered to the Placement (i) a currently dated
good standing certificate from the secretary of state of its jurisdiction of
incorporation and each jurisdiction in which the Company is qualified to do
business as a foreign corporation, and (ii) certified resolutions of the
Company's Board of Directors approving this Agreement and the other Transaction
Documents, and the transactions and agreements contemplated by this Agreement
and the other Transaction Documents.
(g) On or prior to the date hereof and at each Closing, (i) the independent
auditors for the company shall have provided a letter confirming such matters as
the Placement Agent may reasonably request and which are customary in
transactions of this nature.
(h) At each Closing, the Company shall have (i) paid to the Placement Agent,
the Placement Agent's Fee and its Expenses actually incurred as set forth in
Section 3(d) hereof and (iii) executed and delivered to the Placement Agent the
Agent's Warrants in an amount proportional to the Units sold.
(i) On or prior to the First Closing, each of Exigent Partners, L.P., W.
Vickery Stoughton and Thomas H. Grove (collectively, the "Significant
Stockholders") shall have agreed in writing
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not to sell, transfer or otherwise dispose of any of the Company's securities
beneficially owned by them or issuable to them pursuant to the exercise of
options, warrants or conversion, warrants or conversion of other securities
without the Placement Agent's written consent, which consent shall not be
unreasonably withheld, until the second anniversary of the Final Closing, except
that such persons may make transfers to a parent, spouse, sibling or descendent,
or to a trust for the benefit of any of the foregoing persons or otherwise up to
50,000 shares of Common Stock in the aggregate without the consent of the
Placement Agent; provided, however, that such transfers shall be subject to this
Section 6(i) and to Section 6(j) hereof and that the Placement Agent may require
that any such permitted transfer be made subject to a voting agreement pursuant
to which the transferring stockholder retains the right to vote all transferred
shares until the second anniversary of the Final Closing. In addition, if within
two years of the Final Closing, the Company registers any of its securities
under the Act which registration is effective, the Significant Stockholders and
any permitted transferees will extend the terms of the "lock-up" set forth in
this Section 6(i) for any additional period reasonably requested by the
underwriter, provided, however, that in the event that such registration is an
underwritten registration and the underwriter shall agree, Significant
Stockholders may sell shares in such offering in accordance with any piggy-back
registration rights granted to such persons and in effect on the date hereof as
described in the Memorandum.
(j) On or prior to the First Closing, the Company and its Significant
Stockholders shall have agreed in writing to give the Placement Agent, for a
period of five (5) years from the Final Closing, the irrevocable preferential
right of first offer described below to purchase for the Placement Agent's
account, or to act as underwriter or agent for any proposed public or private
offering of the Company's securities by the Company or any of its Significant
Stockholders, subject to, however, rights of certain existing stockholders to
purchase shares offered by the Company under the Stockholders Agreement. The
Company and its Significant Stockholders agree to offer the Placement Agent the
opportunity to purchase or sell such securities on terms no less favourable than
they can obtain elsewhere. If, within 30 business days of the receipt of a
notice of intention and statement of terms, the Placement Agent does not accept
in writing such offer to purchase such securities or to act as underwriter or
agent with respect to such offering upon the terms proposed, and subject to
Section 6(i) hereof, the Company and the applicable Significant Stockholders
shall be free to negotiate terms with third parties with respect to such
offering and to effect such offering on such proposed terms. Before the Company
or the Significant Stockholders shall accept any proposal having any significant
term less favorable to them, the Placement Agent's preferential right shall be
applied, and the procedure set forth above with respect to such modified
proposal adopted. The Placement Agent's failure to exercise these preferential
rights in any situation shall not affect the Placement Agent's preferential
rights to any subsequent offering during the term of such agreement.
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(k) There shall have been delivered to the Placement Agent a signed opinion of
counsel to the Company ("Company Counsel"), dated as of each Closing Date,
substantially in the form of Exhibit A hereto and otherwise in form and
substance reasonably satisfactory to counsel to the Placement Agent.
(l) All proceedings taken at or prior to each Closing in connection with the
authorization, issuance and sale of the Units and the Agent's Warrants will be
reasonably satisfactory in form and substance to the Placement Agent and its
counsel, and such counsel shall have been furnished with all such documents,
certificates and opinions as they may reasonably request upon reasonable prior
notice in connection with the transactions contemplated hereby.
7. Indemnification. (a) The Company will (i) indemnify and hold harmless the
---------------
Placement Agent, its selected dealers and their respective officers, directors,
employees and each person, if any, who controls the Placement Agent within the
meaning of the Act and such selected dealers (each an "Indemnitee") against,
and pay or reimburse each Indemnitee for, any and all losses, claims, damages,
liabilities or expenses whatsoever (or actions or proceedings or investigations
in respect thereof), joint or several (which will, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all reasonable attorneys' fees, including appeals), to which
any Indemnitee may become subject, under the Act or otherwise, in connection
with the offer and sale of the Units, whether such losses, claims, damages,
liabilities or expenses shall result from any claim of any Indemnitee or any
third party; and (ii) reimburse each Indemnitee for any legal or other expenses
reasonably incurred in connection with investigating or defending against any
such loss, claim, action, proceeding or investigation; provided, however, that
the Company will not be liable in any such case to the extent that any such
claim, damage or liability results from (A) an untrue statement or alleged
untrue statement of a material fact made in the Memorandum, or an omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in reliance upon and
in conformity with written information furnished to the Company by the Placement
Agent or any such controlling persons specifically for use in the preparation
thereof, or (B) any violations by the Placement Agent of the Act or state
securities laws which does not result from a violation thereof by the Company or
any of its affiliates. In addition to the foregoing agreement to indemnify and
reimburse, the Company will indemnify and hold harmless each Indemnitee against
any and all losses, claims, damages, liabilities or expenses whatsoever (or
actions or proceedings or investigations in respect thereto), joint or several
(which shall for all purposes of this Agreement, include, but not be limited to,
all costs of defense and investigation and all reasonable attorneys' fees,
including appeals) to which any indemnitee may become subject insofar as such
costs, expenses, losses, claims, damages or liabilities arise out of or are
based upon the claim of any person or entity that he or it is entitled to
broker's or finder's fees from any Indemnitee in connection with the Offering.
The foregoing indemnity agreements will be in addition to any liability which
the Company may otherwise have.
(b) The Placement Agent will indemnify and hold harmless the Company, its
officers, directors, employees and each person, if any, who controls the Company
within the meaning of the Act against, and pay or reimburse any such person for,
any and all losses, claims damages or liabilities or expenses whatsoever (or
actions, proceedings or investigations in respect thereof) to which the Company
or any such person may become subject under the Act or otherwise, whether such
losses, claims, damages, liabilities or expenses shall result from (A) any claim
of the
14
<PAGE>
Company, any of its officers, directors, employees, any person who controls the
Company within the meaning of the Act or any third party insofar as such losses,
claims, damages or liabilities are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Memorandum but only with
reference to information contained in the Memorandum relating to the Placement
Agent furnished in writing to the Company by the Placement Agent, specifically
for use in the preparation thereof or (B) any violations by the Placement Agent
of the Act or state securities laws. The Placement Agent will reimburse the
Company or any such person for any legal or other expenses reasonably incurred
in connection with investigation or defending against any such loss, claim,
damage, liability or action, proceeding or investigation to which such indemnity
obligation applies. The foregoing indemnity agreements will be in addition to
any liability which the Placement Agent may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, claim, proceeding or investigation
("Action"), such indemnified party, if a claim in respect thereof is to be made
against the indemnifying party under this Section 7, will notify the idemnifying
party of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party under this Section 7 unless the indemnifying party has
been substantially prejudiced by such omission. The indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party, to assume the defense thereof subject to the
provisions herein stated, with counsel reasonably satisfactory to such
indemnified party. The indemnified party will have the right to employ separate
counsel in any such Action and to participate in the defense thereof, but the
fees and expenses of such counsel will not be at the expense of the indemnifying
party if the indemnifying party has assumed the defense of the Action with
counsel reasonably satisfactory to the indemnified party, provided, however,
that if the indemnified party shall be requested by the indemnifying party to
participate in the defense thereof or shall have concluded in good faith and
specifically notified the indemnifying party either that there may be actual or
potential conflict of interest for one counsel to represent both the indemnified
and the indemnifying party, then the counsel representing it, to the extent made
necessary by such defenses, shall have the right to direct such defenses of such
Action on its behalf but not on behalf of the indemnifying party and in such
case the fees and expenses of such counsel in connection with any such
participation or defenses shall be paid by the indemnifying party. No settlement
of any Action against an indemnified party will be made without the consent of
the indemnifying party and the indemnified party, which consent shall not be
unreasonably withheld or delayed in light of all factors or importance to such
party and no indemnifying party shall be liable to indemnify any person for any
settlement of any such claim effected without such indemnifying party's consent.
8. Contribution. To provide for just and equitable contribution, if (i) an
------------
indemnified party makes a claim for indemnification pursuant to Section 7 hereof
and it is finally determined, by a judgment, order or decree not subject to
further appeal that such claims for indemnification may not be enforced, even
though this Agreement expressly provides for indemnification in such case; or
(ii) any indemnified or indemnifying party seeks contribution under the Act, the
1934 Act or otherwise, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Placement Agent on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant
15
<PAGE>
equitable considerations. The relative benefits received by the Company on the
one hand and the Placement Agent on the other shall be deemed to be in the same
proportion as the total net proceeds from the Offering (before deducting
expenses) received by the Company bear to the total commissions and fees
received by the Placement Agent. The relative fault, in the case of an untrue
statement, alleged untrue statement, omission or alleged omission will be
determined by, among other things, whether such statement, alleged statement,
omission or alleged omission relates to information supplied by the Company or
by the Placement Agent, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement, alleged
statement, omission or alleged omission. The Company and the Placement Agent
agree that it would be unjust and inequitable if the respective obligations of
the Company and the Placement Agent for contribution were determined by pro rata
--- ----
allocation of the aggregate losses, liabilities, claims, damages and expenses or
by any other method or allocation that does not reflect the equitable
considerations referred to in this Section 8. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person, if any, who
controls the Placement Agent within the meaning of the Act will have the same
rights to contribution as the Placement Agent, and each person, if any, who
controls the Company within the meaning of the Act will have the same rights to
contribution as the Company, subject in each case to the provisions of this
Section 8. Anything in this Section 8 to the contrary notwithstanding, no party
will be liable for contribution with respect to the settlement of any claim or
action effected without its written consent. This Section 8 is intended to
supersede, to the extent permitted by law, any right to contribution under the
Act, the 1934 Act or otherwise available.
9. Termination. (a) The Offering may be terminated by the Placement Agent at
-----------
any time prior to the expiration of the Offering Period as contemplated in
Section 1(b) hereof ("Expiration Date") in the event that (i) any of the
representations or warranties of the Company contained herein, in the Memorandum
or in any other Transaction Document shall prove to have been false or
misleading in any material respect when made or deemed made, (ii) the Company
shall have failed to perform any of its material obligations hereunder, or (iii)
the Placement Agent shall determine that it is reasonably likely that any of the
conditions to Closing set forth herein will not, or cannot, be satisfied. In the
event of any such termination occasioned by or arising out of or in connection
with any breach or failure hereunder on the part of the Company, the Placement
Agent shall be entitled to receive, in addition to other rights and remedies it
may have hereunder, at law or otherwise, an amount equal to the sum of: (A) all
Placement Agent's Fees earned through the Termination Date, (B) reimbursement of
all Expenses actually incurred through the Termination Date (without regard to
any limitation on the amount of Expenses set forth in Section 3(d) hereof),
including any non-refundable amounts referred to in Section 3(d) hereof, (C) all
amounts which may become payable in respect of Post-Closing Investors pursuant
to Section 3(f) hereof and (D) in the event that the Company is sold, merged or
otherwise acquired, or the Company enters into a letter of intent or completes a
public or private offering of its securities within one (1) year from the
Termination Date, an investment banking fee equal to five percent (5%) of the
total consideration received by the Company and/or its stockholders in
connection with such sale, merger, acquisition or sale of securities. In the
event of any such termination by the Placement Agent as a result of any event
described in clause (iii) or (iv) above, or pursuant to Section 4(d) hereof, not
occasioned by or arising out of or in connection with any breach or failure
hereunder by the Company, the Placement Agent will be entitled to receive the
sum of all Placement Agent's Fees earned through the Termination Date,
16
<PAGE>
reimbursement for the amount of all Expenses actually incurred through the
Termination Date up to the maximum amount set forth herein.
(b) This Offering may be terminated by the Company at any time prior to the
Expiration Date in the event that the Placement Agent shall have failed to
perform any of its material obligations hereunder. In the event of any such
termination by the Company, the Placement Agent shall be entitled to
reimbursement for the amount of the Expenses actually incurred through the
Termination Date, and may retain any non-refundable portions thereof, but shall
be entitled to no other amounts whatsoever except as may be due under any
indemnity or contribution obligation provided herein or any other Transaction
Document, at law or otherwise.
(c) Upon any such termination, the Escrow Agent will, at the request of the
Placement Agent, cause all monies received in respect of subscriptions for Units
not accepted by the Company to be promptly returned to such subscribers without
interest, penalty, expense or deduction. Any interest earned thereon shall be
applied first to the payment of amounts, if any, due to the Escrow Agent and
next to the payment of Expenses incurred by the Placement Agent hereunder which
remain unpaid.
10. Survival. (a) The obligations of the parties to pay any costs and expenses
--------
hereunder and to provide indemnification and contribution as provided herein
shall survive any termination hereunder.
(b) The respective indemnities, agreements, representations, warranties and
other statements of the Company set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by or
on behalf of, and regardless of any access to information by, the Company or the
Placement Agent, or any of their officers or directors or any controlling person
thereof, and will survive the sale of the Units.
11. Notices. All communications hereunder will be in writing and, except as
-------
otherwise expressly provided herein or after notice by one party to the other of
a change of address, if sent to the Placement Agent, will be mailed, delivered
or telefaxed and confirmed to Spencer Trask Securities Incorporated, 535 Madison
Avenue, 18th Floor, New York, New York 10022, Attention: Laura McNamara, Telefax
number (212) 751-3483, with a copy to Hertzog, Calamari & Gleason, 100 Park
Avenue, New York, NY 10017, Attn: John D. Vaughan, Esq., Telefax number (212)
213-1199 and if sent to the Company, will be mailed, delivered or telefaxed and
confirmed to Exigent Diagnostics, Inc., 709 Swedeland Road, P.O. Box 1539, King
of Prussia, Pennsylvania 19087, Attn: W. Vickery Stoughton, Telefax number (610)
270-6150, with a copy to Pepper, Hamilton & Scheetz, 3000 Two Logan Square,
Philadelphia, Pennsylvania 19103-2799, Attn: James D. Epstein, Esq., Telefax
number (215) 981-4750.
12. APPLICABLE LAW, COSTS, ETC. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED
---------------------------
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR UNITED STATES
FEDERAL COURT SITTING IN NEW YORK COUNTY OVER ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED HEREBY, AND
THE COMPANY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD
17
<PAGE>
AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. THE COMPANY FURTHER
WAIVES ANY OBJECTION TO VENUE IN SUCH STATE AND ANY OBJECTION TO AN ACTION OR
PROCEEDING IN SUCH STATE ON THE BASIS OF A NON-CONVENIENT FORUM. THE COMPANY
FURTHER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT AGAINST THE PLACEMENT AGENT
SHALL BE BROUGHT ONLY IN NEW YORK STATE OR UNITED STATES FEDERAL COURTS SITTING
IN NEW YORK COUNTY. SERVICE OR PROCESS MAY BE MADE UPON THE COMPANY BY MAILING A
COPY THEREOF TO IT, BY CERTIFIED OR REGISTERED MAIL, AT ITS ADDRESS TO BE USED
FOR THE GIVING OF NOTICES UNDER THIS AGREEMENT. THE COMPANY AND THE PLACEMENT
AGENT EACH HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT
CONTEMPLATED HEREBY. THE PLACEMENT AGENT OR THE COMPANY, AS THE CASE MAY BE,
SHALL BE ENTITLED TO COSTS AND REASONABLE ATTORNEY'S FEES IN THE EVENT IT
PREVAILS IN ANY CLAIMS, ACTIONS AWARDS OR JUDGMENT UNDER THIS AGREEMENT.
13. Miscellaneous. No provision of this Agreement may be changed or terminated
-------------
except by a writing signed by the party or parties to be charged therewith.
Unless expressly so provided, no party to this Agreement will be liable for the
performance of any other party's obligations hereunder. Any party hereto may
waive compliance by the other with any of the terms, provisions and conditions
set forth herein; provided, however that any such waiver shall be in writing
specifically setting forth those provisions waived thereby. No such waiver shall
be deemed to constitute or imply waiver of any other term, provision or
condition of this Agreement. This Agreement contains the entire agreement
between the parties hereto and is intended to supersede any and all prior
agreements between the parties relating to the same subject matter. This
Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which shall constitute a single agreement.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this Agreement, whereupon it will become a binding
agreement between the Company and the Placement Agent in accordance with its
terms.
Very truly yours,
EXIGENT DIAGNOSTICS, INC.
By: W. Vickery Stoughton
-------------------------
/s/ W. Vickery Stoughton
Chairman and CEO
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Accepted and agreed to this
10 day of December, 1996.
SPENCER TRASK SECURITIES INCORPORATED
By: /s/ William P. Dioguardi
--------------------------
Its: President
-------------------------
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EXHIBIT 10.27
PLACEMENT AGENCY AGREEMENT
--------------------------
January 29, 1998
Spencer Trask Securities Incorporated
535 Madison Avenue
18th Floor
New York, New York 10022
Ladies and Gentlemen:
Exigent Diagnostics, Inc., a Delaware corporation (the "Company"), hereby
confirms its agreement with Spencer Trask Securities Incorporated, a Delaware
corporation (the "Placement Agent"), as follows:
1. Offering. (a) The Company will offer (the "Offering") for sale through
--------
the Placement Agent and its selected dealers, as exclusive agent for the
Company, up to 60 units (the "Units"), plus an additional 9 Units to cover
oversubscriptions, if any. Each Unit will consist of 76,923 shares (the
"Shares") of the Company's common stock, $.01 par value per share (the "Common
Stock").
(b) Placement of the Units will be made on a "best efforts--all or none"
basis with respect to the first 30 Units (the "Minimum Amount") and on a "best
efforts" basis as to the remaining Units. The minimum subscription for Units
shall be one Unit, however, the Placement Agent may, in its discretion, offer
fractional Units. The Units will be offered commencing on the date of the
Memorandum (as defined below) for a period of 90 days, unless extended by the
Placement Agent and the Company for an additional 90 days or terminated earlier
as provided herein (the "Offering Period"). The date on which the Offering shall
terminate shall be referred to as the "Termination Date."
(c) Subscriptions for the Units will be accepted by the Company at a price
of $100,000 per Unit (the "Offering Price"); provided, however, that the Company
shall not accept subscriptions for, or sell Units to, any persons or entities
who do not qualify as "accredited investors," as such term is defined in Rule
501 of Regulation D promulgated under the Securities Act of 1933 (the "Act").
(d) The offering of the Units will be made by the Placement Agent on
behalf of the Company solely pursuant to the Memorandum, which at all times will
be in form and substance acceptable to the Placement Agent and its counsel and
contain such legends and other information as the Placement Agent and its
counsel may, from time to time, deem necessary and desirable to be set forth
therein. "Memorandum" as used in this Agreement means the Company's Confidential
Private Placement Memorandum dated January 29, 1998, inclusive of all exhibits,
and all amendments, supplements and appendices thereto. Unless otherwise
defined, each term used in this Agreement will have the same meaning as set
forth in the Memorandum.
2. Representations and Warranties. The Company hereby represents and warrants
------------------------------
to the Placement Agent that:
<PAGE>
(a) The Memorandum has been diligently prepared by the Company, in
conjunction with its legal counsel and independent accountants, in conformity
with all applicable law, including the Act and the requirements of all other
applicable rules and regulations of the Securities and Exchange Commission (the
"SEC") relating to offerings of the type contemplated by the Offering (the
"Regulations"), and the applicable securities laws and the rules and regulations
of those jurisdictions wherein the Units are to be offered and sold. The Units
will be offered and sold pursuant to the registration exemption provided by
Regulation D as promulgated under Section 4(2) of the Act or otherwise under
Section 4(2) of the Act as a transaction not involving a public offering and the
requirements of any other applicable state securities laws and the respective
rules and regulations thereunder in those jurisdictions in which the Placement
Agent notifies the Company that the Units are being offered for sale. The
Company has not taken nor will it take any action which conflicts with the
conditions and requirements of, or which would make unavailable with respect to
the Offering, the exemption(s) from registration available pursuant to
Regulation D or Section 4(2) of the Act and knows of no reason why any such
exemption would be otherwise unavailable to it. None of the Company, its
affiliates or, to its knowledge, its predecessors has been subject to any order,
judgment or decree of any court of competent jurisdiction temporarily,
preliminarily or permanently enjoining such person for failing to comply with
Section 503 of Regulation D.
(b) The Memorandum does not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the statements, documents,
certificates or other items prepared or supplied by the Company with respect to
the transactions contemplated hereby contains an untrue statement of a material
fact or omits a material fact necessary to make the statements contained therein
not misleading. There is no fact which the Company has not disclosed to the
Placement Agent and its counsel and of which the Company is aware which
materially and adversely affects or could materially and adversely affect the
business prospects, financial condition, operations, property or affairs of the
Company or any of its subsidiaries.
(c) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Except as set forth in the Memorandum, the
Company has no subsidiaries and does not have an equity interest in any other
firm, partnership, association or other entity. The Company and each of its
subsidiaries is duly qualified to transact business as a foreign corporation and
is in good standing under the laws of each jurisdiction where the location of
its properties or the conduct of its business makes such qualification
necessary.
(d) The Company has all requisite power and authority (corporate and
other) to conduct its business as presently conducted and as proposed to be
conducted (as described in the Memorandum), to enter into and perform its
obligations under this Agreement and the other agreements contemplated hereby
and by the Memorandum (collectively, the "Transaction Documents") and to issue,
sell and deliver the Shares. Each of the Transaction Documents has been duly
authorized. This Agreement has been duly executed and delivered and constitutes,
and each of the other Transaction Documents, upon due execution and delivery,
will constitute, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms.
2
<PAGE>
(e) None of the execution and delivery of, or performance by the Company
under any of the Transaction Documents or the consummation of the transactions
herein or therein contemplated conflicts with or violates, or will result in the
creation or imposition of, any lien, charge or other encumbrance upon any of the
assets of the Company under any agreement or other instrument to which the
Company is a party or by which the Company or its assets may be bound, or any
term of the charter or by-laws of the Company, or any license, permit, judgment,
decree, order, statute, rule or regulation applicable to the Company or any of
its assets.
(f) The Company has authorized and outstanding capital stock as set forth
under the heading "Capitalization" in the Memorandum. All outstanding shares of
capital stock of the Company are duly authorized, validly issued and
outstanding, fully paid and nonassessable. Except as set forth in the
Memorandum: (i) there are no outstanding options, stock subscription agreements,
warrants or other rights permitting or requiring the Company or others to
purchase or acquire any shares of capital stock or other equity securities of
the Company or to pay any dividend or make any other distribution in respect
thereof; (ii) there are no securities issued or outstanding which are
convertible into or exchangeable for any of the foregoing and there are no
contracts, commitments or understandings, whether or not in writing, to issue or
grant any such option, warrant, right or convertible or exchangeable security;
(iii) no shares of stock or other securities of the Company are reserved for
issuance for any purpose; (iv) there are no voting trusts or other contracts,
commitments, understandings, arrangements or restrictions of any kind with
respect to the ownership, voting or transfer of shares of stock or other
securities of the Company, including without limitation, any preemptive rights,
rights of first refusal, proxies or similar rights and (v) no person holds a
right to require the Company to register any securities of the Company under the
Act or to participate in any such registration. The issued and outstanding
shares of capital stock of the Company conform in all material respects to all
statements in relation thereto contained in the Memorandum and the Memorandum
describes all material terms and conditions thereof. All issuances by the
Company of its securities were exempt from registration under the Act and any
applicable state securities laws.
(g) The Shares and the Agent's Shares (as defined below) have been duly
authorized and, when issued and delivered against payment therefor as provided
in the Transaction Documents, will be validly issued, fully paid and
nonassessable, will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company other than as provided
in the Transaction Documents and no holder of any of the Shares or the Agent's
Securities (as defined below) will be subject to personal liability solely by
reason of being such a holder, and none of the Shares or the Agent's Securities
are subject to preemptive or similar rights of any stockholder or securityholder
of the Company or, other than as described in the Memorandum, an adjustment
under the antidilution or exercise rights of any holders of any outstanding
shares of capital stock, options, warrants or other rights to acquire any
securities of the Company. A sufficient number of authorized but unissued shares
of Common Stock have been reserved for issuance upon the exercise of the Agent's
Warrants (as defined below).
(h) No consent, authorization or filing of or with any court or
governmental authority is required in connection with the issuance or the
consummation of the transactions contemplated herein or in the other Transaction
Documents, except for required filings with the SEC and applicable "Blue Sky" or
state securities commissions relating specifically to the Offering (all of which
filings have been made by, or on behalf of, the Company, other than those which
are
3
<PAGE>
required to be made after the First Closing (as defined below), and which will
be duly made on a timely basis).
(i) The financial statements, together with the related notes, of the
Company included in the Memorandum present fairly in all material respects the
financial position of the Company as of the respective dates specified and the
results of its operations and changes in financial position for the respective
periods covered thereby. Such financial statements and related notes were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated. Except as set forth in such
financial statements or in the Memorandum, the Company has incurred no material
liabilities of any kind, whether accrued, absolute, contingent or otherwise or
entered into any material transactions. The other financial and statistical
information with respect to the Company and any pro forma information and
related notes included in the Memorandum or otherwise provided to the Placement
Agent present fairly the information shown therein on a basis consistent with
the audited and unaudited financial statements of the Company included in the
Memorandum.
(j) The conduct of business by the Company as presently and proposed to be
conducted (as described in the Memorandum) is not subject to continuing
oversight, supervision, regulation or examination by any governmental official
or body of the United States or any other jurisdiction wherein the Company
conducts or proposes to conduct such business, except as described in the
Memorandum and except such regulation as is applicable to commercial enterprises
generally. The Memorandum accurately describes, in all material respects, all
requisite licenses, permits and other governmental authorization to conduct its
business as presently, and as proposed to be, conducted (as described in the
Memorandum).
(k) No default by the Company or, to the best knowledge of the Company,
any other party exists in the due performance under any of the agreements
referred to in the Memorandum to which the Company is a party or to which any of
its assets is subject (collectively, the "Company Agreements") where such
default would have a material adverse effect upon the business, results of
operations or financial condition of the Company (a "Material Adverse Effect").
The Company Agreements are the only material agreements to which the Company is
bound or by which its assets are subject, are accurately and fairly described in
all material respects in the Memorandum and are in full force and effect in
accordance with their respective terms.
(l) Except as set forth in the Memorandum, there are no actions,
proceedings, claims or investigations, before or by any court or governmental
authority (or any state of facts which management of the Company has concluded
could give rise thereto) pending or, to the best knowledge of the Company,
threatened, against the Company, or involving its assets or any of its officers
or directors which, if determined adversely to the Company or such officer or
director, could result in any Material Adverse Effect or adversely affect the
transactions contemplated by this Agreement or the other Transaction Documents
or the enforceability thereof.
(m) The Company is not in violation of: (i) its charter or by-laws; (ii)
any indenture, mortgage, deed of trust, note or other agreement or instrument to
which the Company is a party or by which it is or may be bound or to which any
of its assets may be subject; (iii) any statute, rule or regulation; or (iv) any
judgment, decree or order applicable to the Company, which violation or
violations individually, or in the aggregate, might result in any Material
Adverse Effect.
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(n) The Company does not own any real property in fee simple except as
disclosed in the Memorandum, and the Company has good and marketable title to
all property (real and personal, tangible and intangible) owned by it, free and
clear of all security interests, liens and encumbrances, except such as are
described in the Memorandum.
(o) Except as otherwise described in the Memorandum (collectively, the
"Intangibles"), the Company owns all right, title and interest in, or possesses
adequate and enforceable rights to use, all patents, patent applications,
trademarks, trade names, service marks, copyrights, rights, licenses,
franchises, trade secrets, confidential information, processes and formulations
described as owned by it in the Memorandum. Except as set forth in the
Memorandum, to the best knowledge of the Company it has not infringed upon the
rights of others with respect to the Intangibles and the Company has not
received notice that it has or may have infringed or is infringing upon the
rights of others with respect to the Intangibles, or any notice of conflict with
the asserted rights of others with respect to the Intangibles which could,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth in the Memorandum, to the best knowledge of the Company, no others have
infringed upon the Intangibles.
(p) Subsequent to the respective dates as of which information is given in
the Memorandum, the Company has operated its business diligently and only in the
ordinary course as theretofore conducted and, except as may otherwise be set
forth in the Memorandum, there has been no: (i) Material Adverse Effect; (ii)
transaction otherwise than in the ordinary course of business; (iii) issuance of
any securities (debt or equity) or any rights to acquire any such securities;
(iv) damage, loss or destruction, whether or not covered by insurance, with
respect to any asset or property of the Company; or (v) agreement to permit any
of the foregoing.
(q) The Company has filed, on a timely basis, each Federal, state, local
and foreign tax return which is required to be filed, or has requested an
extension therefor and has paid all taxes and all related assessments, penalties
and interest to the extent that the same have become due.
(r) The Company is not obligated to pay, and has not obligated the
Placement Agent to pay, a finder's or origination fee in connection with the
Offering and agrees to indemnify the Placement Agent from any such claim made by
any other person. The Company has not offered for sale or solicited offers to
purchase the Units except for negotiations with the Placement Agent. No other
person has any right, based upon acts of the Company, its officers, directors or
representatives, to participate in any offer, sale or distribution of the
Company's securities to which the Placement Agent's rights, described herein,
shall apply.
(s) The Company has and will maintain appropriate casualty and liability
insurance coverage, in scope and amounts reasonable and customary for similar
businesses.
3. Placement Agent Appointment and Compensation. (a) The Company hereby
--------------------------------------------
appoints the Placement Agent and its selected dealers as its exclusive agent in
connection with the Offering. The Company has not and will not make, or permit
to be made, any offers or sales of the Units other than through the Placement
Agent without its prior written consent. The Placement Agent has no obligation
to purchase any of the Units. The agency of the Placement Agent hereunder shall
continue until the later of the Termination Date or the Final Closing (as
defined below).
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(b) The Company has caused to be delivered to the Placement Agent copies
of the Memorandum and has consented, and hereby consents, to the use of such
copies for the purposes permitted by the Act and applicable securities laws, and
hereby authorizes the Placement Agent and its agents, employees and selected
dealers to use the Memorandum in connection with the sale of the Units until the
Termination Date, and no other person or entity is or will be authorized to give
any information or make any representations other than those contained in the
Memorandum or to use any offering materials other than those contained in the
Memorandum in connection with the sale of the Units.
(c) The Company will cooperate with the Placement Agent by making
available to its representatives such information as may be requested in making
a reasonable investigation of the Company and its affairs and shall provide
access to such employees as shall be reasonably requested. Prior to the First
Closing, the Company shall provide, at its own expense, credit or similar
reports on such key management persons as the Placement Agent shall reasonably
request.
(d) The Company shall pay to the Placement Agent at each closing a
placement fee equal to ten percent (10%) of the Offering Price of all the Units
sold at such Closing, which shall be distributed from escrow (the "Placement
Agent's Fee"), and all reasonable out-of-pocket expenses incurred by the
Placement Agent on the Company's behalf including mailing, telephone, travel
costs and legal fees ("Expenses"), to be paid from the gross proceeds of the
Units sold at each Closing up to a maximum of $65,000 for the Offering (the
"Expense Allowance"), a non-refundable $35,000 portion of which has been paid to
the Placement Agent. Payment of the proportional amount of the Placement Agent's
Fee and payment of Expenses will be made out of the proceeds of subscriptions
for the Units sold at each Closing.
(e) As additional compensation hereunder, at each Closing (as defined
below), the Company shall sell to the Placement Agent or its designees for an
aggregate purchase price of $1, warrants (the "Agent's Warrants") to purchase,
at an exercise price of $1.30 per share, a number of Shares equal to twenty
percent (20%) of the aggregate number of Shares contained in the Units sold in
the Offering (the "Agent's Shares"; and, collectively with the Agent's Warrants,
the "Agent's Securities"). The Agent's Warrants shall be exercisable until the
later of the date seven (7) years after the date of the Final Closing or the
date which is three (3) years after the closing date of the initial public
offering of the Company's securities within such seven year period, whichever is
later (the "Warrant Exercise Term"). If the Company at any time has any
securities registered under the Act or the Securities Exchange Act of 1934 (the
"1934 Act"), the Company agrees to register the Agent's Securities promptly on
two (2) separate occasions, at the request of the holders of a majority of the
Agent's Securities made at any time during the Warrant Exercise Term. The
Company shall pay all expenses, other than underwriters' discounts and
commissions, relating to registering the Agent's Securities covered by the first
request, and the holder(s) of such Agent's Securities shall pay all expenses
arising from the second registration. Prior to the First Closing, the Company
and Placement Agent shall enter into a warrant agreement (the "Warrant
Agreement") which shall contain such terms and other customary provisions
including piggyback registration rights for a period of nine (9) years from the
Final Closing, or for the Warrant Exercise Term, whichever is longer, and anti-
dilution protections (including, but not limited to, stock splits,
reclassifications, mergers or acquisitions, or the sale of substantially all of
the Company's stock) applicable to the issuance of additional securities at a
price below the exercise or market price of the Agent's Warrants, other than the
shares existing on the date
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hereof issued to SmithKline Beecham Corporation, and the Placement Agent and the
Shares underlying the Consulting Agreement with Cedar Capital and the 1996
Incentive and Non-Qualified Stock Option Plan and the 1996 Key Executive Stock
Option Plan.
(f) The Company shall also pay to the Placement Agent the Placement
Agent's Fee and Agent's Warrants with respect to, and based on, any investment
by any party ("Post Closing Investor") with which the Placement Agent has had
substantive discussions in connection with their investing in the Offering which
invests in the Company at any time on or before the first anniversary of the
later of the Termination Date or Final Closing.
(g) [Intentionally Omitted].
(h) If the Company completes an initial public offering of its Common
Stock with Fahnestock & Co. Inc., the Company will pay the Placement Agent, as
full payment under the current Investment Banking Agreement between the Company
and the Placement Agent, a fee equal to $100,000.
4. Subscription and Closing Procedures. (a) Each prospective purchaser will
-----------------------------------
be required to complete and execute one original signature page of each of the
Subscription Agreement and Registration Rights Agreement and Shareholder's
Agreement in the forms annexed to the Memorandum ("Subscription Documents"),
which will be forwarded or delivered to the Placement Agent at the Placement
Agent's offices at the address set forth in Section 11 hereof, together with the
subscriber's check or good funds in the full amount of the Offering Price for
the number of Units desired to be purchased.
(b) All funds for subscriptions received from the offering of the Units
will be promptly forwarded by the Placement Agent or the Company, if received by
it, to and deposited into the escrow account (the "Escrow Account") established
for such purpose with United States Trust Company of New York (the "Escrow
Agent"). All such funds for subscriptions will be held in the Escrow Account
pursuant to the terms of the Escrow Agreement among the Company, the Placement
Agent and the Escrow Agent. The Company will pay all fees related to the
establishment and maintenance of the Escrow Account. Any interest accruing on
funds in the Escrow Account shall be utilized first to reimburse the Company for
such fees and the balance shall be distributed one-half to the Company and one-
half to the Placement Agent. Subject to the receipt of such subscriptions for
the Minimum Amount, the Company will either accept or reject the Subscription
Documents in a timely fashion and at each Closing will countersign the
Subscription Documents and provide duplicate copies of such Agreements to the
Placement Agent for distribution to the subscribers. The Company will give
notice to the Placement Agent of its acceptance of each subscription. The
Company will promptly return to subscribers incomplete, improperly completed,
improperly executed and rejected subscriptions and give written notice thereof
to the Placement Agent upon such return.
(c) If subscriptions for at least the Minimum Amount have been accepted
prior to the Termination Date, the funds therefor have been collected by the
Escrow Agent and all of the conditions set forth elsewhere in this Agreement are
fulfilled, a closing shall be held promptly with respect to the Units sold (the
"First Closing"). Thereafter, the remaining Units will continue to be offered
and sold until the Termination Date. Additional closings ("Closings") may from
time to time be conducted at times mutually agreeable with respect to additional
Units sold with
7
<PAGE>
the final closing ("Final Closing") to occur approximately 10 days from the
earlier of the Termination Date or the sale of all Units offered. Delivery of
payment for the accepted subscriptions for Units from the funds held in the
Escrow Account will be made at each Closing at the Placement Agent's offices
against delivery of the Units by the Company at the address set forth in Section
11 hereof (or at such other place as may be mutually agreed upon between the
Company and the Placement Agent). Executed certificates for the Shares
constituting the Units and the Agent's Warrants will be in such authorized
denominations and registered in such names as the Placement Agent may reasonably
request on or before the second (2nd) full business day prior to the date of
each Closing ("Closing Date"), and will be made available to the Placement Agent
for checking and packaging at the Placement Agent's office at least one (1) full
business day prior thereto.
(d) If Subscription Documents for the Minimum Amount have not been
received and accepted by the Company on or before the Termination Date for any
reason, the Offering will be terminated, no Units will be sold, and the Escrow
Agent will, at the request of the Placement Agent, cause all monies received
from subscribers for the Units to be promptly returned to such subscribers
without interest, penalty, expense or deduction.
5A. Further Covenants. The Company hereby covenants and agrees that:
-----------------
(a) Except with the prior written consent of the Placement Agent, the
Company shall not, at any time prior to the Final Closing, take any action which
would cause any of the representations and warranties made by it in this
Agreement not to be complete and correct on and as of each Closing Date with the
same force and effect as if such representations and warranties had been made on
and as of each such date, including, without limitation, incurring any material
indebtedness, disposing of any material assets or making any material
acquisition or change in its business or operations.
(b) If, at any time prior to the Final Closing, any event shall occur
which does or may materially affect the Company or as a result of which it might
become necessary to amend or supplement the Memorandum so that the
representations and warranties herein remain true, or in case it shall, in the
opinion of counsel to the Placement Agent, be necessary to amend or supplement
the Memorandum to comply with Regulation D or any other applicable securities
laws or regulations, the Company will promptly notify the Placement Agent and
shall, at its sole cost, prepare and furnish to the Placement Agent copies of
appropriate amendments and/or supplements in such quantities as the Placement
Agent may reasonably request. The Company will not at any time, whether before
or after the Final Closing, prepare or use any amendment or supplement to the
Memorandum of which the Placement Agent will not previously have been advised
and furnished with a copy, or to which the Placement Agent or its counsel will
have objected in writing or orally (confirmed in writing within 24 hours), or
which is not in compliance with the Act, the Regulations and other applicable
securities laws. As soon as the Company is advised thereof, the Company will
advise the Placement Agent and its counsel, and confirm the advice in writing,
of any order preventing or suspending the use of the Memorandum, or the
suspension of the qualification or registration of the Shares for offering or
the suspension of any exemption for such qualification or registration of the
Shares for offering in any jurisdiction, or of the institution or threatened
institution of any proceedings for any of such purposes, and the Company will
use commercially reasonably efforts (i) to prevent the
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<PAGE>
issuance of any such order and, (ii) if issued, to obtain as soon as reasonably
possible the lifting thereof.
(c) The Company shall comply with the Act and the Regulations so as to
permit the continuance of the sales of the Units, and will file with the SEC,
and shall promptly thereafter forward to the Placement Agent, any and all
reports on Form D as are required.
(d) The Company shall use its reasonable best efforts to qualify the Units
for sale under the securities laws of such jurisdictions as may be mutually
agreed to by the Company and the Placement Agent, and the Company will make such
applications and furnish information as may be required for such purposes,
provided that the Company will not be required to qualify as a foreign
corporation in any jurisdiction. The Company will, from time to time, prepare
and file such statements and reports as are or may be required to continue such
qualifications in effect for so long a period as the Placement Agent may
reasonably request.
(e) The Company shall place a legend on the certificates representing the
Shares issued to subscribers stating that the securities evidenced thereby have
not been registered under the Act or applicable state securities laws, setting
forth or referring to the applicable restrictions on transferability and sale of
such securities under the Act and applicable state laws.
(f) The Company shall apply the net proceeds from the sale of the Units to
fund its working capital requirements and for such other purposes as
specifically described under "Use of Proceeds" in the Memorandum. Except as
specifically set forth in the Memorandum, the net proceeds of the Offering shall
not be used to repay indebtedness to officers, directors or stockholders of the
Company without the prior written consent of the Placement Agent.
(g) During the Offering Period, the Company shall make available for
review by prospective purchasers of the Units during normal business hours at
the Company's offices, upon their request, copies of the Company Agreements to
the extent that such shall not violate any obligation on the part of the Company
to maintain the confidentiality thereof and shall afford each prospective
purchaser of Units the opportunity to ask questions of and receive answers from
an officer of the Company concerning the terms and conditions of the Offering
and the opportunity to obtain such other additional information necessary to
verify the accuracy of the Memorandum to the extent it possesses such
information or can acquire it without unreasonable expense.
(h) Except with the prior written consent of the Placement Agent, the
Company shall not, at any time prior to the Final Closing, engage in or commits
to engage in any transaction outside the scope of its business as described in
the Memorandum, agree to issue or set aside for issuance any securities (debt or
equity) or any rights to acquire any such securities except as contemplated by
the Memorandum.
(i) For a period of five years from the Final Closing, the Company shall
deliver (i) to the Placement Agent and the Company's stockholders annual audited
financial statements setting forth fairly the financial position of the Company,
(ii) to the Placement Agent quarterly unaudited financial statements including
both a balance sheet and statement of income, (iii) to the Company's
stockholders a quarterly report, reviewed by the Placement Agent, of the
progress and status of the Company and an annual report setting forth fairly the
financial position of the
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<PAGE>
Company, (iv) to the Placement Agent a copy of a list of its stockholders as and
when so requested and (v) to the Placement Agent such additional information and
documents concerning the business and financial condition of the Company as the
Placement Agent may from time to time reasonably request, subject to such
confidentiality agreements as the Company may reasonably request.
(j) The Company shall pay all reasonable expenses incurred in connection with
the preparation and printing of all necessary offering documents and instruments
related to the Offering and the issuance of the Shares, the Agent's Shares and
the Agent's Warrants and will also pay the Company's own expenses for accounting
fees, legal fees and other costs involved with the Offering. The Company will
provide at its own expense such quantities of the Memorandum and other documents
and instruments relating to the Offering as the Placement Agent may reasonably
request. In addition, the Company will pay all reasonable filing fees, costs and
legal fees for Blue Sky services and related filings and expenses of counsel
with respect to Blue Sky qualifications. The Blue Sky filings shall be prepared
by the Placement Agent's counsel on behalf of the Company and all Blue Sky
filing fees shall be paid by the Company prior to any filing. At each Closing,
the Placement Agent may deduct from the proceeds of subscriptions for Units sold
at such Closing, all other fees and expenses of Blue Sky counsel outstanding as
of such date, and pay such amount directly to such counsel.
(k) Except as permitted by the Stockholder Agreement attached as Annex C to the
Memorandum, (i) until the Termination Date, neither the Company nor any person
or entity acting on its behalf will negotiate with any other placement agent or
underwriter with respect to a private or public offering of the Company's or any
subsidiary's debt or equity securities, (ii) until the Termination Date, neither
the Company nor anyone acting on its behalf will, without the prior written
consent of the Placement Agent, offer for sale to, or solicit offers to
subscribe for Units or other securities of the Company from, or otherwise
approach or negotiate in respect thereof with, any other person and (iii) prior
to the second anniversary of the Final Closing, the Company will not, without
the Placement Agent's prior written consent sell any securities, or any rights
to acquire any securities, of the Company or create any additional classes or
series of capital stock; provided, however, this agreement and the provisions of
section 5A(k) of the placement agreement for the Prior Offering shall terminate
upon the Company's completion of an initial public offering.
(l) The following officers of the Company will continue in their current
positions following the Offering: W. Vickery Stoughton and Thomas H. Grove.
(m) [Intentionally Omitted].
(n) In accordance with Section 8 of the Stockholders Agreement attached as
Annex C to the Memorandum (the "Stockholders Agreement"), the Company shall
cause its Board of Directors to have at least three "independent" members who
are reasonably acceptable to the Placement Agent and who are unaffiliated with
the Placement Agent or the Company. In addition, the Placement Agent shall have
the right, as more particularly set forth in the Stockholders Agreement, for a
period ending on the earlier of the effective date or five (5) years from the
Final Closing, to designate up to two (2) persons reasonably acceptable to the
Company to be, at the Placement Agent's sole discretion, either nominees for
director of the Company or advisors to the Board of Directors of the Company. W.
Vickery Stoughton shall be entitled to designate such
10
<PAGE>
nominees for election to the board of directors as provided in Section 8 of the
Stockholders Agreement. All such nominees for director shall be elected in
accordance with Section 8 of the Stockholders Agreement and the Company shall
use its best efforts (which shall include, without limitation, the solicitation
of proxies on behalf of such nominees) to cause the election of such nominees.
In the event such persons nominated by the Placement Agent are designated by the
Placement Agent to be advisors, such persons shall receive notice of and have
the right to attend all regular and special meetings of the Board of Directors
and shall be advised of all actions which the Board intends to adopt by written
consent, reasonably prior to the adoption thereof. Such advisors will receive
reimbursement of reasonable expenses and such compensation for attending
meetings equal to the compensation received by any outside director, but will
have no power to vote. The Company further agrees that it shall hold "in person"
directors' meetings no less frequently than quarterly. Thirty (30) days' advance
notice of regular meetings and such notice of special meetings as may be
required to be given to directors by statute or the Company's bylaws shall be
given to the Placement Agent. The Company agrees to indemnify and hold the
Placement Agent harmless against any and all claims, actions, awards and
judgments arising solely out of the attendance and participation of the
Placement Agent and its designated nominees or advisors at any such meeting
described herein. In the event the Company maintains a liability insurance
policy affording coverage for the acts of its officers and directors, it agrees,
if possible, to include the Placement Agent's designated advisors as insured
under such policy.
5B. Covenants of the Placement Agent. The Placement Agent hereby covenants
--------------------------------
and agrees that in connection with the making of offers to sell the Units:
(a) It will use only the Memorandum and such other written information as is
approved or supplied by the Company;
(b) It will not make any representation or warranty to any respective purchaser
of Units which is inconsistent with the Memorandum;
(c) It will not take any action which would constitute a general solicitation
or general advertising within the meaning of Rule 502 of Regulation D; and
(d) It will make offers only to those potential purchasers which it reasonably
believes are "accredited investors" under Regulation D.
6. Conditions of Placement Agent's Obligations. The obligations of the
-------------------------------------------
Placement Agent hereunder are subject to the fulfillment, at or before each
Closing, of the following additional conditions:
(a) Each of the representations and warranties of the Company shall be true and
correct in all material respects when made on the date hereof and on and as of
each Closing Date as though made on and as of each Closing Date.
(b) The Company shall have performed and complied with all agreements,
covenants and conditions required to be performed and complied with by it under
the Transaction Documents at or before each Closing.
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<PAGE>
(c) No order suspending the use of the Memorandum or enjoining the offering or
sale of the Units shall have been issued, and no proceedings for that purpose or
a similar purpose shall have been initiated or pending, or, to the best of the
Company's knowledge, are contemplated or threatened.
(d) As of the First Closing, the Company will have an authorized capitalization
as described in the Memorandum, of which not more than 17,500,000 shares of
Common Stock shall be issued and outstanding, not including any options,
warrants or similar rights outstanding or reserved for issuance as described in
the Memorandum.
(e) The Placement Agent shall have received a certificate of the Chief
Executive Officer of the Company, dated as of each Closing Date, certifying, in
such detail as Placement Agent may reasonably request, as to the fulfillment of
the conditions set forth in subparagraphs (a), (b), (c) and (d) above.
(f) The Company shall have delivered to the Placement Agent (i) a currently
dated good standing certificate from the secretary of state of its jurisdiction
of incorporation and each jurisdiction in which the Company is qualified to do
business as a foreign corporation, and (ii) certified resolutions of the
Company's Board of Directors approving this Agreement and the other Transaction
Documents, and the transactions and agreements contemplated by this Agreement
and the other Transaction Documents.
(g) Intentionally Omitted.
(h) At each Closing, the Company shall have (i) paid to the Placement Agent,
the Placement Agent's Fee and its Expenses actually incurred as set forth in
Section 3(d) hereof and (iii) executed and delivered to the Placement Agent the
Agent's Warrants in an amount proportional to the Units sold.
(i) On or prior to the First Closing the Company shall have received a term
sheet from Fahnestock & Co. Inc. relating to an initial public offering of the
Company's Common Stock acceptable to the Company.
(j) [Intentionally Omitted].
(k) There shall have been delivered to the Placement Agent a signed opinion of
counsel to the Company ("Company Counsel"), dated as of each Closing Date,
substantially in the form of Exhibit A hereto and otherwise in form and
substance reasonably satisfactory to counsel to the Placement Agent.
(l) All proceedings taken at or prior to each Closing in connection with the
authorization, issuance and sale of the Units and the Agent's Warrants will be
reasonably satisfactory in form and substance to the Placement Agent and its
counsel, and such counsel shall have been furnished with all such documents,
certificates and opinions as they may reasonably request upon reasonable prior
notice in connection with the transactions contemplated hereby.
7. Indemnification. (a) The Company will (i) indemnify and hold harmless the
---------------
Placement Agent, its selected dealers and their respective officers, directors,
employees and each person, if
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any, who controls the Placement Agent within the meaning of the Act and such
selected dealers (each an "Indemnitee") against, and pay or reimburse each
Indemnitee for, any and all losses, claims, damages, liabilities or expenses
whatsoever (or actions or proceedings or investigations in respect thereof),
joint or several (which will, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all reasonable
attorneys' fees, including appeals), to which any Indemnitee may become subject,
under the Act or otherwise, in connection with the offer and sale of the Units,
whether such losses, claims, damages, liabilities or expenses shall result from
any claim of any Indemnitee or any third party; and (ii) reimburse each
Indemnitee for any legal or other expenses reasonably incurred in connection
with investigating or defending against any such loss, claim, action, proceeding
or investigation; provided, however, that the Company will not be liable in any
such case to the extent that any such claim, damage or liability results from
(A) an untrue statement or alleged untrue statement of a material fact made in
the Memorandum, or an omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in reliance upon and in conformity with written information
furnished to the Company by the Placement Agent or any such controlling persons
specifically for use in the preparation thereof, or (B) any violations by the
Placement Agent of the Act or state securities laws which does not result from a
violation thereof by the Company or any of its affiliates. In addition to the
foregoing agreement to indemnify and reimburse, the Company will indemnify and
hold harmless each Indemnitee against any and all losses, claims, damages,
liabilities or expenses whatsoever (or actions or proceedings or investigations
in respect thereof), joint or several (which shall for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all reasonable attorneys' fees, including appeals) to which
any Indemnitee may become subject insofar as such costs, expenses, losses,
claims, damages or liabilities arise out of or are based upon the claim of any
person or entity that he or it is entitled to broker's or finder's fees from any
Indemnitee in connection with the Offering. The foregoing indemnity agreements
will be in addition to any liability which the Company may otherwise have.
(b) The Placement Agent will indemnify and hold harmless the Company, its
officers, directors, employees and each person, if any, who controls the Company
within the meaning of the Act against, and pay or reimburse any such person for,
any and all losses, claims, damages or liabilities or expenses whatsoever (or
actions, proceedings or investigations in respect thereof) to which the Company
or any such person may become subject under the Act or otherwise, whether such
losses, claims, damages, liabilities or expenses shall result from (A) any claim
of the Company, any of its officers, directors, employees, any person who
controls the Company within the meaning of the Act or any third party, insofar
as such losses, claims, damages or liabilities are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Memorandum but only with reference to information contained in the Memorandum
relating to the Placement Agent furnished in writing to the Company by the
Placement Agent, specifically for use in the preparation thereof or (B) any
violations by the Placement Agent of the Act or state securities laws. The
Placement Agent will reimburse the Company or any such person for any legal or
other expenses reasonably incurred in connection with investigating or defending
against any such loss, claim, damage, liability or action, proceeding or
investigation to which such indemnity obligation applies. The foregoing
indemnity agreements will be in addition to any liability which the Placement
Agent may otherwise have.
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(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, claim, proceeding or investigation
("Action"), such indemnified party, if a claim in respect thereof is to be made
against the indemnifying party under this Section 7, will notify the
indemnifying party of the commencement thereof, but the omission to so notify
the indemnifying party will not relieve it from any liability which it may have
to any indemnified party under this Section 7 unless the indemnifying party has
been substantially prejudiced by such omission. The indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party, to assume the defense thereof subject to the
provisions herein stated, with counsel reasonably satisfactory to such
indemnified party. The indemnified party will have the right to employ separate
counsel in any such Action and to participate in the defense thereof, but the
fees and expenses of such counsel will not be at the expense of the indemnifying
party if the indemnifying party has assumed the defense of the Action with
counsel reasonably satisfactory to the indemnified party, provided, however,
that if the indemnified party shall be requested by the indemnifying party to
participate in the defense thereof or shall have concluded in good faith and
specifically notified the indemnifying party either that there may be an actual
or potential conflict of interest for one counsel to represent both the
indemnified and the indemnifying party, then the counsel representing it, to the
extent made necessary by such defenses, shall have the right to direct such
defenses of such Action on its behalf but not on behalf of the indemnifying
party and in such case the fees and expenses of such counsel in connection with
any such participation or defenses shall be paid by the indemnifying party. No
settlement of any Action against an indemnified party will be made without the
consent of the indemnifying party and the indemnified party, which consent shall
not be unreasonably withheld or delayed in light of all factors of importance to
such party and no indemnifying party shall be liable to indemnify any person for
any settlement of any such claim effected without such indemnifying party's
consent.
8. Contribution. To provide for just and equitable contribution, if (i) an
------------
indemnified party makes a claim for indemnification pursuant to Section 7 hereof
and it is finally determined, by a judgment, order or decree not subject to
further appeal that such claims for indemnification may not be enforced, even
though this Agreement expressly provides for indemnification in such case; or
(ii) any indemnified or indemnifying party seeks contribution under the Act, the
1934 Act, or otherwise, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Placement Agent on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Placement Agent on the other
shall be deemed to be in the same proportion as the total net proceeds from the
Offering (before deducting expenses) received by the Company bear to the total
commissions and fees received by the Placement Agent. The relative fault, in
the case of an untrue statement, alleged untrue statement, omission or alleged
omission will be determined by, among other things, whether such statement,
alleged statement, omission or alleged omission relates to information supplied
by the Company or by the Placement Agent, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, alleged statement, omission or alleged omission. The Company and the
Placement Agent agree that it would be unjust and inequitable if the respective
obligations of the Company and the Placement Agent for contribution were
determined by pro rata allocation of the aggregate losses, liabilities, claims,
--- ----
damages and expenses or by any other method or allocation
14
<PAGE>
that does not reflect the equitable considerations referred to in this Section
8. No person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) will be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation. For purposes of this Section
8, each person, if any, who controls the Placement Agent within the meaning of
the Act will have the same rights to contribution as the Placement Agent, and
each person, if any, who controls the Company within the meaning of the Act will
have the same rights to contribution as the Company, subject in each case to the
provisions of this Section 8. Anything in this Section 8 to the contrary
notwithstanding, no party will be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 8 is intended to supersede, to the extent permitted by law, any right to
contribution under the Act, the 1934 Act or otherwise available.
9. Termination. (a) The Offering may be terminated by the Placement Agent at
-----------
any time prior to the expiration of the Offering Period as contemplated in
Section 1(b) hereof ("Expiration Date") in the event that (i) any of the
representations or warranties of the Company contained herein, in the Memorandum
or in any other Transaction Document shall prove to have been false or
misleading in any material respect when made or deemed made, (ii) the Company
shall have failed to perform any of its material obligations hereunder, or (iii)
the Placement Agent shall determine that it is reasonably likely that any of the
conditions to Closing set forth herein will not, or cannot, be satisfied. In
the event of any such termination occasioned by or arising out of or in
connection with any breach or failure hereunder on the part of the Company, the
Placement Agent shall be entitled to receive, in addition to other rights and
remedies it may have hereunder, at law or otherwise, an amount equal to the sum
of: (A) all Placement Agent's Fees earned through the Termination Date, (B)
reimbursement of all Expenses actually incurred through the Termination Date
(without regard to any limitation on the amount of Expenses set forth in Section
3(d) hereof), including any non-refundable amounts referred to in Section 3(d)
hereof, (C) all amounts which may become payable in respect of Post-Closing
Investors pursuant to Section 3(f) hereof and (D) in the event that the Company
is sold, merged or otherwise acquired, or the Company enters into a letter of
intent or completes a public or private offering of its securities within one
(1) year from the Termination Date, an investment banking fee equal to five
percent (5%) of the total consideration received by the Company and/or its
stockholders in connection with such sale, merger, acquisition or sale of
securities. In the event of any such termination by the Placement Agent as a
result of any event described in clause (iii) or (iv) above, or pursuant to
Section 4(d) hereof, not occasioned by or arising out of or in connection with
any breach or failure hereunder by the Company, the Placement Agent will be
entitled to receive the sum of all Placement Agent's Fees earned through the
Termination Date, reimbursement for the amount of all Expenses actually incurred
through the Termination Date up to the maximum amount set forth herein.
(b) This Offering may be terminated by the Company at any time prior to the
Expiration Date in the event that the Placement Agent shall have failed to
perform any of its material obligations hereunder. In the event of any such
termination by the Company, the Placement Agent shall be entitled to
reimbursement for the amount of the Expenses actually incurred through the
Termination Date, and may retain any non-refundable portions thereof, but shall
be entitled to no other amounts whatsoever except as may be due under any
indemnity or contribution obligation provided herein or any other Transaction
Document, at law or otherwise.
15
<PAGE>
(c) Upon any such termination, the Escrow Agent will, at the request of the
Placement Agent, cause all monies received in respect of subscriptions for Units
not accepted by the Company to be promptly returned to such subscribers without
interest, penalty, expense or deduction. Any interest earned thereon shall be
applied first to the payment of amounts, if any, due to the Escrow Agent and
next to the payment of Expenses incurred by the Placement Agent hereunder which
remain unpaid.
10. Survival. (a) The obligations of the parties to pay any costs and
--------
expenses hereunder and to provide indemnification and contribution as provided
herein shall survive any termination hereunder.
(b) The respective indemnities, agreements, representations, warranties and
other statements of the Company set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by or
on behalf of, and regardless of any access to information by, the Company or the
Placement Agent, or any of their officers or directors or any controlling person
thereof, and will survive the sale of the Units.
11. Notices. All communications hereunder will be in writing and, except as
-------
otherwise expressly provided herein or after notice by one party to the other of
a change of address, if sent to the Placement Agent, will be mailed, delivered
or telefaxed and confirmed to Spencer Trask Securities Incorporated, 535 Madison
Avenue, 18th Floor, New York, New York 10022, Attention: A. Emerson Martin, II,
Telefax number (212) 751-3483, with a copy to Hertzog, Calamari & Gleason, 100
Park Avenue, New York, NY 10017, Attn: John D. Vaughan, Esq., Telefax number
(212) 213-1199 and if sent to the Company, will be mailed, delivered or
telefaxed and confirmed to Exigent Diagnostics, Inc., 6100 Bristol Parkway,
Culver City, CA 90230, Attn: W. Vickery Stoughton, Telefax number (610) 971-
9814, with a copy to Pepper Hamilton LLP, 3000 Two Logan Square, Philadelphia,
Pennsylvania 19103-2799, Attn: James D. Epstein, Esq., Telefax number (215) 981-
4750.
12. APPLICABLE LAW, COSTS, ETC. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED
---------------------------
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR UNITED STATES
FEDERAL COURT SITTING IN NEW YORK COUNTY OVER ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED HEREBY, AND
THE COMPANY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL
COURT. THE COMPANY FURTHER WAIVES ANY OBJECTION TO VENUE IN SUCH STATE AND ANY
OBJECTION TO AN ACTION OR PROCEEDING IN SUCH STATE ON THE BASIS OF A NON-
CONVENIENT FORUM. THE COMPANY FURTHER AGREES THAT ANY ACTION OR PROCEEDING
BROUGHT AGAINST THE PLACEMENT AGENT SHALL BE BROUGHT ONLY IN NEW YORK STATE OR
UNITED STATES FEDERAL COURTS SITTING IN NEW YORK COUNTY. SERVICE OF PROCESS MAY
BE MADE UPON THE COMPANY BY MAILING A COPY THEREOF TO IT, BY CERTIFIED OR
REGISTERED MAIL, AT ITS ADDRESS TO BE USED FOR THE GIVING OF NOTICES UNDER THIS
AGREEMENT. THE COMPANY AND THE PLACEMENT AGENT EACH HEREBY WAIVES ITS RIGHT TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.
16
<PAGE>
THE PLACEMENT AGENT OR THE COMPANY, AS THE CASE MAY BE, SHALL BE ENTITLED TO
COSTS AND REASONABLE ATTORNEY'S FEES IN THE EVENT IT PREVAILS IN ANY CLAIMS,
ACTIONS, AWARDS OR JUDGMENT UNDER THIS AGREEMENT.
13. Miscellaneous. No provision of this Agreement may be changed or
-------------
terminated except by a writing signed by the party or parties to be charged
therewith. Unless expressly so provided, no party to this Agreement will be
liable for the performance of any other party's obligations hereunder. Any
party hereto may waive compliance by the other with any of the terms, provisions
and conditions set forth herein; provided, however that any such waiver shall be
in writing specifically setting forth those provisions waived thereby. No such
waiver shall be deemed to constitute or imply waiver of any other term,
provision or condition of this Agreement. This Agreement contains the entire
agreement between the parties hereto and is intended to supersede any and all
prior agreements between the parties relating to the same subject matter. This
Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which shall constitute a single agreement.
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this Agreement, whereupon it will become a binding
agreement between the Company and the Placement Agent in accordance with its
terms.
Very truly yours,
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. Vickery Stoughton
--------------------------------------
W. Vickery Stoughton
Chairman and CEO
Accepted and agreed to this
____ day of _______________, 199__.
SPENCER TRASK SECURITIES INCORPORATED
By: /s/ William P. Dioguardi
----------------------------------
Its: President
----------------------------------
17
<PAGE>
EXHIBIT 10.28
Spencer Trask Securities Incorporated
535 Madison Avenue
New York, NY 10022
January 31, 1997
Exigent Diagnostics, Inc.
709 Swedeland Road
Post Office Box 1539
King of Prussia, PA 19406-0939
Dear Mr. Stoughton:
This will confirm our agreement to provide Exigent Diagnostics, Inc.
(the "Company") with investment banking services for a period of 5 years from
the date hereof. Such services shall consist of advice relating to corporate
management, strategic planning, financial planning and relationships with banks
and other financial institutions. Such services shall be provided in connection
with any transaction entered into by the Company of any of its affiliates (other
than SmithKline (as defined in the Company's Confidential Private Placement
Memorandum, dated December 4, 1996)) (including, without limitation, any sale or
exchange of stock or assets, merger, consolidation, acquisition, financing,
joint venture, or other arrangement) with any party introduced to the company by
us, directly or indirectly, during such period.
We will be paid a finder's fee, payable at the closing of any such
transaction, equal to a percentage of the consideration or value received by the
Company and/or its stockholders as follows: (i) 7% of the first $1 million,
(ii) 6% of the next $1 million, (iii) 5% of the next $5 million, (iv) 4% of the
next $1 million, (v) 3% of the next $1 million, and (vi) 2.5% of all amounts
received in excess of $9 million.
This represents our entire agreement with respect to the subject
matter hereof, superseding all prior agreements and understandings, written or
oral. It may not be modified or amended except in a writing signed by the party
to be charged. This letter may be signed in counterparts and shall be governed
by the internal laws of the State of New York.
If the foregoing accurately reflects our understanding, please sign
where indicated below.
Very truly yours,
/s/ William P. Dioguardi
William P. Dioguardi,
President
<PAGE>
AGREED:
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. Vickery Stoughton
--------------------------
Name: W. Vickery Stoughton
Title: Chairman & CEO
<PAGE>
EXHIBIT 10.29
================================================================================
----------------------------------
EXIGENT PARTNERS, L.P.
(A Delaware Limited Partnership)
----------------------------------
AGREEMENT OF LIMITED PARTNERSHIP
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINED TERMS............................................................... 1
ARTICLE II - ORGANIZATION............................................................... 4
2.1. Continuation of the Partnership............................................ 4
2.2. Name....................................................................... 4
2.3. Place of Business and Office; Registered Office and Agent.................. 4
2.4. Purpose.................................................................... 4
2.5. Term....................................................................... 4
2.6. Qualification in Other Jurisdictions....................................... 4
ARTICLE III - CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS................................... 5
3.1. Initial Contributions...................................................... 5
3.2. Additional Capital Contributions; Loans.................................... 5
3.3. Partnership Capital........................................................ 6
3.4. Capital Accounts........................................................... 6
ARTICLE IV - ALLOCATIONS AND DISTRIBUTIONS.............................................. 6
4.1. Distributions.............................................................. 6
4.2. Allocation of Net Income and Net Loss...................................... 6
4.3. Tax Elections.............................................................. 7
ARTICLE V - RIGHTS AND DUTIES OF THE GENERAL PARTNER.................................... 7
5.1. Management Power........................................................... 7
5.2. Restrictions on the Authority of the General Partner....................... 8
5.3. Duties and Obligations of the General Partner.............................. 9
5.4. Other Business of Partners................................................. 9
5.5. Expenses and Reimbursement................................................. 9
5.6. General Partner's Liability................................................ 10
5.7. Indemnification............................................................ 10
ARTICLE VI - RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS............................. 11
6.1. No Participation in Management............................................. 11
6.2. No Authority to Act........................................................ 11
6.3. Liability of Limited Partners.............................................. 11
6.4. Representations and Indemnification........................................ 12
ARTICLE VII - TRANSFERABILITY OF PARTNERS' INTERESTS.................................... 13
7.1. Assignments, Sales or Other Dispositions by Limited Partners............... 13
7.2. Involuntary Transfers by a Limited Partner................................. 15
7.3. Assignments by the General Partner......................................... 15
7.4. Withdrawals of Partners.................................................... 15
ARTICLE VIII - DISSOLUTION, LIQUIDATION AND TERMINATION OF THE PARTNERSHIP.............. 15
8.1. Dissolution................................................................ 15
8.2. Liquidation................................................................ 16
ARTICLE IX - RECORDS AND ACCOUNTING; FISCAL AFFAIRS..................................... 17
9.1. Records and Accounting..................................................... 17
9.2. Tax Information............................................................ 18
9.3. Tax Matters................................................................ 18
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
ARTICLE X - MISCELLANEOUS................................................................ 18
10.1. Notification................................................................... 18
10.2. Entire Agreement; Amendments................................................... 19
10.3. Power of Attorney.............................................................. 19
10.4. Applicable Law................................................................. 20
10.5. Headings, etc.................................................................. 20
10.6. Binding Provisions............................................................. 20
10.7. No Waiver...................................................................... 20
10.8. Severability................................................................... 20
10.9. Counterparts................................................................... 20
</TABLE>
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<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP OF
EXIGENT PARTNERS, L.P.
-----------------------------------
AGREEMENT OF LIMITED PARTNERSHIP dated as of October __, 1996, between
Kevin Kimberlin, as the General Partner, and those Persons listed on Schedule A
annexed hereto from time to time as the Limited Partners.
WHEREAS, the General Partner formed Exigent Partners, L.P. (the
"Partnership") as a Delaware limited partnership for the purpose of acquiring
and holding 3,017,000 shares of common stock, $.001 par value (the "Shares"), of
Exigent Diagnostics, Inc., a Delaware corporation (the "Company"), by filing a
Certificate of Limited Partnership with the Secretary of State of Delaware on
October 29, 1996; and
WHEREAS, the General Partner and the Limited Partners (collectively,
the "Partners") desire to enter into this Agreement to admit the Limited
Partners to the Partnership and to set forth their respective rights,
obligations and duties as Partners in the Partnership.
NOW, THEREFORE, the Partners, in consideration of the mutual covenants
herein contained, hereby covenant and agree as follows:
ARTICLE I
DEFINED TERMS
-------------
The defined terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article I.
"Affiliate" shall mean, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person, or (ii) any officer, director, stockholder, member, trustee or
general partner of such Person or of any Person described in clause (i) hereof.
For purposes of this definition, the terms "controls," "is controlled by," or
"is under common control with" shall mean possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" shall mean this Agreement of Limited Partnership, as
amended, modified, supplemented, or restated from time to time.
"Assignee" shall have the meaning set forth in Section 7.1(b) hereof.
"Assignment" shall have the meaning set forth in Section 7.1(a)
hereof.
"Assignor" shall have the meaning set forth in Section 7.1(b) hereof.
"Capital Account" shall mean the capital account of each Partner
described in Section 3.5 hereof.
"Capital Contribution" shall mean the total amount of money and the
net fair market value of any property or services contributed to the Partnership
by a Partner or Partners.
"Code" shall mean the Internal Revenue Code of 1986, as amended (or
any corresponding provision of succeeding law).
"Company" shall mean Exigent Diagnostics, Inc., a Delaware
corporation.
"Financing Agreement" shall mean the Letter Agreement, dated November
__, 1996, between the Partnership and the Company, together with the Letter of
Credit and Promissory Note annexed as exhibits thereto.
"Fiscal Year" shall mean the fiscal year of the Partnership specified
in Section 9.1(b) hereof.
<PAGE>
"General Partner" shall mean Kevin Kimberlin, and any other Person
admitted as a general partner of the Partnership as provided herein, in such
Person's capacity as general partner of the Partnership.
"Initial Capital Contributions" shall mean the capital contributions
agreed to be made by the Initial Partners as described in Section 3.1 hereof.
"Initial Partners" shall mean those Persons listed on Schedule A
hereto as of the date hereof.
"Interest" shall mean the entire ownership interest of a Partner in
the Partnership at any particular time, including the right of such Partner to
any and all benefits to which a Partner may be entitled as provided in this
Agreement, together with the obligations of such Partner to comply with all the
terms and provisions of this Agreement.
"Limited Partner" shall mean each of the Persons listed on Schedule A
hereto from time to time as a limited partner of the Partnership, in such
Person's capacity as a limited partner of the Partnership.
"Net Income" and "Net Loss" shall mean, for each Fiscal Year, an
amount equal to the Partnership's taxable income or loss for such Fiscal Year
determined in accordance with Section 703(a) of the Code (for this purpose, all
items of income, gain, deduction or loss required to be separately stated
pursuant to Section 703(a)(1) of the Code shall be included in taxable income or
loss), with the following adjustments:
(1) any income of the Partnership that is exempt from Federal
income tax and not otherwise taken into account in computing Net Income or Net
Loss pursuant to this definition, shall be taken into account;
(2) any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code or treated as expenditures described in Section
705(a)(2)(B) of the Code pursuant to Section 1.704-1(b)(2)(iv)(i) of the
Regulations, and not otherwise taken into account in computing Net Income or Net
Loss pursuant to this definition, shall be taken into account; and
(3) upon distribution of any asset by the Partnership, the
difference between the adjusted basis and the fair market value (as determined
in good faith by the General Partner) of such asset shall be taken into account
as an item of Net Income or Net Loss.
"Note" shall mean the Promissory Note, dated ____________________,
issued by the Company to the Partnership referred to in the Financing Agreement.
"Notification" shall mean a writing, containing the information
required by this Agreement to be communicated to any Person, sent as provided in
Section 10.1 hereof.
"Partners" shall mean both the General Partner and the Limited
Partners.
"Partnership" shall mean the limited partnership governed hereby, as
such limited partnership may from time to time be constituted.
"Partnership Act" shall mean the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time.
<PAGE>
"Percentage Interest" of a Partner in the Partnership shall equal the
percentage set forth opposite such Partner's name on Schedule A hereto, from
time to time.
"Person" shall mean any individual, partnership, corporation,
unincorporated organization or association, limited liability company, trust or
other entity.
"Regulations" shall mean the Treasury Regulations promulgated under
the Code.
"Securities Act" shall mean the Securities Act of 1933.
"Shares" shall mean the shares of the Company described in the first
"WHEREAS" clause to this Agreement.
"Substituted Limited Partner" shall mean any Person admitted as a
Partner pursuant to Section 7.1(c) hereof.
ARTICLE II
ORGANIZATION
------------
1.2. Continuation of the Partnership. As of the date hereof, the
-------------------------------
Limited Partners shall be admitted as Partners of the Partnership. The Partners
agree to continue the Partnership without interruption and to continue the
business of the Partnership for the period and on the terms and conditions set
forth herein.
1.3. Name. The name of the Partnership shall continue to be Exigent
----
Partners, L.P. The business of the Partnership may be conducted, upon
compliance with all applicable laws, under any other name designated in writing
by the General Partner to the Limited Partners.
1.4. Place of Business and Office; Registered Office and Agent. The
---------------------------------------------------------
Partnership shall maintain its principal office at 535 Madison Avenue, New York,
New York 10022. The name and address of the Partnership's registered agent in
the State of Delaware upon whom process may be served, and the registered office
of the Partnership in the State of Delaware, is The Corporation Trust Company,
1013 Centre Road, Wilmington, Delaware 19805. The General Partner may at any
time change the location of the Partnership's offices and may establish
additional offices, if he shall deem it advisable, after Notification shall have
been given to the Limited Partners.
1.5. Purpose. The Partnership is organized to acquire, hold, vote,
-------
sell, distribute or otherwise dispose of the Shares or any other securities
received with respect thereto, to enter into the Financing Agreement and to
perform its obligations thereunder and to engage in
-3-
<PAGE>
such other businesses, activities and transactions as the General Partner may
from time to time determine.
1.6. Term. The term of the Partnership commenced upon the filing of
----
its Certificate of Limited Partnership with the Secretary of State of Delaware
on October 29, 1996, and shall continue through December 31, 2021, unless
dissolved prior thereto pursuant to the provisions hereof.
1.7. Qualification in Other Jurisdictions. The General Partner shall
------------------------------------
use his best efforts to cause the Partnership to be qualified to do business in
each jurisdiction where its activities make such qualification necessary.
ARTICLE III
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
---------------------------------------
1.8. Initial Contributions. (a) Each Initial Partner shall make an
---------------------
Initial Capital Contribution, in cash, to the Partnership in the amount set
forth opposite such Partner's name in the column entitled "Initial Capital
Contribution" on Schedule A hereto. Such Initial Capital Contribution shall be
made within two (2) days of a request therefor by the General Partner. In
return for such contributions, each Partner shall initially be allocated that
Percentage Interest set forth opposite such Partner's name on Schedule A hereto.
The Partners' Initial Capital Contributions shall be used by the Partnership to
pay expenses of the Partnership, including, but not limited to, legal expenses
and other costs. In addition, $30,170 of such Initial Capital Contributions
will be used to acquire the Shares pursuant to a letter of intent, dated October
10, 1996, between the Partnership and the Company.
(1) In addition, the Partners hereby agree to guaranty their
respective Percentage Interests of the obligations of the Partnership to
Citibank, N.A. ("Bank") pursuant to the [Loan Agreement] dated November __, 1996
between the Partnership and the Bank, to pledge, in accordance with their
respective Percentage Interests, the principal amount of one million dollars
($1,000,000) to the Bank to secure such obligations of the Partnership to the
Bank and such Partner's obligations under his guaranty and to execute and
deliver to the Bank such agreements and other instruments ("Bank Documents") as
the Bank may reasonably request in connection with the foregoing. The Partners
hereby agree that, notwithstanding anything to the contrary contained in the
Bank Documents, in the event that the liability of the Partners, or any of them,
under the Bank Documents shall not be in proportion to their Percentage
Interests, each Partner shall contribute to the other Partners such amounts as
shall result in all Partners sharing ratably the aggregate amount paid by all
Partners to the Bank under the Bank Documents.
-4-
<PAGE>
1.9. Additional Capital Contributions; Loans. Except as specifically
---------------------------------------
provided in Section 3.1, no Partner shall be required to loan funds or make any
additional Capital Contributions to the Partnership. Upon the unanimous consent
of the Partners, the Partners may (but shall not be obligated to) make
additional Capital Contributions or lend funds to the Partnership from time to
time on such terms as may be agreed to by the Partners. All such loans or
Capital Contributions shall be offered to all the Partners in proportion to
their respective Percentage Interests. Upon any additional Capital Contribution
by any Partner, the Percentage Interest of the Partner may be adjusted in any
manner agreed to by all the Partners, and the Partners' Capital Accounts and the
value of the Partnership's assets on its books shall be adjusted in accordance
with Section 1.704-1(b)(2)(iv)(f) of the Treasury Regulations promulgated
pursuant to the Code so that, immediately after such adjustment, the balance in
the Partners' Capital Accounts shall be proportional to the Percentage Interests
then held by each of them. Any adjustment in the Percentage Interest held by
each of the Partners shall be reflected in an amendment to Schedule A hereto.
1.10. Partnership Capital.
-------------------
(1) No Limited Partner shall have the right to require partition
of the Partnership's property or to compel the sale of the Partnership's assets
or the dissolution of the Partnership. No Partner shall have the right to demand
or receive property other than cash for his or its interest. No interest will be
paid on any Capital Contributions or Capital Account.
(2) Neither the General Partner nor any of his Affiliates shall
have any personal liability to any Limited Partner for the repayment of any
amount outstanding in the Capital Account of such Limited Partner. Any such
payment shall be solely from the assets of the Partnership. The foregoing is not
intended to exculpate the General Partner for any acts of malfeasance or any
breach of any fiduciary duty he may have.
1.11. Capital Accounts. An individual Capital Account shall be
----------------
established and maintained for each Partner in accordance with Section 1.704-
1(b)(2)(iv) of the Regulations. Unless otherwise provided in such Regulations,
such Partner's Capital Account shall be credited with (i) such Partner's Capital
Contributions and (ii) the amount of Net Income allocated to such Partner
pursuant to Section 4.2(a) hereof. Each such Capital Account shall be debited
with (i) the net fair market value of property distributed to such Partner; (ii)
the amount of any cash distributions to such Partner; and (iii) the amount of
Net Loss allocated to such Partner pursuant to Section 4.2(b) hereof. Upon the
transfer of any Interest, the transferee shall receive the portion of the
Capital Account of the transferor attributable to the transferred interest.
ARTICLE IV
-5-
<PAGE>
ALLOCATIONS AND DISTRIBUTIONS
-----------------------------
1.12. Distributions. The General Partner shall promptly distribute
-------------
all net cash proceeds derived by the Partnership with respect to the Shares or
any securities received with respect thereto, the Initial Capital Contributions
or otherwise. Except as provided in Section 8.2 hereof, any such distribution
shall be made among the Partners in proportion to their respective Percentage
Interests.
1.13. Allocation of Net Income and Net Loss.
-------------------------------------
(1) For tax and accounting purposes, Net Income for each Fiscal
Year shall be allocated among the Partners in proportion to their respective
Percentage Interests.
(2) For tax and accounting purposes, Net Loss for each Fiscal
Year shall be allocated among the Partners in proportion to their respective
Percentage Interests.
1.14. Tax Elections. All matters concerning the allocation of tax
-------------
items among the Partners, tax elections (except as may otherwise be required by
the income tax laws) and accounting procedures not expressly and specifically
provided for by the terms of this Agreement shall be determined in good faith by
the General Partner on a basis which shall be equitable among the Partners and
such determination shall be final and conclusive as to all of the Partners.
ARTICLE V
RIGHTS AND DUTIES OF THE GENERAL PARTNER
----------------------------------------
1.15. Management Power.
----------------
(1) Except as otherwise expressly provided herein, the General
Partner shall have full, exclusive and complete discretion in the management and
control of the affairs of the Partnership, shall make all decisions affecting
the Partnership's affairs and shall have all of the rights, powers and
obligations of a general partner of a limited partnership under the Partnership
Act and otherwise as provided by law. The General Partner shall not receive any
compensation or fees for managing the Partnership or serving as general partner
thereof.
(2) Except as otherwise expressly provided herein, the General
Partner is hereby granted the right, power and authority to do on behalf of the
Partnership all things which, in his sole judgment, shall be necessary or
appropriate to manage the Partnership's affairs and fulfill the purposes of the
Partnership, including by way of illustration and not by way of limitation, the
power and authority from time to time to do the following:
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(1) to sell, distribute or otherwise dispose of the Shares or any
other securities received with respect thereto, and to exercise any voting or
other rights associated with the ownership of the Shares of any other securities
received with respect thereto;
(2) to employ and dismiss from employment any and all employees,
agents, attorneys or consultants of the Partnership;
(3) to enter into, execute, amend, supplement, acknowledge and
deliver any and all contracts, agreements or other instruments, including, but
not limited to, contracts with one or more banks or trust companies, for the
performance of the functions described in this Section 5.1(b);
(4) to establish and maintain one or more bank accounts for the
Partnership in such bank or banks as the General Partner may, from time to time,
designate as depositaries of the funds of the Partnership;
(5) subject to Section 5.2 hereof, to borrow and lend money and to
repay, in whole or in part, any such borrowings;
(6) to designate and appoint one or more agents for the Partnership
who shall have such authority as may be conferred upon them by the General
Partner and who may perform any of the duties, and exercise any of the powers
and authority conferred upon the General Partner hereunder, including, but not
limited to, designation of one or more agents as authorized signatories on any
bank accounts maintained by the Partnership;
(7) to establish and maintain the books and records of the Partnership
in accordance with Section 9.1 hereof;
(8) to engage in legal action in the name of the Partnership and to
prosecute, defend, settle or compromise all claims by or against third parties,
and to execute all documents and make all representations, admissions and
waivers in connection therewith; and
(9) to perform all normal business functions, and otherwise operate
and manage the business and affairs of the Partnership, in accordance with and
as limited by this Agreement.
Notwithstanding anything to the contrary contained herein, the acts of the
General Partner in carrying on the business of the Partnership as authorized
herein shall bind the Partnership.
1.16. Restrictions on the Authority of the General Partner.
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(1) Without the written consent of Limited Partners holding at least
100% of the percentage Interests held by the Limited Partners, the General
Partner shall not have the authority to:
(1) do any act in contravention of this Agreement;
(2) do any act which would make it impossible to carry on the
ordinary business of the Partnership;
(3) confess a judgment against the Partnership;
(4) cause the Partnership to borrow or to pledge any of its
assets in support of any such borrowing;
(5) sell or otherwise dispose of any of the Partnership's
property to the General Partner or any Affiliates thereof; and
(6) admit any other Person as a General Partner or a Limited
Partner except as specified in Article VII hereof;
(2) The General Partner shall not perform any act that would subject
any Limited Partner to liability as a general partner in any jurisdiction.
1.17. Duties and Obligations of the General Partner.
---------------------------------------------
(1) The General Partner shall take all action which may be necessary
or appropriate for the continuation of the Partnership's valid existence as a
limited partnership under the laws of the State of Delaware and of each other
jurisdiction in which such existence shall be necessary to protect the limited
liability of the Limited Partners or to enable the Partnership to conduct the
business in which it is engaged.
(2) The General Partner shall devote to the Partnership such time as
the General Partner shall deem to be necessary to conduct the Partnership's
business and affairs in an appropriate manner.
1.18. Other Business of Partners. Nothing in this Agreement shall be
--------------------------
deemed to preclude the General Partner from engaging in or possessing any
interest in other business ventures of any kind, nature or description,
independently or with others, whether such ventures shall be competitive with
the Partnership or otherwise. Neither the Partnership nor any Partner shall
have any rights or obligations by virtue of this Agreement or the partnership
relationship
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created hereby in or to such independent ventures or the income or profits or
losses derived therefrom, and the pursuit of such ventures, even if competitive
with the business of the Partnership, shall not be deemed wrongful or improper.
The General Partner shall not be obligated to present any additional investment
opportunities to the Partnership and shall have the right to take for his own
account (individually or as a trustee, partner or fiduciary) or to recommend to
others any such additional investment opportunities.
1.19. Expenses and Reimbursement. The General Partner and his Affiliates
--------------------------
shall be entitled to reimbursement from the Partnership for all amounts expended
by any of them in connection with the organization of the Partnership and the
preparation of this Agreement, including, but not limited to, accounting, legal,
printing and clerical expenses, and registration and filing fees of any kind.
The Partnership shall pay all expenses incurred in connection with its business,
including, without limitation, the following:
(1) all fees and expenses of custodians, attorneys, accountants,
consultants, experts and other third party agents and assistants performing
services on behalf of the Partnership;
(2) all taxes, fees and other governmental charges levied on the
Partnership or its assets;
(3) all expenses of maintaining the Partnership's registered
office in Delaware and any other offices deemed necessary or advisable by the
General Partner;
(4) all costs and expenses incurred in connection with a sale,
transfer or other disposition of the Shares or any other Partnership property;
(5) all amounts payable pursuant to Section 5.7 hereof;
(6) all costs and expenses incurred in connection with any
Partnership tax audit or any judicial or administrative hearing or proceeding in
connection therewith;
(7) all costs incurred in connection with any litigation
involving the Partnership; and
(8) all costs and expenses of liquidating and winding-up the
business of the Partnership.
1.20. General Partner's Liability. The General Partner shall not be
---------------------------
liable, responsible or accountable in damages or otherwise to any Limited
Partner or the Partnership for
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any act or omission of the General Partner, except for acts or omissions
constituting willful misfeasance, bad faith, gross negligence or a reckless
disregard of duty.
1.21. Indemnification. (a) The Partnership shall, subject to Section
---------------
5.7(b) hereof, indemnify the General Partner and his employees, agents and
Affiliates (each, a "Covered Person"), against all claims, losses, liabilities
and expenses, including, but not limited to, amounts paid in satisfaction of
judgments, in compromise, or as fines and penalties, and reasonable counsel
fees, incurred in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which any such Covered Person may be or
may have been involved as a party or otherwise, or with which such Covered
Person may be or may have been threatened, by reason of such Covered Person's
past or present performance of services for the Partnership, except with respect
to any matter as to which such Covered Person shall have been finally
adjudicated in a decision on the merits in any such action, suit, or other
proceeding to be liable to the Partnership or its Partners by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties in the
performance of such services. Expenses, including reasonable counsel fees, so
incurred by any such Covered Person (but excluding amounts paid in satisfaction
of judgments, in compromise, or as fines or penalties) may be paid from time to
time by the Partnership in advance of the final disposition of any such action,
suit, or proceeding upon receipt of an undertaking by or on behalf of such
Covered Person to repay amounts so paid if it shall be ultimately determined
that indemnification of such expenses is not authorized under this Section 5.7;
provided, that (i) such Covered Person shall provide security for such
- -------- ----
undertaking; (ii) the Partnership shall be insured against losses by reason of
such Covered Person's failure to fulfill his undertaking, or (iii) independent
legal counsel in a written opinion shall determine, based on a review of readily
available facts, that there is reason to believe such Covered Person ultimately
will be entitled to indemnification hereunder.
(b) As to the disposition of any action, suit or proceeding (whether
by a compromise payment, pursuant to a consent decree or otherwise) without an
adjudication or a decision on the merits by a court, or by any other body before
which the proceeding shall have been brought, that a Covered Person is liable to
the Partnership or its Partners by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of duties, indemnification shall be
provided if (i) approved by Limited Partners holding a majority of the
percentage interests held by the Limited Partners or (ii) a written opinion of
independent legal counsel, based upon a review of readily available facts, shall
have been obtained, to the effect that such indemnification would not protect
such Covered Person against any liability to the Partnership or its Partners to
which such Covered Person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties. Any
approval pursuant to this Section 5.7(b) shall not prevent the recovery from any
Covered Person of any amount paid to such Covered Person as indemnification in
accordance with this Section 5.7(b) if such Covered Person subsequently shall be
adjudicated by a court of competent jurisdiction to be
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liable to the Partnership or its Partners by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
----------------------------------------------
1.22. No Participation in Management. The Limited Partners shall have no
------------------------------
right to control and shall take no part in the management or control of the
Partnership's business but may exercise the rights and powers of Limited
Partners under this Agreement. The exercise of such rights and powers are deemed
to relate to material matters related to the business of the Partnership or
matters affecting the basic structure of the Partnership.
1.23. No Authority to Act. The Limited Partners shall have no power to
-------------------
represent, act for, sign for or bind the General Partner or the Partnership.
The Limited Partners hereby consent to the exercise by the General Partner of
the powers conferred on him by law and this Agreement.
1.24. Liability of Limited Partners. The liability of the Limited
-----------------------------
Partners shall be limited in accordance with the Partnership Act. In accordance
with the laws of the State of Delaware, a limited partner of a partnership may,
under certain circumstances, be required to return to the partnership amounts
wrongfully distributed to such partner. If any Limited Partner shall be
obligated to make any such payment, such obligation shall be the obligation of
such Limited Partner and not of the General Partner or the Partnership. Except
as set forth in this Section 6.3, a Limited Partner, in his capacity as such,
shall have no obligation to contribute to the capital of the Partnership the
amount of any deficit balance in his Capital Account upon the liquidation of the
Partnership or his Interest therein.
1.25. Representations and Indemnification. (a) Each Limited Partner
-----------------------------------
hereby represents and warrants to the General Partner and the Partnership as
follows:
(1) He understands that none of the Interests, the Note or the
Shares are registered under the Securities Act or any state securities laws and
that the issuance of the Interests, the Note and the Shares is based, in large
part, upon the representations, warranties and agreements contained in this
Section 6.4(a);
(2) He understands that the issuance of the Interests is exempt
from registration under the Securities Act by virtue of Section 4(2) of the
Securities Act and the provisions of Regulation D promulgated thereunder;
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(3) He is acquiring his interest solely for his own account for
investment and not with a view to resale or distribution and he acknowledges
that there is no public market for the Interests, the Note and the Shares, nor
is one expected to develop, and that the Interests, the Note and the Shares are
subject to legal and contractual restrictions on their transferability;
(4) He is a citizen or resident of the United States; and
(5) He is an "accredited investor" within the meaning of
Regulation D promulgated under the Securities Act.
(2) Each Limited Partner agrees to indemnify and hold harmless the
Partnership and the General Partner, their employees, agents and Affiliates
against all losses, liabilities, claims, damages, and expenses (including, but
not limited to, any and all expenses incurred in investigating, preparing, or
defending against any litigation commenced or threatened) by reason of or
arising out of any actual alleged misrepresentation or breach by such Limited
Partner or any representation or warranty set forth in this Section 6.4
ARTICLE VII
TRANSFERABILITY OF PARTNERS' INTERESTS
--------------------------------------
1.26. Assignments, Sales or Other Dispositions by Limited Partners.
-------------------------------------------------------------
(1) No Limited Partner shall have the right to assign, transfer, sell,
encumber, pledge or otherwise dispose of all or any portion of his Interest (an
"Assignment"), unless:
(1) the General Partner shall be satisfied that the purported
Assignment complies with and does not violate any relevant provisions of law,
including the Partnership Act, will not subject the Partnership, the General
Partner or any Affiliates of the General Partner or of the Partnership to
additional regulatory requirements and will not cause a dissolution of the
Partnership or cause the Partnership to be classified other than as a
partnership for Federal income tax purposes;
(2) such Assignment shall be made to a Person who is ale to make
all of the representations and warranties set forth in Section 6.4(a) hereof;
and
(3) the General Partner shall have given his prior written
consent to such Assignment, which consent may be granted or withheld in the sole
discretion of
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the General Partner, except that no such consent shall be required under this
clause (iii) and no compliance with clause (ii) of this Section 7.1(a) shall be
required to the extent that such Assignment shall be without consideration, the
Assignee shall be a spouse, child or lineal descendent of the Assignor or a
trust for his or her benefit, and shall have agreed in writing to be bound by
all of the terms hereof applicable to the Assignor.
Each Limited Partner agrees that he will, upon the request of the General
Partner, execute such certificates or other documents and perform such acts as
the General Partner shall deem appropriate to preserve the limited liability of
the Limited Partners under the laws of the jurisdictions in which the
Partnership is dong business after an Assignment by that Limited Partner. Any
purported Assignment in violation of the provisions of this Section 7.1(a) shall
be null and void and shall not bind, or be recognized by, the Partnership.
(2) A Person who shall have received from a Limited Partner all or a
portion of such Limited Partner's Interest, in compliance with Section 7.1(a)
hereof (an "Assignee"), shall be entitled to receive allocations of Net Income
and Net Loss attributable to the assigned Interest from and after the date on
which the General Partner shall consent to the Assignment (or the date of the
Assignment where no consent shall be required), but shall have no other rights
of a Limited Partner hereunder (including, without limitation, rights to
information provided or made available to the Limited Partners, and accounting,
inspection and voting rights provided herein or by law) until such time as such
Assignee shall have been admitted as a Substituted Limited Partner pursuant to
the provisions of Section 7.1(c) hereof. All rights withheld from an Assignee
hereunder shall remain rights of the Limited Partner who made the Assignment
(the "Assignor") until such time as such Assignee shall have been so admitted.
Notwithstanding the foregoing, the Partnership and the General Partner shall be
entitled to treat the Assignor as the sole and absolute owner of the assigned
Interest in all respects, and shall incur no liability to any Person for
distributions or allocations (or for transmittal of reports and notices required
hereunder to be given to Limited Partners) to such Assignor, made prior to the
date an Assignee shall be admitted to the Partnership as a Substituted Limited
Partner.
(3) Upon compliance with Section 7.1(a) hereof, an Assignee shall
become a Substituted Limited Partner to the extent of the assigned Interest,
only upon compliance with the following additional conditions:
(1) the General Partner shall have consented in writing to such
substitution, which consent may be granted or withheld in the sole discretion of
the General Partner;
(2) the Assignee shall have executed such instruments as the
General Partner shall have reasonably deemed necessary or desirable to admit
such Assignee as a
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Substituted Limited Partner (including, without limitation, a counterpart of
this Agreement and such other documents as may be necessary under the
Partnership Act); and
(3) the Assignor shall have paid or caused to have been paid to
the Partnership all costs and expenses incurred by the General Partner or the
Partnership in connection with such Assignment and substitution (including, but
not limited to, attorneys' and accountants' fees).
(4) An Assignee who shall not have become a Substituted Limited
Partner pursuant to Section 7.1(c) hereof and who shall desire to make a further
Assignment of an Interest shall be subject to all the terms and conditions
contained in this Article VII applicable to Assignments by Limited Partners.
(5) Each Limited Partner and each Assignee shall indemnify and hold
harmless the Partnership, the General Partner, every other Limited Partner and
any Affiliate of the foregoing (each, an "Indemnified Person") against all
losses, claims, damages, liabilities, costs and expenses (including legal or
other expenses incurred in investigating or defending against any such loss,
claim, damage or liability, or any judgments, fines and amounts paid in
settlement), joint or several, to which such Indemnified Persons may become
subject by reason of or arising from (i) any Assignment made by such Limited
Partner in violation of this Article VII and (ii) any misrepresentation or
misstatement of facts or omission to state facts by such Limited Partner or such
Assignee to the General Partner or the Partnership in connection with any
Assignment.
1.27. Involuntary Transfers by a Limited Partner.
-------------------------------------------
(1) In the event of the death, incompetency, insolvency or
bankruptcy of any Limited Partner, the successors, assigns, heirs, distributees
or legal representatives, as the case may be, of such Limited Partner shall be
deemed Assignees of such Limited Partner's Interest (without the requirement of
obtaining the prior written consent of the General Partner). No such Assignee
shall become a Substituted Limited Partner except in compliance with Section
7.1(c) hereof. The General Partner and the Partnership shall be entitled to
treat such Assignee as the sole and absolute owner of such Interest for all
purposes hereof.
(2) The death, incompetency, dissolution, termination, insolvency
or bankruptcy of a Limited Partner shall not dissolve the Partnership, and each
Limited Partner hereby authorizes the General Partner, pursuant to the power of
attorney granted in Section 10.3 hereof, to execute such instruments, documents
and certificates as the General Partner shall deem necessary or appropriate or
as are required by the Partnership Act to continue the valid existence of the
Partnership.
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1.28. Assignments by the General Partner. The General Partner shall
----------------------------------
not make an Assignment of his Interest as general partner of the Partnership
without the prior written consent of Limited Partners holding at least 100% of
the Percentage Interests held by the Limited Partner; provided, however, that
the General Partner may make an Assignment of such Interest, without obtaining
such consent, to any entity controlled by the General Partner or trustees
operating for the benefit of the family of the General Partner. For purposes
hereof, "control" shall have the same meaning as in the definition of
"Affiliate" in Article I hereof. Any permitted assignee of the General
Partner's Interest, as a condition of such Assignment, shall agree in writing to
be bound by the terms of this Agreement and shall execute an appropriate
amendment to the Partnership's Certificate of Limited Partnership reflecting
such Assignment. Each Limited Partner hereby consents to the admission of any
assignee of the General Partner's Interest pursuant to this Section 7.3 as a
substitute General Partner of the Partnership.
1.29. Withdrawals of Partners. No Partner shall withdraw from the
-----------------------
Partnership prior to the Partnership's dissolution except in connection with a
transfer of such Partner's entire Interest pursuant to Article VII.
ARTICLE VIII
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE PARTNERSHIP
-----------------------------------------------------------
1.30. Dissolution.
-----------
(1) The Partnership shall be dissolved upon the happening of any of
the following events:
(1) the expiration of its term;
(2) the election of the General Partner to dissolve the
Partnership;
(3) the death, adjudication of incompetence or adjudication of
bankruptcy of the General Partner;
(4) the sale of all of the assets of the Partnership for cash;
and
(5) termination required by operation of law.
(2) Dissolution of the Partnership shall be effective on the day on
which the event occurs giving rise to the dissolution, but the Partnership shall
not terminate until
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the Certificate of Limited Partnership of the Partnership shall have been
cancelled and the assets of the Partnership shall have been distributed as
provided in Section 8.2 hereof.
1.31. Liquidation.
-----------
(1) Upon dissolution of the Partnership, the General Partner or a
liquidator appointed by the General Partner (or, if the General Partner is
unavailable, a liquidator appointed by Limited Partners holding at least 100% of
the percentage Interests held by the Limited Partners), shall wind up the
affairs of the Partnership and liquidate its assets.
(2) As soon as practicable after the date of dissolution of the
Partnership, but in any event not later than ninety (90) days after such date of
dissolution, the Partnership's assets shall be distributed in the following
manner and order:
(1) the claims of all creditors of the Partnership who are not
Partners, and the expenses of dissolution and winding up, shall be paid and
discharged or adequately reserved against;
(2) the claims of the General Partner as a creditor of the
Partnership shall be paid and discharged or adequately reserved against; and
(3) the claims of the Limited Partners as creditors of the
Partnership shall be paid and discharged or adequately reserved against.
The remaining assets of the Partnership shall be distributed to the Partners in
cash or in kind, as the General Partner or liquidator shall determine in
accordance with the Capital Accounts of the Partners. In the event that the
foregoing order of distribution shall not be permitted under the Partnership
Act, distributions shall be made as closely as legally possible to the order of
distribution required hereby.
(3) No Partner with a negative balance in such Partner's Capital
Account shall be required to restore the amount of such negative balance to the
Partnership upon liquidation of the Partnership or such Partner's Interest
therein.
(4) If certain assets of the Partnership cannot be liquidated or
distributed pro rata to all Partners, the General Partner (or the liquidator)
--- ----
may place such assets in a liquidating trust for the benefit of all Partners.
(5) When the General Partner or liquidator shall have compiled with
the foregoing liquidation plan, the General Partner or liquidator shall execute,
acknowledge and
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cause to be filed an instrument evidencing the cancellation of the Certificate
of Limited Partnership of the Partnership.
(6) If there shall be any pending transaction or claim by or against
the Partnership as to which the interest or obligation of any Partner therein
cannot, in the judgment of the General Partner or the liquidator, be then
ascertained, the value thereof or probable loss therefrom may be excluded from
the valuation of assets for purposes of computing such Partner's Capital Account
upon liquidation. No amount shall be paid or charged to any such Partner's
Capital Account in respect of any such transaction or claim until its final
settlement or such earlier time as the General Partner or the liquidator shall
determine. Moreover, the Partnership may retain from any sums due any such
Partner an amount which the General Partner or the liquidator shall estimate to
be sufficient to cover the share of such Partner in any probable loss or
liability on account of such transaction or claim. The General Partner or the
liquidator shall, at the earliest practicable time, distribute any assets (or
proceeds realized from the sale thereof) excluded or retained pursuant to this
Section 8.2(f) to each Partner from whom such assets or proceeds shall have been
withheld.
ARTICLE IX
RECORDS AND ACCOUNTING; FISCAL AFFAIRS
--------------------------------------
1.32. Records and Accounting.
----------------------
(1) Proper and complete records and books of account of the
business of the Partnership shall be maintained by the General Partner at the
Partnership's principal place of business, and each Limited Partner or his duly
authorized representative shall have access to them, upon reasonable notice and
for a proper purpose, at all reasonable times during business hours.
(2) The books and records of the Partnership shall be kept on
the basis of accounting determined by the General Partner. Such basis of
accounting shall be followed by the Partnership for Federal income tax purposes.
The financial statements of the Partnership shall be prepared in accordance with
generally accepted accounting principles consistently applied, and shall be
appropriate and adequate for the Partnership's business and for carrying out all
provisions of this Agreement. The taxable year of the Partnership shall be its
fiscal year, which shall end on December 31.
1.33. Tax Information. Within 75 days after the end of each Fiscal
---------------
Year, the General Partner will cause to be delivered to each Person who was a
Partner at any time during such Fiscal Year all information necessary for the
preparation of such Partner's Federal income tax returns.
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1.34. Tax Matters. The General Partner is hereby appointed to
-----------
represent the Partnership in any negotiation or judicial or administrative
hearing or proceeding in connection with any tax audit or appeal and otherwise
to fulfill the obligations of the "tax matter partner" as contemplated by
Section 6221 et seq. of the Code, including, but not limited to, the entry into
-- ----
such administrative adjustments or settlements with respect to the treatment of
any items for tax purposes as the General Partner, in the good faith exercise
of his discretion, shall deem necessary and/or appropriate (in such capacity,
the General Partner shall be referred to as the "Tax Matters Partner"). The Tax
Matters Partner, in such capacity, shall incur no personal liability to the
Partnership or the Limited Partners as a result of any exercise of such
Partner's powers and duties hereunder so long as the Tax Matters Partner shall
exercise such powers and duties in good faith, and the indemnification
provisions set forth in Section 5.7 hereof shall extend to the Tax Matters
Partner for all acts taken in good faith in such capacity.
ARTICLE X
MISCELLANEOUS
-------------
1.35. Notification.
-------------
(1) Any Notification to a Partner shall be at such Partner's
address set forth in Schedule A hereto or such other mailing address of which
such Partner shall advise the Partnership and the other Partners in writing. Any
Notification of the Partnership shall be at the address of its principal office,
as set forth in Section 2.3 hereof, or such other mailing address of which the
Partnership shall advise the Partners in writing.
(2) Any Notification shall be deemed to have been duly given if
personally delivered or sent by United States mail or by telefax, telegram or
telex confirmed by letter and will be deemed given (i) if sent by certified or
registered mail, return receipt requested, or by first-class mail, three
calendar days after being deposited in the United States mail, postage prepaid,
(ii) if sent by United States Express Mail, one business day after being
deposited in the United States mail, postage prepaid, (iii) if sent by telefax,
telegram or telex, on the date sent, provided confirmatory notice is sent by
first-class mail, postage prepaid, and (iv) if delivered by hand, on the date of
receipt.
1.36. Entire Agreement; Amendments. This Agreement constitutes the
----------------------------
entire understanding of the parties hereto and shall not be amended except by an
instrument in writing approved by all the Partners; provided, however, that the
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General Partner may unilaterally amend this Agreement (i) to reflect the
admission, withdrawal or substitution of any Partner in accordance with this
Agreement, (ii) to add to the representations, duties or obligations of the
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General Partner, or to surrender any right or power granted to the General
Partner herein, for the benefit of the Limited Partners (provided, that any such
--------
surrender of a right or power would not adversely affect the limited liability
of the Limited Partners for state law purposes), (iii) to take such action and
make such amendments hereto in light of existing laws, rules and regulations, or
changes therein, applicable or relating to the Partnership including, without
limitation, the Code as the General Partner shall deem necessary to permit the
Partnership to continue in existence or to enable the Partnership to achieve the
purposes for which it shall have been formed, (iv) to cure any ambiguity, to
correct any mistake, or to correct or supplement any provision herein or in the
Partnership's Certificate of Limited Partnership which may be inconsistent with
any other provision herein or therein, or to correct any printing, stenographic
or clerical errors or omissions which will not be inconsistent with the
provisions of this Agreement or the status of the Partnership as a partnership
for Federal income tax purposes, and (v) to make any changes hereto intended for
the benefit of the Partnership as a whole, or which shall not be materially
adverse, taken as a whole, to the Interest of the Partner.
1.37. Power of Attorney. Each Limited Partner hereby irrevocably
-----------------
constitutes and appoints the General Partner as his true and lawful
representative and attorney-in-fact, with full power and authority in his name,
place and stead, to make, execute, acknowledge, deliver, swear to, record, file
and publish with respect to the Partnership (i) any and all instruments,
documents and certificates which, from time to time, may be required by the laws
of the United States of America, the State of Delaware or any other state in
which the Partnership shall determine to do business, or any political
subdivision or agency thereof, and to take any other action which the General
Partner may deem necessary or appropriate, in his sole discretion, to execute,
implement and continue or terminate the valid and subsisting existence and
business operations of the Partnership and (ii) any amendments to and
restatements of this Agreement and the Partnership's Certificate of Limited
Partnership as such amendments and restatements are contemplated hereunder, or
any other instruments relating to any such amendments. The foregoing grant of
authority is a special power of attorney coupled with an interest, shall be
irrevocable and shall continue in full force and effect notwithstanding the
subsequent death, incapacity or withdrawal of the grantor. The special power of
attorney shall survive the Assignment by a Limited Partner of the whole or any
portion of his Interest.
1.38. Applicable Law. This Agreement shall be governed by, and
--------------
construed in accordance with, the laws of the State of Delaware without giving
effect to the choice-of-law provisions thereof.
1.39. Headings, etc. The headings in this Agreement are inserted for
--------------
convenience of reference only and shall not affect the interpretation of this
Agreement. Wherever from the context it appears appropriate, each term stated
in either the singular or the plural shall include the singular and the plural
and pronouns stated in either the masculine or the neuter gender shall include
the masculine, the feminine and the neuter.
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<PAGE>
1.40. Binding Provisions. The covenants and agreements contained
------------------
herein shall be binding upon and inure to the benefit of the heirs, executors,
administrators, successors and assigns of the respective parties hereto.
1.41. No Waiver. The failure of any Partner to seek redress for
---------
violation, or to insist on strict performance, of any covenant or condition of
this Agreement shall not prevent a subsequent act which would have constituted a
violation from having the effect of an original violation.
1.42. Severability. If any sentence, paragraph or Section of this
------------
Agreement shall be declared by a court of competent jurisdiction to be void,
such sentence, paragraph or section shall be deemed severed from the remainder
of the Agreement and the balance of the Agreement shall remain in effect.
1.43. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
-20-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
GENERAL PARTNER
/s/ Kevin Kimberlin
-------------------------------
KEVIN KIMBERLIN
LIMITED PARTNERS
/s/ W. Vickery Stoughton
-------------------------------
W. Vickery Stoughton
/s/ Thomas H. Grove
-------------------------------
Thomas H. Grove
/s/ Phil Smith
-------------------------------
Phil Smith
-21-
<PAGE>
EXHIBIT 10.31
CARESIDE, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
-------
The CARESIDE, Inc. Employee Stock Purchase Plan (the "Plan") is
intended to encourage and facilitate the purchase of Shares of the Common Stock
of CARESIDE, Inc. (the "Company"), by employees of the Company and any
Participating Companies, thereby providing employees with a personal stake in
the Company and a long range inducement to remain in the employ of the Company
and Participating Companies. It is the intention of the Company that the Plan
qualify as an "employee stock purchase plan" within the meaning of Section 423
of the Code.
2. DEFINITIONS.
-----------
(a) "Account" means a bookkeeping account established by the Committee on
-------
behalf of a Participant to hold Payroll Deductions.
(b) "Approved Leave of Absence" means a leave of absence that has been
-------------------------
approved by the applicable Participating Company in such a manner as the Board
may determine from time to time.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means the Committee appointed pursuant to section 14 of
---------
the Plan.
(f) "Company" means CARESIDE, Inc.
-------
(g) "Compensation" means an Employee's cash compensation payable for
------------
services to a Participating Company.
(h) "Election Form" means the form acceptable to the Committee which an
-------------
Employee shall use to make an election to purchase Shares through Payroll
Deductions pursuant to the Plan.
(i) "Eligible Employee" means an Employee who meets the requirements for
-----------------
eligibility under section 3 of the Plan.
(j) "Employee" means a person who is an employee of a Participating
--------
Company.
<PAGE>
(k) "Fair Market Value" means the closing price per Share on the principal
-----------------
national securities exchange on which the shares are listed or admitted to
trading or, if not listed or traded on any such exchange, on the National Market
System of the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), or if not listed or traded on any such exchange or system,
the fair market value as reasonably determined by the Board, which determination
shall be conclusive.
(l) "Five Percent Owner" means an Employee who, with respect to a
------------------
Participating Company, is described in section 423(b) of the Code.
(m) "Offering" means an offering of Shares to Eligible Employees pursuant
--------
to the Plan.
(n) "Offering Commencement Date" means the first day of each January 1,
--------------------------
April 1, July 1 and October 1 beginning on or after Offerings are authorized by
the Committee, until the Plan Termination Date, provided that the first Offering
Commencement Date may be delayed until the first day of the second month after
adoption of the Plan, if necessary to permit Participants to make elections in
accordance with section 3(e) of the Plan.
(o) "Offering Period" means the period extending from an Offering
---------------
Commencement Date through the following Offering Termination Date.
(p) "Offering Termination Date" means the last day of each March, June,
-------------------------
September and December following an Offering Commencement Date.
(q) "Option Price" means 85 percent of the lesser of: (1) the Fair Market
------------
Value per Share on the Offering Commencement Date, or if such date is not a
trading day, then on the next trading day thereafter or (2) the Fair Market
Value per Share on the Offering Termination Date, or if such date is not a
trading day, then on the next trading day thereafter.
(r) "Participant" means an Employee who meets the requirements for
-----------
eligibility under section 3 of the Plan and who has timely delivered an Election
Form to the Committee.
(s) "Participating Company" means, as provided in Schedule A, the Company
---------------------
and subsidiaries of the Company, within the meaning of section 424(f) of the
Code, if any, that are approved by the Board from time to time and whose
employees are designated as Employees by the Board.
(t) "Payroll Deductions" means amounts withheld from a Participant's
------------------
Compensation pursuant to the Plan, as described in section 5 of the Plan.
(u) "Plan" means CARESIDE, Inc. Employee Stock Purchase Plan, as set forth
----
in this document, and as may be amended from time to time.
-2-
<PAGE>
(v) "Plan Termination Date" means the earlier of:
---------------------
(1) The Offering Termination Date for the Offering in which the
maximum number of Shares specified in section 5 of the Plan have been issued
pursuant to the Plan; or
(2) The date as of which the Board chooses to terminate the Plan as
provided in section 15 of the Plan.
(w) "Shares" means shares of Common Stock of the Company.
------
(x) "Successor-in-Interest" means the Participant's executor or
---------------------
administrator, or such other person or entity to whom the Participant's rights
under the Plan shall have passed by will or the laws of descent and
distribution.
(y) "Termination Form" means the form acceptable to the Committee which an
----------------
Employee shall use to withdraw from an Offering pursuant to section 8 of the
Plan.
3. ELIGIBILITY AND PARTICIPATION.
-----------------------------
(a) Initial Eligibility. Except as provided in section 3(b) of the Plan,
-------------------
each Employee shall be eligible to participate in the Plan.
(b) Ineligibility. An Employee shall not be eligible to participate in
-------------
the Plan if such Employee:
(1) Is a Five Percent Owner;
(2) Has been employed by a Participating Company on a full-time basis
for less than one full calendar quarter immediately preceding the effective date
of an election to purchase Shares pursuant to the Plan;
(3) Has not customarily worked more than 20 hours per week during a
24-consecutive-month period ending on the last day of the month immediately
preceding the effective date of an election to purchase Shares pursuant to the
Plan; or
(4) Is restricted from participating under section 3(d) of the Plan.
(c) Leave of Absence. For purposes of participation in the Plan, an
----------------
Employee on an Approved Leave of Absence shall be deemed to be an Employee for
the first 90 days of such Approved Leave of Absence and such Employee's
employment shall be deemed to have terminated for purposes of participation
under the Plan at the close of business on the 90th day of such Approved Leave
of Absence unless such Employee shall have returned to regular non-
-3-
<PAGE>
temporary employment before the close of business on such 90th day. Termination
by the Participating Company of an Employee's Approved Leave of Absence, other
than termination or return to non-temporary employment, shall terminate an
Employee's employment for all purposes of the Plan and shall terminate such
Employee's participation in the Plan and the right to exercise any option. An
Approved Leave of Absence shall be considered active employment for purposes of
sections 3(b)(3) and 3(b)(4) of the Plan.
(d) Restrictions on Participation. Notwithstanding any provisions of the
-----------------------------
Plan to the contrary, no Employee shall be granted an option to participate in
the Plan if:
(1) Immediately after the grant, such Employee would be a Five
Percent Owner; or
(2) Such option would permit such Employee's rights to purchase stock
under all employee stock purchase plans of the Participating Companies which
meet the requirements of section 423(b) of the Code to accrue at a rate which
exceeds $25,000 in fair market value (as determined pursuant to section
423(b)(8) of the Code) for each calendar year in which such option is
outstanding.
(e) Commencement of Participation. An Employee who meets the
-----------------------------
eligibility requirements of sections 3(a) and 3(b) of the Plan and whose
participation is not restricted under section 3(d) of the Plan shall become a
Participant by completing an Election Form and filing it with the Committee on
or before the 15th day of the month immediately preceding the Offering
Commencement Date for the first Offering to which such Election Form applies.
Payroll Deductions for a Participant shall commence on the applicable Offering
Commencement Date when his or her authorization for Payroll Deductions becomes
effective, and shall end on the Plan Termination Date, unless sooner terminated
by the Participant pursuant to section 8 of the Plan.
4. SHARES PER OFFERING.
-------------------
The Plan shall be implemented by a series of Offerings that shall terminate
on the Plan Termination Date. Offerings shall be made with respect to
Compensation payable for each calendar month of the Company's fiscal year for
the period commencing with the first day of the month first occurring on or
after adoption of the Plan by the Board and ending with the Plan Termination
Date. Shares available for any Offering shall be the difference between the
maximum number of Shares that may be issued under the Plan, as determined
pursuant to section 10(a) of the Plan, for all of the Offerings, less the actual
number of Shares purchased by Participants pursuant to prior Offerings. If the
total number of Shares for which options are exercised on any Offering
Termination Date exceeds the maximum number of Shares available, the Committee
shall make a pro rata allocation of Shares available for delivery and
distribution in as nearly a uniform manner as practicable, and as it shall
determine to be fair and equitable,
-4-
<PAGE>
and the unapplied Account balances shall be returned to Participants as soon as
practicable following the Offering Termination Date.
5. PAYROLL DEDUCTIONS.
------------------
(a) Amount of Payroll Deductions. An Eligible Employee who wishes to
----------------------------
participate in the Plan shall file an Election Form with the Committee at least
15 days before the Offering Commencement Date for the first Offering for which
such Election Form is effective on which he or she may elect to have Payroll
Deductions of such amounts designated by the Committee on the Election Form from
time to time made from his or her Compensation on each regular payday during the
time he or she is a Participant in the Plan, provided that the rules established
by the Committee shall be consistent with section 423(b)(5) of the Code.
(b) Participants' Accounts. All Payroll Deductions with respect to a
----------------------
Participant pursuant to section 5(a) of the Plan shall be credited to the
Participant's Account under the Plan.
(c) Changes in Payroll Deductions. A Participant may discontinue his
-----------------------------
participation in the Plan as provided in section 8(a) of the Plan, but no other
change can be made during an Offering, including, but not limited to, changes in
the amount of Payroll Deductions for such Offering. A Participant may change
the amount of Payroll Deductions for subsequent Offerings by giving written
notice of such change to the Committee on or before the 15th day of the month
immediately preceding the Offering Commencement Date for the Offering for which
such change is effective.
(d) Leave of Absence. A Participant who goes on an Approved Leave of
----------------
Absence before the Offering Termination Date after having filed an Election Form
with respect to such Offering may:
(1) Withdraw the balance credited to his or her Account pursuant to
section 8(b) of the Plan;
(2) Discontinue contributions to the Plan but remain a Participant in
the Plan through the Offering Termination Date;
(3) Remain a Participant in the Plan during such Approved Leave of
Absence through the Offering Termination Date and continue the authorization for
the Participating Company to make Payroll Deductions for each payroll period out
of continuing payments to such Participant, if any.
6. GRANTING OF OPTIONS.
-------------------
On each Offering Termination Date, each Participant shall be deemed to have
been granted an option to purchase a minimum of one (1) Share and a maximum
number of Shares
-5-
<PAGE>
that shall be a number of whole Shares equal to the quotient obtained by
dividing the balance credited to the Participant's Account as of the Offering
Termination Date, by the Option Price.
7. EXERCISE OF OPTIONS.
-------------------
(a) Automatic Exercise. With respect to each Offering, a Participant's
------------------
option for the purchase of Shares granted pursuant to section 6 of the Plan
shall be deemed to have been exercised automatically on the Offering Termination
Date applicable to such Offering.
(b) Fractional Shares and Minimum Number of Shares. Fractional Shares
----------------------------------------------
shall not be issued under the Plan. Amounts credited to an Account remaining
after the application of such Account to the exercise of options for a minimum
of one (1) full Share shall be credited to the Participant's Account for the
next succeeding Offering, or, at the Participant's election, returned to the
Participant as soon as practicable following the Offering Termination Date,
without interest.
(c) Transferability of Option. No option granted to a Participant
-------------------------
pursuant to the Plan shall be transferable other than by will or by the laws of
descent and distribution, and no such option shall be exercisable during the
Participant's lifetime other than by the Participant.
(d) Delivery of Certificates for Shares. The Company shall deliver
-----------------------------------
certificates for Shares acquired on the exercise of options during an Offering
Period as soon as practicable following the Offering Termination Date.
8. WITHDRAWALS.
-----------
(a) Withdrawal of Account. A Participant may elect to withdraw the
---------------------
balance credited to the Participant's Account by providing a Termination Form to
the Committee at any time before the Offering Termination Date applicable to any
Offering.
(b) Amount of Withdrawal. A Participant may withdraw all, but not less
--------------------
than all, of the amounts credited to the Participant's Account by giving a
Termination Form to the Committee. All amounts credited to such Participant's
Account shall be paid as soon as practicable following the Committee's receipt
of the Participant's Termination Form, and no further Payroll Deductions will be
made with respect to the Participant.
(c) Effect of Withdrawal on Subsequent Participation. A Participant who
------------------------------------------------
elects to withdraw from an Offering pursuant to section 8(a) of the Plan shall
be deemed to have elected not to participate in each of the four succeeding
Offerings following the date on which the Participant gives a Termination Form
to the Committee.
(d) Termination of Employment. Upon termination of a Participant's
-------------------------
employment for any reason other than death, including termination due to
disability or continuation of a leave of
-6-
<PAGE>
absence beyond 90 days, all amounts credited to such Participant's Account shall
be returned to the Participant. In the event of a Participant's (1) termination
of employment due to death or (2) death after termination of employment but
before the Participant's Account has been returned, all amounts credited to such
Participant's Account shall be returned to the Participant's Successor-in-
Interest.
(e) Leave of Absence. A Participant who is on an Approved Leave of
----------------
Absence shall, subject to the Participant's election pursuant to section 5(d) of
the Plan, continue to be a Participant in the Plan until the end of the first
Offering ending after commencement of such Approved Leave of Absence. A
Participant who has been on an Approved Leave of Absence for more than 90 days
shall not be eligible to participate in any Offering that begins on or after the
commencement of such Approved Leave of Absence so long as such leave of absence
continues.
9. INTEREST.
--------
No interest shall be paid or allowed with respect to amounts paid into the
Plan or credited to any Participant's Account.
10. SHARES.
------
(a) Maximum Number of Shares. No more than [____________] Shares may be
------------------------
issued under the Plan. Such Shares may be unissued shares or treasury shares of
the Company. The number of Shares available for any Offering and all Offerings
shall be adjusted if the number of outstanding Shares of the Company is
increased or reduced by split-up, reclassification, stock dividend or the like.
All Shares issued pursuant to the Plan shall be validly issued, fully paid and
nonassessable.
(b) Participant's Interest in Shares. A Participant shall have no
--------------------------------
interest in Shares subject to an option until such option has been exercised.
(c) Registration of Shares. Shares to be delivered to a Participant under
----------------------
the Plan shall be registered in the name of the Participant.
(d) Restrictions on Exercise. The Board may, in its discretion, require
------------------------
as conditions to the exercise of any option such conditions as it may deem
necessary to assure that the exercise of options is in compliance with
applicable securities laws.
11. EXPENSES.
--------
The Participating Companies shall pay all fees and expenses incurred
(excluding individual Federal, state, local or other taxes) in connection with
the Plan. No charge or deduction for any such expenses will be made to a
Participant upon the termination of his or her
-7-
<PAGE>
participation under the Plan or upon the distribution of certificates
representing Shares purchased with his or her contributions.
12. TAXES.
-----
The Participating Companies shall have the right to withhold from each
Participant's Compensation an amount equal to all Federal, state, city or other
taxes as the Participating Companies shall determine are required to be withheld
by them. In connection with such withholding, the Participating Companies may
make any such arrangements as are consistent with the Plan as it may deem
appropriate, including the right to withhold from Compensation paid to a
Participant other than in connection with the Plan.
13. PLAN AND CONTRIBUTIONS NOT TO AFFECT EMPLOYMENT.
-----------------------------------------------
The Plan shall not confer upon any Eligible Employee any right to continue
in the employ of the Participating Companies.
14. ADMINISTRATION.
--------------
The Plan shall be administered by the Board, which may delegate
responsibility for such administration to a committee of the Board (the
"Committee"). If the Board fails to appoint the Committee, any references in
the Plan to the Committee shall be treated as references to the Board. The
Board, or the Committee, shall have authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, and to make
all other determinations deemed necessary or advisable in administering the
Plan, with or without the advice of counsel. The determinations of the Board or
the Committee on the matters referred to in this paragraph shall be conclusive
and binding upon all persons in interest.
15. AMENDMENT AND TERMINATION.
-------------------------
The Board may terminate the Plan at any time and may amend the Plan from
time to time in any respect; provided, however, that upon any termination of the
Plan, all Shares or Payroll Deductions (to the extent not yet applied to the
purchase of Shares) under the Plan shall be distributed to the Participants,
provided further, that no amendment to the Plan shall affect the right of a
Participant to receive his or her proportionate interest in the Shares or his or
her Payroll Deductions (to the extent not yet applied to the purchase of Shares)
under the Plan, and provided further that the Company may seek shareholder
approval of an amendment to the Plan if such approval is determined to be
required by or advisable under the regulations of the Securities or Exchange
Commission or the Internal Revenue Service, the rules of any stock exchange or
system on which the Shares are listed or other applicable law or regulation.
16. EFFECTIVE DATE.
--------------
-8-
<PAGE>
The Plan shall be effective on the date it is adopted by the Board, subject
to approval by the Company's shareholders within one year of the adoption of the
Plan by the Board. Any option granted before the approval of the Plan by the
Company's shareholders shall be expressly conditioned upon such approval, and no
Share certificates shall be issued until such approval. If shareholder approval
is not received within 12 months before or after the date of the initial
adoption of the Plan by the Board, no Share certificates shall be issued with
respect to any automatic exercises which may have occurred pursuant to section 7
of the Plan, and all amounts credited to Participants' Accounts with respect to
such Shares shall be returned to Participants as soon as administratively
practicable.
17. GOVERNMENT AND OTHER REGULATIONS.
--------------------------------
(a) In General. The purchase of Shares under the Plan shall be subject to
----------
all applicable laws, rules and regulations, and to such approvals by any
governmental agencies as may be required.
(b) Securities Law. The Committee shall have the power to make each grant
--------------
under the Plan subject to such conditions as it deems necessary or appropriate
to comply with the then-existing requirements of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, including Rule
16b-3 (or any similar rule) of the Securities and Exchange Commission.
18. NON-ALIENATION.
--------------
No Participant shall be permitted to assign, alienate, sell, transfer,
pledge or otherwise encumber his interest under the Plan prior to the
distribution to him of Share certificates. Any attempt at assignment,
alienation, sale, transfer, pledge or other encumbrance shall be void and of no
effect.
19. NOTICES.
-------
Any notice required or permitted hereunder shall be sufficiently given only
if delivered personally, telecopied, or sent by first class mail, postage
prepaid, and addressed:
If to the Company:
-----------------
Secretary
CARESIDE, Inc.
6100 Bristol Parkway
Culver City, CA 90230
Or any other address provided pursuant to written notice.
-9-
<PAGE>
If to the Participant:
---------------------
At the address on file with the Company from time to time, or to such other
address as either party may hereafter designate in writing by notice
similarly given by one party to the other.
20. SUCCESSORS.
----------
The Plan shall be binding upon and inure to the benefit of any successor,
successors or assigns of the Company.
21. SEVERABILITY.
------------
If any part of this Plan shall be determined to be invalid or void in any
respect, such determination shall not affect, impair, invalidate or nullify the
remaining provisions of this Plan which shall continue in full force and effect.
22. ACCEPTANCE.
----------
The election by any Eligible Employee to participate in this Plan
constitutes his or her acceptance of the terms of the Plan and his or her
agreement to be bound hereby.
23. APPLICABLE LAW.
--------------
This Plan shall be construed in accordance with the laws of the State of
Delaware, to the extent not preempted by applicable Federal law.
-10-
<PAGE>
EXHIBIT 10.32
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT dated as of March 6, 1998 (the
"Effective Date") between Exigent Diagnostics, Inc., a Delaware corporation (the
"Company"), and each Investor executing a copy hereof (each a "Stockholder";
collectively, are the "Stockholders").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company intends to offer for sale to the Stockholders up to
4,615,380 shares of common stock, $.01 par value per share (the "Common Stock"),
plus, at the option of the Company, up to an additional 692,307 shares of Common
Stock solely to cover over subscriptions;
WHEREAS, the Stockholders desire to purchase from the Company, and the
Company desires to issue and sell to the Stockholders, up to an aggregate of 60
Units (plus, at the option of the Company, an additional 9 Units solely to cover
oversubscriptions, if any), each Unit consisting of 76,923 shares of Common
Stock, all upon the terms set forth in the Company's Confidential Private
Placement Memorandum dated January 29, 1998 (the "Memorandum") (the "Purchase
Shares");
WHEREAS, to induce the Stockholders to purchase Units, the Company has
agreed to register shares of Common Stock pursuant to the terms and conditions
set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements made herein, and other good valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and accepted, the parties hereto
agree as follows:
1. Definitions. As used herein, unless the context otherwise requires,
-----------
the following terms have the following respective meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange
Act.
"Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Common Stock" has the meaning set forth in the first WHEREAS clause
of the Recitals.
"Demand" has the meaning set forth in Section 2.1.1.
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
promulgated thereunder, as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include reference to the comparable section, if any, of any such
subsequent similar federal statute.
"Initial Public Offering" means the first offering of securities
registered with the Commission under the Securities Act.
"Joint Stockholders" means the Stockholders who are or may from time
to time become a party to this Agreement, together with the "Stockholders" who
are or may from time to time become a party to the Prior Agreement.
"Participating Holder" has the meaning set forth in Section 2.1.4.
"Person" means any individual, partnership, joint venture,
corporation, trust. unincorporated organization, government or department or
agency of a government.
"Placement Agent" means Spencer Trask Securities Incorporated.
"Prior Agreement" means that certain Registration Rights Agreement
executed by the Company and each Person who purchased Common Stock pursuant to
the Prior Offering.
"Prior Offering" means the Company's initial private placement of
Common Stock through the Placement Agent.
"Public Offering" means a public offering of the securities registered
with the Commission under the Securities Act.
"Registrable Common Securities" means the Purchase Shares, together
with any other shares of Common Stock purchased by any Joint Stockholder in the
Prior Offering.
"Registrable Securities" means collectively the Registrable Common
Securities and any other securities issuable in connection therewith or in
replacement thereof by way of a dividend, distribution, recapitalization,
exchange, merger, consolidation or other reorganization. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall be permitted to be sold by, and in compliance with,
Rule 144 (or any successor provision) promulgated under the Securities Act
(unless the Placement Agent and the Company consent to their being considered
"Registrable Securities" notwithstanding their ability to sell such securities
by, and in compliance with, Rule 144 (or any successor provision) or (c) they
shall have ceased to be outstanding.
-2-
<PAGE>
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration, filing and National Association of Securities Dealers, Inc. fees,
all listing fees, all fees and expenses of complying with securities or blue sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities), all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements of counsel for the
Company and counsel for the Participating Holders comprising not more than one
outside law firm which shall be selected by the Participating Holders of a
majority of the Registrable Securities sought to be registered in such
registration ("Selling Stockholder Counsel"), and of the Company's independent
public accountants, including the expenses of "comfort" letters required by or
incident to such performance and compliance, and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
subsequent similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
References to a particular section of the Securities Act of 1933, as amended,
shall include a reference to the comparable section, if any, of any such
subsequent similar federal statute.
2. Registration Rights.
-------------------
2.1 Initial Registration and Registration on Demand.
-----------------------------------------------
2.1.1 Initial Registration. In the event the Company shall
--------------------
complete an Initial Public Offering of its securities prior to the fifth (5th)
anniversary of the Final Closing Date (as defined in the Memorandum), the
Company shall, subject to and in accordance with the terms, conditions,
procedures and requirements set forth herein, cause to be filed and take all
commercially reasonable efforts to effect the registration under the Securities
Act of all Registrable Securities not later than 360 days after the closing of
such Initial Public Offering, or such later date as shall be negotiated on
behalf of the Joint Stockholders by the Placement Agent, the Company and any
underwriter for such Initial Public Offering as shall be determined by the terms
hereof (the "Holdback Period"); provided, however, that a holder of Registrable
Securities may inform the Company in writing that it wishes to exclude all or a
portion of its Registrable Securities from such registration.
2.1.2. Demand. In the event that by the fifth (5th) anniversary
------
of the Effective Date the Company has not yet completed an Initial Public
Offering, subject to Section 2.1.7, upon the written request (the "Demand") of
the holders of a majority of Registrable Securities that the Company effect the
registration under the Securities Act of all or part of the Registrable
Securities, the Company shall cause to be filed, and shall take all commercially
reasonable actions to effect, as soon as practicable and in any event, subject
to the reasonable
-3-
<PAGE>
cooperation of the Joint Stockholders, within 120 days after the Demand is
received from the Joint Stockholders, the registration under the Securities Act,
of the Registrable Securities which the Company has been so requested to
register by the Joint Stockholders. Whenever the Company shall effect a
registration pursuant to Section 2.1 in connection with an underwritten Public
Offering by the Joint Stockholders of Registrable Securities, holders of
securities of the Company who have "piggyback" registration rights may include
all or a portion of such securities in such registration, offering or sale. If
the managing underwriter of any such Public Offering shall inform the Company by
letter of its belief that the number or type of securities of the Company
requested by holders of the securities of the Company other than the Joint
Stockholders to be included in such registration would materially and adversely
affect the underwritten Public Offering, then the Company shall include in such
registration, to the extent of the number and type of securities which the
Company is so advised can be sold in (or during the time of) such Public
Offering, first, all of the Registrable Securities specified by the Joint
Stockholders in the Demand and second, for each holder of the Company's
securities other than the Joint Stockholders, the fraction of each holder's
securities proposed to be registered which is obtained by dividing (i) the
number of the securities of the Company that such holder proposes to include in
such registration by (ii) the total number of securities proposed to be included
in such registration by all holders other than the Joint Stockholders. Prior to
such registration being declared effective, the Joint Stockholders holding a
majority of the Registrable Securities requesting such Demand registration may
withdraw such Demand registration, subject to the provisions of Section 2.1.4
below.
2.1.3. Registration Statement Form. Registrations under this Section
---------------------------
2.1 shall be on such appropriate registration form of the Commission as shall be
selected by the Company. The Company shall include in any such registration
statement all information which. in the opinion of counsel to the Company, is
required to be included.
2.1.4. Expenses. The Company shall pay the Registration Expenses in
--------
connection with any registration effected pursuant to this Section 2.1, other
than underwriting discounts and selling commissions relating to the sale or
disposition of Registrable Securities. if the registration pursuant to Section
2.1.2 is withdrawn at the request of a majority of the Joint Stockholders
requesting registration and if such Joint Stockholders elect not to have such
registration count as its Demand registration under Section 2.1.2, the Joint
Stockholders shall pay all the Registration Expenses of such registration, other
than the fees and expenses of counsel to the Company or of any other holder of
Common Stock participating in the registration (a "Participating Holder"). At
no time shall the Joint Stockholders be required to pay the underwriting
discounts or selling commissions relating to the sale or disposition of shares
of Common Stock by other Persons, or the fees and expenses of any Participating
Holder's or the Company's counsel, except as required by Section 2.6.2 below.
2.1.5. Effective Registration Statement. A registration requested
--------------------------------
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, (ii)
if after it has become effective, such registration is
-4-
<PAGE>
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason and has not
thereafter become effective, or (iii) in the case of an underwritten Public
Offering, if the conditions to closing specified in the underwriting agreement,
if any, entered into in connection with such registration are not satisfied or
waived.
2.1.6. Selection of Underwriters. In connection with each
-------------------------
underwritten Public Offering, (a) the Company shall promptly select the managing
underwriter subject to the approval of the Joint Stockholders (by the holders of
a majority of the Registrable Securities sought to be registered by the
Participating Holders), which approval shall not be unreasonably withheld,
delayed or conditioned by the Joint Stockholders, and (b) if they so desire, the
Joint Stockholders shall promptly (by the holders of a majority of the
Registrable Securities sought to be registered by the Participating Holders in
such Demand) select the co-managing underwriter subject to the approval of the
Company (which approval shall not be unreasonably withheld, delayed or
conditioned by the Company).
2.1.7. Limitations on Registration. The Company shall not be
---------------------------
required to file a registration statement pursuant to this Section 2.1(a) which
would become effective within (i) the Holdback Period, or such shorter period as
agreed to by the lead managing underwriter for the Company's Initial Public
Offering, following the effective date of a registration statement filed by the
Company with the Commission pertaining to an Initial Public Offering for the
account of the Company, provided that no other holder of the Company's
securities shall have been permitted to participate in such Initial Public
Offering, or (ii) 120 days following the effective date of a registration
statement (other than a registration statement filed on Form S-4 or S-8) filed
by the Company with the Commission pertaining to any subsequent Public Offering
for the account of the Company or another holder of securities of the Company if
the Joint Stockholders were afforded the opportunity to include all of its
Registrable Securities in such subsequent registration pursuant to Section 2.2,
or (b) if it would violate any restriction or prohibition requested by any
managing underwriter for the Company's Initial Public Offering. In no event
shall the Company be required to effect more than one (1) registration pursuant
to Section 2.1.1 and one (1) registration pursuant to Section 2.1.2.
Notwithstanding the foregoing, if, in the good faith determination of the
Company's Board of Directors, a registration would adversely affect certain
activities of the Company to the material detriment of the Company, then the
Company may at its option direct that such registration be delayed for a period
not in excess of 90 days in the aggregate from the date of the Company's receipt
of the Demand or from the first date upon which the Company is required to
effect the registration contemplated by Section 2.1.1, as applicable (the
"Period of Delay"); provided, however, if there shall occur any such delay in
the registration hereunder, then the holders of the Registrable Securities shall
be entitled, (i) for a period of thirty (30) days after the Period of Delay, to
effect a Demand registration under Section 2.1.2 prior to any other holder of
registration rights (other than SmithKline Beecham Corporation, its affiliates
and their permitted transferees, as to which the rights hereunder shall be pari
----
pasu) or prior to a registered Public Offering by the Company (other than such a
- ----
Public Offering by the Company on Form S-4 or S-8), and (ii) to effect a
registration under Section 2.
-5-
<PAGE>
1.1 prior to any other holder of registration rights (other than SmithKline
Beecham Corporation, its affiliates and their permitted transferees, as to which
the rights hereunder shall be pari pasu) or prior to a registered Public
---- ----
Offering by the Company (other than such a Public Offering by the Company on
Form S-4 or S-8).
2.2 Piggyback Registration.
----------------------
2.2.1. Right to Include Registrable Securities. If the
---------------------------------------
Company at any time proposes to register any of its securities under the
Securities Act by registration on Forms S- 1, S-2, S-3) or any successor or
similar form(s) (except registrations on such Forms or similar forms solely for
registration of securities in connection with (i) an employee benefit plan or
dividend reinvestment plan or a merger or consolidation or (ii) debt securities
which are not convertible into Common Stock), whether or not for sale for its
own account, it shall each such time give written notice to the Joint
Stockholders of its intention to do so at least 30 days prior to the anticipated
filing date of a registration statement with respect to such registration with
the Commission. Upon the written request of the Joint Stockholders made as
promptly as practicable and in any event within 10 business days after the
receipt of any such notice, which request shall specify the Registrable
Securities intended to be disposed of by the Joint Stockholders, the Company
shall use commercially reasonable efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the Joint Stockholders; provided, however, that if, at
any time after giving written notice of its intention to register any securities
and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to the Joint
Stockholders and (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from any obligation of the Company to pay the
Registration Expenses in connection therewith), without prejudice, provided,
however, that the Joint Stockholders may request that such registration be
effected as a registration under Section 2.1.2 hereof if such registration right
was then available to the Joint Stockholders under Section 2.1.2 hereof) and
(ii) in the case of a determination to delay registering, shall be permitted to
delay registering any Registrable Securities for the same period as the delay in
registering such other securities. The Company shall pay all Registration
Expenses in connection with registration of Registrable Securities requested
pursuant to Section 2.2, other than underwriting discounts and selling
commissions relating to the sale or disposition of Registrable Securities.
2.2.2. Priority in Piggyback Registrations. Priority in
----------------------------------- -----------
Piggyback Registrations. Notwithstanding anything in Section 2.2.1 above to the
- -----------------------
contrary, if the managing underwriter of any underwritten Public Offering shall
inform the Company by letter of its belief that the number or type of
Registrable Securities requested to be included in such registration would
materially and adversely affect such Public Offering, then the Company shall
promptly notify the Joint Stockholders of such fact. If the managing underwriter
does not agree to include
-6-
<PAGE>
all (or such lesser amount as the Joint Stockholders shall, in their discretion,
agree to) of the number of the Registrable Securities initially requested by the
Joint Stockholders to be included in such registration, then the Company shall
include in such registration, to the extent of the number and type which the
Company is so advised can be sold in (or during the time of) such Public
Offering first, all securities proposed by the Company to be sold for its
account, if the Company initiated such registration, or by the holder of
securities or initiated such demand registration, if any, second, for each
Initial Stockholder (other than the Waiving Initial Stockholders), the fraction
of such Initial Stockholder's securities proposed to be registered which is
obtained by dividing (i) the number of the securities of the Company that such
Initial Stockholder proposes to include in such registration by (ii) the total
number of securities proposed to be sold in such Public Offering by all such
Initial Stockholders, and third, for each of the Stockholders signatory hereto,
the Waiving Initial Stockholders and any other holders of contractual
registration rights, if any, the fraction of such holder's securities proposed
to be registered which is obtained by dividing (i) the number of the securities
of the Company that such holder proposes to include in such registration by (ii)
the total number of securities proposed to be sold in such Public Offering by
all such Stockholders signatory hereto, all such Waiving Initial Stockholders
and all such other holders of contractual registration rights. As used herein,
the term "Initial Stockholders" means each Person who prior to the date hereof
was a party to that certain Stockholders' Agreement dated as of December 4, 1996
and relating to the Company, and each such Person's successors and assigns. As
used herein, the term "Waiving Initial Stockholders" means those Initial
Stockholders who agree to waive their order of priority set forth in Section
2.2.2 of the Prior Agreement and agree to rank pari passu in order of priority
in regards to piggyback registration rights with the Stockholders signatory
hereto.
2.3 Registration Procedures.
-----------------------
2.3.1. In connection with the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2, the
Company shall as promptly as practicable:
(i) prepare and file with the Commission the
requisite registration statement to effect such registration and thereafter use
commercially reasonable efforts to cause such registration statement to become
and remain effective;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
registration statement for 180 days or such shorter period as may be required
for the disposition of all of such Registrable Securities by the underwriters;
(iii) furnish to the Joint Stockholders such number of
conformed copies of such registration statement and of each such amendment and
supplement
-7-
<PAGE>
thereto (in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule
424 under the Securities Act, in conformity with the requirements of the
Securities Act, and such number of copies of such other documents as the Joint
Stockholders may reasonably request;
(iv) use commercially reasonable efforts (x) to register or
qualify all Registrable Securities and other securities covered by such
registration statement under such other securities or Blue Sky laws of such
States of the United States of America where an exemption is not available and
as the Joint Stockholders shall reasonably request, (y) to keep such
registration or qualification in effect for so long as such registration
statement remains in effect, and (z) to take any other action which may
reasonably be necessary or advisable to enable the Joint Stockholders to
consummate the disposition in such jurisdictions of the Registrable Securities
to be sold by the Joint Stockholders, except that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
Company in any jurisdiction wherein it would not, but for the requirements of
this paragraph (iv), be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
(v) use commercially reasonable efforts to cause all
Registrable Securities covered by such registration statement to be registered
with or approved by such other federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to the Company and
counsel to the Joint Stockholders to consummate the disposition of such
Registrable Securities in accordance with their intended method of disposition;
(vi) furnish to the Joint Stockholders, (x) an opinion of
outside counsel for the Company, and (y) a copy of a "comfort" letter addressed
to the Company and/or any managing underwriter signed by the certified
independent public accountants who have certified the Company's financial
statements included or incorporated by reference in such registration statement,
each covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountant's comfort letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountant's comfort letters delivered to the underwriters in
underwritten Public Offerings of securities (and dated the dates such opinions
and comfort letters are customarily dated);
(vii) notify the Joint Stockholders when a prospectus
relating thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of which, the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were made, and at
the request of the Joint Stockholders to use its best efforts to promptly
prepare and furnish to the Joint Stockholders such number of copies of a
supplement to or an amendment of such prospectus as
-8-
<PAGE>
may be necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
under which they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security-holders, as soon as reasonably practicable, an earnings statement
meeting the requirements of Section 11(a) of the Securities Act, which the
Company shall be entitled to satisfy by complying with the requirements of Rule
158 promulgated thereunder, and promptly famish a copy of the same to the Joint
Stockholders;
(ix) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement; and
(x) use commercially reasonable efforts to list all
Registrable Securities covered by such registration statement on any national
securities exchange or over-the-counter market, if any, on which Registrable
Securities of the same class, and if applicable, series, covered by such
registration statement are then listed.
The Joint Stockholders agree that upon receipt of any notice from the
Company of the happening of an event of the kind described in Section 2.3.1
(vii), the Joint Stockholders shall forthwith discontinue its disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until the Joint Stockholders' receipt of the copies of
the supplemented or amended prospectus contemplated by Section 2.3.1(vii).
2.4 Underwritten Offerings.
----------------------
2.4.1. Requested Underwritten Offerings. If requested by the
--------------------------------
underwriters for any underwritten Public Offering by the Joint Stockholders
pursuant to a registration requested under Section 2.1, the Company shall enter
into an underwriting agreement with such underwriters for such Public Offering,
such agreement to be reasonably satisfactory in substance and form to the
Company, the Joint Stockholders and the underwriters, and to contain such
representations and warranties by the Company and the Joint Stockholders and
such other terms as are generally prevailing in agreements of that type,
including, without limitation, indemnities to the effect and to the extent
provided in Section 2.6 or as are generally prevailing in agreements of that
type. The Joint Stockholders shall cooperate with the Company in the
negotiation of the underwriting agreement and shall give consideration to the
reasonable suggestions of the Company regarding the form and substance thereof.
The Joint Stockholders shall be a party to such underwriting agreement. The
Joint Stockholders shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding the Joint Stockholders, the
Joint
-9-
<PAGE>
Stockholders' Registrable Securities, the Joint Stockholders' intended method of
distribution and any other representations or warranties required by law or
customarily given by selling shareholders in an Underwritten Public Offering or
as reasonably required by the managing underwriter of the Public Offering of
Registrable Securities.
2.4.2. Piggyback Underwritten Offerings. If the Company proposes
--------------------------------
to register any of its securities under the Securities Act as contemplated by
Section 2.2 and such securities are to be distributed by or through one or more
underwriters, subject to the other provisions of Section 2.2.2 the Company
shall, if requested by the Joint Stockholders such underwriters to include all
the Registrable Securities to be offered and sold by the Joint Stockholders
among the securities of the Company to be distributed by such underwriters. The
Joint Stockholders shall become a party to the underwriting agreement negotiated
between the Company and such underwriters. The Joint Stockholders shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding the Joint Stockholders, the Joint Stockholders' Registrable Securities
and the Joint Stockholders' intended method of distribution or any other
representations or warranties required by law or customarily given by selling
shareholders in an underwritten Public Offering or as reasonably required by the
managing underwriter of the Public Offering of Registrable Securities.
2.4.3. Holdback Agreements.
-------------------
(i) In connection with the Initial Public Offering or
any registration of Registrable Securities in connection with an underwritten
Public Offering, the Joint Stockholders agree if required by the underwriter or
underwriters not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any Registrable Securities,
and not to effect any such public sale or distribution of any other equity
security of the Company or of any security convertible into or exchangeable or
exercisable for any equity security of the Company (in each case, other than as
part of such underwritten Public Offering) during the 15 days prior to, and
during the Holdback Period, or such shorter period set forth in the underwriting
agreement with respect to such Public Offering as the managing underwriter of
such Public Offering shall reasonably require, beginning on, the effective date
of such registration statement.
(ii) If any registration of Registrable Securities shall
be in connection with an underwritten Public Offering, the Company agrees (x) if
required by the underwriter or underwriters, not to effect any public sale or
distribution of any of its equity securities or of any security convertible into
or exchangeable or exercisable for any equity security of the Company (other
than in connection with any employee stock option or other benefit plan which
has been duly adopted by the Company and which provides for the distribution to
participants in the plan of equity securities of the Company or securities
convertible or exchangeable or exercisable for equity securities of the Company,
or in connection with a merger or acquisition approved by the Board of Directors
of the Company) during the
-10-
<PAGE>
Holdback Period, or such shorter period as the managing underwriter of such
Public Offering shall reasonably require, beginning on the effective date of
such registration statement (except as part of such registration) and (y) that
any agreement entered into after the date of this Agreement pursuant to which
the Company issues or agrees to issue any privately placed equity securities
shall contain a provision under which holders of such securities agree that, if
required by the underwriter or underwriters, they will not effect any public
sale or distribution of any such securities during the period referred to in the
foregoing clause (x), including any sale pursuant to Rule 144 under the
Securities Act (except as part of such registration, if permitted), if such
holder is participating in the Public Offering pursuant to such registration.
2.5. Preparation: Reasonable Investigation. In connection with the
--------------------------------------
preparation and filing of any registration statement under the Securities Act in
which the Joint Stockholders are or may be a selling shareholder, the Company
shall give the Joint Stockholders not less than 30 days prior written notice of
the preparation of such registration statement and give the Joint Stockholders
and its counsel and accountants the opportunity to participate, at the Joint
Stockholders' expense, in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each amendment
thereof or supplement thereto @provided that the Joint Stockholders shall
furnish the Company with comments on any such amendment or supplement as
promptly as the Company shall reasonably require), and give each of them such
access to its books and records, such opportunities to discuss the business of
the Company with officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of the
Joint Stockholders' counsel, to conduct a reasonable investigation within the
meaning of the Securities Act. Any expenses incurred by the Joint Stockholders
in connection with any such investigation shall be borne by the Joint
Stockholders other than the reasonable fees and disbursements of Selling
Stockholder Counsel incurred in connection with such investigation.
2.6. Indemnification.
---------------
2.6.1. Indemnification by the Company. In the event of any
------------------------------
registration of any securities of the Company under the Securities Act in which
the Joint Stockholders are selling shareholders, the Company shall, and hereby
does, indemnify and hold harmless, in the case of any registration statement
filed pursuant to Sections 2.1 or 2.2, the Participating Holders, its directors,
officers, employees, agents and affiliates and, to the extent required by any
underwriting agreement entered into by the Company, each other Person who
participates as an underwriter in the Public Offering or sale of such securities
and each other Person who controls a Participating Holder or any such
underwriter within the meaning of the Securities Act, insofar as losses, claims,
damages, or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon (a) any untrue
statement or alleged untrue statement of any fact contained in any registration
statement under which such securities were registered under the Securities Act,
any preliminary prospectus, final prospectus, or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a fact required to be stated therein or necessary to
make the statements therein in light of the circumstances in which thy were made
not misleading,
-11-
<PAGE>
(b) any violation by the Company, its directors, officers, employees or agents
of this Agreement or any law applicable to and in connection with such
registration, and the Company shall reimburse the Joint Stockholders and each
such director, officer, agent or affiliate and, to the extent required by an
underwriting agreement entered into by the Company, any underwriter and
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding described in clauses (a) and (b); provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by the
Participating Holders, specifically stating that it is for use in the
preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Participating
Holders or any such director, officer, agent or affiliate or controlling Person
and shall survive the transfer of such securities by the Participating Holders.
2.6.2. Indemnification by the Joint Stockholders. If any Registrable
-----------------------------------------
Securities are included in any registration statement, the Participating Holders
shall indemnify and hold harmless (in the same manner and to the same extent as
set forth in Section 2.6.1 above) the Company, each director of the Company,
each officer of the Company and each employee of the Company and, to the extent
required by any underwriting agreement entered into by the Participating
Holders, each other Person who participates as an underwriter in the Public
Offering or sale of such securities and each other Person who controls any such
underwriter within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by the Participating Holders
specifically stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement; provided, however, in no event shall the liability of
any Stockholder under this Section 2.6.2. exceed the proceeds obtained by the
sale of such Stockholder's Shares in any such registration.
2.6.3. Notice of Claims, Etc. Promptly after receipt, by an
---------------------
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 2.6,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party, immediately give written notice to the latter of
the commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 2.6, except to the extent that the indemnifying party is materially
prejudiced by such failure. The indemnified party shall be entitled to receive
-12-
<PAGE>
the indemnification payments described in Section 2.6.6 after providing such
written notice to the indemnifying party. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that the indemnifying
parties may agree, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable out of pocket costs related to the indemnified party's cooperation
with the indemnifying party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties arises in respect of such claim after the assumption of the defense
thereof. No indemnifying party shall be liable for any settlement of any action
or proceeding effected without its written consent, which shall not be
unreasonably withheld, delayed or conditioned. Consent of the indemnified party
shall be required for the entry of any judgment or to enter into a settlement
only when such judgment or settlement does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect such claim or litigation.
2.6.4. Contribution. If the indemnification provided for in this
------------
Section 2.6 shall for any reason be held by a court to be unavailable to an
indemnified party under Section 2.6.1 or 2.6.2 hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under Sections 2.6.1 or 2.6.2 hereof, the indemnified
party and the indemnifying party under Sections 2.6.1 or 2.6.2 hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on one hand and the Joint Stockholders on the
other or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect the relative
fault of the Company on one hand and the Joint Stockholders on the other that
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. No Person guilty of
fraudulent misrepresentation (within the meaning of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for' any settlement of any action or claim,
effected without such Person's written consent, which consent shall not be
unreasonably withheld; provided, however, in no event shall the liability of any
Stockholder under this Section 2.6.4. exceed the proceeds obtained by the sale
of such Stockholder's Shares in any such registration.
2.6.5. Other Indemnification. Indemnification and contribution
---------------------
similar to that specified in the preceding paragraphs of this Section 2.6 (with
appropriate modifications) shall be given by the Company and the Participating
Holders with respect to any required
-13-
<PAGE>
registration or other qualification of securities under any federal or state law
or regulation of any governmental authority other than the Securities Act.
3. Rule 144. With a view to making available the benefits of certain
--------
rules and regulations of the Commission that may permit the sale of the
Registrable Securities to the public without registration after an initial
Public Offering, the Company agrees to:
(a) provide information and such other assistance requested by
the Joint Stockholders as is customarily provided by issuers in connection with
sales of their common stock by directors or affiliates under Rule 144,
promulgated under the Securities Act;
(b) make and keep public information available, as those terms
are understood and defined in Rule 144 promulgated under the Securities Act at
all times;
(c) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(d) deliver a written statement as to whether it has complied
with such requirements of this Section, to the Joint Stockholders upon the Joint
Stockholders' request.
4. Remedies.
--------
(a) If the Company fails for any reason (other than reasons
relating to acts or omissions of any Shareholder) to register a Stockholder's
Registrable Securities subject and pursuant to the terms and conditions of this
Agreement, then, at the election of the Company, the Company shall (i) to the
extent of funds legally available therefor ("Available Funds"), repurchase all
of the Registrable Securities owned by all such Joint Stockholders for an amount
per share equal to the sum of the average of the appraised values of the Common
Stock (which shall not include any discount for minority interest) calculated by
each of two independent appraisal firms, one of which shall be selected by the
Placement Agent and the other of which shall be selected by the Company (the
"Fair Market Value"), or (ii) provide such Joint Stockholders with the rights
set forth in subsection (b) below. If the Company elects to purchase Registrable
Securities pursuant to clause (i) above and the aggregate Fair Market Value of
the Registrable Securities to be repurchased by the Company is greater than the
amount of Available Funds, then the number of Registrable Securities that the
Company shall so repurchase from each such Stockholder shall equal the product
obtained by multiplying the Available Funds by a fraction, the numerator of
which is the number of Registrable Securities owned by such Stockholder and the
denominator of which is the total number of Registrable Securities owned by such
Joint Stockholders.
(b) If the Company elects not to repurchase all of the
Registrable Securities which may be purchased pursuant to subsection (a) above,
then any Joint Stockholders
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<PAGE>
who thereafter continue to own shares of Common Stock and whose Registrable
Securities have not been registered shall have the right to nominate a majority
of the Board of Directors of the Company (including the right to remove
directors as necessary to create vacancies for the election of such nominees),
and the former partners of Exigent Partners, L.P., W. Vickery Stoughton and
Thomas H. Grove (the "Management Stockholders") hereby agree to vote their
shares of Common Stock, and the Company will cause any future purchaser of 5% or
more of the Common Stock of the Company to vote such shares of Common Stock, in
favor of the directors nominated by such Joint Stockholders at any meeting of
stockholders or pursuant to any written consent in which the election of
directors is submitted to the vote of the Company's stockholders (and to remove
directors as necessary to create vacancies therefor). The Company shall take all
steps necessary to cause a meeting of the Company's stockholders for the purpose
of effecting the foregoing. The obligations of the Partnership and the
Management Stockholders under this Section 5(b) shall terminate upon the earlier
of (i) the redemption of each such Stockholder's Registrable Securities or (ii)
the registration of each such Joint Stockholder's Registrable Securities. Upon
the termination of all the Joint Stockholder's rights set forth in this
subsection (b), all members of the Board of Directors of the Company who were
nominated and elected pursuant to the provisions of this subsection (b) shall,
immediately resign from the Board of Directors and the Company may remove any
such directors. The remaining members of the Board of Directors of the Company
are hereby authorized to fill any vacancies created as a result of any such
resignation or removal.
(c) For purposes of this Section 5, any Stockholder's Registrable
Securities shall be deemed to be so registered if such Stockholder elects not to
include his Registrable Securities in any registration statement in which such
Registrable Securities are eligible to be included pursuant to this Agreement.
(d) If Available Funds are insufficient to allow the Company to
repurchase all such Registrable Securities, each of the Management Stockholders,
the former partners of the Exigent Partners, L.P. and the Investors shall
perform such acts, execute such instruments, and vote his or its shares in such
manner as may be necessary to increase such surplus to an amount sufficient to
authorize such purchase, including but not limited to the following: (i) a
recapitalization of the Company so as to reduce its stated capital and increase
its surplus and (ii) a reappraisal of the Company's assets (including goodwill,
if any) to reflect the market value of such assets, in the event such value
exceeds the book value thereof.
(e) The rights of the Joint Stockholders pursuant to this Section
5 shall be in addition to all other rights and remedies that such Joint
Stockholders may have hereunder or at law or otherwise.
5. Modification: Waivers. This Agreement may be modified or amended
----------------------
only with the written consent of the Company and the holders of a majority of
the Registrable Securities. No party shall be released from its obligations
hereunder without the written consent of the Company and the holders of at least
a majority of the Registrable Securities. The observance of
-15-
<PAGE>
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) by the party entitled to
enforce such term but any such waiver shall be effective only if in a writing
signed by the party against which such waiver is to be asserted. Except as
otherwise specifically provided herein, no delay on the part of any party hereto
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any right, power or privilege hereunder.
6. Entire Agreement. This Agreement represents the entire understanding
----------------
and agreement between the parties hereto with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, between the par-ties with respect to the subject matter
hereof.
7. Severability. If any provision of this Agreement, or the application
------------
of such provision to any Person or circumstance, shall be held invalid, the
remainder of this Agreement or the application of such provision to other
Persons or circumstances, to the extent permitted by law, shall not be affected
thereby; provided, that the parties shall negotiate in good faith with respect
to an equitable modification of the provision or application thereof held to be
invalid.
8. Notices.
-------
(a) Any notice or communication to any party hereto shall be duly
given if in writing and delivered in person, receipt requested, or courier
guaranteeing next day delivery, or facsimile (with written confirmation of
receipt) to such other party's address or facsimile number facsimile set forth
below.
If to EXIGENT DIAGNOSTICS, INC. or a MANAGEMENT STOCKHOLDER:
5 Radnor Corporate Center
Suite 300
Radnor, Pennsylvania 19087
Attention: W. Vickery Stoughton
Facsimile: 610-971-9814
with a copy to:
James D. Epstein, Esquire
Pepper Hamilton LLP
3000 Two Logan Square
Philadelphia, PA 19103-2799
Facsimile: 215-981-4750
-16-
<PAGE>
If to the Partnership:
c/o Spencer Trask Securities Incorporated
535 Madison Avenue - 18th Floor
New York, New York 10022
Attention: Mr. Kevin Kimberlin
Facsimile: 212-751-3483
with a copy to:
John D. Vaughan, Esquire
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
Facsimile: 212-213-1199
If to a Stockholder, to such address set forth on the Stockholder's
signature page hereto, or if to an assignee or successor of a Stockholder, to
such address appearing in the records of the Company.
(b) All notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered or telecopied
(with written confirmation of receipt); and the next business day after timely
delivery to the courier, if sent by courier guaranteeing next day delivery.
9. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and shall be binding upon the Company and the Joint Stockholders and their
respective successors and permitted assigns. Each Stockholder may assign its
rights under this Agreement to any Person to whom the Stockholder transfers any
of the Registrable Securities or any interest therein without the necessity of
obtaining any consent to such assignment, provided that such Person becomes a
party to that certain stockholders agreement, by and among the Company, the
Joint Stockholders and certain other holders of the Common Stock. In the event
that a Stockholder assigns its rights to a holder or holders of only a portion
of the Registrable Securities, then all references to the Stockholder herein
shall also be deemed to refer to such other holder or holders, but in such event
the Stockholder shall have the sole right to make all decisions by and give
notices for such holder or holders under this Agreement; provided, that if the
Stockholder no longer owns any Registrable Securities, then all decisions and
notices hereunder shall be made by the holders of not less than a majority of
the Registrable Securities outstanding and all other holders of Registrable
Securities shall be bound by any such decision.
-17-
<PAGE>
10. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which for all purposes shall be deemed to be an original
and all of which together shall constitute the same agreement.
11. Headings. The Section headings in this Agreement are for convenience
--------
of reference only, and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
12. Construction. This Agreement shall be governed, construed and
------------
enforced in accordance with the laws of the State of New York without regard to
its principles of conflict of laws.
13. No Inconsistent Agreements. The Company has not previously, and shall
--------------------------
not hereafter, enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Joint Stockholders in this
Agreement.
14. Recapitalization, Etc. In the event that any capital stock or other
----------------------
securities are issued in respect of, in exchange for, or in substitution of, any
Registrable Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Registrable Securities or any other
similar change in the Company's capital structure, appropriate adjustments shall
be made in this Agreement so as to fairly and equitably preserve, as far as
practicable, the original rights and obligations of the parties hereto under
this Agreement.
15. Specific Performance. The parties hereto agree that the Registrable
--------------------
Securities of the Company cannot be purchased or sold in the open market and
that, for these reasons, among others, the holder or holders of the Registrable
Securities will be irreparably damaged in the event that this Agreement is not
specifically enforceable. The rights granted in this Section 16 shall be
cumulative and not exclusive, and shall be in addition to any and all other
rights which the parties hereto may have hereunder, at law or in equity. The
Company and the Joint Stockholders consent to the jurisdiction of the federal
courts in the City of New York in any suit, action or proceeding brought
pursuant to this Section 16, waives any objection it may have to the laying of
venue in any such suit, action or proceeding in any of such court, and agrees
that service of any court paper may be made in such manner as may be provided
under applicable laws or court rules governing service of process.
16. Term. This Agreement shall continue in full force and effect with
----
respect to any Stockholder for nine (9) years from the Final Closing (as defined
in the Memorandum), or the first date on which the such Stockholder and their
affiliates may sell all of the Securities held by them in a ninety (90) day
period pursuant to Rule 144 under the Securities Act.
17. Appointment of Agent. In connection with any Initial Public Offering,
--------------------
the holders of Registrable Securities appoint the Placement Agent to act as
their agent and attorney-
-18-
<PAGE>
in-fact to negotiate with the Company and the underwriters for the Initial
Public Offering the terms and conditions of the holdback agreements of the
holders of Registrable Securities as they relate to the Initial Public Offering
(including, but not limited to, the length of the Holdback Period, and the other
rights of such holders of Registrable Securities to sell their Registrable
Securities), and to execute and deliver any and all documents, and to take any
and all actions, in the name and on behalf of the holders of Registrable
Securities, as may be necessary or appropriate, in the judgment of the Placement
Agent, to confirm any agreements reached relating to the subject matter
described in this Section 17.
18. Termination of Prior Registration Agreement. The execution and
-------------------------------------------
delivery of this Agreement shall automatically terminate the Prior Agreement
which, thereupon, shall no longer be in force or effect and no party thereto
shall have any rights or obligations thereunder; provided that with respect to
those stockholders which purchased shares of Common Stock in the Prior Offering
and which have not consented to the amendment of the Prior Agreement, the
termination of the Prior Agreement shall be null and void. As a result of the
termination of the
-19-
<PAGE>
Prior Agreement, the registration rights of the Joint Stockholders shall be
governed exclusively by the terms and conditions of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first above written and delivered by their respective duly
authorized officers.
EXIGENT DIAGNOSTICS, INC.
By: /s/ Vickery Stoughton
--------------------------------
W. Vickery Stoughton
Chairman and Chief Executive Officer
As to Section 5 only:
/s/ Kevin Kimberlin
-----------------------------------
Kevin Kimberlin
/s/ Vickery Stoughton
-----------------------------------
W. Vickery Stoughton
/s/ Thomas Grove
-----------------------------------
Thomas H. Grove
As to Section 18 only:
On behalf of the Stockholders under the Prior
Agreement
By: Spencer Trask Securities Incorporated
Attorney-in-Fact
By: /s/ William Dioguardi
-------------------------
William P. Dioguardi
-20-
<PAGE>
STOCKHOLDER SIGNATURE PAGE
TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
_________ __, 1998.
If the Holder is an INDIVIDUAL:
______________________________
Print Name
______________________________
Signature
______________________________
______________________________
Print Address
If the Holder is a PARTNERSHIP,
CORPORATION or a TRUST:
______________________________
Name of Partnership, Corporation or Trust
By:___________________________
Signature
Print Name:______________
Print Title:_____________
______________________________
______________________________
Print Address
Accepted and agreed to this
____ day of _______________, 199_
EXIGENT DIAGNOSTICS, INC.
By:___________________________
W. Vickery Stoughton
Chairman & CEO
-21-
<PAGE>
EXHIBIT 10.33
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT dated March 6, 1998 (the "Effective
Date") between Exigent Diagnostics, Inc., a Delaware corporation (the
"Company"), and each Investor executing a copy hereof (each a "Stockholder";
collectively, are the "Stockholders").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company intends to offer for sale to the Stockholders up to
4,615,380 shares of common stock, $.01 par value per share (the "Common Stock"),
plus, at the option of the Company, up to an additional 692,307 shares of Common
Stock solely to cover over subscriptions;
WHEREAS, the Stockholders desire to purchase from the Company, and the
Company desires to issue and sell to the Stockholders, up to an aggregate of 60
Units (plus, at the option of the Company, an additional 9 Units solely to cover
oversubscriptions, if any), each Unit consisting of 76,923 shares of Common
Stock, all upon the terms set forth in the Company's Confidential Private
Placement Memorandum dated January 29, 1998 (the "Memorandum") (the "Purchase
Shares");
WHEREAS, to induce the Stockholders to purchase Units, the Company has
agreed to register shares of Common Stock pursuant to the terms and conditions
set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements made herein, and other good valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and accepted, the parties hereto
agree as follows:
1. Definitions. As used herein, unless the context otherwise requires,
-----------
the following terms have the following respective meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange
Act.
"Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Common Stock" has the meaning set forth in the first WHEREAS clause
of the Recitals.
"Demand" has the meaning set forth in Section 2.1.1.
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
promulgated thereunder, as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include reference to the comparable section, if any, of any such
subsequent similar federal statute.
"Initial Public Offering" means the first offering of securities registered
with the Commission under the Securities Act.
"Joint Stockholders" means the Stockholders who are or may from time to
time become a party to this Agreement, together with the "Stockholders" who are
or may from time to time become a party to the Prior Agreement.
"Participating Holder" has the meaning set forth in Section 2.1.4.
"Person" means any individual, partnership, joint venture, corporation,
trust. unincorporated organization, government or department or agency of a
government.
"Placement Agent" means Spencer Trask Securities Incorporated.
"Prior Agreement" means that certain Registration Rights Agreement executed
by the Company and each Person who purchased Common Stock pursuant to the Prior
Offering.
"Prior Offering" means the Company's initial private placement of Common
Stock through the Placement Agent.
"Public Offering" means a public offering of the securities registered with
the Commission under the Securities Act.
"Registrable Common Securities" means the Purchase Shares, together with
any other shares of Common Stock purchased by any Joint Stockholder in the Prior
Offering.
"Registrable Securities" means collectively the Registrable Common
Securities and any other securities issuable in connection therewith or in
replacement thereof by way of a dividend, distribution, recapitalization,
exchange, merger, consolidation or other reorganization. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall be permitted to be sold by, and in compliance with,
Rule 144 (or any successor provision) promulgated under the Securities Act
(unless the Placement Agent and the Company consent to their being considered
"Registrable Securities" notwithstanding their ability to sell such securities
by, and in compliance with, Rule 144 (or any successor provision) or (c) they
shall have ceased to be outstanding.
-2-
<PAGE>
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration, filing and National Association of Securities Dealers, Inc. fees,
all listing fees, all fees and expenses of complying with securities or blue sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities), all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements of counsel for the
Company and counsel for the Participating Holders comprising not more than one
outside law firm which shall be selected by the Participating Holders of a
majority of the Registrable Securities sought to be registered in such
registration ("Selling Stockholder Counsel"), and of the Company's independent
public accountants, including the expenses of "comfort" letters required by or
incident to such performance and compliance, and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
subsequent similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
References to a particular section of the Securities Act of 1933, as amended,
shall include a reference to the comparable section, if any, of any such
subsequent similar federal statute.
2. Registration Rights.
-------------------
2.1. Initial Registration and Registration on Demand.
-----------------------------------------------
2.1.1. Initial Registration. In the event the Company shall
--------------------
complete an Initial Public Offering of its securities prior to the fifth (5th)
anniversary of the Final Closing Date (as defined in the Memorandum), the
Company shall, subject to and in accordance with the terms, conditions,
procedures and requirements set forth herein, cause to be filed and take all
commercially reasonable efforts to effect the registration under the Securities
Act of all Registrable Securities not later than 360 days after the closing of
such Initial Public Offering, or such later date as shall be negotiated on
behalf of the Joint Stockholders by the Placement Agent, the Company and any
underwriter for such Initial Public Offering as shall be determined by the terms
hereof (the "Holdback Period"); provided, however, that a holder of Registrable
Securities may inform the Company in writing that it wishes to exclude all or a
portion of its Registrable Securities from such registration.
2.1.2. Demand. In the event that by the fifth (5th)
------
anniversary of the Effective Date the Company has not yet completed an Initial
Public Offering, subject to Section 2.1.7, upon the written request (the
"Demand") of the holders of a majority of Registrable Securities that the
Company effect the registration under the Securities Act of all or part of the
Registrable Securities, the Company shall cause to be filed, and shall take all
commercially reasonable actions to effect, as soon as practicable and in any
event, subject to the reasonable
-3-
<PAGE>
cooperation of the Joint Stockholders, within 120 days after the Demand is
received from the Joint Stockholders, the registration under the Securities Act,
of the Registrable Securities which the Company has been so requested to
register by the Joint Stockholders. Whenever the Company shall effect a
registration pursuant to Section 2.1 in connection with an underwritten Public
Offering by the Joint Stockholders of Registrable Securities, holders of
securities of the Company who have "piggyback" registration rights may include
all or a portion of such securities in such registration, offering or sale. If
the managing underwriter of any such Public Offering shall inform the Company by
letter of its belief that the number or type of securities of the Company
requested by holders of the securities of the Company other than the Joint
Stockholders to be included in such registration would materially and adversely
affect the underwritten Public Offering, then the Company shall include in such
registration, to the extent of the number and type of securities which the
Company is so advised can be sold in (or during the time of) such Public
Offering, first, all of the Registrable Securities specified by the Joint
Stockholders in the Demand and second, for each holder of the Company's
securities other than the Joint Stockholders, the fraction of each holder's
securities proposed to be registered which is obtained by dividing (i) the
number of the securities of the Company that such holder proposes to include in
such registration by (ii) the total number of securities proposed to be included
in such registration by all holders other than the Joint Stockholders. Prior to
such registration being declared effective, the Joint Stockholders holding a
majority of the Registrable Securities requesting such Demand registration may
withdraw such Demand registration, subject to the provisions of Section 2.1.4
below.
2.1.3. Registration Statement Form. Registrations under this Section 2.1
---------------------------
shall be on such appropriate registration form of the Commission as shall be
selected by the Company. The Company shall include in any such registration
statement all information which. in the opinion of counsel to the Company, is
required to be included.
2.1.4. Expenses. The Company shall pay the Registration Expenses in
--------
connection with any registration effected pursuant to this Section 2.1, other
than underwriting discounts and selling commissions relating to the sale or
disposition of Registrable Securities. if the registration pursuant to Section
2.1.2 is withdrawn at the request of a majority of the Joint Stockholders
requesting registration and if such Joint Stockholders elect not to have such
registration count as its Demand registration under Section 2.1.2, the Joint
Stockholders shall pay all the Registration Expenses of such registration, other
than the fees and expenses of counsel to the Company or of any other holder of
Common Stock participating in the registration (a "Participating Holder"). At
no time shall the Joint Stockholders be required to pay the underwriting
discounts or selling commissions relating to the sale or disposition of shares
of Common Stock by other Persons, or the fees and expenses of any Participating
Holder's or the Company's counsel, except as required by Section 2.6.2 below.
2.1.5. Effective Registration Statement. A registration requested
--------------------------------
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, (ii)
if after it has become effective, such registration is
-4-
<PAGE>
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason and has not
thereafter become effective, or (iii) in the case of an underwritten Public
Offering, if the conditions to closing specified in the underwriting agreement,
if any, entered into in connection with such registration are not satisfied or
waived.
2.1.6. Selection of Underwriters. In connection with each underwritten
-------------------------
Public Offering, (a) the Company shall promptly select the managing underwriter
subject to the approval of the Joint Stockholders (by the holders of a majority
of the Registrable Securities sought to be registered by the Participating
Holders), which approval shall not be unreasonably withheld, delayed or
conditioned by the Joint Stockholders, and (b) if they so desire, the Joint
Stockholders shall promptly (by the holders of a majority of the Registrable
Securities sought to be registered by the Participating Holders in such Demand)
select the co-managing underwriter subject to the approval of the Company (which
approval shall not be unreasonably withheld, delayed or conditioned by the
Company).
2.1.7. Limitations on Registration. The Company shall not be required to
---------------------------
file a registration statement pursuant to this Section 2.1(a) which would become
effective within (i) the Holdback Period, or such shorter period as agreed to by
the lead managing underwriter for the Company's Initial Public Offering,
following the effective date of a registration statement filed by the Company
with the Commission pertaining to an Initial Public Offering for the account of
the Company, provided that no other holder of the Company's securities shall
have been permitted to participate in such Initial Public Offering, or (ii) 120
days following the effective date of a registration statement (other than a
registration statement filed on Form S-4 or S-8) filed by the Company with the
Commission pertaining to any subsequent Public Offering for the account of the
Company or another holder of securities of the Company if the Joint Stockholders
were afforded the opportunity to include all of its Registrable Securities in
such subsequent registration pursuant to Section 2.2, or (b) if it would violate
any restriction or prohibition requested by any managing underwriter for the
Company's Initial Public Offering. In no event shall the Company be required to
effect more than one (1) registration pursuant to Section 2.1.1 and one (1)
registration pursuant to Section 2.1.2. Notwithstanding the foregoing, if, in
the good faith determination of the Company's Board of Directors, a registration
would adversely affect certain activities of the Company to the material
detriment of the Company, then the Company may at its option direct that such
registration be delayed for a period not in excess of 90 days in the aggregate
from the date of the Company's receipt of the Demand or from the first date upon
which the Company is required to effect the registration contemplated by Section
2.1.1, as applicable (the "Period of Delay"); provided, however, if there shall
occur any such delay in the registration hereunder, then the holders of the
Registrable Securities shall be entitled, (i) for a period of thirty (30) days
after the Period of Delay, to effect a Demand registration under Section 2.1.2
prior to any other holder of registration rights (other than SmithKline Beecham
Corporation, its affiliates and their permitted transferees, as to which the
rights hereunder shall be pari pasu) or prior to a registered Public Offering by
---- ----
the Company (other than such a Public Offering by the Company on Form S-4 or S-
8), and (ii) to effect a registration under Section 2.
-5-
<PAGE>
1.1 prior to any other holder of registration rights (other than SmithKline
Beecham Corporation, its affiliates and their permitted transferees, as to which
the rights hereunder shall be pari pasu) or prior to a registered Public
---- ----
Offering by the Company (other than such a Public Offering by the Company on
Form S-4 or S-8).
2.2. Piggyback Registration.
----------------------
2.2.1. Right to Include Registrable Securities. If the Company
---------------------------------------
at any time proposes to register any of its securities under the Securities Act
by registration on Forms S- 1, S-2, S-3) or any successor or similar form(s)
(except registrations on such Forms or similar forms solely for registration of
securities in connection with (i) an employee benefit plan or dividend
reinvestment plan or a merger or consolidation or (ii) debt securities which are
not convertible into Common Stock), whether or not for sale for its own account,
it shall each such time give written notice to the Joint Stockholders of its
intention to do so at least 30 days prior to the anticipated filing date of a
registration statement with respect to such registration with the Commission.
Upon the written request of the Joint Stockholders made as promptly as
practicable and in any event within 10 business days after the receipt of any
such notice, which request shall specify the Registrable Securities intended to
be disposed of by the Joint Stockholders, the Company shall use commercially
reasonable efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Joint Stockholders; provided, however, that if, at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to the Joint Stockholders and (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from any obligation of the Company to pay the Registration Expenses in
connection therewith), without prejudice, provided, however, that the Joint
Stockholders may request that such registration be effected as a registration
under Section 2.1.2 hereof if such registration right was then available to the
Joint Stockholders under Section 2.1.2 hereof) and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities for the same period as the delay in registering such
other securities. The Company shall pay all Registration Expenses in connection
with registration of Registrable Securities requested pursuant to Section 2.2,
other than underwriting discounts and selling commissions relating to the sale
or disposition of Registrable Securities.
2.2.2. Priority in Piggyback Registrations. Priority in
----------------------------------- -----------
Piggyback Registrations. Notwithstanding anything in Section 2.2.1 above to the
- -----------------------
contrary, if the managing underwriter of any underwritten Public Offering shall
inform the Company by letter of its belief that the number or type of
Registrable Securities requested to be included in such registration would
materially and adversely affect such Public Offering, then the Company shall
promptly notify the Joint Stockholders of such fact. If the managing underwriter
does not agree to include
-6-
<PAGE>
all (or such lesser amount as the Joint Stockholders shall, in their discretion,
agree to) of the number of the Registrable Securities initially requested by the
Joint Stockholders to be included in such registration, then the Company shall
include in such registration, to the extent of the number and type which the
Company is so advised can be sold in (or during the time of) such Public
Offering first, all securities proposed by the Company to be sold for its
account, if the Company initiated such registration, or by the holder of
securities or initiated such demand registration, if any, second, for each
Initial Stockholder (other than the Waiving Initial Stockholders), the fraction
of such Initial Stockholder's securities proposed to be registered which is
obtained by dividing (i) the number of the securities of the Company that such
Initial Stockholder proposes to include in such registration by (ii) the total
number of securities proposed to be sold in such Public Offering by all such
Initial Stockholders, and third, for each of the Stockholders signatory hereto,
the Waiving Initial Stockholders and any other holders of contractual
registration rights, if any, the fraction of such holder's securities proposed
to be registered which is obtained by dividing (i) the number of the securities
of the Company that such holder proposes to include in such registration by (ii)
the total number of securities proposed to be sold in such Public Offering by
all such Stockholders signatory hereto, all such Waiving Initial Stockholders
and all such other holders of contractual registration rights. As used herein,
the term "Initial Stockholders" means each Person who prior to the date hereof
was a party to that certain Stockholders' Agreement dated as of December 4, 1996
and relating to the Company, and each such Person's successors and assigns. As
used herein, the term "Waiving Initial Stockholders" means those Initial
Stockholders who agree to waive their order of priority set forth in Section
2.2.2 of the Prior Agreement and agree to rank pari passu in order of priority
in regards to piggyback registration rights with the Stockholders signatory
hereto.
2.3. Registration Procedures.
-----------------------
2.3.1. In connection with the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2, the
Company shall as promptly as practicable:
(i) prepare and file with the Commission the requisite
registration statement to effect such registration and thereafter use
commercially reasonable efforts to cause such registration statement to become
and remain effective;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
registration statement for 180 days or such shorter period as may be required
for the disposition of all of such Registrable Securities by the underwriters;
(iii) furnish to the Joint Stockholders such number of
conformed copies of such registration statement and of each such amendment and
supplement
-7-
<PAGE>
thereto (in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule
424 under the Securities Act, in conformity with the requirements of the
Securities Act, and such number of copies of such other documents as the Joint
Stockholders may reasonably request;
(iv) use commercially reasonable efforts (x) to register or
qualify all Registrable Securities and other securities covered by such
registration statement under such other securities or Blue Sky laws of such
States of the United States of America where an exemption is not available and
as the Joint Stockholders shall reasonably request, (y) to keep such
registration or qualification in effect for so long as such registration
statement remains in effect, and (z) to take any other action which may
reasonably be necessary or advisable to enable the Joint Stockholders to
consummate the disposition in such jurisdictions of the Registrable Securities
to be sold by the Joint Stockholders, except that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
Company in any jurisdiction wherein it would not, but for the requirements of
this paragraph (iv), be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
(v) use commercially reasonable efforts to cause all
Registrable Securities covered by such registration statement to be registered
with or approved by such other federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to the Company and
counsel to the Joint Stockholders to consummate the disposition of such
Registrable Securities in accordance with their intended method of disposition;
(vi) furnish to the Joint Stockholders, (x) an opinion of
outside counsel for the Company, and (y) a copy of a "comfort" letter addressed
to the Company and/or any managing underwriter signed by the certified
independent public accountants who have certified the Company's financial
statements included or incorporated by reference in such registration statement,
each covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountant's comfort letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of issuer's
counsel and in accountant's comfort letters delivered to the underwriters in
underwritten Public Offerings of securities (and dated the dates such opinions
and comfort letters are customarily dated);
(vii) notify the Joint Stockholders when a prospectus relating
thereto is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, in
the light of the circumstances under which they were made, and at the request of
the Joint Stockholders to use its best efforts to promptly prepare and furnish
to the Joint Stockholders such number of copies of a supplement to or an
amendment of such prospectus as
-8-
<PAGE>
may be necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
under which they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security-holders, as soon as reasonably practicable, an earnings statement
meeting the requirements of Section 11(a) of the Securities Act, which the
Company shall be entitled to satisfy by complying with the requirements of Rule
158 promulgated thereunder, and promptly famish a copy of the same to the Joint
Stockholders;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement; and
(x) use commercially reasonable efforts to list all
Registrable Securities covered by such registration statement on any national
securities exchange or over-the-counter market, if any, on which Registrable
Securities of the same class, and if applicable, series, covered by such
registration statement are then listed.
The Joint Stockholders agree that upon receipt of any notice from the
Company of the happening of an event of the kind described in Section 2.3.1
(vii), the Joint Stockholders shall forthwith discontinue its disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until the Joint Stockholders' receipt of the copies of
the supplemented or amended prospectus contemplated by Section 2.3.1(vii).
2.4. Underwritten Offerings.
----------------------
2.4.1. Requested Underwritten Offerings. If requested by the
--------------------------------
underwriters for any underwritten Public Offering by the Joint Stockholders
pursuant to a registration requested under Section 2.1, the Company shall enter
into an underwriting agreement with such underwriters for such Public Offering,
such agreement to be reasonably satisfactory in substance and form to the
Company, the Joint Stockholders and the underwriters, and to contain such
representations and warranties by the Company and the Joint Stockholders and
such other terms as are generally prevailing in agreements of that type,
including, without limitation, indemnities to the effect and to the extent
provided in Section 2.6 or as are generally prevailing in agreements of that
type. The Joint Stockholders shall cooperate with the Company in the negotiation
of the underwriting agreement and shall give consideration to the reasonable
suggestions of the Company regarding the form and substance thereof. The Joint
Stockholders shall be a party to such underwriting agreement. The Joint
Stockholders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters other than representations,
warranties or agreements regarding the Joint Stockholders, the Joint
-9-
<PAGE>
Stockholders' Registrable Securities, the Joint Stockholders' intended method of
distribution and any other representations or warranties required by law or
customarily given by selling shareholders in an Underwritten Public Offering or
as reasonably required by the managing underwriter of the Public Offering of
Registrable Securities.
2.4.2. Piggyback Underwritten Offerings. If the Company proposes to
--------------------------------
register any of its securities under the Securities Act as contemplated by
Section 2.2 and such securities are to be distributed by or through one or more
underwriters, subject to the other provisions of Section 2.2.2 the Company
shall, if requested by the Joint Stockholders such underwriters to include all
the Registrable Securities to be offered and sold by the Joint Stockholders
among the securities of the Company to be distributed by such underwriters. The
Joint Stockholders shall become a party to the underwriting agreement negotiated
between the Company and such underwriters. The Joint Stockholders shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding the Joint Stockholders, the Joint Stockholders' Registrable Securities
and the Joint Stockholders' intended method of distribution or any other
representations or warranties required by law or customarily given by selling
shareholders in an underwritten Public Offering or as reasonably required by the
managing underwriter of the Public Offering of Registrable Securities.
2.4.3. Holdback Agreements.
-------------------
(i) In connection with the Initial Public Offering or any
registration of Registrable Securities in connection with an underwritten Public
Offering, the Joint Stockholders agree if required by the underwriter or
underwriters not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any Registrable Securities,
and not to effect any such public sale or distribution of any other equity
security of the Company or of any security convertible into or exchangeable or
exercisable for any equity security of the Company (in each case, other than as
part of such underwritten Public Offering) during the 15 days prior to, and
during the Holdback Period, or such shorter period set forth in the underwriting
agreement with respect to such Public Offering as the managing underwriter of
such Public Offering shall reasonably require, beginning on, the effective date
of such registration statement.
(ii) If any registration of Registrable Securities shall be in
connection with an underwritten Public Offering, the Company agrees (x) if
required by the underwriter or underwriters, not to effect any public sale or
distribution of any of its equity securities or of any security convertible into
or exchangeable or exercisable for any equity security of the Company (other
than in connection with any employee stock option or other benefit plan which
has been duly adopted by the Company and which provides for the distribution to
participants in the plan of equity securities of the Company or securities
convertible or exchangeable or exercisable for equity securities of the Company,
or in connection with a merger or acquisition approved by the Board of Directors
of the Company) during the
-10-
<PAGE>
Holdback Period, or such shorter period as the managing underwriter of such
Public Offering shall reasonably require, beginning on the effective date of
such registration statement (except as part of such registration) and (y) that
any agreement entered into after the date of this Agreement pursuant to which
the Company issues or agrees to issue any privately placed equity securities
shall contain a provision under which holders of such securities agree that, if
required by the underwriter or underwriters, they will not effect any public
sale or distribution of any such securities during the period referred to in the
foregoing clause (x), including any sale pursuant to Rule 144 under the
Securities Act (except as part of such registration, if permitted), if such
holder is participating in the Public Offering pursuant to such registration.
2.5. Preparation: Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of any registration statement under the Securities Act in
which the Joint Stockholders are or may be a selling shareholder, the Company
shall give the Joint Stockholders not less than 30 days prior written notice of
the preparation of such registration statement and give the Joint Stockholders
and its counsel and accountants the opportunity to participate, at the Joint
Stockholders' expense, in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each amendment
thereof or supplement thereto @provided that the Joint Stockholders shall
furnish the Company with comments on any such amendment or supplement as
promptly as the Company shall reasonably require), and give each of them such
access to its books and records, such opportunities to discuss the business of
the Company with officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of the
Joint Stockholders' counsel, to conduct a reasonable investigation within the
meaning of the Securities Act. Any expenses incurred by the Joint Stockholders
in connection with any such investigation shall be borne by the Joint
Stockholders other than the reasonable fees and disbursements of Selling
Stockholder Counsel incurred in connection with such investigation.
2.6. Indemnification.
---------------
2.6.1. Indemnification by the Company. In the event of any
------------------------------
registration of any securities of the Company under the Securities Act in which
the Joint Stockholders are selling shareholders, the Company shall, and hereby
does, indemnify and hold harmless, in the case of any registration statement
filed pursuant to Sections 2.1 or 2.2, the Participating Holders, its directors,
officers, employees, agents and affiliates and, to the extent required by any
underwriting agreement entered into by the Company, each other Person who
participates as an underwriter in the Public Offering or sale of such securities
and each other Person who controls a Participating Holder or any such
underwriter within the meaning of the Securities Act, insofar as losses, claims,
damages, or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon (a) any untrue
statement or alleged untrue statement of any fact contained in any registration
statement under which such securities were registered under the Securities Act,
any preliminary prospectus, final prospectus, or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a fact required to be stated therein or necessary to
make the statements therein in light of the circumstances in which thy were made
not misleading,
-11-
<PAGE>
(b) any violation by the Company, its directors, officers, employees or agents
of this Agreement or any law applicable to and in connection with such
registration, and the Company shall reimburse the Joint Stockholders and each
such director, officer, agent or affiliate and, to the extent required by an
underwriting agreement entered into by the Company, any underwriter and
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding described in clauses (a) and (b); provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by the
Participating Holders, specifically stating that it is for use in the
preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Participating
Holders or any such director, officer, agent or affiliate or controlling Person
and shall survive the transfer of such securities by the Participating Holders.
2.6.2. Indemnification by the Joint Stockholders. If any
-----------------------------------------
Registrable Securities are included in any registration statement, the
Participating Holders shall indemnify and hold harmless (in the same manner and
to the same extent as set forth in Section 2.6.1 above) the Company, each
director of the Company, each officer of the Company and each employee of the
Company and, to the extent required by any underwriting agreement entered into
by the Participating Holders, each other Person who participates as an
underwriter in the Public Offering or sale of such securities and each other
Person who controls any such underwriter within the meaning of the Securities
Act, with respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by the
Participating Holders specifically stating that it is for use in the preparation
of such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement; provided, however, in no event
shall the liability of any Stockholder under this Section 2.6.2. exceed the
proceeds obtained by the sale of such Stockholder's Shares in any such
registration.
2.6.3. Notice of Claims, Etc. Promptly after receipt, by an
---------------------
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 2.6,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party, immediately give written notice to the latter of
the commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 2.6, except to the extent that the indemnifying party is materially
prejudiced by such failure. The indemnified party shall be entitled to receive
-12-
<PAGE>
the indemnification payments described in Section 2.6.6 after providing such
written notice to the indemnifying party. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that the indemnifying
parties may agree, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable out of pocket costs related to the indemnified party's cooperation
with the indemnifying party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties arises in respect of such claim after the assumption of the defense
thereof. No indemnifying party shall be liable for any settlement of any action
or proceeding effected without its written consent, which shall not be
unreasonably withheld, delayed or conditioned. Consent of the indemnified party
shall be required for the entry of any judgment or to enter into a settlement
only when such judgment or settlement does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect such claim or litigation.
2.6.4. Contribution. If the indemnification provided for in
------------
this Section 2.6 shall for any reason be held by a court to be unavailable to an
indemnified party under Section 2.6.1 or 2.6.2 hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under Sections 2.6.1 or 2.6.2 hereof, the indemnified
party and the indemnifying party under Sections 2.6.1 or 2.6.2 hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on one hand and the Joint Stockholders on the
other or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect the relative
fault of the Company on one hand and the Joint Stockholders on the other that
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. No Person guilty of
fraudulent misrepresentation (within the meaning of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for' any settlement of any action or claim,
effected without such Person's written consent, which consent shall not be
unreasonably withheld; provided, however, in no event shall the liability of any
Stockholder under this Section 2.6.4. exceed the proceeds obtained by the sale
of such Stockholder's Shares in any such registration.
2.6.5. Other Indemnification. Indemnification and contribution
---------------------
similar to that specified in the preceding paragraphs of this Section 2.6 (with
appropriate modifications) shall be given by the Company and the Participating
Holders with respect to any required
-13-
<PAGE>
registration or other qualification of securities under any federal or state law
or regulation of any governmental authority other than the Securities Act.
3. Rule 144. With a view to making available the benefits of certain
--------
rules and regulations of the Commission that may permit the sale of the
Registrable Securities to the public without registration after an initial
Public Offering, the Company agrees to:
(a) provide information and such other assistance requested by
the Joint Stockholders as is customarily provided by issuers in connection with
sales of their common stock by directors or affiliates under Rule 144,
promulgated under the Securities Act;
(b) make and keep public information available, as those terms
are understood and defined in Rule 144 promulgated under the Securities Act at
all times;
(c) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(d) deliver a written statement as to whether it has complied
with such requirements of this Section, to the Joint Stockholders upon the Joint
Stockholders' request.
4. Remedies.
--------
(a) If the Company fails for any reason (other than reasons
relating to acts or omissions of any Shareholder) to register a Stockholder's
Registrable Securities subject and pursuant to the terms and conditions of this
Agreement, then, at the election of the Company, the Company shall (i) to the
extent of funds legally available therefor ("Available Funds"), repurchase all
of the Registrable Securities owned by all such Joint Stockholders for an amount
per share equal to the sum of the average of the appraised values of the Common
Stock (which shall not include any discount for minority interest) calculated by
each of two independent appraisal firms, one of which shall be selected by the
Placement Agent and the other of which shall be selected by the Company (the
"Fair Market Value"), or (ii) provide such Joint Stockholders with the rights
set forth in subsection (b) below. If the Company elects to purchase Registrable
Securities pursuant to clause (i) above and the aggregate Fair Market Value of
the Registrable Securities to be repurchased by the Company is greater than the
amount of Available Funds, then the number of Registrable Securities that the
Company shall so repurchase from each such Stockholder shall equal the product
obtained by multiplying the Available Funds by a fraction, the numerator of
which is the number of Registrable Securities owned by such Stockholder and the
denominator of which is the total number of Registrable Securities owned by such
Joint Stockholders.
(b) If the Company elects not to repurchase all of the
Registrable Securities which may be purchased pursuant to subsection (a) above,
then any Joint Stockholders
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<PAGE>
who thereafter continue to own shares of Common Stock and whose Registrable
Securities have not been registered shall have the right to nominate a majority
of the Board of Directors of the Company (including the right to remove
directors as necessary to create vacancies for the election of such nominees),
and the former partners of Exigent Partners, L.P., W. Vickery Stoughton and
Thomas H. Grove (the "Management Stockholders") hereby agree to vote their
shares of Common Stock, and the Company will cause any future purchaser of 5% or
more of the Common Stock of the Company to vote such shares of Common Stock, in
favor of the directors nominated by such Joint Stockholders at any meeting of
stockholders or pursuant to any written consent in which the election of
directors is submitted to the vote of the Company's stockholders (and to remove
directors as necessary to create vacancies therefor). The Company shall take all
steps necessary to cause a meeting of the Company's stockholders for the purpose
of effecting the foregoing. The obligations of the Partnership and the
Management Stockholders under this Section 5(b) shall terminate upon the earlier
of (i) the redemption of each such Stockholder's Registrable Securities or (ii)
the registration of each such Joint Stockholder's Registrable Securities. Upon
the termination of all the Joint Stockholder's rights set forth in this
subsection (b), all members of the Board of Directors of the Company who were
nominated and elected pursuant to the provisions of this subsection (b) shall,
immediately resign from the Board of Directors and the Company may remove any
such directors. The remaining members of the Board of Directors of the Company
are hereby authorized to fill any vacancies created as a result of any such
resignation or removal.
(c) For purposes of this Section 5, any Stockholder's
Registrable Securities shall be deemed to be so registered if such Stockholder
elects not to include his Registrable Securities in any registration statement
in which such Registrable Securities are eligible to be included pursuant to
this Agreement.
(d) If Available Funds are insufficient to allow the Company to
repurchase all such Registrable Securities, each of the Management Stockholders,
the former partners of the Exigent Partners, L.P. and the Investors shall
perform such acts, execute such instruments, and vote his or its shares in such
manner as may be necessary to increase such surplus to an amount sufficient to
authorize such purchase, including but not limited to the following: (i) a
recapitalization of the Company so as to reduce its stated capital and increase
its surplus and (ii) a reappraisal of the Company's assets (including goodwill,
if any) to reflect the market value of such assets, in the event such value
exceeds the book value thereof.
(e) The rights of the Joint Stockholders pursuant to this
Section 5 shall be in addition to all other rights and remedies that such Joint
Stockholders may have hereunder or at law or otherwise.
5 Modification: Waivers. This Agreement may be modified or amended only
---------------------
with the written consent of the Company and the holders of a majority of the
Registrable Securities. No party shall be released from its obligations
hereunder without the written consent of the Company and the holders of at least
a majority of the Registrable Securities. The observance of
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<PAGE>
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) by the party entitled to
enforce such term but any such waiver shall be effective only if in a writing
signed by the party against which such waiver is to be asserted. Except as
otherwise specifically provided herein, no delay on the part of any party hereto
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any right, power or privilege hereunder.
6 Entire Agreement. This Agreement represents the entire understanding
----------------
and agreement between the parties hereto with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, between the par-ties with respect to the subject matter
hereof.
7 Severability. If any provision of this Agreement, or the application
------------
of such provision to any Person or circumstance, shall be held invalid, the
remainder of this Agreement or the application of such provision to other
Persons or circumstances, to the extent permitted by law, shall not be affected
thereby; provided, that the parties shall negotiate in good faith with respect
to an equitable modification of the provision or application thereof held to be
invalid.
8 Notices.
-------
(a) Any notice or communication to any party hereto shall be
duly given if in writing and delivered in person, receipt requested, or courier
guaranteeing next day delivery, or facsimile (with written confirmation of
receipt) to such other party's address or facsimile number facsimile set forth
below.
If to EXIGENT DIAGNOSTICS, INC. or a MANAGEMENT STOCKHOLDER:
5 Radnor Corporate Center
Suite 300
Radnor, Pennsylvania 19087
Attention: W. Vickery Stoughton
Facsimile: 610-971-9814
with a copy to:
James D. Epstein, Esquire
Pepper Hamilton LLP
3000 Two Logan Square
Philadelphia, PA 19103-2799
Facsimile: 215-981-4750
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<PAGE>
If to the Partnership:
c/o Spencer Trask Securities Incorporated
535 Madison Avenue - 18th Floor
New York, New York 10022
Attention: Mr. Kevin Kimberlin
Facsimile: 212-751-3483
with a copy to:
John D. Vaughan, Esquire
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
Facsimile: 212-213-1199
If to a Stockholder, to such address set forth on the Stockholder's
signature page hereto, or if to an assignee or successor of a Stockholder, to
such address appearing in the records of the Company.
(b) All notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered or telecopied
(with written confirmation of receipt); and the next business day after timely
delivery to the courier, if sent by courier guaranteeing next day delivery.
9 Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and shall be binding upon the Company and the Joint Stockholders and their
respective successors and permitted assigns. Each Stockholder may assign its
rights under this Agreement to any Person to whom the Stockholder transfers any
of the Registrable Securities or any interest therein without the necessity of
obtaining any consent to such assignment, provided that such Person becomes a
party to that certain stockholders agreement, by and among the Company, the
Joint Stockholders and certain other holders of the Common Stock. In the event
that a Stockholder assigns its rights to a holder or holders of only a portion
of the Registrable Securities, then all references to the Stockholder herein
shall also be deemed to refer to such other holder or holders, but in such event
the Stockholder shall have the sole right to make all decisions by and give
notices for such holder or holders under this Agreement; provided, that if the
Stockholder no longer owns any Registrable Securities, then all decisions and
notices hereunder shall be made by the holders of not less than a majority of
the Registrable Securities outstanding and all other holders of Registrable
Securities shall be bound by any such decision.
-17-
<PAGE>
10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which for all purposes shall be deemed to be an original
and all of which together shall constitute the same agreement.
11 Headings. The Section headings in this Agreement are for convenience
--------
of reference only, and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
12 Construction. This Agreement shall be governed, construed and
------------
enforced in accordance with the laws of the State of New York without regard to
its principles of conflict of laws.
13 No Inconsistent Agreements. The Company has not previously, and shall
--------------------------
not hereafter, enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Joint Stockholders in this
Agreement.
14 Recapitalization, Etc. In the event that any capital stock or other
----------------------
securities are issued in respect of, in exchange for, or in substitution of, any
Registrable Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Registrable Securities or any other
similar change in the Company's capital structure, appropriate adjustments shall
be made in this Agreement so as to fairly and equitably preserve, as far as
practicable, the original rights and obligations of the parties hereto under
this Agreement.
15 Specific Performance. The parties hereto agree that the Registrable
--------------------
Securities of the Company cannot be purchased or sold in the open market and
that, for these reasons, among others, the holder or holders of the Registrable
Securities will be irreparably damaged in the event that this Agreement is not
specifically enforceable. The rights granted in this Section 16 shall be
cumulative and not exclusive, and shall be in addition to any and all other
rights which the parties hereto may have hereunder, at law or in equity. The
Company and the Joint Stockholders consent to the jurisdiction of the federal
courts in the City of New York in any suit, action or proceeding brought
pursuant to this Section 16, waives any objection it may have to the laying of
venue in any such suit, action or proceeding in any of such court, and agrees
that service of any court paper may be made in such manner as may be provided
under applicable laws or court rules governing service of process.
16 Term. This Agreement shall continue in full force and effect with
----
respect to any Stockholder for nine (9) years from the Final Closing (as defined
in the Memorandum), or the first date on which the such Stockholder and their
affiliates may sell all of the Securities held by them in a ninety (90) day
period pursuant to Rule 144 under the Securities Act.
17 Appointment of Agent. In connection with any Initial Public Offering,
--------------------
the holders of Registrable Securities appoint the Placement Agent to act as
their agent and attorney-
-18-
<PAGE>
in-fact to negotiate with the Company and the underwriters for the Initial
Public Offering the terms and conditions of the holdback agreements of the
holders of Registrable Securities as they relate to the Initial Public Offering
(including, but not limited to, the length of the Holdback Period, and the other
rights of such holders of Registrable Securities to sell their Registrable
Securities), and to execute and deliver any and all documents, and to take any
and all actions, in the name and on behalf of the holders of Registrable
Securities, as may be necessary or appropriate, in the judgment of the Placement
Agent, to confirm any agreements reached relating to the subject matter
described in this Section 17.
18 Termination of Prior Registration Agreement. The execution and
-------------------------------------------
delivery of this Agreement shall automatically terminate the Prior Agreement
which, thereupon, shall no longer be in force or effect and no party thereto
shall have any rights or obligations thereunder; provided
that with respect to those stockholders which purchased shares of Common Stock
in the Prior Offering and which have not consented to the amendment of the Prior
Agreement, the termination of the Prior Agreement shall be null and void. As a
result of the termination of the
-19-
<PAGE>
Prior Agreement, the registration rights of the Joint Stockholders shall be
governed exclusively by the terms and conditions of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first above written and delivered by their respective duly
authorized officers.
EXIGENT DIAGNOSTICS, INC.
By: /s/ W. Vickery Stoughton
-------------------------------------
W. Vickery Stoughton
Chairman and Chief Executive Officer
As to Section 5 only:
/s/ Kevin Kimberlin
-----------------------------------------
Kevin Kimberlin
/s/ W. Vickery Stoughton
-----------------------------------------
W. Vickery Stoughton
/s/ Thomas H. Grove
-----------------------------------------
Thomas H. Grove
As to Section 18 only:
On behalf of the Stockholders under the Prior
Agreement
By: Spencer Trask Securities Incorporated
Attorney-in-Fact
By: /s/ William P. Dioguardi
--------------------------------
William P. Dioguardi
-20-
<PAGE>
STOCKHOLDER SIGNATURE PAGE
TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
_________ __, 1998.
If the Holder is an INDIVIDUAL:
______________________________
Print Name
______________________________
Signature
______________________________
______________________________
Print Address
If the Holder is a PARTNERSHIP,
CORPORATION or a TRUST:
______________________________
Name of Partnership, Corporation or Trust
By:___________________________
Signature
Print Name:______________
Print Title:_____________
______________________________
______________________________
Print Address
Accepted and agreed to this
____ day of _______________, 199_
EXIGENT DIAGNOSTICS, INC.
By:___________________________
W. Vickery Stoughton
Chairman & CEO
-21-
<PAGE>
EXHIBIT 10.34
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT is made this 17th day of December, 1998
(the "Effective Date") between Careside, Inc., a Delaware corporation (the
"Company") and S.R.One, Limited, a Pennsylvania Business Trust ("S.R.One").
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to a Securities Purchase Agreement (the "Agreement")
dated as of the Effective Date, by and between the Company and S.R.One, the
Company has agreed that it will, prior to January 31, 1999, borrow from S.R.One,
and S.R.One has agreed to lend to the Company, the aggregate principal amount of
$3,000,000 (the promissory notes evidencing such obligations being herein
referred to as the "Notes"); and the Company has issued to S.R.One a warrant to
acquire shares ("Warrant Shares") of Common Stock of the Company, $.01 par value
per share ("Common Stock"), having an aggregate value, determined at the Share
Price (as defined in the Warrant attached as Exhibit C to the Agreement), equal
to twenty-five percent (25%) (fifty percent (50%) if the Notes have not been
repaid by June 30, 1999) of the aggregate principal amount of the Notes; and
WHEREAS, the Company desires to provide S.R.One and its successors and
permitted assigns with certain rights regarding the registration of the Common
Shares.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements made herein, and other good valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and accepted, the parties hereto
agree as follows:
1. Definitions. As used herein, unless the context otherwise requires,
-----------
the following terms have the following respective meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange
Act.
"Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Common Stock" has the meaning set forth in the first WHEREAS clause
of the Recitals.
"Demand" has the meaning set forth in Section 2.1.1.
<PAGE>
- 2 -
"Demand Registration Period" means the (i) period commencing on the
earlier of one (1) after the effective date of the initial Public Offering of
Common Stock and the fifth (5th) anniversary of the Effective Date, and (ii)
ending on the date which is the earlier of three (3) years after the effective
date of the initial Public Offering or the seventh (7th) anniversary of the
Effective Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
promulgated thereunder, as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include reference to the comparable section, if any, of any such
subsequent similar federal statute.
"Investors" means the purchasers of Common Stock in the private
placements of Common Stock undertaken by the Company in 1997 and 1998.
"Participating Holder" has the meaning set forth in Section 2.1.4.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, government or department or
agency of a government.
"Public Offering" has the meaning set forth in Section 2.1.7.
"Registrable Securities" means collectively the Registrable Common
Securities and any other securities issuable in connection therewith or in
replacement thereof by way of a dividend, distribution, recapitalization,
exchange, merger, consolidation or other reorganization. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) they shall have been sold as permitted by, and in compliance
with, Rule 144 (or any successor provision) promulgated under the Securities Act
or (c) they shall have ceased to be outstanding.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration, filing and National Association of Securities Dealers, Inc. fees,
all listing fees, all fees and expenses of complying with securities or blue sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities), all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements of counsel for the
Company and counsel for S.R.One (comprising not more than one outside law firm)
and of the Company's independent public accountants, including the expenses of
"comfort"
<PAGE>
- 3 -
letters required by or incident to such performance and compliance, and any fees
and disbursements of underwriters customarily paid by issuers or sellers of
securities.
"Securities Act" means the Securities Act of 1933, as amended, or any
subsequent similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
References to a particular section of the Securities Act of 1933, as amended,
shall include a reference to the comparable section, if any, of any such
subsequent similar federal statute.
2. Registration Rights.
-------------------
2.1 Registration on Demand.
----------------------
2.1.1 Demand. At any time during the Demand Registration Period,
------
subject to Section 2.1.7, upon the written request (the "Demand") of S.R.One
that the Company effect the registration under the Securities Act of all or part
of the Registrable Securities, the Company shall cause to be filed, and shall
take all commercially reasonable actions to effect, as soon as practicable and
in any event, subject to the reasonable cooperation of S.R.One within 120 days
after the Demand is received from S.R.One, the registration under the Securities
Act, of the Registrable Securities which the Company has been so requested to
register by S.R.One.
2.1.2 Registration of Other Securities. Whenever the Company shall
--------------------------------
effect a registration pursuant to this Section 2.1 in connection with an
underwritten offering by S.R.One of Registrable Securities, holders of
securities of the Company who have "piggyback" registration rights may include
all or a portion of such securities in such registration, offering or sale. If
the managing underwriter of any such offering shall inform the Company by letter
of its belief that the number or type of securities of the Company requested by
holders of the securities of the Company other than S.R.One to be included in
such registration would materially and adversely affect the underwritten
offering, then the Company shall include in such registration, to the extent of
the number and type of securities which the Company is so advised can be sold in
(or during the time of) such offering, first, all of the Registrable Securities
-----
specified by S.R.One in the Demand and second, for each holder of the Company's
------
securities other than S.R.One, the fraction of such holder's securities proposed
to be registered which is obtained by dividing (i) the number of the securities
of the Company that such holder proposes to include in such registration by (ii)
the total number of securities proposed to be included in such registration by
all holders other than S.R.One.
<PAGE>
- 4 -
2.1.3 Registration Statement Form. Registrations under this
---------------------------
Section 2.1 shall be on such appropriate registration form of the Commission as
shall be selected by the Company. The Company shall include in any such
registration statement all information which, in the opinion of counsel to the
Company, is required to be included.
2.1.4 Expenses. The Company shall pay the Registration Expenses
--------
in connection with the Demand registration effected pursuant to this Section
2.1, other than underwriting discounts and selling commissions relating to the
sale or disposition of Registrable Securities. If a registration requested
pursuant to this Section 2.1 is withdrawn or otherwise not effected, other than
at the request of S.R.One (whether such request is for pricing or other
reasons), the Company shall pay the Registration Expenses in connection
therewith. If the registration pursuant to a Demand is withdrawn at the request
of S.R.One and if S.R.One elects not to have such registration count as its
Demand registration under this Section 2.1, S.R.One shall pay all the
Registration Expenses of such registration, other than the fees and expenses of
counsel to Company or of any other holder of Common Stock participating in the
registration (a "Participating Holder"). At no time shall S.R.One be required
to pay the underwriting discounts or selling commissions relating to the sale or
disposition of shares of Common Stock by other Persons, or the fees and expenses
of any Participating Holder's or the Company's counsel, except as required by
Section 2.6.2 below.
2.1.5 Effective Registration Statement. A registration requested
--------------------------------
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, (ii)
if after it has become effective, such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason and has not thereafter become
effective, or (iii) in the case of an underwritten offering, if the conditions
to closing specified in the underwriting agreement, if any, entered into in
connection with such registration are not satisfied or waived.
2.1.6 Selection of Underwriters. In connection with each
-------------------------
underwritten offering, (a) the Company shall promptly select the managing
underwriter subject to the approval of S.R.One (which approval shall not be
unreasonably withheld, delayed or conditioned by S.R.One) and (b) S.R.One shall
promptly select the co-managing underwriter subject to the approval of the
Company (which approval shall not be unreasonably withheld, delayed or
conditioned by the Company).
2.1.7 Limitations on Registration on Demand.
-------------------------------------
(i) The Company shall not be required to file a registration
statement pursuant to this Section 2.1 which would become effective within (a)
180 days, or such shorter period as agreed to by the managing underwriter for
the Company's initial
<PAGE>
- 5 -
Public Offering, following the effective date (the "IPO Effective Date") of a
registration statement filed by the Company with the Commission pertaining to an
initial underwritten public offering of convertible debt securities or equity
securities for cash (a "Public Offering") for the account of the Company,
provided that no other holder of the Company's securities shall have been
permitted to participate in such initial Public Offering, or (b) 120 days
following the effective date of a registration statement (other than a
registration statement filed on Form S-8) filed by the Company with the
Commission pertaining to any subsequent Public Offering for the account of the
Company or another holder of securities of the Company if S.R.One was afforded
the opportunity to include all of its Registrable Securities in such subsequent
registration pursuant to Section 2.2.
(ii) In no event shall the Company be required to effect more
than one registration pursuant to this Section 2.1.
(iii) Notwithstanding the foregoing, if, in the good faith
determination of the Company's Board of Directors, a registration would
adversely affect certain activities of the Company to the material detriment of
the Company, then the Company may at its option direct that the effective date
of such registration be delayed for a period not in excess of 90 days in the
aggregate from the date of the Company's receipt of the Demand (the "Delay
Period"); provided, however, any action by a Person under a registration or
other agreement with the Company in connection with or triggered by a
registration under this Agreement shall not be considered an adverse effect for
purposes of this sentence; and provided further that if there shall occur any
such delay in a registration hereunder, then S.R.One shall be entitled to (a)
effect such registration no later than any other holder of registration rights,
or (b), if the Company shall effect a Public Offering during any such Delay
Period, sell, together with the Investors, all of their respective Registrable
Securities in connection with such Public Offering, whichever occurs first;
provided, however, that if the managing underwriter of such Public Offering does
not agree to include all (or such lesser amount as S.R.One shall, in its sole
discretion, agree to) of the number of S.R.One's Registrable Securities in such
registration, then the Company shall include in such registration, to the extent
of the number and type which the Company is so advised can be sold in (or during
the time of) such Public Offering first, all securities proposed by the Company
-----
to be sold for its own account, and second, for each of S.R.One and the
------
Investors, the fraction of such holder's securities proposed to be registered
which is obtained by dividing (i) the number of the securities of the Company
that such holder proposes to include in such registration by (ii) the total
number of securities proposed to be sold in such offering by such holders.
2.2 Piggyback Registration.
----------------------
<PAGE>
- 6 -
2.2.1 Right to Include Registrable Securities. If the Company at
---------------------------------------
any time proposes to register any of its securities under the Securities Act by
registration on Forms S-1, S-2, S-3 or any successor or similar form(s) (except
registrations on such Forms or similar forms solely for registration of
securities in connection with (i) an employee benefit plan or dividend
reinvestment plan or a merger or consolidation or (ii) debt securities which are
not convertible into Common Stock), whether or not for sale for its own account,
it shall each such time give written notice to S.R.One of its intention to do so
at least 30 days prior to the anticipated filing date of a registration
statement with respect to such registration with the Commission; provided
however, that no such notice shall be required if the managing underwriters for
such registration shall have, in a writing delivered to the Company, provided
that no Common Stock held be the Company's stockholders may be sold pursuant to
the registration. Upon the written request of S.R.One made as promptly as
practicable and in any event within 10 business days after the receipt of any
such notice, which request shall specify the Registrable Securities intended to
be disposed of by S.R.One, the Company shall use commercially reasonable efforts
to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by S.R.One;
provided, however, that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to S.R.One and (i) in the case of a determination not to register,
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from any obligation of the Company to
pay the Registration Expenses in connection therewith), without prejudice,
(provided, however, that S.R.One may request that such registration be effected
as a registration under Section 2.1 hereof) and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities for the same period as the delay in registering such
other securities; and provided further that S.R.One shall have the right to have
its Registrable Securities included in any Public Offering after the Company's
initial Public Offering (in accordance with Section 2.2.2) if, and only if, any
other holder of the Company's convertible debt securities or equity securities
shall have the right to have its Registrable Securities included in such Public
Offering. No registration effected under this Section 2.2 shall relieve the
Company of its obligation to effect any registration upon demand under Section
2.1. The Company shall pay all Registration Expenses in connection with
registration of Registrable Securities requested pursuant to Section 2.2, other
than underwriting discounts and selling commissions relating to the sale or
disposition of Registrable Securities.
2.2.2 Priority in Piggyback Registrations. Notwithstanding anything
-----------------------------------
in Section 2.2.1 above to the contrary and except as provided in Section 2.1.7,
if the managing underwriter of any underwritten offering shall inform the
Company by letter of its belief that
<PAGE>
- 7 -
the number or type of Registrable Securities requested to be included in such
registration would materially and adversely affect such offering, then the
Company shall promptly notify S.R.One of such fact. If the managing underwriter
does not agree to include all (or such lesser amount as S.R.One shall, in its
sole discretion, agree to) of the number of the Registrable Securities initially
requested by S.R.One to be included in such registration, then the Company shall
include in such registration, to the extent of the number and type which the
Company is so advised can be sold in (or during the time of) such offering
first, all securities proposed by the Company to be sold for its own account, if
- -----
the Company initiated such registration, or by the holder of securities who
initiated such demand registration, if any, second, for each of S.R.One, Spencer
------
Trask Securities, Incorporated and the Investors, other than the holder(s) of
the securities who initiated such demand registration, if any, the fraction of
such holder's securities proposed to be registered which is obtained by dividing
(i) the number of the securities of the Company that such holder proposes to
include in such registration by (ii) the total number of securities proposed to
be sold in such offering by such holders, and third, for each remaining holder
-----
of the Company's securities, other than the holder of the securities who
initiated such demand registration and the holders listed above, if any, the
fraction of such holder's securities proposed to be registered which is obtained
by dividing (i) the number of the securities of the Company that such holder
proposes to include in such registration by (ii) the total number of securities
proposed to be sold in such offering by such holders.
2.3 Registration Procedures.
-----------------------
2.3.1 In connection with the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2, the
Company shall as promptly as practicable:
(i) prepare and file with the Commission the requisite
registration statement to effect such registration and thereafter use
commercially reasonable efforts to cause such registration statement to become
and remain effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such registration statement for 180
days or such shorter period as may be required for the disposition of all of
such Registrable Securities by the underwriters;
(iii) furnish to S.R.One such number of conformed copies of
such registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the prospectus
contained in such
<PAGE>
- 8 -
registration statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the Securities Act, and such number
of copies of such other documents as S.R.One may reasonably request;
(iv) use commercially reasonable efforts (x) to register or
qualify all Registrable Securities and other securities covered by such
registration statement under such other securities or Blue Sky laws of such
States of the United States of America where an exemption is not available and
as S.R.One shall reasonably request, (y) to keep such registration or
qualification in effect for so long as such registration statement remains in
effect, and (z) to take any other action which may reasonably be necessary or
advisable to enable S.R.One to consummate the disposition in such jurisdictions
of the Registrable Securities to be sold by S.R.One, except that the Company
shall not for any such purpose be required to qualify generally to do business
as a foreign corporation in any jurisdiction wherein it would not, but for the
requirements of this paragraph (iv), be obligated to be so qualified or to
consent to general service of process in any such jurisdiction;
(v) use commercially reasonable efforts to cause all
Registrable Securities covered by such registration statement to be registered
with or approved by such other federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to the Company and
counsel to S.R.One to consummate the disposition of such Registrable Securities
in accordance with their intended method of disposition;
(vi) furnish to S.R.One, (x) an opinion of outside counsel
for the Company, and (y) a copy of a "comfort" letter addressed to the Company
and/or any managing underwriter signed by the certified independent public
accountants who have certified the Company's financial statements included or
incorporated by reference in such registration statement, each covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of the accountant's comfort
letter, with respect to events subsequent to the date of such financial
statements, as are customarily covered in opinions of issuer's counsel and in
accountant's comfort letters delivered to the underwriters in underwritten
public offerings of securities (and dated the dates such opinions and comfort
letters are customarily dated);
(vii) notify S.R.One when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, in the light of the
circumstances under which they were made, and at the request of S.R.One to use
its best efforts to promptly prepare and furnish to S.R.One such number of
copies of a
<PAGE>
- 9 -
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security-holders, as soon as reasonably practicable, an earnings statement
meeting the requirements of Section 11(a) of the Securities Act, which the
Company shall be entitled to satisfy by complying with the requirements of Rule
158 promulgated thereunder, and promptly furnish a copy of the same to S.R.One;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement; and
(x) use commercially reasonable efforts to list all
Registrable Securities covered by such registration statement on any national
securities exchange or over-the-counter market, if any, on which Registrable
Securities of the same class, and if applicable, series, covered by such
registration statement are then listed.
S.R.One agrees that upon receipt of any notice from the Company of the
happening of an event of the kind described in Section 2.3.1(vii), S.R.One shall
forthwith discontinue its disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until S.R.One's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 2.3.1(vii).
2.4 Underwritten Offerings.
----------------------
2.4.1 Requested Underwritten Offerings. If requested by the
--------------------------------
underwriters for any underwritten offering by S.R.One pursuant to a registration
requested under Section 2.1, the Company shall enter into an underwriting
agreement with such underwriters for such offering, such agreement to be
reasonably satisfactory in substance and form to the Company, S.R.One and the
underwriters, and to contain such representations and warranties by the Company
and S.R.One and such other terms as are generally prevailing in agreements of
that type, including, without limitation, indemnities to the effect and to the
extent provided in Section 2.6 or as are generally prevailing in agreements of
that type. S.R.One shall cooperate with the Company in the negotiation of the
underwriting agreement and shall give consideration to the reasonable
suggestions of the Company regarding the form and substance thereof. S.R.One
shall be a party to such underwriting agreement. S.R.One shall
<PAGE>
- 10 -
not be required to make any representations or warranties to or agreements with
the Company or the underwriters other than representations, warranties or
agreements regarding S.R.One, S.R.One's Registrable Securities, S.R.One's
intended method of distribution and any other representations or warranties
required by law or customarily given by selling shareholders in an underwritten
public offering or as reasonably required by the managing underwriter of the
offering of Registrable Securities.
2.4.2 Piggyback Underwritten Offerings. If the Company proposes
--------------------------------
to register any of its securities under the Securities Act as contemplated by
Section 2.2 and such securities are to be distributed by or through one or more
underwriters, subject to the priority and other provisions of Section 2.2.2, the
Company shall, if requested by S.R.One, arrange for such underwriters to include
all the Registrable Securities to be offered and sold by S.R.One among the
securities of the Company to be distributed by such underwriters. S.R.One shall
become a party to the underwriting agreement negotiated between the Company and
such underwriters. S.R.One shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding S.R.One, S.R.One's
Registrable Securities and S.R.One's intended method of distribution or any
other representations or warranties required by law or customarily given by
selling shareholders in an underwritten public offering or as reasonably
required by the managing underwriter of the offering of Registrable Securities.
<PAGE>
- 11 -
2.4.3 Holdback Agreements.
-------------------
(i) In connection with the initial Public Offering or any
registration of Registrable Securities in connection with an underwritten public
offering, S.R.One agrees if required by the underwriter or underwriters not to
effect any public or private sale or distribution, including any sale pursuant
to Rule 144 under the Securities Act, of any Registrable Securities, and not to
effect any such public or private sale or distribution of any other equity
security of the Company or of any security convertible into or exchangeable or
exercisable for any equity security of the Company (in each case, other than as
part of such underwritten public offering) during the 365-day period, or such
shorter period set forth in the underwriting agreement with respect to such
offering as the managing underwriter of such offering shall reasonably require,
beginning on, the effective date of such registration statement, provided that
(a) S.R.One has received written notice of such registration at least 15 days
prior to such effective date and (b), with respect to any offering other than
pursuant to a firm commitment underwriting, the underwriters continue to
actively market the Registrable Securities until the earlier of the end of such
lock-up period and the closing with respect to the sale of all, or the final
portion of, the Registrable Securities offered by S.R.One; provided, however,
that the restrictions imposed on S.R.One by this Section 2.4.3(i) shall
terminate on the earlier of the end of such lock-up period and thirty (30) days
after such closing.
(ii) If any registration of Registrable Securities shall be in
connection with an underwritten public offering, the Company agrees (x) if
required by the underwriter or underwriters, not to effect any public sale or
distribution of any of its equity securities or of any security convertible into
or exchangeable or exercisable for any equity security of the Company (other
than in connection with any employee stock option or other benefit plan which
has been duly adopted by the Company and which provides for the distribution to
participants in the plan of equity securities of the Company or securities
convertible or exchangeable or exercisable for equity securities of the Company,
or in connection with a merger or acquisition approved by the Board of Directors
of the Company) during the 365-day period, or such shorter period as the
managing underwriter of such offering shall reasonably require, beginning on the
effective date of such registration statement (except as part of such
registration) and (y) that any agreement entered into after the date of this
Agreement pursuant to which the Company issues or agrees to issue any privately
placed equity securities shall contain a provision under which holders of such
securities agree that, if required by the underwriter or underwriters, they will
not effect any public sale or distribution of any such securities during the
period referred to in the foregoing clause (x), including any sale pursuant to
Rule 144 under the Securities Act (except as part of such registration, if
permitted), if such holder is participating in the offering pursuant to such
registration.
<PAGE>
- 12 -
2.5 Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of any registration statement under the Securities Act in
which S.R.One is a selling shareholder, the Company shall give S.R.One not less
than 30 days prior written notice of the preparation of such registration
statement and give S.R.One and its counsel and accountants the opportunity to
participate, at S.R.One's expense, in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto (provided that S.R.One shall
furnish the Company with comments on any such amendment or supplement as
promptly as the Company shall reasonably require), and give each of them such
access to its books and records, such opportunities to discuss the business of
the Company with officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of
S.R.One's counsel, to conduct a reasonable investigation within the meaning of
the Securities Act. Any expenses incurred by S.R.One in connection with any
such investigation shall be borne by S.R.One, other than the reasonable fees and
disbursements of S.R.One's outside counsel.
2.6 Indemnification.
---------------
2.6.1 Indemnification by the Company. In the event of any
------------------------------
registration of any securities of the Company under the Securities Act in which
S.R.One is or may be a selling shareholder, the Company shall, and hereby does,
indemnify and hold harmless, S.R.One, its directors, officers, employees, agents
and affiliates and, to the extent required by any underwriting agreement entered
into by the Company, each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person who controls S.R.One
or any such underwriter within the meaning of the Securities Act, insofar as
losses, claims, damages, or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon (a)
any untrue statement or alleged untrue statement of any fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus, or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, or (b) any violation by
the Company, its directors, officers, employees or agents of this Agreement or
any law applicable to and in connection with such registration, and the Company
shall reimburse S.R.One and each such director, officer, agent or affiliate,
and, to the extent required by any underwriting agreement entered into by the
Company, underwriter and controlling Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding described in clauses (a) or
(b); provided, however, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is
<PAGE>
- 13 -
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by S.R.One, specifically stating
that it is for use in the preparation thereof. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
S.R.One or any such director, officer, agent or affiliate or controlling Person
and shall survive the transfer of such securities by S.R.One.
2.6.2 Indemnification by S.R.One. If any Registrable Securities
--------------------------
are included in any registration statement, S.R.One shall indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section
2.6.1 above) the Company, each director of the Company, each officer of the
Company and each employee of the Company and, to the extent required by any
underwriting agreement entered into by S.R.One, each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person who controls any such underwriter within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by S.R.One specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, that in no event shall
the liability of S.R.One under this Section 2.6.2 exceed the amount of the
proceeds to S.R.One from the sale of the Registrable Securities in any such
registration.
2.6.3 Notice of Claims, Etc. Promptly after receipt by an
----------------------
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 2.6,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party, immediately give written notice to the latter of
the commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 2.6, except to the extent that the indemnifying party is materially
prejudiced by such failure. The indemnified party shall be entitled to receive
the indemnification payments described in Section 2.6.6 after providing such
written notice to the indemnifying party. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent
<PAGE>
- 14 -
that the indemnifying parties may agree, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable out of pocket costs related to the
indemnified party's cooperation with the indemnifying party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties arises in respect of such claim after the
assumption of the defense thereof. No indemnifying party shall be liable for any
settlement of any action or proceeding effected without its written consent,
which consent shall not be unreasonably withheld, delayed or conditioned.
Consent of the indemnified party shall be required for the entry of any judgment
or to enter into a settlement only when such judgment or settlement does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect such claim
or litigation.
2.6.4 Contribution. If the indemnification provided for in this
------------
Section 2.6 shall for any reason be held by a court to be unavailable to an
indemnified party under Section 2.6.1 or 2.6.2 hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under Sections 2.6.1 or 2.6.2 hereof, the indemnified
party and the indemnifying party under Sections 2.6.1 or 2.6.2 hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on one hand and S.R.One on the other or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect the relative fault of the
Company on one hand and S.R.One on the other that resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. No Person guilty of fraudulent misrepresentation
(within the meaning of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation. In
addition, no Person shall be obligated to contribute hereunder any amounts in
payment for any settlement of any action or claim, effected without such
Person's written consent, which consent shall not be unreasonably withheld. In
no event shall the liability of S.R.One under this Section 2.6.4 exceed the
amount of the proceeds to S.R.One from the sale of the Registrable Securities in
the related registration.
2.6.5 Other Indemnification. Indemnification and contribution
---------------------
similar to that specified in the preceding paragraphs of this Section 2.6 (with
appropriate modifications) shall be given by the Company and S.R.One with
respect to any required registration or other qualification of securities under
any federal or state law or regulation of any governmental authority other than
the Securities Act.
<PAGE>
- 15 -
3. Rule 144. With a view to making available the benefits of certain
--------
rules and regulations of the Commission that may permit the sale of the
Registrable Securities to the public without registration after an initial
Public Offering, the Company agrees to:
(a) provide information and such other assistance requested by
S.R.One as is customarily provided by issuers in connection with sales of their
common stock by directors or affiliates under Rule 144, promulgated under the
Securities Act;
(b) make and keep public information available, as those terms are
understood and defined in Rule 144 promulgated under the Securities Act at all
times;
(c) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(d) deliver a written statement as to whether it has complied with
such requirements of this Section, to S.R.One
upon S.R.One's request.
4. Modification; Waivers. This Agreement may be modified or amended only
---------------------
with the written consent of each party hereto. No party shall be released from
its obligations hereunder without the written consent of the other party. The
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) by the party
entitled to enforce such term, but any such waiver shall be effective only if in
a writing signed by the party against which such waiver is to be asserted.
Except as otherwise specifically provided herein, no delay on the part of any
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party hereto of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.
5. Entire Agreement. This Agreement represents the entire understanding
----------------
and agreement between the parties hereto with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
6. Severability. If any provision of this Agreement, or the application
------------
of such provision to any Person or circumstance, shall be held invalid, the
remainder of this Agreement or the application of such provision to other
Persons or circumstances, to the
<PAGE>
- 16 -
extent permitted by law, shall not be affected thereby; provided, that the
parties shall negotiate in good faith with respect to an equitable modification
of the provision or application thereof held to be invalid.
7. Notices.
-------
(i) Any notice or communication to any party hereto shall be duly
given if in writing and delivered in person, receipt requested, or courier
guaranteeing next day delivery, or facsimile (with written confirmation of
receipt) to such other party's address or facsimile number set forth below.
If to Careside, Inc.:
6100 Bristol Parkway
Culver City, CA 90320
Attention: W. Vickery Stoughton
Facsimile: (310)338-6789
with a copy to:
Julia D. Corelli, Esq.
Pepper Hamilton, LLP
3000 Two Logan Square
Philadelphia, Pennsylvania 19103-2799
If to S.R.One:
S.R.One, Limited
Four Tower Bridge
200 Barr Harbor Drive
Suite 250
Conshohocken, Pennsylvania 19428
Attention: Mr. Peter Sears
Facsimile:
with a copy to:
(ii) All notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered or facsimiled
(with written
<PAGE>
- 17 -
confirmation of receipt); and the next business day after timely delivery to the
courier, if sent by courier guaranteeing next day delivery.
8. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and shall be binding upon the Company and S.R.One and their respective
successors and permitted assigns. S.R.One may assign its rights under this
Agreement to any Person to whom S.R.One transfers any of the Registrable
Securities or any interest therein without the necessity of obtaining any
consent to such assignment, provided that such Person becomes a party to that
certain stockholders agreement, by and among the Company, S.R.One and certain
other holders of the Common Stock. In the event that S.R.One assigns its rights
to a holder or holders of only a portion of the Registrable Securities, then all
references to S.R.One herein shall also be deemed to refer to such other holder
or holders, but in such event S.R.One shall have the sole right to make all
decisions by and give notices for such holder or holders under this Agreement;
provided, that if S.R.One no longer owns any Registrable Securities, then all
decisions and notices hereunder shall be made by the holders of not less than a
majority of the Registrable Securities outstanding and all other holders of
Registrable Securities shall be bound by any such decision.
9. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which for all purposes shall be deemed to be an original
and all of which together shall constitute the same agreement.
10. Headings. The Section headings in this Agreement are for convenience
--------
of reference only, and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
11. Construction. This Agreement shall be governed, construed and
------------
enforced in accordance with the laws of the Commonwealth of Pennsylvania without
regard to its principles of conflict of laws.
12. No Inconsistent Agreements. The Company has not previously, and shall
--------------------------
not hereafter, enter into any agreement with respect to its securities which is
inconsistent with the rights granted to S.R.One in this Agreement.
13. Recapitalizations, etc. In the event that any capital stock or other
----------------------
securities are issued in respect of, in exchange for, or in substitution of, any
Registrable Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Registrable Securities or any other
similar change in the Company's capital structure, appropriate adjustments shall
be made in this
<PAGE>
- 18 -
Agreement so as to fairly and equitably preserve, as far as practicable, the
original rights and obligations of the parties hereto under this Agreement.
14. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association in effect at
the time such arbitration is instituted. The arbitration panel shall be composed
of three arbitrators, one of whom shall be chosen by the Company, one of whom
shall be chosen by S.R.One, and one of whom shall be chosen by the two
arbitrators previously designated. If both or either of the Company and/or
S.R.One fails to choose an arbitrator within fourteen (14) calendar days after
receiving notice of commencement of arbitration or if the two arbitrators fail
to choose a third arbitrator within fourteen (14) calendar days of their
appointment, such arbitrators shall be chosen by the American Arbitration
Association. Unless the parties to the arbitration shall otherwise agree to a
different place of arbitration, the place of arbitration shall be Philadelphia,
PA. The arbitration award shall be final and binding upon the parties thereto
and may be entered in any court having jurisdiction. Each party shall bear (i)
its own expenses in connection with such arbitration and (ii) one-half of the
fees and expenses of the American Arbitration Association and all arbitrators.
No arbitration award shall contain any provision which is inconsistent with the
preceding sentence.
15. Specific Performance. The parties hereto agree that the Registrable
--------------------
Securities of the Company cannot be purchased or sold in the open market and
that, for these reasons, among others, the holder or holders of the Registrable
Securities will be irreparably damaged in the event that this Agreement is not
specifically enforceable. Accordingly, in the event of any controversy
concerning the Registrable Securities which are the subject of this Agreement,
or any right or obligation to register such securities, such right or obligation
determined as part of an arbitration award described in Section 14 shall be
enforceable in a court of equity by specific performance. The rights granted in
this Section 15 shall be cumulative and not exclusive, and shall be in addition
to any and all other rights which the parties hereto may have hereunder, at law
or in equity. S.R.One consents to the jurisdiction of the federal courts of the
Commonwealth of Pennsylvania in any suit, action or proceeding brought pursuant
to this Section 15, waives any objection it may have to the laying of venue in
any such suit, action or proceeding in any of such court, and agrees that
service of any court paper may be made in such manner as may be provided under
applicable laws or court rules governing service of process.
16. Term. This Agreement shall continue in full force and effect until
----
the earlier of (i) ten (10) years after the last issuance of any Antidilution
Shares or Conversion Shares and (ii) the first date on which S.R.One and its
permitted assigns may sell all of the Registrable Securities held by them in a
ninety (90) day period pursuant to Rule 144 under the Securities Act.
<PAGE>
- 19 -
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first above written and delivered by their respective duly
authorized officers.
CARESIDE, INC.
By: /s/ James Koch
-----------------------------
Name: James Koch
Title: Chief Financial Officer
S.R.One, Limited
By: /s/ Peter Sears
----------------------------
Name: Peter Sears
Title:
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this S-
1 Registration Statement.
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
December 17, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM CARESIDE, INC.'S
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 SEP-30-1998
<CASH> 1,237,149 2,827,880
<SECURITIES> 0 1,647,891
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,463,729 5,371,244
<PP&E> 1,736,860 2,442,607
<DEPRECIATION> 158,133 443,406
<TOTAL-ASSETS> 3,140,223 7,609,511
<CURRENT-LIABILITIES> 702,616 1,465,811
<BONDS> 0 0
0 0
0 0
<COMMON> 33,654 50,843
<OTHER-SE> 2,403,953 6,092,857
<TOTAL-LIABILITY-AND-EQUITY> 3,140,223 7,609,511
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 6,536,039 6,807,503
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8,329 0
<INCOME-PRETAX> (6,330,783) (6,611,620)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (6,330,783) (6,611,620)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (6,330,783) (6,611,620)
<EPS-PRIMARY> (2.04) (1.48)
<EPS-DILUTED> (2.04) (1.48)
</TABLE>
