EXHIBIT 10.8
ASSET PURCHASE AGREEMENT
dated March 29, 2000
BY AND AMONG
SFBC INTERNATIONAL, INC.,
SFBC/PHARMACEUTICAL DEVELOPMENT
ASSOCIATES, INC.,
PHARMACEUTICAL DEVELOPMENT
ASSOCIATES, INC.,
and
CLINICAL SITE SERVICES CORP.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE PAGE
------- ----
<S> <C> <C>
ARTICLE 1 DEFINITIONS............................................................................................1
ARTICLE 2 PURCHASE OF ACQUIRED ASSETS AND ASSUMPTION OF ASSUMED LIABILITIES.....................................11
Section 2.01. Purchase of Assets.............................................................................11
Section 2.02. Assumption of Specified Liabilities............................................................12
Section 2.03. Subsequent Documentation.......................................................................12
Section 2.04. Assignment of Contracts........................................................................13
ARTICLE 3 PURCHASE PRICE........................................................................................13
Section 3.01. Purchase Price.................................................................................13
Section 3.02. Manner of Payment of Purchase Price............................................................15
Section 3.03. The Earn-Out...................................................................................16
Section 3.04. Fair Consideration.............................................................................18
ARTICLE 4 CLOSING...............................................................................................18
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLERS AND CLINSITE................................................19
Section 5.01. Organization...................................................................................19
Section 5.02. Qualifications to Do Business..................................................................19
Section 5.03. Authorization and Validity of Agreement........................................................19
Section 5.04. No Conflict or Violation.......................................................................19
Section 5.05. Consents and Approvals.........................................................................20
Section 5.06. Unaudited Financial Statements.................................................................20
Section 5.07. Absence of Certain Changes or Events...........................................................20
Section 5.08. Tax Matters....................................................................................21
Section 5.09. Absence of Undisclosed Liabilities.............................................................21
Section 5.10. Real Property..................................................................................21
Section 5.11. Leased Real Property...........................................................................21
Section 5.12. Equipment and Machinery........................................................................22
Section 5.13. Accounts Receivable............................................................................22
Section 5.14. Intellectual Property..........................................................................22
Section 5.15. Compliance with Law............................................................................23
Section 5.16. Litigation.....................................................................................23
Section 5.17. Employee Benefit Plans.........................................................................23
Section 5.18. Environmental Compliance.......................................................................24
Section 5.19. Licenses and Permits...........................................................................25
Section 5.20. Personnel; Labor...............................................................................26
Section 5.21. Insurance......................................................................................26
Section 5.22. Material Contracts.............................................................................27
Section 5.23. Customers and Suppliers........................................................................28
Section 5.24. Absence of Certain Business Practices..........................................................28
Section 5.25. Severance Arrangements.........................................................................29
Section 5.26. Shareholders...................................................................................29
Section 5.27. Year 2000 Compliance...........................................................................29
Section 5.28. Investment Representations and Restrictions on Transfer........................................30
Section 5.29. No Other Agreements to Sell Assets.............................................................31
Section 5.30. Broker's and Finder's Fees.....................................................................31
Section 5.31. Non-Compete Agreements.........................................................................30
Section 5.32. All Material Information.......................................................................31
Section 5.33. Superior Proposal..............................................................................31
Section 5.34. Other Borrowers................................................................................30
Section 5.35. Conduct of Business ...........................................................................30
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SFBC..................................................32
Section 6.01. Organization...................................................................................32
Section 6.02. Authorization and Validity of Agreement........................................................32
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE PAGE
------- ----
<S> <C> <C>
Section 6.03. No Conflict or Violation.......................................................................33
Section 6.04. Consents and Approvals.........................................................................33
Section 6.05. Financial Statements...........................................................................33
Section 6.06. Absence of Certain Changes or Events...........................................................33
Section 6.07. Absence of Undisclosed Liabilities.............................................................34
Section 6.08. Compliance with Law............................................................................34
Section 6.09. Litigation.....................................................................................34
Section 6.10. Related Party Transactions.....................................................................34
Section 6.11. Year 2000 Compliance...........................................................................35
Section 6.12. All Material Information.......................................................................35
Section 6.13. Broker's and Finder's Fees.....................................................................35
Section 6.14. Environmental Compliance.......................................................................35
Section 6.15. Insurance......................................................................................36
ARTICLE 7 TAXES.................................................................................................37
Section 7.01. Taxes; Transfer Taxes..........................................................................37
Section 7.02. Cooperation on Tax Matters.....................................................................37
Section 7.03. Allocation of Purchase Price...................................................................38
ARTICLE 8 COVENANTS PRIOR TO CLOSING............................................................................38
Section 8.01. Sellers' and Clinsite's Covenants..............................................................38
Section 8.02. Access.........................................................................................39
Section 8.03. Cooperation....................................................................................39
ARTICLE 9 CONDITIONS OF CLOSING.................................................................................39
Section 9.01. Conditions Precedent to the Obligations of Sellers and Clinsite to Complete the Closing........39
Section 9.02. Conditions Precedent to the Obligations of SFBC and Purchaser to Complete the Closing..........40
ARTICLE 10 POST CLOSING COVENANTS................................................................................42
Section 10.01. The Earn-Out...................................................................................42
Section 10.02. Post-Closing Access and Delivery of Reports....................................................42
Section 10.03. Covenant Not to Compete........................................................................43
Section 10.04. Change of Business Name........................................................................43
Section 10.05. Further Assurances.............................................................................44
Section 10.06. Right of First Refusal.........................................................................44
Section 10.07. Underwriting Arrangements......................................................................44
Section 10.08. Registration Rights Agreement..................................................................45
Section 10.09. Miscellaneous..................................................................................45
Section 10.10. Employment of Personnel........................................................................45
Section 10.11. Advances to Clinsite...........................................................................45
Section 10.12. Option to Purchase the Assets of LeeCoast......................................................46
Section 10.13. Cash Transfers; Conduct of Operations..........................................................48
Section 10.14. Scott Davis' Employment........................................................................49
ARTICLE 11 SURVIVAL..............................................................................................49
ARTICLE 12 INDEMNIFICATION.......................................................................................50
Section 12.01. Indemnification of Purchaser...................................................................50
Section 12.02. Indemnification by SFBC and Purchaser..........................................................51
Section 12.03. Procedure......................................................................................52
ARTICLE 13 NO SOLICITATION; VOTING AGREEMENT.....................................................................52
Section 13.01. No Solicitation................................................................................52
ARTICLE 14 TERMINATION...........................................................................................54
Section 14.01. Termination of Agreement.......................................................................54
Section 14.02. Effect of Termination..........................................................................54
ARTICLE 15 MISCELLANEOUS.........................................................................................55
Section 15.01. Public Announcements...........................................................................55
Section 15.02. Expenses.......................................................................................55
Section 15.03. Severability...................................................................................55
Section 15.04. Counterparts...................................................................................55
Section 15.05. Benefit........................................................................................55
</TABLE>
- ii -
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE PAGE
------- ----
<S> <C> <C>
Section 15.06. Notices and Addresses.........................................................................56
Section 15.07. Attorney's Fees...............................................................................57
Section 15.08. Oral Evidence.................................................................................57
Section 15.09. Arbitration...................................................................................57
Section 15.10. Headings......................................................................................57
Section 15.11. Construction..................................................................................57
Section 15.12. Governing Law; Jurisdiction...................................................................58
</TABLE>
- iii -
<PAGE>
This ASSET PURCHASE AGREEMENT (the "Agreement") has been entered into
as of March 29, 2000 by and among SFBC International, Inc. a Delaware
corporation ("SFBC"), SFBC/Pharmaceutical Development Associates, Inc., a
Florida corporation ("Purchaser"), Pharmaceutical Development Associates, Inc.,
a North Carolina corporation ("PDA" or "Seller"), and CLINICAL SITE SERVICES
CORP., a Tennessee corporation ("Clinsite").
RECITALS
1. WHEREAS, Seller is engaged in the clinical research business,
primarily in the area of managing Phase III clinical trials, (being sometimes
referred to hereafter as the "Business") and Clinsite as a part of its
operations has at times also engaged in Phase III clinical trials and, to the
extent that Clinsite has assets which would be useful to Purchaser in its future
conduct of the Business, such assets will be sold to Purchaser hereunder.
2. WHEREAS, of the one thousand (1,000) authorized, issued and
outstanding common stock of PDA, Clinsite owns of record and beneficially all
shares, subject to a pledge in favor of PCLP (as hereinafter defined) and
certain other parties,
3. WHEREAS, Purchaser desires to purchase the Business and the assets
of Seller used in the Business and Seller desires to sell the Business and such
assets to Purchaser, in each case upon the terms and subject to the conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the respective
representations, warranties, covenants, and agreements herein contained, and
intending to be legally bound, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms have the meanings indicated
below:
"Accounts Receivable" means all accounts and notes receivable, rights
to refunds, and deposits and prepaid items or credits of Seller, excluding
inter-company items receivable from Clinsite and other affiliates of Seller, as
reflected on Schedule 1.
"Acquired Assets" means (i) the Accounts Receivable, Assigned
Contracts, cash, deposits and prepaid assets belonging to Seller, Equipment and
Machinery, Files and Records, Intangible Assets, Intellectual Property,
Inventory, Licenses and Permits (to the extent transferable by Seller), Leased
Real Property, work-in-process, and all other assets of Seller (excluding
inter-company items) as of the Closing Date (including all such items shown or
reflected in the December 31, 1999 balance sheet of Seller, with additions
thereto, net of dispositions in the Ordinary Course of Business, since December
31, 1999), of every kind, nature, character, and description, whether real,
personal or mixed, whether accrued, contingent or other, and wherever situated,
and whether or not reflected in any financial statement of Seller, but excluding
the Excluded Assets, and (ii) the Clinsite Intellectual Property and accounts
receivable of Clinsite relating to the Business which are reflected on
<PAGE>
Schedule 1. In no event does the term "Acquired Assets" include any assets of
Seller's Subsidiary.
"Acquisition Proposal" has the meaning specified in Section 13.01.
"Act" means the Securities Act of 1933, as amended.
"Adjusted Net Income" has the meaning set forth in Section 3.03(a).
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934.
"Assigned Contracts" means the Customer Contracts, Real Property
Leases, Material Contracts, those Equipment and Machinery leases and agreements
specified in Schedule 5.12, and those Other Contracts specifically designated as
Assigned Contracts on Schedule 5.22.
"Assignment and Assumption Agreement" has the meaning specified in
Section 3.02(c).
"Assumed Liabilities" has the meaning specified in Section 2.02.
"Balance Sheet Date" means the date of Seller's Balance Sheet.
"Bulletin Board" has the meaning specified in Section 3.03.
"Business" has the meaning specified in the Recitals hereto.
"Business Day" means any day other than Saturday, Sunday, and any other
day on which there is no trading on the floor of the New York Stock Exchange.
"Business Loan Agreement" means that certain Business Loan Agreement
among Clinsite, Seller, PCLP and certain other parties dated April 21, 1999.
"Cash Payment" has the meaning specified in Section 3.01(a)(i)(A).
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liabilities Act of 1980, as amended.
"Clay Park" means Clay Park Labs, Inc., a corporation, and its
affiliates.
"Clay Park Net Revenue" means the revenues generated from services
provided to Clay Park, less discounts, credits and adjustments consistent with
prior practices among Clinsite, Seller and Clay Park.
<PAGE>
"Clinsite" has the meaning specified in the preamble hereof.
"Clinsite Intellectual Property" means all United States and foreign
patents and patent applications (whether utility, design, or plant product),
registered and unregistered trademarks, service marks, trade names, including
all names set forth on Schedule 5.01, logos, brands, business identifiers,
private labels, trade dress (including all goodwill and reputation symbolized by
any of the foregoing), rights of publicity, processes, industrial designs,
inventions, registered and unregistered copyrights and copyright applications,
product formulas, know-how, trade secrets, U.R.L.s or Internet addresses, and
Computer Software, and all rights with respect to the foregoing, and all other
proprietary rights that Seller and Clinsite owns, licenses, or possesses the
right to use, with respect to the Acquired Assets or in the conduct by Seller of
the Business.
"Clinsite/PCLP Agreement" has the meaning specified in Section 3.01(d).
"Closing" has the meaning specified in Article 4.
"Closing Date" has the meaning specified in Article 4.
"Closing Date Balance Sheet" has the meaning specified in Section
3.01(b).
"COBRA" means Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Computer Software" means all computer source codes, programs, data
files, and other software (including both applications software and operating
software), including all machine readable code, printed listings of code,
documentation, and related property and information relating to the Business,
including licenses and other rights to use Computer Software of third parties.
"Counsel for Clinsite" shall mean Alston & Bird LLP.
"Counsel for Purchaser" shall mean Michael Harris, P.A.
"Counsel for Seller" shall mean Alston & Bird LLP.
"Customer Contracts" means those agreements set forth on Schedule 2.04.
"Davis Employment Agreement" has the meaning specified in Section
9.01(c).
<PAGE>
"Earn-Out" has the meaning specified in Section 3.03.
"Employee Plans" has the meaning specified in Section 5.17(c).
"Environmental Claims" means all accusations, allegations,
investigations, warnings, notice letters, notices of violations, Liens, orders,
claims, demands, suits or administrative or judicial actions for any injunctive
relief, fines, penalties, or any damage, including without limitation personal
injury, property damage (including any depreciation of property values), lost
use of property, natural resource damages, or environmental response costs
arising out of Environmental Conditions or under Environmental Requirements.
"Environmental Conditions" means the state of the environment,
including natural resources (e.g., flora and fauna), soil, surface water, ground
water, any present or potential drinking water supply, subsurface strata or
ambient air, relating to or arising out of the use, handling, storage,
treatment, recycling, generation, transportation, spilling, leaking, pumping,
pouring, injecting, emptying, discharging, emitting, escaping, leaching,
dumping, disposal, release, or threatened release of Hazardous Materials,
whether or not yet discovered which could or does result in Environmental
Claims. With respect to Environmental Claims by third parties, Environmental
Conditions also include the exposure of persons to Hazardous Materials at the
work place or the exposure of persons or property to Hazardous Materials
migrating or otherwise emanating from, to, or located at, under, or on the
Leased Real Property.
"Environmental Expenses" means any liability (including strict
liability), loss, cost, penalty, fine, punitive damages, encumbrance, or expense
relating to any Environmental Claim or Environmental Conditions, or incurred in
compliance with any Environmental Requirements, including without limitation the
costs of investigation, cleanup, remedial, monitoring, corrective, or other
responsive action, compliance costs, settlement costs, lost property value, and
related legal and consulting fees and expenses.
"Environmental Requirements" means all present laws, rules,
regulations, ordinances, codes, policies, guidance documents, approvals, plans,
authorizations, licenses, permits issued by all government agencies,
departments, commissions, boards, bureaus, or instrumentalities of the United
States, all states and political subdivisions thereof, and any foreign
government body, and all judicial, administrative, and regulatory decrees,
judgments, and orders relating to human health, pollution, or protection of the
environment (including ambient air, surface water, ground water, land surface,
or surface strata), including (i) laws relating to emissions, discharges,
releases, or threatened releases of Hazardous Materials, and (ii) laws relating
to the identification, generation, manufacture, processing, distribution, use,
treatment, storage, disposal, recovery, transport, or other handling of
Hazardous Materials, (iii) CERCLA, the Toxic Substances Control Act, as amended;
the Hazardous Materials Transportation Act, as amended, RCRA, the Clean Water
Act, as amended, the Safe Drinking Water Act, as amended; the Clean Air Act, as
amended, the Atomic Energy Act of 1954, as amended, and the Occupational Safety
and Health Act, as amended; and (iv) all analogous laws promulgated or issued by
any federal, state, or other governmental authority or foreign governmental
body.
<PAGE>
"Equipment and Machinery" means (i) all personal property owned by
Seller, including without limitation the equipment, machinery, furniture,
fixtures and improvements, computer hardware, tooling, spare parts, supplies,
and vehicles owned or leased by Seller (including all leases of such property),
(ii) any rights of Seller to warranties applicable to the foregoing (to the
extent assignable), and licenses received from manufacturers and sellers of any
such item, and (iii) any related claims, credits, and rights of recovery with
respect thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
"Escrow Agent" means Kantner and Associates, Attorneys at Law.
"Escrow Payment" has the meaning specified in Section 3.01(a)(i)(B).
"Excess Operating Assets Amount" means the amount, if any, by which
PDA's Operating Assets exceed its Operating Liabilities.
"Excess Operating Liability Amount" means the amount, if any, by which
PDA's Operating Liabilities exceed its Operating Assets.
"Excluded Assets" means any receivables from Seller to Clinsite or its
Affiliates or from Clinsite or its Affiliates to Seller.
"Exercise Period" has the meaning specified in Section 10.12(a).
"Fair Market Value" has the meaning specified in Section 3.03.
"FDA" means the United States Food and Drug Administration.
"Files and Records" means all files and records of Seller and Clinsite
relating to the Business, the Acquired Assets or the Assumed Liabilities,
whether in hard copy or magnetic or other format including customer and supplier
lists and records; FDA records; equipment maintenance records; equipment
warranty information; plant plans, specifications and drawings; sales and
advertising material; Computer Software; technical and research analyses;
engineering, sales, marketing and other studies, data and plans; bid
information; quality assurance records; and records relating to those employees
who may become employed by Purchaser following the Closing.
"Future SFBC Shareholders" has the meaning specified in Section 5.28.
"GAAP" means generally accepted United States accounting principles
specified in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public
<PAGE>
Accountants and statements and pronouncements of the Financial Accounting
Standards Board that are applicable to the circumstances as of the date of
determination.
"Gessner" means George Gessner and Lynne Gessner.
"Gessner Consulting Agreement" has the meaning specified in Section
9.01(e).
"Gessner Note" has the meaning specified in Section 3.03(h).
"Hazardous Materials" means (i) any substance that is or becomes
defined as a "hazardous substance", "hazardous waste", "hazardous materials",
pollutant, or contaminant under any Environmental Requirements, including
CERCLA, SARA, RCRA, and any analogous federal, state, local or foreign law; (ii)
petroleum (including crude oil and any fraction thereof); and (iii) any natural
or synthetic gas (whether in liquid or gaseous state).
"Gessner Note" has the meaning specified in Section 3.03 (h).
"Intangible Assets" means all intangible personal property rights of
Seller, including all rights on the part of Seller to proceeds of any insurance
policies and all claims on the part of Seller for recoupment, reimbursement, and
coverage under any insurance policies; all rights of Seller in and to all
telephone, facsimile, email, and telex (if any) numbers and telephone and other
directory listings utilized in connection with the Business; and all industry,
vendor and other certifications and endorsements utilized in connection with the
Business.
"Indemnified Party" has the meaning specified in Section 12.03(a).
"Indemnifying Party" has the meaning specified in Section 12.03(a).
"Intellectual Property" means any United States and foreign patents and
patent applications (whether utility, design, or plant product), registered and
unregistered trademarks, service marks, trade names, logos, brands, business
identifiers, private labels, trade dress (including all goodwill and reputation
symbolized by any of the foregoing), rights of publicity, processes, industrial
designs, inventions, registered and unregistered copyrights and copyright
applications, product formulas, know-how, trade secrets, U.R.L.s or Internet
addresses, and Computer Software, and all rights with respect to the foregoing.
"Inventory" means all the finished goods, raw materials, work in
process, repair and replacement parts, and supplies owned by Seller (including
goods in transit, consigned inventory, inventory sold on approval and rental
inventory) and all rights of Seller to warranties received from its suppliers
with respect to the foregoing (to the extent assignable), and related claims,
credits, and rights of recovery with respect thereto.
"IPO" has the meaning specified in Section 3.03.
<PAGE>
"Law" or "Laws" has the meaning specified in Section 5.15.
"Leased Real Property" has the meaning specified in Section 5.11.
"LeeCoast" means Clinsites/LeeCoast Research Center, Inc., a wholly
owned subsidiary of Clinsite.
"LeeCoast Escrow Agent" has the meaning specified in Section 10.12(c).
"LeeCoast Operating Assets" means LeeCoast's trade accounts receivable,
work in progress receivables and fixed assets as of the end of the month
immediately preceding the date of any Notice given under Section 10.12(b), as
adjusted in accordance with this Agreement.
"LeeCoast Operating Liabilities" means LeeCoast's account payable,
accrued expenses and unearned revenues as of the end of the month immediately
preceding the date of any Notice given under Section 10.12(b), as adjusted in
accordance with this Agreement.
"LeeCoast Note" has the meaning specified in Section 10.11.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Licenses and Permits" means all governmental licenses, permits,
franchises, authorizations, and approvals that are held by Seller and relate to
the conduct of the Business, as presently conducted and specified on Schedule
5.19.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
(statutory or other), option, easement, right-of-way, charge, or conditional
sale agreement.
"Loan" has the meaning specified in Section 10.11.
"Loss" or "Losses" has the meaning specified in Section 12.01.
"Material Contracts" has the meaning specified in Section 5.22.
"Material Adverse Effect" when used with respect to Seller, Clinsite,
SFBC or Purchaser, means a material adverse effect on the assets, operations,
business, or financial condition of Seller or Clinsite solely with respect to
the Business or SFBC and Purchaser, taken as a whole, as the case may be.
"Material Intellectual Property" is a collective reference to the
Clinsite Intellectual Property and the Intellectual Property specified on
Schedule 5.14.
<PAGE>
"Nasdaq" has the meaning specified in Section 3.03.
"New LeeCoast Offer Terms" has the meaning specified in Section
10.12(e).
"Note" has the meaning specified in Section 3.01(a)(i)(C).
"Offer" has the meaning specified in Section 10.06.
"Offered Shares" has the meaning specified in Section 10.06.
"Operating Assets" as to Seller and Clinsite arising from the Business
means the aggregate of the Accounts Receivable (or accounts receivable), work in
progress receivables and fixed assets (as to Clinsite relating to the Business)
as of the Closing Date .
"Operating Liabilities" as to Seller and Clinsite arising from the
Business means the aggregate of the accounts payable, accrued expenses and
unearned revenues (as to Clinsite relating to the Business) as of the Closing
Date .
"Option" has the meaning specified in Section 10.12(a).
"Option Exercise Price" has the meaning specified in Section 10.12(a).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Other Borrowers" means the Affiliates of Clinsite who are borrowers
under the Business Loan Agreement other than Seller.
"Other Contracts" means all leases for Equipment and Machinery or other
personal property (whether Seller is lessor or lessee), indentures, loan
agreements, security agreements, partnership and/or joint venture agreements,
license agreements, service contracts, employment and consulting agreements,
suretyship contracts, reimbursement agreements, distribution agreements, and all
other contracts, commitments, and agreements to which Seller is a party, but
excluding Customer Contracts, Material Contracts and Real Property Leases.
"Other Lien Holders" means all parties other than PCLP who are lenders
under the Business Loan Agreement.
"PCLP" means Pacific Capital, L.P.
<PAGE>
"PCLP Debt" means (i) the Promissory Note of Clinsite, Seller and
certain Affiliates of Clinsite payable to PCLP, dated April 21, 1999 in the face
amount of up to $840,000, with an outstanding principal balance of $600,000 due
April 21, 2004, (ii) the first Amended and Restated Promissory Note of Clinsite
payable to PCLP, dated March 19, 1996 in the principal amount of $400,000 with
an outstanding principal balance of $400,000 due March 31, 2004, (iii) the First
Amended and Restated Promissory Note of Clinsite payable to PCLP, dated November
4, 1996 in the principal amount of $750,000 with an outstanding principal
balance of $750,000 due September 30, 2004, and (iv) all other obligations and
liabilities of Clinsite, Seller and their Affiliates under the foregoing
Promissory Notes and under the terms and provisions of the Loan Documents (as
defined in the Business Loan Agreement among Clinsite, Seller, PCLP and certain
other parties dated April 21, 1999.).
"Pension Benefit Plans" has the meaning specified in Section 5.17.
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint-stock company, trust, or
unincorporated organization, or any governmental agency, officer, department,
commission, board, bureau, or instrumentality thereof.
"Personnel" means the officers and employees of Seller, including
leased employees.
"Policies" and "Policy" have the meanings specified in Section 5.21.
"Proposed Transferee" has the meaning specified in Section 10.06.
"Purchase Orders" means all of Seller's (and Clinsite's with respect to
the Business) outstanding purchase orders, contracts, or other commitments to
suppliers of goods and services for materials, supplies, services, or other
items used in the Business.
"Purchase Price" has the meaning specified in Section 3.01(c).
"Purchaser" has the meaning specified in the preamble hereof.
"RCRA" means the Resource Conservation and Recovery Act, as amended.
"Real Property Leases" has the meaning specified in Section 5.11.
"Registration Rights Agreement" has the meaning specified in Section
10.08.
"Required Consents" has the meaning specified in Section 5.05.
"SARA" means the Superfund Amendments and Reauthorization Act, as
amended.
"Seller" has the meaning specified in the preamble hereof and does not
include any Subsidiary.
<PAGE>
"Seller's Balance Sheet" has the meaning specified in Section 5.06.
"Senior Lender" has the meaning specified in Section 3.01(e).
"Services" has the meaning specified in Section 5.27.
"Shareholders" has the meaning specified in Section 5.26.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Superior Proposal" means with respect to Seller or Clinsite, as the
case may be, a written proposal made by a Person other than either such party
which is for (I) (i) a merger, reorganization, consolidation, share exchange,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving such party as a result of which either (A) such party's
shareholders prior to such transaction (by virtue of their ownership of such
party's shares) in the aggregate cease to own at least 60% of the voting
securities of the entity surviving or resulting from such transaction (or the
ultimate parent entity thereof) or (B) the individuals comprising the board of
directors of such party prior to such transaction do not constitute a majority
of the board of directors of such ultimate parent entity, (ii) a sale, lease,
exchange, transfer or other disposition of any of the assets of Seller and its
Subsidiary constituting Acquired Assets outside of the Ordinary Course of
Business, in a single transaction or a series of related transactions, or (iii)
the acquisition, directly or indirectly, by a Person of beneficial ownership of
40% or more of the common stock of such party whether by merger, consolidation,
share exchange, business combination, tender or exchange offer or otherwise
(other than a merger, consolidation, share exchange, business combination,
tender or exchange offer or other transaction upon the consummation of which
such party's shareholders would in the aggregate beneficially own greater than
60% of the voting securities of such Person), and which is (II) otherwise on
terms which the Board of Directors of such party in good faith concludes (after
consultation with its financial advisors and outside counsel), taking into
account, among other things, all legal, financial, regulatory and other aspects
of the proposal and the Person making the proposal, (i) would, if consummated,
result in a transaction that is more favorable to its shareholders (in their
capacities as shareholders), from a financial point of view, than the
transactions contemplated by this Agreement and (ii) is reasonably capable of
being completed in the good faith judgment of the Board of Directors.
"Taxes" means all federal, state, local, or foreign taxes of any nature
except for Transfer Taxes.
"Tax Returns" means any return, report, information return, or other
document (including any related or supporting information) filed or required to
be filed with any governmental agency, department, commission, board, bureau, or
instrumentality in connection with the determination, assessment, collection, or
administration of any Taxes or Transfer Taxes, as the case may be.
<PAGE>
"Terms of Offer for LeeCoast" has the meaning specified in Section
10.12(e).
"To the Knowledge of Seller" means (unless otherwise expressly stated
or modified) actual knowledge or information of those officers and employees of
Clinsite or Seller, as the case may be, listed in Schedule 1A after inquiry of
the appropriate employees of those companies who are reasonably likely to have
the applicable information.
"To the Knowledge of SFBC or Purchaser" means (unless otherwise
expressly stated or modified) the actual knowledge of those officers and
employees of SFBC and Purchaser, as the case may be, listed on Schedule 1B after
inquiry of the appropriate employees of those companies who are reasonably
likely to have the applicable information.
"Trade Payables" has the meaning specified in Section 2.02(a).
"Transfer Taxes" means sales, use, transfer, real property transfer,
recording and other similar taxes and fees.
"Welfare Benefit Plans" has the meaning specified in Section 5.17.
"Year 2000 Ready" has the meaning specified in Section 5.27.
ARTICLE 2
PURCHASE OF ACQUIRED ASSETS AND
ASSUMPTION OF ASSUMED LIABILITIES
Section 2.01. Purchase of Assets. Subject to the terms and conditions
herein set forth including, without limitation, Section 2.04, on the Closing
Date, Seller (and Clinsite as to Clinsite Intellectual Property, any Customer
Contracts and accounts receivable relating to the Business which are contained
on Schedule 1) shall sell, convey, transfer, assign, and deliver to Purchaser,
and Purchaser shall purchase, acquire, and accept from Seller and Clinsite, all
of the respective rights, titles, and interests of Seller and Clinsite in and to
the Acquired Assets; provided, however, that to the extent that LeeCoast (or any
other Subsidiary of Clinsite still operating) uses any Clinsite Intellectual
Property in the conduct of its business as of the Closing Date, LeeCoast (or any
other Subsidiary of Clinsite still operating) is hereby granted by Purchaser a
perpetual paid-up license to continue to use such Clinsite Intellectual
Property, which license shall be assignable to any purchaser of a controlling
equity interest in, or substantially all the assets of, LeeCoast (or any other
Subsidiary of Clinsite still operating). The sales, conveyances, transfers,
assignments, and deliveries by Seller and Clinsite of the Acquired Assets, as
herein provided, shall be effected on the Closing Date, free and clear of all
Liens, by appropriate deeds, bills of sale, endorsements, assignments, and other
instruments of transfer and conveyance reasonably satisfactory in form and
substance to Purchaser, but subject to Liens in favor of PCLP encumbering the
Acquired Assets, securing payment of the Note and the Earn-Out, as provided in
the Assignment and Assumption Agreement which
<PAGE>
shall be consistent with the provisions of Section 3.01(e). In no event is
Purchaser acquiring any assets of Seller's Subsidiary.
Section 2.02. Assumption of Specified Liabilities. Subject to the terms
and conditions herein set forth, from and after the Closing, Purchaser shall
assume and Purchaser shall pay, perform, and discharge, when due, only the
following liabilities and obligations of Seller:
(a) trade payables of Seller (other than any inter-company
payables to Clinsite or its other Affiliates) reflected on
Seller's Balance Sheet or incurred after the date of Seller's
Balance Sheet in the Ordinary Course of Business (including
quantity, frequency and payment and other terms of trade)
("Trade Payables");
(b) Seller's unearned revenues consisting of the obligation to
complete Customers' Contracts; and
(c) Seller's obligations arising under the Assigned Contracts.
Purchaser shall not assume, pay, perform, or discharge any other liabilities or
obligations, of Clinsite or Seller, including without limitation:
(i) Seller's obligations to Personnel or to any
organization that provides Personnel to Seller;
(ii) Seller's obligations to commissioned representatives
of Seller, except for commissions due for ongoing
studies and included in the Assumed Liabilities;
(iii) The fees and expenses of Counsel for Clinsite and
Seller, provided SFBC and Purchaser acknowledge that
such fees and expenses shall be paid in accordance
with Section 3.02(a); and
(iv) Any liabilities of Seller's Subsidiary.
The liabilities and obligations to be assumed by Purchaser pursuant to
the foregoing provisions of this Section 2.02 are referred to herein as the
"Assumed Liabilities." Without limiting or otherwise affecting the foregoing
provisions of this Section 2.02, and except as otherwise provided in this
Agreement, all liabilities and obligations in respect of the conduct of the
Business after the Closing or the ownership of the Acquired Assets after the
Closing shall be the responsibility of, and shall be paid and discharged by,
Purchaser.
Section 2.03. Subsequent Documentation. At any time and from time to
time after the Closing Date, Clinsite and Seller shall, upon the request of
Purchaser, and Purchaser shall, upon the request of Seller or Clinsite, promptly
execute, acknowledge, and deliver, or cause to be executed, acknowledged, and
delivered, such further instruments and other documents, and perform or cause to
be performed such further acts, as may be reasonably required to evidence or
effectuate the sale, conveyance, transfer, assignment,
<PAGE>
and delivery hereunder of the Acquired Assets, the assumption by Purchaser of
the Assumed Liabilities, the performance by the parties of any of their other
respective obligations under this Agreement, and to carry out the purposes and
intent of this Agreement.
Section 2.04. Assignment of Contracts. Schedule 2.04 shall contain a
list of all contracts, agreements and commitments among or between Clinsite (to
the extent related to the Business), Seller and their customers (collectively,
the "Customer Contracts"). Notwithstanding any other provision hereof to the
contrary, to the extent that assignment hereunder by Clinsite or Seller, as the
case may be, of any of the Assigned Contracts is not permitted or is not
permitted without the consent of any third party, Clinsite or Seller, as the
case may be, shall use commercially reasonable efforts (but shall not be
obligated to provide economic remuneration) to obtain such consents authorizing
the transfer and assignment to Purchaser of, or the substitution of Purchaser
for Clinsite or Seller, as the case may be, under all such Assigned Contracts.
Nothing in this Agreement shall be construed as an attempt to assign any
Assigned Contract which is not assignable without the consent of the other party
or parties thereto, unless such consent shall have been given.
ARTICLE 3
PURCHASE PRICE
Section 3.01. Purchase Price. Purchaser shall pay to Seller as the
purchase price for the Acquired Assets:
(a) (i) $600,000, as adjusted as provided below, consisting
of the following:
(A) A payment to Seller of $272,000 in cash (the
"Cash Payment");
(B) $178,000 in cash subject to adjustment
pursuant to Section 3.01(b) which shall be
paid to the Escrow Agent pursuant to an
Escrow Agreement, the form of which is
annexed as Exhibit 3.01(a)(i)(B) (the
"Escrow Payment"); and
(C) delivery of a $150,000 promissory note (the
"Note") payable to Seller, in the form of
Exhibit 3.01(a)(i)(C) attached hereto and
guaranteed by SFBC in a manner acceptable to
PCLP;
(ii) up to $1,200,000 of the Earn-Out, as set forth in
Section 3.03; and
(iii) the assumption by Purchaser of all Assumed
Liabilities, pursuant to the Assignment and
Assumption Agreement.
<PAGE>
(b) Following receipt of the unaudited balance sheet of Seller
dated as of 12:01 a.m. on the Closing Date prepared by
Purchaser in accordance with GAAP, consistently applied, (the
"Closing Date Balance Sheet"), the Escrow Payment shall be
paid to Seller or Purchaser, as the case may be, as follows:
(i) If the Closing Date Balance Sheet shows that there is
any Excess Operating Liability Amount, then the
Escrow Agent shall pay the amount to Purchaser and
the balance of the Escrow Payment to Seller. If the
Excess Operating Liability Amount exceeds the Escrow
Payment plus accrued interest, Purchaser shall be
entitled to set-off the excess amount against the
Earn-Out.
(ii) If the Closing Date Balance Sheet shows that there is
no Excess Operating Liability Amount, the Escrow
Agent shall pay the Escrow Payment, together with all
accrued interest, to Seller.
(iii) Notwithstanding the foregoing, Seller shall have the
right to engage an accounting firm to review the
preparation of the Closing Date Balance Sheet. If
both Purchaser and Seller cannot agree as to the
amount of the Excess Operating Liability Amount, if
any, or the amount of the Excess Operating Assets
Amount, if any, as the case may be, the parties shall
submit the matter to a third independent accounting
firm whose opinion shall be final.
(iv) In the event that a portion of the Escrow Payment is
paid to Purchaser, the accrued interest shall be
allocated between Seller and Purchaser in proportion
to the amount of the Escrow Payment each receives.
(v) The Escrow Agent shall make the disbursements of the
Escrow Payment and accrued interest pursuant to
Section 3.01(b)(i) within 10 business days of receipt
of the Closing Date Balance Sheet, unless it is given
notice that Seller has engaged an accounting firm to
review the preparation of the Closing Date Balance
Sheet in which case the Escrow Agent shall promptly
disburse the Escrow Payment and accrued interest
after receipt of either notice (A) that Seller and
Purchaser have agreed upon the Excess Operating
Liability Amount or (B) the opinion from the third
independent accounting firm which opinion shall be
deemed conclusive.
(c) If at the Closing or at any time thereafter a determination is made
concerning PDA's Operating Assets and Operating Liabilitiesthat there is an
Excess Operating Assets Amount, Purchaser shall promptly pay such sum to Seller.
(d) The Cash Payment, the Escrow Payment (less any sum returned to
Purchaser), the Excess Operating Assets Amount, if any, the Note, the Earn-Out
(including the payment described in Section
<PAGE>
3.03(f)(ii)), and the assumption of all Assumed Liabilities shall collectively
constitute the "Purchase Price".
(e) At Closing, Seller will assign and transfer the Note to PCLP
with an acknowledgment by Purchaser of such assignment and
with an acknowledgment and agreement by PCLP (the
"Clinsite/PCLP Agreement") in the form of Exhibit 3.01(d)
attached hereto providing, among other things, that the Cash
Payment and all payments pursuant to the Note will be credited
to the account of Clinsite and its Subsidiaries against the
PCLP Debt in accordance with the Clinsite/PCLP Agreement and
that PCLP will cancel such amount of the PCLP Debt upon
receipt of such payments.
(f) At Closing, PCLP, on its own behalf, shall (and shall cause
any required third parties, including the Other Lien Holders
to) execute appropriate amendments to all UCC filings
sufficient in form and content to subordinate its first
priority security interest in and to the accounts receivable
of Seller constituting Acquired Assets and the Lien associated
therewith to a Lien in favor of Heller Healthcare Finance,
Inc. (or other senior secured lender) ("Senior Lender") which
has a first priority security interest in and to the assets of
SFBC and Purchaser (excluding the Acquired Assets other than
accounts receivable).
Section 3.02. Manner of Payment of Purchase Price. Purchaser shall pay
the Purchase Price as follows (except for the Earn-Out which shall be paid in
accordance with Section 3.03):
(a) On behalf of Seller, Purchaser shall transmit by wire transfer
to PCLP for Seller's account in accordance with the
Clinsite/PCLP Agreement, the Cash Payment (less all fees and
expenses of Counsel to Clinsite and Seller, which shall be
wired to Counsel to Clinsite and Seller directly in accordance
with wire transfer instructions to be provided to Purchaser by
Counsel to Clinsite and Seller, and a fee of $17,360.61 due to
Steve Klein) in immediately available funds in accordance with
wire transfer instructions to be provided to Purchaser by
PCLP;
(b) Purchaser shall pay the Escrow Payment to the Escrow Agent;
(c) Purchaser shall deliver the Note to Seller to be assigned by
Seller to PCLP in accordance with the Clinsite/PCLP Agreement;
and
(d) Purchaser shall deliver to Seller an Assignment and Assumption
Agreement with respect to all Assumed Liabilities in the form
attached hereto as Exhibit 3.02 (c) (the "Assignment and
Assumption Agreement").
Section 3.03. The Earn-Out. SFBC shall pay or cause Purchaser to pay to
Seller in accordance with the Clinsite/PCLP Agreement as additional Purchase
Price amounts based upon the Adjusted Net Income (as defined below) for the
12-month periods beginning April 1, 2000, April 1, 2001 and April 1, 2002 of
Purchaser unless otherwise agreed by the parties, as provided below (the
"Earn-Out"):
<PAGE>
(a) "Adjusted Net Income" shall mean, subject to Section 10.13(d),
Purchaser's income after all cash and non-cash expenses
(excluding any deduction for amortization but including
deduction for depreciation) but before income taxes; provided,
however, that (i) in no event shall any reduction be made for
corporate income taxes (state or federal) or any other
expenses incurred by Purchaser for internal accounting or tax
purposes, (ii) auditing fees and expenses shall not exceed
$20,000 per 12-month period, (iii) SFBC may charge a
management fee not exceeding $12,000 per 12-month period,
including $12,000 for the 12-month period beginning April 1,
2000, (iv) no reduction shall be made for any bonus paid to
David Scott Davis pursuant to Section 3(b)(ii) of the
Employment Agreement of even date herewith with Purchaser
(which provisions entitle David Scott Davis to a bonus which
is a function of the amount of the Earn-Out), and (v) in no
event shall any reduction be made on account of the issuance
of any equity security, or the grant of an option or other
right to acquire any equity security, of either Purchaser of
SFBC.
(b) For the 12-month period beginning April 1, 2000, (i) Adjusted Net
Income, less (ii) $133,333, shall be multiplied by 4.5 and the amount of the
resulting product shall be the Earn-Out for the first 12-month period;
(c) For each of the 12-month periods, the first beginning April 1,
2001 and the second 12-month period beginning April 1, 2002,
$133,333 shall be deducted from the average of the Adjusted
Net Income for the 12-month period being measured and all
preceding 12-month periods, including the 12-month period
beginning April 1, 2000, which number shall be multiplied by
4.5. From this product there shall be deducted the cumulative
amount of the Earn-Out paid previously. By way of example, see
Schedule 3.03(c).
(d) The Earn-Out, if any, shall be paid on May 15 of each year
following the 12-month period being measured, which amount
shall be payable to PCLP on behalf of Clinsite unless
otherwise advised in writing by PCLP to be credited to
Clinsite in accordance with the Clinsite/PCLP Agreement, but
subject to Section 3.03(h) below.
(e) The Earn-Out shall be subject to a maximum of $600,000 for the
12-month period beginning April 1, 2000 and $1,200,000 in
total, not including any amount paid pursuant to Section
3.03(f)(ii).
(f) (i) At the option of Purchaser it may pay the Earn-Out,
if any, each year in any combination of cash or in
common stock of SFBC. If Purchaser elects to deliver
any shares of SFBC common stock, it shall deliver a
number equal to the amount of the Earn-Out elected to
be paid in common stock, divided by the average Fair
Market Value of SFBC common stock for the month of
April immediately preceding each delivery date of the
Earn-Out. In the event that SFBC has completed an IPO
prior to payment of the Earn-Out and SFBC determines
to pay the Earn-Out by issuing shares
<PAGE>
of SFBC common stock, then SFBC shall deposit an
amount of cash equal to the Fair Market Value of the
common stock being paid with respect to the Earn-Out
into an interest bearing account at Mellon Bank (or
other financial institution acceptable to Clinsite
and PCLP) until such time as SFBC's registration
statement on Form S-3 covering the common stock
issued has become effective. SFBC shall use its best
efforts to register the common stock issued in
payment of the Earn-Out at the earliest practicable
time on Form S-3 for the purpose stated above.
Subject to the following sentence, when such shares
have been so registered, SFBC shall deliver such
shares to PCLP on behalf of Clinsite and Seller,
provided that the value of such shares on the date of
delivery shall not be less than the amount of cash
deposited by SFBC in accordance with the foregoing,
plus accrued interest. In the event that at the time
SFBC has registered the shares previously issued in
payment of the Earn-Out on Form S-3, the value of
such shares of common stock shall be less than the
amount of cash deposited by SFBC in accordance with
the foregoing, PCLP shall have the option of
receiving either (i) the cash, plus accrued interest
from the financial institution holding the deposit
made by SFBC in accordance with the foregoing, or
(ii) the shares of common stock previously issued in
payment of the Earn-Out.
(ii) By April 1, 2002, as additional Earn-Out, SFBC shall
cause Purchaser to pay to Seller (or if the PCLP Debt
has not been paid in full at such time, to PCLP in
accordance with the Clinsite/PCLP Agreement) an
amount equal to 5% of the Clay Park Net Revenue in
excess of an aggregate of $2,600,000 for combined
calendar years 2000 and 2001 with the $2,600,000
pro-rated because the Closing Date occurs after
January 1, 2000. This additional Earn-Out shall not
be included as an expense to Purchaser for purposes
of determining any other amounts due under this
Section 3.03.
(g) As used in this Agreement, if SFBC's common stock is publicly
traded, "Fair Market Value" shall be calculated for the month
referred to in this Agreement as follows:
(i) the closing price of SFBC's common stock appearing on
a national securities exchange if the principal
market for the common stock is such an exchange, or,
if not listed or not the principal market, the
closing price on The Nasdaq Stock Market ("Nasdaq").
(ii) if SFBC's shares are not listed on Nasdaq, then the
closing price for its common stock as listed on the
National Association of Securities Dealers, Inc.'s
Over-the-Counter Bulletin Board (the "Bulletin
Board"); or
<PAGE>
(iii) if SFBC's common stock is not listed on the Bulletin
Board, then the average bid and asked price for
SFBC's shares as listed in the National Quotation
Bureau's "pink sheets"; or
(iv) if there are no listed bid and asked prices published
in the pink sheets, then the Fair Market Value shall
be based upon the average closing bid and asked price
as determined following a polling of all dealers
making a market in SFBC's common stock.
In the event that SFBC has not completed an initial public offering of
its securities ("IPO") prior to payment of the Earn-Out in any year, Fair Market
Value shall be as agreed upon by SFBC, Clinsite and PCLP, or, in the event of
disagreement, by a national or regional investment banking firm unaffiliated
with any party to this Agreement mutually selected by the parties.
(h) The parties acknowledge that George Gessner and Lynne Gessner
(collectively "Gessner") are the holders of a promissory note
dated January 29, 1997 in the original principal amount of
$100,000 (the "Gessner Note") payable by PDA. If each of the
PCLP Debt and/or the Gessner Note has not been satisfied prior
to payment of any Earn-Out payments, for each fiscal year
until such time as each of the PCLP Debt and the Gessner Note
are paid in full, the Earn-Out shall be paid first directly to
each of PCLP and Gessner, with PCLP receiving 91.67% of the
Earn-Out and Gessner receiving 8.33% of the Earn-Out, and the
balance of the Earn-Out (if any) during such fiscal year being
paid to Seller in accordance with the Clinsite/PCLP Agreement.
In the event payments of SFBC common stock are made to PCLP or
Gessner in accordance with this Section, any shares shall be
issued in the name of PCLP or Gessner, as the case may be.
Section 3.04. Fair Consideration. The parties acknowledge and agree
that the consideration provided for in this Article 3 represents fair
consideration and reasonable equivalent value for the sale and transfer of the
Acquired Assets and the transactions, covenants, and agreements set forth in
this Agreement, which consideration was agreed upon as the result of
arm's-length good-faith negotiations between the parties and their respective
representatives.
ARTICLE 4
CLOSING
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Michael Harris, P.A., West Palm
Beach, Florida at 10:00 a.m. Eastern Standard Time, 10 days after completion of
due diligence by Purchaser, or at such other place and time, or on such other
date, as may be mutually agreed to by the parties (the "Closing Date"). The
Closing shall take place not later than March 30, 2000.
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER AND CLINSITE
As a material inducement to SFBC and Purchaser to enter into this
Agreement and to consummate the transactions contemplated hereby, Seller and
Clinsite hereby jointly and severally represent and warrant to SFBC and
Purchaser as follows, which representations and warranties shall also be true
and correct on the Closing Date:
Section 5.01. Organization. Each of Seller and Clinsite is a
corporation duly organized, validly existing, and in good standing under the
laws of the state of its incorporation and has all requisite corporate power and
authority to own and lease its properties and assets and to conduct its business
as now conducted. Schedule 5.01 sets forth each fictitious name under which
Seller or Clinsite has conducted business. The only Subsidiary of Seller is
Clinical Development Associates, Inc.
Section 5.02. Qualifications to Do Business. Schedule 5.02 sets forth
each jurisdiction in which Seller is qualified to do business as a foreign
corporation. Neither the nature of the Business carried on by Seller, nor the
properties owned or leased by either Seller, requires Seller to be qualified to
do business as a foreign corporation in any other jurisdiction, except in any
case where a failure so to qualify would not have a Material Adverse Effect on
Seller .
Section 5.03. Authorization and Validity of Agreement. Each of Seller
and Clinsite has all requisite corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the performance of Seller' and Clinsite's obligations
hereunder have been duly authorized by all necessary actions on the part of
Seller and Clinsite (including approval by the vote or consent of holders of a
legally-sufficient percentage of the outstanding shares of capital stock of
Seller and Clinsite in accordance with the law of the jurisdiction of its
incorporation and the certificate of incorporation and bylaws of Seller and
Clinsite), and no other corporate proceedings on the part of Seller or Clinsite
are necessary to authorize the execution, delivery of this Agreement, and
performance of its obligations. This Agreement has been duly executed and
delivered by Seller and Clinsite and constitutes their valid and binding
obligation, enforceable against each of them in accordance with its terms.
Section 5.04. No Conflict or Violation. The execution, delivery, and
performance of this Agreement by Seller and Clinsite do not and shall not: (a)
violate or conflict with any provision of the articles or certificate of
incorporation, bylaws, or other governing document of Seller or Clinsite, (b)
violate any provision of law or any order, judgment, or decree of any court or
other governmental or regulatory authority specifically applicable to Seller,
Clinsite or the Business; (c) except as set forth on Schedule 5.04 hereto,
violate or result in a breach of or constitute (with due notice or lapse of time
or both) a default under any Material Contract, lease, loan agreement, mortgage,
security agreement, indenture, or Other Contract or instrument to which each of
Seller or Clinsite is a party or by which it is bound or to which any of its
properties or assets is subject which would prevent Seller from transferring any
of the Acquired Assets in
<PAGE>
the manner and as contemplated by and in accordance with the terms and
provisions of this Agreement or which would have a Material Adverse Effect on
the Business; or (d) result in the imposition of any Liens or restrictions on
the Business or any of the Acquired Assets.
Section 5.05. Consents and Approvals. Schedule 5.05 sets forth a list
of each consent, waiver, authorization, or approval of any governmental or
regulatory authority, or (if failure to obtain would have a Material Adverse
Effect) of any other Person, and each declaration to or filing or registration
with any governmental or regulatory authority required in connection with the
execution and delivery of this Agreement by Seller or the performance by Seller
of its obligations hereunder (collectively, the "Required Consents").
Section 5.06. Unaudited Financial Statements. Attached hereto as
Schedule 5.06 are true and complete copies of (a) the combined balance sheets of
Seller as of fiscal year end 1998 and 1997, and the related statements of
operations and cash flows for each of those years, together with the notes
thereto and (b) the combined unaudited balance sheet of Seller as of December
31, 1999 or other most recent available balance sheet and the combined unaudited
comparative statements of operations and cash flows for the 12-month period
ended December 31, 1999 without inclusion of any Subsidiary. The term "Seller's
Balance Sheet" means the unaudited internal balance sheet as of December 31,
1999 . All financial statements described by this Section 5.06 have been
prepared in accordance with GAAP and present fairly the financial position of
Seller as of the respective dates thereof and the results of Seller's operation
and cash flow for the periods then ended, subject to the lack of footnote
disclosure and changes resulting from normal year-end adjustments, none of which
alone or in the aggregate would create a Material Adverse Effect on Seller's
financial condition or the financial condition of the Business.
Section 5.07. Absence of Certain Changes or Events. Except for the
execution and delivery of this Agreement and the transactions to take place
pursuant hereto, and except as set forth on Schedule 5.07, since Seller's
Balance Sheet Date, Seller has operated the Business in the Ordinary Course of
Business and there has not been any adverse change, or event or development
(including any damage, destruction or loss, whether or not covered by insurance)
which, individually or together with such other events, would result in a
Material Adverse Effect. In amplification, but not limitation, of the foregoing
sentences, except as set forth on Schedule 5.07, neither Seller nor Clinsite has
received any notice from any current customer that such customer intends to
terminate any current project or study or cease doing business with Clinsite
(with respect to the Business) or either Seller or Purchaser in the future.
Seller has not incurred any liabilities since the date of Seller's Balance Sheet
other than (i) liabilities incurred in the Ordinary Course of Business, (ii)
liabilities incurred pursuant to any Material Contract, or (iii) liabilities
which are not Assumed Liabilities.
Section 5.08. Tax Matters. Seller has timely filed all Tax Returns
required to have been filed with any federal, state, local, or foreign taxing
authority and has paid all Taxes shown to be due and payable on the Tax Returns.
Seller has set up reserves or accruals on Seller's Balance Sheet which are
adequate for the payment of all Taxes for all periods through the Closing Date.
No taxing authority has asserted any claim against Seller for the assessment of
any additional tax liability or initiated any action or proceeding which
<PAGE>
could result in such an assertion. Seller has made all withholding of Taxes
required to be made under all applicable federal, state, local, and foreign laws
and regulations with respect to compensation paid to employees, and the amounts
withheld have been properly paid over to the appropriate authorities. There have
been no waivers or extensions by Seller of statutes of limitations with respect
to Taxes.
Section 5.09. Absence of Undisclosed Liabilities. Except as set forth
on Schedule 5.09, Seller has no indebtedness or liability which is not shown on
Seller's Balance Sheet or provided for thereon, other than (i) liabilities
incurred or accrued in the Ordinary Course of Business since the date of
Seller's Balance Sheet and (ii) indebtedness and liabilities disclosed in any
Schedule to this Agreement.
Section 5.10. Real Property. Seller does not own any real property.
Section 5.11. Leased Real Property. Schedule 5.11 sets forth a list of
all real property in which Seller has a leasehold interest (each a "Real
Property Lease" and collectively the "Real Property Leases" and the property
covered by those Real Property Leases being referred to herein as the "Leased
Real Property"). Seller has made true and complete copies of all Real Property
Leases available to Purchaser. Except as set forth on Schedule 5.11, Seller is
not in material breach of or material default under any Real Property Lease and
no party to any Real Property Lease has given Seller written notice of or made a
claim with respect to any breach or default thereunder. Except as set forth on
Schedule 5.11, none of the Leased Real Property is subject to any sublease or
grant to any Person of any right to the use, occupancy, or enjoyment of the
property or any portion thereof. Except as set forth on Schedule 5.11, the
Leased Real Property is not subject to any Liens (other than the Lien, if any,
of current property taxes and assessments not in default). The Leased Real
Property is not subject to any use restrictions, exceptions, reservations, or
limitations which in any material respect interfere with or impair the present
and continued use thereof in the conduct of the Business as presently conducted.
There are no pending or, To the Knowledge of Seller, threatened condemnation
proceedings relating to any of the Leased Real Property.
Section 5.12. Equipment and Machinery.
(a) Schedule 5.12 sets forth a list of, or otherwise describes,
all material Equipment and Machinery held for or used in the
Business. Except as set forth in Schedule 5.12, Seller has
good title, free and clear of all material Liens (other than
the Lien, if any, of current property taxes and assessments
not in default) to the Equipment and Machinery listed, except
for any Equipment and Machinery which has been sold or
disposed of in the Ordinary Course of Business since the date
of Seller's Balance Sheet. Seller holds good and transferable
leasehold interests in all Equipment and Machinery leased by
each, in each case under valid and enforceable leases which
are listed on Schedule 5.12.
(b) The Equipment and Machinery are in good operating condition
and repair (except for ordinary wear and tear), are sufficient
for the operation of the Business as presently conducted, and
are in conformity in all respects with all applicable laws,
ordinances,
<PAGE>
orders, regulations, and other requirements (including
applicable FDA, zoning, environmental, motor vehicle safety,
occupational safety and health laws and regulations) relating
thereto currently in effect, except where the failure to
conform would not have a Material Adverse Effect.
Section 5.13. Accounts Receivable. The Accounts Receivable reflected in
Seller's Balance Sheet, and all Accounts Receivable arising since the date of
Seller's Balance Sheet (including Clinsite's accounts receivable relating to the
Business reflected on Schedule 1), represent or shall represent bona fide claims
against debtors for sales, services performed, or other charges arising in the
Ordinary Course of Business and, To the Knowledge of Seller, are not the subject
of any dispute or counterclaim. All Accounts Receivable, net of reserves for
doubtful accounts reflected on Seller's Balance Sheet, are collectible in the
Ordinary Course of Business.
Section 5.14. Intellectual Property. All Intellectual Property material
to the Business is listed on Schedule 5.14. All Material Intellectual Property
is owned or licensed by Seller, free and clear of all Liens, and To the
Knowledge of Seller is not the subject of any challenge. To the Knowledge of
Seller, there are no facts that would invalidate or render any Material
Intellectual Property unenforceable. Except as disclosed on Schedule 5.14, (a)
there are no licenses now outstanding or other rights granted to third parties
under any Material Intellectual Property, and (b) neither Seller nor Clinsite is
a party to any agreement or understanding with respect to any Material
Intellectual Property. Except as described on Schedule 5.14, To the Knowledge of
Seller, there are no material unresolved claims made, and there has not been
communicated to Clinsite or Seller the threat of any such claim, that any of the
Material Intellectual Property or activities of Seller in connection with the
Material Intellectual Property constitutes unfair competition or is in violation
or infringement of any patent, trademark, trade name, service mark, trade dress,
right of publicity, copyright, or registration therefor, of any other Person.
Section 5.15. Compliance with Law. Except as set forth on Schedule
5.15, To the Knowledge of Seller, Seller and the Business are in material
compliance with all applicable federal, state, local, and foreign laws, rules,
regulations, guidelines, orders, injunctions, building and other codes,
ordinances, permits, licenses, authorizations, judgments, decrees of federal,
state, local, foreign or other authorities, and all orders, writs, decrees and
consents of any governmental or political subdivision or agency thereof, or any
court or similar Person established by any such governmental or political
subdivision or agency thereof (collectively, the "Laws"). Seller is not in
default with respect to any order, writ, judgment, award, injunction, or decree
of any court or governmental or regulatory authority or arbitrator specifically
applicable to it or the Business, its Personnel, or any of the Acquired Assets
nor To the Knowledge of Seller are there any factual circumstances which are
likely to result in such default.
Section 5.16. Litigation. Except as set forth on Schedule 5.16, (a) To
the Knowledge of Seller, there are no claims, actions, suits, proceedings,
arbitral actions, or investigations pending or threatened against Seller, the
Business, or the Acquired Assets before or by any court or governmental body
which, if adversely determined, could have a Material Adverse Effect on either
Seller or could adversely affect the
<PAGE>
ability of Seller to consummate the transactions contemplated by this Agreement;
and (b) there are no unsatisfied judgments against Clinsite, Seller, the
Business, or the Acquired Assets.
Section 5.17. Employee Benefit Plans.
(a) Welfare Benefit Plans. Since December 31, 1997, Seller and its
Affiliates have not maintained or administered within the two
year period before the Closing Date any "employee welfare
benefit plan" (as defined in ERISA Section 3): (i)to which
Seller contributes or is (or since December 31, 1997 had been)
obligated to contribute, or (ii) under which Seller has (or
since December 31, 1997 had) any liability, with respect to
Seller's current or former employees or any individuals
providing services to Seller (collectively the "Welfare
Benefit Plans" and individually a "Welfare Benefit Plan").
(b) Pension Benefit Plans. Seller and its Affiliates have not
maintained or administered since December 31, 1997 any
"employee pension benefit plan" (as defined in ERISA Section
3): (i) to which Seller contributes or is (or since December
31, 1997 had been) legally obligated to contribute, or (ii)
under which Seller has (or since December 31, 1997 had) any
liability with respect to Seller's current or former employees
or independent contractors (collectively the "Pension Benefit
Plans" and individually a "Pension Benefit Plan").
(c) Employee Plans. Schedule 5.17(c) contains a list of each
employee benefit plan, program, arrangement, agreement,
policy, or commitment whether insured or uninsured, funded or
unfunded, that is not a Welfare Benefit Plan or a Pension
Benefit Plan, relating to deferred compensation, bonuses, or
compensation in addition to regular pay or wages, stock
options, employee stock purchases, severance, unemployment,
flexible benefits, disability, vacation, sickness, leave of
absence, fringe benefits, employee awards, educational
assistance or reimbursement, equity participation (including
but not limited to stock appreciation and phantom stock
plans), restricted stock, employee discounts, excess benefits,
rabbi, secular or vesting trust, child or dependent care,
long-term and nursing home care, and profit sharing: (i) which
is sponsored, maintained, or administered by Seller or any
Affiliate; (ii) to which Seller contributes, or is legally
obligated to contribute, or (iii) under which Seller has any
liability with respect to Seller's current or former employees
or any individuals providing services to Seller or any
Affiliate (collectively, the "Employee Plans" and individually
an "Employee Plan").
(d) Liabilities. Except as set forth in Schedule 5.17(d), there
are no liabilities of Seller or any Affiliate, contingent or
otherwise, accrued or unaccrued, asserted or unasserted, with
respect to any Employee Plan that in any case would become a
liability of Purchaser after the Closing Date.
<PAGE>
(e) Litigation. Except as set forth in Schedule 5.17(e), there is
no action, lawsuit, claim for benefits, proceeding,
investigation, audit, or arbitration pending, or To the
Knowledge of Seller threatened, as of the Closing Date,
involving any Employee Plan.
(f) Funding Instruments. All trust agreements, custodial
agreements, investment management agreements, insurance or
annuity contracts (or any other funding instruments) and any
other contract or agreement relating to any Employee Plan are
legally valid and binding and in full force and effect.
(g) Affiliated Service Group. Seller is not a member of an
affiliated service group within the meaning of Code Section
414(m).
(h) Code Section 414(o) Employees. Neither Seller nor any
Affiliate has any employees or individuals providing services
to Seller or any Affiliate within the meaning of the
regulations under Code Section 414(o). Subject to ERISA
Review.
Section 5.18. Environmental Compliance.
(a) The Leased Real Property and all operations and activities
conducted thereon (including the Business) are, and at all
times during possession thereof by Seller, have been, and To
the Knowledge of Seller without inquiry to any third parties,
at all times prior to Seller's possession thereof were, in
material compliance with all applicable Environmental
Requirements.
(b) No Hazardous Material has ever been generated, manufactured,
refined, used, transported, treated, stored, handled,
disposed, transferred, produced, or processed by Seller at or
on the Leased Real Property;
(c) To the Knowledge of Seller without inquiry to any third
parties, no underground storage tank or other underground
storage receptacle (or associated equipment or piping) for
Hazardous Materials is currently located on the Leased Real
Property; and there have been no releases (i.e., any past or
present releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping,
leaching, disposing, or dumping) of Hazardous Materials at,
on, to, or from the Leased Real Property.
(d) To the Knowledge of Seller without inquiry to any third
parties, there are no PCBs or friable asbestos located at or
on the Leased Real Property.
<PAGE>
(e) To the Knowledge of Seller without inquiry to any third
parties, lien or other encumbrance has been imposed on the
Leased Real Property by any federal, state, local or foreign
governmental agency or authority due to either the presence of
any Hazardous Material on or off the Leased Real Property or a
violation of any Environmental Requirement.
(f) Seller and Clinsite have not received any notices issued
pursuant to the citizen's suit provision of any Environmental
Requirement relating to the Leased Real Property or any
facility or operations thereon.
(g) Seller and Clinsite have not received any request for
information, notice, demand, letter, administrative inquiry,
or formal or informal complaint, or claim with respect to any
Environmental Conditions or violation of any Environmental
Requirement relating to the Leased Real Property or any
facility or operations thereon.
Section 5.19. Licenses and Permits. To the Knowledge of Seller, Seller
has obtained all Licenses and Permits necessary for the conduct of the Business
and all Licenses and Permits are in full force and effect, except where failure
to obtain such Licenses and Permits would not have a Material Adverse Effect.
The Licenses and Permits are described in Schedule 5.19. The consummation of the
transactions contemplated hereby shall not interrupt or give any governmental
authority or body the right to terminate or interrupt the continuation of any of
the Licenses and Permits or the conduct of the Business as presently conducted.
Seller is in compliance with all material terms, conditions, and requirements of
all Licenses and Permits, except where noncompliance would not have a Material
Adverse Effect, and no proceeding is pending or, To the Knowledge of Seller,
threatened relating to the revocation or limitation of any of the Licenses or
Permits.
Section 5.20. Personnel; Labor.
(a) Schedule 5.20(a) sets forth the (i) names, titles (if any),
and current annual rate of compensation (including bonuses) as
of the Closing Date of all Personnel earning in excess of
$10,000 per annum, and (ii) the approximate number of Seller's
employees. Seller has no collective bargaining agreements.
(b) Except as and to the extent set forth in Schedule 5.20(b), (i)
Seller is in compliance with all federal, state, and local
laws respecting employment and employment practices, terms,
and conditions of employment and wages and hours, and are not
engaged in any unfair labor practice, except where
noncompliance would not have a Material Adverse Effect on
Seller; (ii) there is no charge or complaint of unlawful
employment practice or unfair dismissal of which Seller or
Clinsite have received notice pending or threatened against
Seller in any court or before any federal, state, or local
agency (and Seller and Clinsite do not believe that there
exists any reasonable basis therefor); (iii) there is no
unfair labor practice charge or complaint
<PAGE>
of which Seller has received notice pending or threatened
against Seller before the National Labor Relations Board (and
Seller and Clinsite do not believe that there exists any
reasonable basis therefor); (iv) there is no labor dispute,
slowdown, or stoppage actually pending or, To the Knowledge of
Seller or Clinsite, threatened against or involving Seller;
(v) To the Knowledge of Seller and Clinsite, no attempt to
organize any group or all of the employees of Seller has been
made or proposed; (vi) no grievance or arbitration which might
have a Material Adverse Effect on Seller or the Business is
pending and, To the Knowledge of Seller, no claim therefor
exists; (vii) no private agreement restricts Seller from
relocating, closing, or terminating any of its operations or
facilities; and (viii) Seller has not experienced any work
stoppage or other labor difficulty or committed any unfair
labor practice.
Section 5.21. Insurance. Schedule 5.21 lists all policies of title,
liability, fire, casualty, business interruption, workers' compensation, and
other forms of insurance collectively "Policies" and individually a "Policy")
insuring the properties, assets, or operations of Seller, setting forth the
carrier, policy number, expiration dates, premiums, description of type of
coverage, and coverage amounts. Seller has made copies of all such policies
available to Purchaser. Except as set forth in Schedule 5.21, each of the
Policies is in the amount and insures against the risks usually and customarily
carried by a Person engaged in the Business as presently conducted, is in full
force and effect, and Seller are not in default under any provisions of any
Policy nor has Seller received notice of cancellation of any Policy. There is no
claim by Seller pending under any Policy as to which coverage has been
questioned, denied, or disputed by the underwriters of any Policy, and To the
Knowledge of Seller, there is no basis for denial of any claim under any such
policy. Neither Seller nor Clinsite (with respect to the Business) has received
any written notice from or on behalf of any insurance carrier issuing any Policy
that insurance rates therefor shall hereafter be substantially increased (except
to the extent that insurance rates may be increased for all similarly situated
risks) or that there shall hereafter be a cancellation or an increase in a
deductible (or an increase in premiums in order to maintain an existing
deductible) or non-renewal of any Policy. The Policies are sufficient in all
material respects for compliance by Seller with all requirements of law and with
the requirements of all Assigned Contracts.
Section 5.22. Material Contracts. Schedule 5.22 lists as of the date of
this Agreement (and excluding this Agreement itself) all of the following
contracts and other agreements or commitments (whether oral or written) to which
Seller or Clinsite is a party and which relate to the conduct of the Business
(other than contracts and other agreements which are not Assumed Liabilities or
are not included in the Acquired Assets (collectively, the "Material
Contracts"):
(a) employment, consulting, bonus, profit-sharing, percentage
compensation, deferred compensation, pension, welfare,
retirement, stock purchase or stock option plans and
agreements and commitments with the directors or Personnel of
Seller, excluding agreements and commitments terminable by
Seller on not more than 30 days' notice without liability or
penalty, and plans disclosed in Schedule 5.17(c);
<PAGE>
(b) notes, mortgages, contracts, agreements, and commitments for
the repayment or borrowing of money by Seller in excess of
$10,000 in any one case, or for a line of credit including
borrowings by Seller in the form of guarantees of,
indemnification for, or agreements to acquire any obligations
of others, and all security or pledge agreements related
thereto;
(c) contracts, agreements, and commitments relating to any joint
venture, partnership, strategic alliance, or sharing of
profits or losses with any Person;
(d) contracts, agreements, and commitments containing covenants
purporting to limit the freedom of Seller or any Personnel to
compete in any business or in any geographic area;
(e) contracts, agreements, and commitments requiring payments or
distributions to any shareholder, director, or Personnel of
Seller, or any relative or affiliate of any such Person;
(f) material contracts, agreements, licenses and commitments
relating to Computer Software;
(g) contracts, agreements, and commitments not disclosed on any
other Schedule to this Agreement and which involve or may
involve the payment or receipt by Seller (whether in payment
of a debt, as a result of a guarantee or indemnification, for
goods or services, or otherwise) of more than $25,000 per year
or $50,000 over the initial term thereof, or are otherwise
material to the Business;
(h) contracts, agreements and commitments not made in the Ordinary
Course of Business; and
(i) all Real Property Leases.
Schedule 5.22 identifies whether each Material Contract is to be an
Assigned Contract, but subject to Section 2.04. Seller and Clinsite have made
true and complete copies of all the Material Contracts available to Purchaser.
Except as set forth in Schedule 5.22, there are no transactions
relating to the Business presently pending or planned or initiated or completed
since December 31, 1999 between Seller and any shareholder, officer, director,
or Personnel of Seller, or any relative or Affiliate of any such Person,
including any contract, agreement, or other arrangement (i) providing for the
furnishing of services by Seller, (ii) providing for the rental of real or
personal property by Seller, or (iii) otherwise requiring payments from Seller
(other than for services as officers or directors of Seller) to any such Person
or corporation,
<PAGE>
partnership, trust, or other entity in which any such Person has a direct or
indirect interest as a shareholder, officer, director, trustee, or partner.
All of the Material Contracts are in full force and effect, except as
provided in Schedule 5.22. Except as set forth in Schedule 5.22, neither Seller,
nor, To the Knowledge of Seller, any other party thereto, has breached any
material provision of, or is in material default under, the terms of, nor does
any condition exist which, with notice or lapse of time, or both, would cause
Seller or, To the Knowledge of Seller, any other party to be in default under,
any contract, agreement, or commitment.
Section 5.23. Customers and Suppliers. Schedule 5.23 sets forth a list
of (a) all Seller's (or Clinsite's with respect to the Business) customers who
in fiscal year 1999 generated at least $100,000 in revenues (excluding
pass-through revenues), which Schedule 5.23 shall reflect the amount of
pass-through revenues by customer, showing the dollar volume of sales to each
such customer for such fiscal year, and (b) Seller's 10 largest suppliers by
dollar volume and the dollar volume of purchases or leases by Seller from each
such supplier for such fiscal year. Except as set forth on Schedule 5.23, no
customer or supplier listed has terminated or materially changed, or has
provided notice to Clinsite or Seller that it intends to, terminate or
materially change its relationship with Seller (or Clinsite with respect to the
Business).
Section 5.24. Absence of Certain Business Practices. Except as set
forth on Schedule 5.24, within the three years immediately preceding the date of
this Agreement, To the Knowledge of Seller, neither Seller nor any Personnel, or
any other Person acting on behalf of Seller has given or agreed to give,
directly or indirectly, any gift or similar benefit to any customer, supplier,
governmental employee, or other Person who is or may be in a position to help or
hinder the Business (or assist Seller in connection with any actual or proposed
transaction relating to the Business or the Acquired Assets), which might
subject Seller to any damage or penalty in any civil, criminal, or governmental
litigation or proceeding and which, if not continued in the future, may have a
Material Adverse Effect on Seller.
Section 5.25. Severance Arrangements. Except as set forth in Schedule
5.25, Seller has not entered into any severance or similar arrangement in
respect of any present or former Personnel that shall result in any obligation
(absolute or contingent) of Seller or Purchaser to make any payment to any
present or former Personnel following termination of employment, including the
termination of employment effected by the transactions contemplated by this
Agreement. The consummation of the transaction contemplated by this Agreement
will not trigger any severance or similar arrangement of Seller payable by
Purchaser after the Closing.
Section 5.26. Shareholders. Subject to a pledge in favor of PCLP and
certain other parties, the issued and outstanding shares of Seller are owned of
record and beneficially by the Persons set forth on Schedule 5.26
("Shareholders"), and no other Person has any equity interest in, or right,
contingent or other, to acquire any equity interest in Seller.
<PAGE>
Section 5.27. Year 2000 Compliance.
(a) Seller's systems, processes, products, equipment and services
(including its management reporting and accounting software
modules and its related systems) are "Year 2000 Ready." "Year
2000 Ready" means that the systems, processes, products,
equipment and services of Seller (including any software
embedded in any products) ("Services"), have correctly
identified, recognized and processed four-digit year dates,
and the Services have since January 1, 2000: (1) continued to
function properly with regard to dates with no errors or
system interruptions; (2) accurately performed calculations
and comparisons on dates that span centuries; (3); accepted
and properly processed dates that could span more than 100
years (e.g., calculating a person's age from their birth date
and the current date); (4) properly sorted and sequenced dates
that span centuries; (5) recognize that February 29, 2000 is a
valid date and that the Year 2000 has 366 days; (6) prohibited
use of date fields for any purpose other than to store valid
dates; (7) precluded the use of 12/31/99 or any other valid
date to indicate something other than a date (e.g., 12/31/99
in a date field means "do not ever cancel"); and (8) complied
with and conform to the specifications of American National
Standard ANSI X3.30-1997, Representation of Date for
Information Interchange.
(b) Seller has contracted all critical suppliers regarding its
Year 2000 Readiness. To the Knowledge of Seller, the Year 2000
Readiness of such critical suppliers is adequate to support
the Business in all material respects.
(c) Neither of Seller nor Clinsite has made any express warranties
to any third party regarding the Year 2000 Readiness of the
Business, except as set forth on Schedule 5.27.
Section 5.28. Investment Representations and Restrictions on Transfer.
Except as otherwise agreed in this Agreement or in the Registration Rights
Agreement, in the event that common stock of SFBC is issued pursuant to this
Agreement, Seller, Clinsite, PCLP and/or Gessner (collectively, the "Future SFBC
Shareholders") will sign an investment letter in substance containing the
following representations:
(a) Each Future SFBC Shareholder has been advised and understands
that the issuance by SFBC of its common stock will not be
registered under the Act or the securities laws of any state,
in reliance upon Section 4(2) of the Act and Rule 506
thereunder, on the grounds that no distribution or public
offering of those securities is to be effected, and that in
this connection, SFBC and Purchaser are relying in part on the
representations of Clinsite and Seller set forth in this
Section 5.28;
<PAGE>
(b) Each Future SFBC Shareholder has been further advised and
understand, if applicable, that no public market now exists
for the common stock which may be issued by SFBC and that a
public market may never exist for the securities;
(c) Each Future SFBC Shareholder will purchase the common stock
for investment purposes, for their own accounts and not with a
view to, or for sale in connection with, any distribution
thereof in violation of federal or state securities laws;
(d) By reason of their business and financial experience, each
Future SFBC Shareholder has the capacity to protect its own
interest in connection with its investment in the common
stock;
(e) Each Future SFBC Shareholder is aware of SFBC's business
affairs and financial condition and have each acquired
sufficient information about SFBC to reach an informed and
knowledgeable decision to acquire the common stock;
(f) If true, each Future SFBC Shareholder is an "accredited
investor" as such term is defined in Rule 501 of Regulation D
under the Act;
(g) Each Future SFBC Shareholder understands that any resale or
other transfer by it or him of the common stock issued
pursuant to the Earn-Out if any, and exercise of the Option,
will be subject to restrictions under the Act and applicable
state securities laws, and that the certificates representing
the common stock, issuable upon payment of the Earn-Out if
any, and exercise of the Option, if applicable, shall bear a
legend evidencing such restriction on transfer. The legend on
the common stock shall be substantially in the following form:
"The shares represented by this certificate have been acquired
for investment and have not been registered under the
Securities Act of 1933 (the "Act") or the securities laws of
any state. The shares may not be transferred by sale,
assignment, pledge or otherwise unless (i) a registration
statement for the shares under the Act and other applicable
securities laws is in effect or (ii) the corporation has
received an opinion of counsel, which opinion is reasonably
satisfactory to the corporation, to the effect that such
registration is not required under the Act and other
applicable securities laws."
Section 5.29. No Other Agreements to Sell Assets. Neither Clinsite nor
Seller have any obligation, absolute or contingent, to any other Person to sell
any of the Acquired Assets or any of the securities of Seller, or to effect any
merger, consolidation, or other reorganization of Seller, or to enter into any
agreement with respect thereto.
<PAGE>
Section 5.30. Broker's and Finder's Fees. Except for the fee due to
Steve Kline which shall be paid on behalf of Seller at Closing from the proceeds
of the Cash Payment, no broker, finder, or Person is entitled to any commission
or finder's fee payable by Clinsite or Seller in connection with this Agreement
or the transactions contemplated by this Agreement.
Section 5.31. Non-Compete Agreements. To the Knowledge of Seller and
Clinsite, (i) neither Seller nor Clinsite has entered into any agreement not to
compete with any Person, and (ii) subject to the execution of the agreements in
connection with the Closing releasing any such obligations to Clinsite or any
Subsidiary, neither Davis, Gessner nor any other employee of Seller to be
employed by Purchaser has done so.
Section 5.32 All Material Information. To the Knowledge of Seller,
Seller and Clinsite have not withheld from Purchaser any material facts relating
to the Acquired Assets, the Business, the operations of Seller or Clinsite (with
respect to the Business), or the financial or other condition of Seller. No
representation or warranty made herein by Seller or Clinsite and no statement
contained in any certificate or other instrument furnished or to be furnished to
Purchaser by Seller or Clinsite in connection with the transactions contemplated
by this Agreement contains or will contain an untrue statement of a material
fact or omits to state any material fact necessary in order to make any
representation, warranty, or other statement of Seller or Clinsite not
misleading.
Section 5.33. Superior Proposal. Clinsite is the sole shareholder of
PDA, and each has approved the transactions contemplated by this Agreement with
such board of directors approval, if any, which is necessary. If either the
board of directors of Clinsite or Seller receives a Superior Proposal which it
must consider pursuant to Section 13.01, and either board of directors is
required by state law to submit such Superior Proposal to its shareholders, such
board of directors shall submit such Superior Proposal without recommendation.
Section 5.34. Other Borrowers. Except for distributions of assets or
property in connection with discontinuing the operations of certain Other
Borrowers, each of the Other Borrowers has never transferred to Seller or
Clinsite any material assets or other material property except for fair
consideration.
Section 5.35. Conduct of the Business. No Subsidiary of Clinsite or
Seller is managing (as opposed to selling or generating leads for) Phase III
clinical trials.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SFBC
Purchaser and SFBC hereby jointly and severally represent and warrant
to each of Seller and Clinsite as follows:
<PAGE>
Section 6.01. Organization.
(a) Organization and Qualification. SFBC and Purchaser are
corporations duly organized, validly existing, and in good
standing under the laws of the jurisdiction of their
incorporation. SFBC and Purchaser are duly authorized to
conduct business and each of them is in good standing under
the laws of each jurisdiction where such qualification is
required, except where a lack of such qualification would not
have a Material Adverse Effect on the financial condition of
SFBC and Purchaser taken as a whole.
(b) Capitalization of Purchaser. The capitalization of SFBC and
Purchaser are as reflected on Schedule 6.01(b). All of the
issued and outstanding common stock of SFBC and Purchaser has
been duly authorized, are validly issued, fully paid, and
non-assessable. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or
commitments that could require SFBC or Purchaser to issue,
sell, or otherwise cause to become outstanding any shares of
their capital stock, except as disclosed on Schedule 6.01(b).
There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with
respect to SFBC or Purchaser.
Section 6.02. Authorization and Validity of Agreement. SFBC and
Purchaser have all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement and the performance of the obligations of SFBC and Purchaser
hereunder have been duly authorized by all necessary corporate action by the
board of directors, and no other corporate proceedings on the part of SFBC or
Purchaser are necessary to authorize the execution, delivery or performance.
This Agreement has been duly executed by SFBC and Purchaser and constitutes a
valid and binding obligation, enforceable against SFBC and Purchaser in
accordance with its terms.
Section 6.03. No Conflict or Violation. The execution, delivery, and
performance of this Agreement by SFBC and Purchaser does not and shall not: (a)
violate or conflict with any provision of the articles or certificate of
incorporation, bylaws, or other governing document of SFBC or Purchaser, (b)
violate any provision of law or any order, judgment, or decree of any court or
other governmental or regulatory authority specifically applicable to SFBC or
Purchaser; (c) violate or result in a breach of or constitute (with due notice
or lapse of time or both) a default under any contract, lease, loan agreement,
mortgage, security agreement, indenture, or other agreement or instrument to
which SFBC or Purchaser is a party or by which it is bound or to which any of
its properties or assets is subject which would prevent SFBC or Purchaser from
consummating the transactions contemplated by this Agreement in accordance with
the terms and provisions of this Agreement or which would have a Material
Adverse Effect on SFBC or Purchaser; or (d) result in the imposition of any
Liens or restrictions on the assets of SFBC or Purchaser.
Section 6.04. Consents and Approvals. No consent, waiver,
authorization, or approval of any governmental or regulatory authority, or of
any other Person, or (based in part on the accuracy of Clinsite's and Seller's
representations and warranties set forth in Section 5.28) declaration to or
filing or registration
<PAGE>
with any governmental or regulatory authority, other than those consents,
waivers, and approvals that have already been obtained, are required in
connection with the execution and delivery of this Agreement by SFBC or
Purchaser or the performance by SFBC or Purchaser of their obligations
hereunder.
Section 6.05. Financial Statements. Purchaser has done no business
since inception. Attached hereto as Schedule 6.05 are true and complete copies
of (a) the balance sheets of SFBC as of December 31, 1998 and 1997 and the
related statements of operations, shareholders' equity and cash flows for each
of the two years for the period ended December 31, 1998 together with the notes
thereto and the audit report thereon of Kaufman, Rossin & Co., certified public
accountants, and (b) the unaudited balance sheet of SFBC as of December 31, 1999
and the unaudited statement of operations for the 12-month period ended December
31, 1999. The term "SFBC Balance Sheet" means the balance sheet as of December
31, 1999 referred to above. All financial statements described by this Section
6.05 have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods covered thereby and
present fairly the financial position of SFBC as of the respective dates thereof
and the results of SFBCs' operations and cash flows for the periods then ended.
Section 6.06. Absence of Certain Changes or Events. Except for the
execution and delivery of this Agreement and the transactions to take place
pursuant hereto, and except as set forth on Schedule 6.06, since the SFBC
Balance Sheet Date, SFBC has operated its business in the Ordinary Course of
Business and there has not been any adverse change, or event or development
(including any damage, destruction or loss, whether or not covered by insurance)
which, individually or together with such other events, would result in a
Material Adverse Effect. In amplification, but not limitation, of the foregoing
sentences, except as set forth on Schedule 6.06, SFBC has received no notice
from any material current customer that any such customer intends to terminate
any current project or study or cease doing business with it in the future. SFBC
has not incurred any liabilities since December 31, 1999 other than liabilities
incurred in the Ordinary Course of Business. Purchaser was organized on March
16, 2000 and has not engaged in any business.
Section 6.07. Absence of Undisclosed Liabilities. Except as set forth
on Schedule 6.07, SFBC has no material indebtedness or liability which is not
shown on the SFBC Balance Sheet or provided for thereon, other than liabilities
incurred or accrued in the Ordinary Course of Business since December 31, 1999.
Section 6.08. Compliance with Law. Except as set forth on Schedule
6.08, To the Knowledge of SFBC, SFBC and its business are in compliance with all
applicable federal, state, local, and foreign laws, ordinances, orders, rules,
and regulations including those applicable to the FDA, discrimination in
employment, occupational safety and health, trade practices, competition and
pricing, product warranties, zoning, building, sanitation, employment,
retirement, labor relations, product advertising, and Environmental
Requirements, other than, in any such case, any failure to be in compliance that
does not or shall not have a Material Adverse Effect on the business, financial
or future prospects of SFBC. SFBC is not in default with respect to any order,
writ, judgment, award, injunction, or decree of any court or
<PAGE>
governmental or regulatory authority or arbitrator applicable to it or its
business, its Personnel, or is aware that any factual circumstances are likely
to result in such default.
Section 6.09. Litigation. Except as set forth on Schedule 6.09 (a) To
the Knowledge of SFBC, there are no claims, actions, suits, proceedings,
arbitral actions, or investigations pending or threatened against SFBC, its
business, before or by any court or governmental body which, if adversely
determined, could have a Material Adverse Effect on SFBC or could adversely
affect the ability of SFBC to consummate the transactions contemplated by this
Agreement; and (b) there are no unsatisfied judgments against SFBC, or its
business.
Section 6.10. Related Party Transactions. Except as set forth in
Schedule 6.10, there are no material transactions relating to SFBC's business
presently pending or planned, or initiated or completed since December 31, 1999,
between SFBC and any officer, director or affiliate of SFBC, any relative of any
such Person, including any contract, agreement, or other arrangement (i)
providing for the furnishing of material services by or to SFBC, (ii) providing
for the rental of material real or personal property by or to SFBC, or (iii)
otherwise requiring material payments from or to SFBC (other than for services
as officers or directors of SFBC) to any such Person or corporation,
partnership, trust, or other entity in which any such Person has a substantial
interest as a shareholder, officer, director, trustee, or partner.
Section 6.11. Year 2000 Compliance.
(a) SFBC's systems, processes, products, equipment and services
(including its management reporting and accounting software
modules and its related systems) are "Year 2000 Ready." "Year
2000 Ready" means that the Services of SFBC have correctly
identified, recognized and processed four-digit year dates,
and the Services have since January 1, 2000: (1) continued to
function properly with regard to dates with no errors or
system interruptions; (2) accurately performed calculations
and comparisons on dates that span centuries; (3); accepted
and properly processed dates that could span more than 100
years (e.g., calculating a person's age from their birth date
and the current date); (4) properly sorted and sequenced dates
that span centuries; (5) recognize that February 29, 2000 is a
valid date and that the Year 2000 has 366 days; (6) prohibited
use of date fields for any purpose other than to store valid
dates; (7) precluded the use of 12/31/99 or any other valid
date to indicate something other than a date (e.g., 12/31/99
in a date field means "do not ever cancel"); and (8) complied
with and conform to the specifications of American National
Standard ANSIX3.30-19865, Representation for Calendar Date and
Ordinal Date for Information Interchange.
(b) SFBC has contacted its critical customers suppliers regarding
their Year 2000 Readiness. To the Knowledge of SFBC, the Year
2000 Readiness of such critical customers and suppliers is as
set forth on Schedule 6.11.
<PAGE>
(c) SFBC has made no express or implied warranties to any third
party regarding the Year 2000 Readiness of themselves, or any
of their Services, except as set forth on Schedule 6.11.
Section 6.12. All Material Information. To the Knowledge of SFBC, SFBC
has not withheld from Seller or Clinsite any material facts relating to SFBC's
business, the operations of SFBC, or the financial or other condition of SFBC,
and no representation or warranty made herein by SFBC and no statement contained
in any certificate or other instrument furnished or to be furnished to Seller
and Clinsite by SFBC in connection with the transactions contemplated by this
Agreement contains or will contain an untrue statement of a material fact or
omits to state any material fact necessary in order to make any representation,
warranty, or other statement of SFBC not misleading.
Section 6.13. Broker's and Finder's Fees. No broker, finder, or other
Person claiming through SFBC is entitled to any commission or finder's fee in
connection with this Agreement or the transactions contemplated by this
Agreement.
Section 6.14. Environmental Compliance.
(a) All leased real property occupied by SFBC and all operations
and activities conducted thereon are, and at all times during
possession thereof by SFBC, have been, and To the Knowledge of
SFBC without inquiry to any third parties, at all times prior
to SFBC possession thereof were, in material compliance with
all applicable Environmental Requirements.
(b) Except as disclosed on Schedule 6.14(b), no Hazardous Material
has ever been generated, manufactured, refined, used,
transported, treated, stored, handled, disposed, transferred,
produced, or processed by SFBC at or on SFBC's currently
leased real property;
(c) To the Knowledge of SFBC without inquiry to any third parties,
no underground storage tank or other underground storage
receptacle (or associated equipment or piping) for Hazardous
Materials is currently located on SFBC's leased real property;
and there have been no releases (i.e., any past or present
releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching,
disposing, or dumping) of Hazardous Materials at, on, to, or
from SFBC's Leased Real Property.
(d) To the Knowledge of SFBC without inquiry to any third parties,
there are no PCBs or friable asbestos located at or on the
SFBC's Leased Real Property.
(e) To the Knowledge of SFBC without inquiry to any third parties,
lien or other encumbrance has been imposed on SFBC's Leased
Real Property by any federal, state, local or foreign
governmental agency or authority due to either the presence of
<PAGE>
any Hazardous Material on or off SFBC's leased real property
or a violation of any Environmental Requirement.
(f) SFBC has not received any notices issued pursuant to the
citizen's suit provision of any Environmental Requirement
relating to SFBC's leased real property or any facility or
operations thereon.
(g) SFBC has not received any request for information, notice,
demand, letter, administrative inquiry, or formal or informal
complaint, or claim with respect to any Environmental
Conditions or violation of any Environmental Requirement
relating to the real property or Leased Real Property or any
facility or operations thereon.
Section 6.15. Insurance. Schedule 6.15 lists all policies of title,
liability, fire, casualty, business interruption, workers' compensation, and
other forms of insurance collectively "Policies" and individually a "Policy")
insuring the properties, assets, or operations of SFBC, setting forth the
carrier, policy number, expiration dates, premiums, description of type of
coverage, and coverage amounts. SFBC has made copies of all such policies
available to Purchaser. Except as set forth in Schedule 6.15, each of the
Policies is in the amount and insures against the risks usually and customarily
carried by a Person engaged in the Business as presently conducted, is in full
force and effect, and Seller is not in default under any provisions of any
Policy nor has SFBC received notice of cancellation of any Policy. There is no
claim by SFBC pending under any Policy as to which coverage has been questioned,
denied, or disputed by the underwriters of any Policy, and To the Knowledge of
SFBC, there is no basis for denial of any claim under any such policy. Seller
has not received any written notice from or on behalf of any insurance carrier
issuing any Policy that insurance rates therefor shall hereafter be
substantially increased (except to the extent that insurance rates may be
increased for all similarly situated risks) or that there shall hereafter be a
cancellation or an increase in a deductible (or an increase in premiums in order
to maintain an existing deductible) or non-renewal of any Policy. The Policies
are sufficient in all material respects for compliance by SFBC with all
requirements of law and with the requirements of all Assigned Contracts.
ARTICLE 7
TAXES
Section 7.01. Taxes; Transfer Taxes. Seller shall pay all Taxes,
including any deficiency, interest or penalty asserted with respect thereto.
Seller shall be responsible for the preparation and filing of all Tax Returns
required with respect to Taxes and Transfer Taxes relating to all periods
through the Closing Date, and shall indemnify, defend and hold harmless
Purchaser for any Tax arising through the Closing Date. Purchaser agrees to
indemnify, defend and hold harmless Seller and Clinsite for Transfer Taxes (if
any), including any deficiency, interest or penalty asserted with respect to
thereto arising out of or in connection with the transactions effected pursuant
to this Agreement.
<PAGE>
Section 7.02. Cooperation on Tax Matters. Seller shall furnish or cause
to be furnished to Purchaser, as promptly as practicable, whether before or
after the Closing Date, such information and assistance relating to the Business
as is reasonably necessary for the preparation and filing by Purchaser of any
Tax Return, claim for refund, or other required or optional filings relating to
tax matters, for the preparation by Purchaser for, and proof of facts during,
any tax audit, for the preparation by Purchaser for any tax protest, for the
prosecution or defense by Purchaser of any suit or other proceeding relating to
tax matters, or for the answer by Purchaser to any governmental or regulatory
inquiry relating to tax matters.
Each party agrees that for a period of not less than seven (7) years
following the Closing Date, it shall not destroy or otherwise dispose of any of
the Files and Records relating to the Acquired Assets or the Assumed Liabilities
in its possession with respect to periods prior to the Closing Date. In
addition, from and after the Closing Date, upon reasonable notice and during
normal business hours, each party shall provide access to the other and their
respective attorneys, accountants, and other representatives, at the requesting
party's expense, to such Files and Records as the requesting party may
reasonably deem necessary to properly prepare for, file, prove, answer,
prosecute, and/or defend any such return, filing, audit, protest, claim, suit,
inquiry, or other proceeding.
Section 7.03. Allocation of Purchase Price. The parties agree that the
Purchase Price shall be allocated among the Acquired Assets in accordance with
Schedule 7.03 and shall cooperate in the timely filing of Internal Revenue
Service Form 8594 (or other appropriate forms), which shall be prepared in
accordance with the allocation pursuant to Section 1060 of the Code, and any
forms or documents required to be filed with respect to such matters with state
or local taxing authorities. Each of the parties hereto shall not, and shall not
permit any Affiliate to, take a position (except as required by any governmental
order or ruling) on any Tax Return, before any governmental agency charged with
the collection of any tax, or in any judicial proceeding, that is in any way
inconsistent with the Purchase Price allocation determined in accordance with
Section 7.03.
ARTICLE 8
COVENANTS PRIOR TO CLOSING
Section 8.01. Seller's and Clinsite's Covenants. Seller and Clinsite
covenant that, except as otherwise consented to in writing by Purchaser, from
and after the date hereof until the Closing or the earlier termination of this
Agreement:
(a) Except as set forth in Schedule 8.01(a), Seller shall not
engage in any practice, take any action or enter into any
transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing:
(i) Seller will not authorize or effect any change in
their certificate of incorporation or bylaws; and
<PAGE>
(ii) Seller shall not issue any note, bond or other debt
security or create, incur, assume or grant any
indebtedness or borrow money or capitalize lease
obligations outside the Ordinary Course of Business.
(b) All real property, machinery and equipment and other operating
properties used in the business of Seller will be kept and
maintained in good repair and working order (ordinary wear and
tear excepted) on a basis consistent with past practices, and
Seller will duly observe and conform to all material terms and
conditions upon or under which any of such properties are
held.
(c) Seller shall use its commercially reasonable efforts to
maintain in full force and effect in all material respects all
insurance coverages for its business currently in effect and
shall undertake to obtain equivalent replacement coverage with
respect to any policies hereafter canceled or terminated.
Section 8.02. Access. Seller shall give Purchaser access to information
relating to the Business as Purchaser shall reasonably request.
Section 8.03. Cooperation. Each of Seller, Clinsite and Purchaser agree
to cooperate with each other in determining whether any filings are required to
be made or consents required to be obtained in any jurisdiction in connection
with the consummation of the transactions contemplated hereby and in making or
causing to be made any such filings promptly and in seeking to obtain in a
timely manner any such consents; and to use all commercially reasonable efforts
to obtain promptly the satisfaction of the conditions to the Closing of the
transactions contemplated herein. Each of Seller, Clinsite, and Purchaser shall
furnish to each other and to each other's counsel all such information as may be
reasonably required in order to effectuate the foregoing.
ARTICLE 9
CONDITIONS OF CLOSING
Section 9.01. Conditions Precedent to the Obligations of Seller and
Clinsite to Complete the Closing. The obligations of Seller and Clinsite under
this Agreement to enter into and complete the Closing and to sell the Acquired
Assets of Seller shall be subject to satisfaction of the following conditions,
unless waived by them.
(a) Purchaser shall have paid or delivered each component of the
Purchase Price in accordance with Article 3.
(b) All representations and warranties of SFBC and Purchaser
herein shall have been true and correct in all material
respects when made, shall have continued to have been true and
correct in all material respects at all times subsequent
thereto, and shall be true and correct in all material
respects on and as of the Closing Date as though made on, as
of and with reference to such date, except as expressly stated
herein to be
<PAGE>
made as of a specified date. Each of SFBC and Purchaser shall
have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Closing
Date.
(c) Purchaser shall enter into an employment agreement with D.
Scott Davis (the "Davis Employment Agreement") in the form
annexed as Exhibit 9.01(c) to this Agreement.
(d) Purchaser shall enter into an agreement with Seller's
Subsidiary with respect to those Customer Contracts between
the Subsidiary and sponsors of clinical trials, whereby
Purchaser agrees to complete the Phase III management services
which Seller had been performing pursuant to an oral
agreement.
(e) Purchaser shall enter into a consulting agreement with George
Gessner (the "Gessner Consulting Agreement") in the form
annexed as Exhibit 9.01(e).
(f) Purchaser shall have received from SFBC as working capital a
sum equal to $300,000 in cash.
(g) Counsel to SFBC and Purchaser shall deliver an opinion
addressed to Seller and Clinsite and dated the Closing Date,
substantially in the form of Exhibit 9.01(g).
(h) Purchaser shall have executed and delivered to Seller the
Assignment and Assumption Agreement, and any other
conveyancing documents to which it is a party, deemed
necessary by counsel to the parties, including, without
limitation, an acknowledgement and acceptance of a bill of
sale covering the Acquired Assets.
(i) Each of SFBC and Purchaser shall have delivered to Seller a
copy of the resolutions of their respective boards of
directors (and minutes of shareholder meetings or consents if
necessary) certified as of the Closing Date by the secretary
or assistant secretary thereof, duly authorizing the
execution, delivery and performance by each of SFBC and
Purchaser of this Agreement and each other agreement, document
and instrument contemplated hereby, together with a
certification as to the incumbency of the persons authorized
to execute and deliver such documents on their behalf.
(j) The Clinsite/PCLP Agreement shall have been executed and
delivered by each of Clinsite, PCLP and any required third
parties pursuant to due authority.
(k) The Registration Rights Agreement shall have been executed and
delivered by each of SFBC and Clinsite in a form satisfactory
to PCLP.
(l) SFBC and Purchaser shall have delivered to Clinsite and PCLP
the financial portion of the business plan for Sellers, as
developed for SFBC's underwriter, subject to an appropriate
confidentiality agreement in favor of SFBC.
(m) George Gessner shall have entered into a marketing agreement
with LeeCoast.
(n) The initial installment of $66,667 pursuant to the Loan shall
have been paid to LeeCoast pursuant to Section 10.11.
<PAGE>
Section 9.02. Conditions Precedent to the Obligations of SFBC and
Purchaser to Complete the Closing. The obligations of SFBC and Purchaser under
this Agreement to enter into and complete the Closing and the purchase of the
Acquired Assets shall be subject to satisfaction of the following conditions,
unless waived by SFBC and Purchaser:
(a) All representations and warranties of Seller and Clinsite
herein shall have been true and correct in all material
respects when made, shall have continued to have been true and
correct in all material respects at all times subsequent
thereto, and shall be true and correct in all material
respects on and as of the Closing Date as though made on, as
of and with reference to such date, except as expressly stated
herein to be made as of a specified date. Seller and Clinsite
shall have performed and complied in all material respects
with all covenants and agreements required by this Agreement
to be performed or complied with by it on or prior to the
Closing Date.
(b) All the Required Consents shall have been obtained.
(c) There shall not have occurred since December 31, 1999, any
change with respect to the Business, Acquired Assets, or the
financial condition or results of operations of Seller which
could reasonably be expected to have a Material Adverse Effect
upon the Business, Acquired Assets, the financial condition or
results of operations of Seller.
(d) Seller has executed and delivered to Purchaser all documents
necessary to convey title to the Acquired Assets to Purchaser
as contemplated by this Agreement, including, and without
limitation, the Assignment and Assumption Agreement, bill of
sale and any assignments and assumption related to any Real
Property Leases.
(e) Seller shall have provided to Purchaser a complete and
accurate Schedule including an aging Schedule for all of
Seller's Accounts Receivable (and Clinsite's accounts
receivable with respect to the Business listed on Schedule 1)
as of a date not more than five business days prior to the
Closing Date.
(f) Purchaser shall have entered into assignment and assumption
agreements with respect to all assumed Leases of real property
or personal property.
(g) Counsel to Seller and Clinsite shall deliver an opinion
addressed to SFBC and Purchaser and dated the Closing Date in
substantially the form of Exhibit 9.02(g).
(h) PCLP (and the Other Lien Holders) (i) shall have consented to
this Agreement and the transactions contemplated hereby, and
shall have modified the PCLP Debt specifically to subordinate
the Lien of PCLP (and the Other Lien Holders) on the Accounts
Receivable constituting Acquired Assets and the accounts
receivable of Purchaser to a loan from Senior Lender in
accordance with the form of subordination customarily required
by Senior Lender
<PAGE>
and (ii) PCLP's Lien (and the Liens of the Other Lien Holders)
against the Acquired Assets shall only secure payments due by
Purchaser hereunder constituted by the Note and the Earn-Out.
(i) Purchaser shall have entered into the Davis Employment
Agreement..
(j) Purchaser shall have entered into an agreement with Seller's
Subsidiary as provided in Section 9.01(d).
(k) Each of Clinsite and Seller shall have provided SFBC and
Purchaser with such financial and other information concerning
Seller which SFBC and Purchaser may reasonably request.
(l) Each of Clinsite and Seller shall have delivered to Purchaser
a copy of the resolutions of their respective boards of
directors (and minutes of shareholder meetings or consents as
required to approve this Agreement) certified as of the
Closing Date by the secretary or assistant secretary thereof,
duly authorizing the execution, delivery and performance by
each of them of this Agreement and each other agreement,
document and instrument contemplated hereby, together with a
certification of incumbency of the persons authorized to
execute and deliver such documents on their behalf.
(m) The Registration Rights Agreement shall have been executed and
delivered by each of SFBC and Clinsite.
(n) PDA shall have executed a release or otherwise terminated
those certain employment and non-compete and confidentiality
agreements by and between D. Scott Davis and PDA dated
November 1, 1999.
(o) Clinsite and PDA and/or its Subsidiary shall have executed a
release or otherwise terminated those certain employment and
non-compete and confidentiality agreements with George Gessner
dated November 1, 1999.
(p) George Gessner shall have entered into a marketing agreement
with LeeCoast.
(q) LeeCoast shall deliver the LeeCoast Note to SFBC.
ARTICLE 10
POST CLOSING COVENANTS
Following the Closing, the parties hereto shall be bound by the
following covenants:
<PAGE>
Section 10.01. The Earn-Out. SFBC shall pay or cause Purchaser to pay
the Earn-Out, if any, as provided in Section 3.03 of this Agreement.
Section 10.02. Post-Closing Access and Delivery of Reports.
(a) Purchaser shall, following the Closing, give to Seller, PCLP
and their authorized representatives such reasonable access,
at Seller's and/or PCLP's cost and expense, during normal
business hours and upon prior notice, to all books and records
reflecting the results of operations of Purchaser which
include the Acquired Assets acquired (including without
limitation all such accounting books and tax records), as
Seller or PCLP may reasonably require in connection with the
preparation and filing of Tax Returns, audits or any claim
made by any party with respect to a liability or obligation
that is not an Assumed Liability. Such access shall also be
given to the extent necessary to ensure that the Earn-Out may
be achieved during a given fiscal year. Seller, Clinsite, PCLP
and their authorized representatives shall execute such
confidentiality agreements with respect to such inspections as
shall be reasonably requested by Purchaser.
(b) Within 45 days following the end of each calendar quarter
during 2000 (except the quarter ended March 31, 2000), 2001,
and 2002, Purchaser shall deliver to Seller and PCLP in the
manner provided for the giving of notice pursuant to Section
15.06 of this Agreement, a written report containing at the
very least the information relating to the operations of the
Acquired Assets similar to that reflected on Schedule 5.06 to
this Agreement.
Section 10.03. Covenant Not to Compete.
(a) Seller and Clinsite hereby covenant and agree that for the
period commencing with the Closing Date and ending two years
from such date, Seller and Clinsite, shall not, within the
United States, directly or indirectly, own, operate, or
otherwise engage in any entity or business enterprise which is
engaged in a Phase III clinical research business similar to
that conducted by Seller as of the Closing Date.
(b) Seller and Clinsite shall cause their Subsidiaries and
Affiliates to hold in confidence and refrain from disclosing,
or making use of all knowledge and information of a
confidential nature relating to the Business of prior to the
Closing Date or knowledge learned as the result of Seller or
Clinsite exercising their rights hereunder, except knowledge
and information which is or becomes generally available to the
public other than as a result of a disclosure prohibited
hereby, or is required to be disclosed by Law.
(c) Notwithstanding Sections 10.03(a) and (b) above or any other
provision of this Agreement, in the event, and to the extent,
that the business operations conducted by LeeCoast (or any
other Subsidiary of Clinsite still operating) may constitute
engaging in Phase III clinical research, the provisions of
those Sections shall not apply to Seller, Clinsite or LeeCoast
(or any other Subsidiary of Clinsite still operating), or any
of
<PAGE>
their successors or assigns as it relates to the business
operations being conducted by LeeCoast (or any other
Subsidiary of Clinsite still operating) as of the Closing
Date.
Section 10.04. Change of Business Name. As soon as possible after the
Closing, Seller shall change their names to names which do not include
"Pharmaceutical Development Associates" or "PDA", , and Seller and Clinsite
shall cease using such names or any confusingly similar names. Purchaser shall
not be entitled to use the name "Clinical Site Services Corp.", "Clinsites",
"Clinsite" or any confusingly similar names and such names are not Acquired
Assets.
Section 10.05. Further Assurances. Seller and Clinsite from time to
time after the Closing, at Purchaser's request, will execute, acknowledge and
deliver to Purchaser such other instruments of conveyance and transfer and will
take such other actions and execute and deliver such other documents,
certifications and further assurances as Purchaser may reasonably require in
order to vest more effectively in Purchaser, or to put Purchaser more fully in
possession of, any of the Acquired Assets. Each of the parties hereto will
cooperate with the other and execute and deliver to the other parties hereto
such other instruments and documents and take such other actions as may be
reasonably requested from time to time by any other party hereto as necessary to
carry out, evidence and confirm the intended purposes of this Agreement.
Section 10.06. Right of First Refusal. If SFBC issues shares of its
common stock in payment of the Earn-Out and SFBC has not completed an IPO, this
section shall be applicable. For so long as Seller or Clinsite continues to hold
any of the common stock of SFBC (or, if earlier, the date of any IPO), Seller
and Clinsite shall not sell, assign, transfer, assign, pledge, hypothecate,
mortgage, encumber, or otherwise dispose of all or any of its shares of SFBC
common stock, except to a third party (the "Proposed Transferee") pursuant to a
bona fide offer (the "Offer") to purchase any portion of the common stock (the
"Offered Shares") after having granted SFBC a right of first refusal to purchase
the Offered Shares pursuant to the terms of this Section 10.06. In the event of
an Offer, Seller and Clinsite shall submit an offer to sell the Offered Shares
to SFBC on terms and conditions, including price, that are no less favorable
than those on which Seller or Clinsite propose to sell the Offered Shares to the
Proposed Transferee. Seller or Clinsite shall deliver to SFBC a copy of the
Offer, which shall disclose the identity of the Proposed Transferee, the terms
and conditions, including price, of the proposed sale, and any other material
facts relating to the proposed sale. If Seller or Clinsite receives a written
acceptance of the terms of the Offer as to all the Offered Shares from SFBC
within 15 days of transmittal of the Offer, then the common stock shall be
deemed to be the subject of a binding purchase and sale agreement as of the time
of Seller's or Clinsite's receipt of the written acceptance, and the closing of
such purchase and sale shall take place at the principal offices of SFBC within
10 days following the date of delivery to Seller or Clinsite of the acceptance.
If SFBC does not purchase all of the Offered Shares, then Seller or Clinsite may
sell all (but not less than all) of the Offered Shares to the Proposed
Transferee, within 30 days of the lapse or waiver of the rights to purchase the
Offered Shares, for a price and upon other terms and conditions not materially
more favorable to the Proposed Transferee than those specified in the Offer. If
the Offered Shares are not sold to the Proposed Transferee within such 30-day
period, then such Offered Shares shall continue to be subject to this Section
10.06 as to any other proposed transfer.
<PAGE>
Section 10.07. Underwriting Arrangements. In connection with any IPO,
Seller and Clinsite (or their transferees including PCLP), if they own any
common stock of SFBC, shall enter into a written agreement with the managing
underwriter in such form and containing such provisions as are customary in the
securities business for such an agreement between underwriters and companies of
SFBC's size and investment stature, including without limitation an agreement
that Seller and Clinsite (and their transferees) shall not sell or dispose of
the common stock on the date of closing of the IPO for a specified period
following such closing date (but not longer than the period that is applicable
to SFBC's (i) officers, directors and employees and (ii) shareholders owning
more than the lesser of (x) 5% of the outstanding common stock or (y) the
percentage of the outstanding common stock held by PCLP and Gessner in the
aggregate).
Section 10.08. Registration Rights Agreement. SFBC shall execute and
deliver to Clinsite and Seller in connection with the Closing the Registration
Rights Agreement ("Registration Rights Agreement") attached hereto as Exhibit
10.08.
Section 10.09. Miscellaneous. At any time, and from time to time:
(a) Seller and Clinsite shall execute such consents and other
instruments and make such filings as may be reasonably
necessary or appropriate in order to allow Purchaser or any
Affiliate of Purchaser to change its name to, or to utilize
the names "Pharmaceutical Development Associates" (or any
substantially similar names to which Seller owns any right)
from and after the Closing Date.
(b) Subject to Section 10.03(c), after the Closing, Seller and
Clinsite (including any Subsidiary of each) shall not directly
or indirectly use, for their own benefit or otherwise, or
disclose to any other Person, any information relating to the
Acquired Assets or the Business, except to the extent that
such information (i) is or becomes generally available to the
trade or the public other than as a result of a disclosure by
Seller or Clinsite or their representatives, (ii) is required
to be disclosed by Law or order of a court or governmental
body, (iii) as necessary in connection with tax matters or
(iv) as may be necessary or appropriate to communicate to
Seller's or Clinsite's agents, employees, officers, directors,
or counsel to effectuate the terms of this Agreement.
Section 10.10. Employment of Personnel. Except as otherwise agreed by
the parties prior to the Closing, Purchaser shall offer to employ all Personnel
of Seller set forth on Schedule 10.10 immediately after the Closing. Except for
D. Scott Davis who shall be employed pursuant to the terms of the Davis
Employment Agreement, the terms of such employment shall be employment at will.
The employment of all Personnel set forth on Schedule 10.10 by Clinsite or
Seller shall be terminated effective as of the Closing Date. Purchaser shall not
be liable for any severance compensation which shall be paid or owed by Seller.
<PAGE>
Section 10.11. Advances to LeeCoast. Pending exercise of the Option
described in Section 10.12, SFBC shall lend to LeeCoast the sum of $200,000 to
be used as working capital for LeeCoast (the "Loan"). The Loan shall be made in
installments of $66,667 on the Closing Date, and $66,666 payable 30 and 60 days
thereafter. The Loan shall be evidenced by a promissory note in the form of
Exhibit 10.11 and shall have a face amount of up to $200,000 due in 12 months
from the actual date of the first advance together with 8% per annum simple
interest (the "LeeCoast Note"). The LeeCoast Note shall be secured by a first
priority security interest in favor of SFBC in the accounts receivable of
LeeCoast, (but subordinated by SFBC if required by any lender providing senior
term or revolving credit facilities to LeeCoast not existing as of the Closing
Date) and SFBC shall have the right to set-off the Earn-Out against the LeeCoast
Note in case of default by LeeCoast. In the event of a sale of LeeCoast to any
third party not affiliated with SFBC, the LeeCoast Note shall become immediately
due and payable with accrued interest. In the event that the Option is exercised
by SFBC or Purchaser in accordance with Section 10.12, and Clinsite and PCLP
elect to receive cash for payment as the Option Exercise Price, any amount due
under the LeeCoast Note shall be credited toward the Option Exercise Price. PCLP
and the Other Lien Holders shall subordinate their Lien on the Earn-Out to any
set-off rights of SFBC solely with respect to the LeeCoast Note.
Section 10.12. Option to Purchase the Assets of LeeCoast.
(a) (i) For a period of time commencing the earlier of (A) 30 days
after the closing of an IPO or (B) six months following the
Closing Date (the "Exercise Period") and terminating at 6:00
p.m. Miami time on a date 12 months following the Closing
Date, each of SFBC and Purchaser shall have the option (the
"Option"), but not the obligation, to purchase all or
substantially all of the assets of LeeCoast in exchange for a
payment of $600,000, plus the amount by which the LeeCoast
Operating Assets exceed the LeeCoast Operating Liabilities (or
minus the amount by which the LeeCoast Operating Liabilities
exceed the LeeCoast Operating Assets) as of the end of the
month immediately preceding the date of any Notice given under
Section 10.12(b) (the "Option Exercise Price"), subject to
adjustment as of the closing date of such purchase and upon
receipt of a closing date balance sheet prepared by Purchaser
in accordance with GAAP, consistently applied.
(ii) The provisions of Section 3.01(b) shall apply to the
extent that Clinsite and LeeCoast shall have the same right to
engage another accounting firm to review the preparation of
the LeeCoast closing date balance sheet if the variance
between the LeeCoast Operating Assets and the LeeCoast
Operating Liabilities exceeds $25,000. If Purchaser, Clinsite
and LeeCoast cannot resolve the difference between the two
balance sheets, they shall submit the matter to another
accounting firm in the same manner as Section 3.01(b).
(iii) If during the Exercise Period, Clinsite and PCLP receive
a Notice in accordance with Section 10.12(b), and if SFBC has
completed an IPO, then Clinsite and PCLP shall have the option
of electing to receive cash or common stock of SFBC with a
Fair Market Value equal to the Option Exercise Price as
payment of that portion of the Option Exercise Price remaining
after crediting the pay-off amount for the LeeCoast Note. In
the event that SFBC or Purchaser pays the Option Exercise
Price in common stock of SFBC, all provisions
<PAGE>
related to SFBC common stock, including the deposit of cash,
registration of shares under the Act, and the Registration
Rights Agreement shall cover such shares in the same manner as
if such shares were a part of the Earn-Out; provided that a
fourth right to a registration on Form S-3 shall be added in
favor of Clinsite under the Registration Rights Agreement.
(b) If the Option is exercised, SFBC or Purchaser shall assume all
of the LeeCoast Operating Liabilities. SFBC and Purchaser (or
either one) may exercise the Option by giving written notice
to Clinsite and PCLP of its intent to exercise the Option (the
"Notice") within the Exercise Period. In connection delivery
of the Notice, SFBC or Purchaser shall also (i) at its expense
select auditors and arrange for an audit of the financial
statements of Clinsite or the subsidiary which owns the
LeeCoast assets (the "Audit") and (ii) deliver an asset
purchase agreement which contains all of the representations
and warranties of Clinsite and Seller and SFBC or Purchaser
contained in this Agreement, to the extent applicable. The
Audit shall be as of any date ending a calendar month and for
the periods selected by the party giving the Notice. Clinsite
shall to the fullest extent reasonably practical cooperate
with and facilitate the conduct of the Audit. Within 15 days
from receipt of the asset purchase agreement, Clinsite shall
deliver all of the required schedules to the party giving the
Notice and a notice to SFBC and Purchaser from Clinsite and
PCLP stating whether they elect to receive cash or shares of
common stock of SFBC in payment of the Option Exercise Price.
The financial statements of Clinsite or the subsidiary which
owns LeeCoast which shall be contained in the asset purchase
agreement shall be as of a fiscal quarter or year date not
more than 90 days from the date of delivery of the asset
purchase agreement to Clinsite.
(c) Within 15 days after the receipt of the schedules, SFBC or
Purchaser, as the case may be, shall tender $100,000 cash (the
"Escrow Deposit") to an agent reasonably acceptable to SFBC as
escrow agent ("LeeCoast Escrow Agent"). The LeeCoast Escrow
Agent shall hold the Escrow Deposit until (i) the Audit
regarding LeeCoast has been completed and (ii) it has been
given written notice that the party giving the Notice
exercises the Option (the "Exercise Notice") or declines to do
so (the "Rejection Notice"). The party giving the Notice shall
have 15 days after receipt of the Audit to either deliver the
Exercise Notice or the Rejection Notice to the other parties
to the asset purchase agreement and to the LeeCoast Escrow
Agent, which shall hold the funds in escrow and deposit them
in an interest bearing account with Mellon Bank or a financial
institution acceptable to all parties. If the Exercise Notice
is given, and Clinsite elects to receive the Option Exercise
Price in cash, the LeeCoast Escrow Agent shall deliver the
Escrow Deposit together with accrued interest to Clinsite at
the closing, or if no closing occurs, upon a final
determination of an arbitration panel, or a court if review is
sought, that the party giving the Exercise Notice has breached
its obligation under this Agreement, or the asset purchase
agreement described above if executed and delivered. If the
Rejection Notice is given, if LeeCoast breaches its
obligations under this Agreement or the asset purchase
agreement described above if executed and delivered, or if
Clinsite and PCLP elect to receive SFBC common stock, LeeCoast
Escrow Agent shall deliver the Escrow Deposit together with
accrued interest to the party which gave the Notice.
<PAGE>
(d) Pending exercise of the Option, SFBC and Purchaser and their
representatives shall have the right to review any books and
records of LeeCoast upon reasonable notice during business
hours. LeeCoast and Clinsite shall cooperate to the fullest
extent reasonably practical with such due diligence requests.
Additionally, during the Exercise Period, LeeCoast shall
provide SFBC within 10 days of their availability (but in no
event more than 45 days after the end of any calendar month),
its internally generated unaudited financial statements in
order for SFBC to continue to monitor the financial position
of LeeCoast and to facilitate its decision during the Exercise
Period as to whether it will exercise the Option; provided,
however, that no delay in providing such financial statements
shall extend the Exercise Period.
(e) Notwithstanding anything in this Section 10.12 to the
contrary, Clinsite and LeeCoast shall be free to solicit
offers to purchase LeeCoast or its assets prior to or after
the commencement of the Exercise Period. If a bona fide
written offer is received which Clinsite believes is a better
offer, it shall submit the terms and conditions, including the
price and other material facts relating to the proposed sale
(the "Terms of Offer for LeeCoast") to SFBC and Purchaser, and
after receipt of which they shall have 10 business days to
provide written notice that they will match such Terms of
Offer for LeeCoast. If SFBC and Purchaser elect not to match
the Terms of Offer for LeeCoast, then Clinsite and LeeCoast
shall be free to consummate the transaction with such third
party on substantially the same terms and conditions provided
to SFBC and Purchaser. For purposes of determining whether an
offer is on substantially the same terms, publicly traded
securities which can be immediately resold shall be treated as
equivalent to cash. If SFBC and Purchaser elect to match the
Terms of Offer for LeeCoast, then, if in the good faith
judgment of the board of directors of Clinsite their fiduciary
duties require providing the third party who offered the Terms
of Offer for LeeCoast an opportunity to top its original bid,
then Clinsite shall inform all interested parties of such
determination, and such third party shall be afforded 5
business days and one opportunity only to top the Terms of
Offer for LeeCoast (unless providing only one such opportunity
is determined by the board of directors of Clinsite to be a
breach of its fiduciary duty in which case the board of
directors shall proceed with a bidding process in accordance
with its fiduciary duty). If that third party does not elect
to top its original bid, then the Option shall be deemed
exercised. If the third party does top its original bid or
last bid with a better offer (the "New LeeCoast Offer Terms"),
then SFBC and Purchaser shall be notified of the New LeeCoast
Offer Terms and, thereafter, shall have 10 business days from
the date each receives the New LeeCoast Offer Terms to match
such New LeeCoast Offer Terms, in which case SFBC must close
the transaction on substantially the same terms and conditions
contained in the New LeeCoast Offer Terms or Clinsite shall be
free to sell LeeCoast to the third party offering the New
LeeCoast Offer Terms.
Section 10.13. Cash Transfers; Conduct of Operations. From the Closing
Date until December 31, 2002, each of SFBC and Purchaser covenants and agrees as
follows:
<PAGE>
(a) Purchaser will not be required by SFBC to, and shall not,
repay the working capital required by this Agreement to SFBC,
nor shall Purchaser make any loan or other advance to SFBC or
any Affiliate thereof;
(b) Purchaser shall not distribute more than 50% of its annual
after tax income to shareholders;
(c) Purchaser shall be maintained as an independent company for
accounting purposes;
(d) Purchaser shall not be charged with any SFBC or Affiliate
inter-company charges, including, without limitation
admistrative expenses or overhead, except for the $12,000
annual management fee and auditing fees and expenses up to
$20,000 per year;
(e) Purchaser shall not be a party to any transaction with SFBC or
its Affiliates, unless such transaction is determined in good
faith by SFBC to be at least as favorable as could be obtained
with an unaffiliated third party or is consented to by
Clinsite and PCLP; and
(f) SFBC shall conduct all ophthalmology, dermatology and generic
clinical equivalence studies which require management of
multiple sites (the "Studies") through Purchaser; provided,
however, that this provision shall not prevent SFBC from
acquiring another business already performing or managing such
Studies as of the date of the acquisition(s) and the acquired
business may continue performing Studies including new Studies
after the date of the acquisition(s) as long as SFBC officers,
directors, employees or independent contractors (excluding
employees of any acquired business) do not assist any acquired
business in soliciting or managing the Studies.
Section 10.14. D. Scott Davis' Employment. In addition to, but not in
limitation of, anything contained in the Davis Employment Agreement, at least
until December 31, 2002 SFBC shall employ D. Scott Davis ("Davis") as President
of Purchaser, and he shall be responsible for day to day operations of
Purchaser. Until December 31, 2002, Davis will not be required to devote any
material time to any other SFBC activities without the written consent of Davis
and PCLP. Notwithstanding the foregoing, Purchaser may terminate Davis for
"cause" as defined in the Davis Employment Agreement.
ARTICLE 11
SURVIVAL
All representations and warranties contained in this Agreement shall
survive the execution, delivery, and performance hereof, notwithstanding any
investigation conducted at any time with respect thereto, for the longer of (a)
eighteen (18) months after the Closing Date or (b) in the case of the
representations and warranties made in any of Sections 5.08 and 5.18, a period
ending 60 days after the expiration of the statutory period of limitations
(without any extensions) applicable to
<PAGE>
any matter subject to the representations and warranties contained in those
Sections, except that the representations and warranties made in each of
Sections 5.01, 5.03, and 5.28, (to the extent applicable), 6.01 and 6.02, shall
survive indefinitely.
ARTICLE 12
INDEMNIFICATION
Section 12.01. Indemnification of Purchaser.
(a) Seller and Clinsite shall, jointly and severally, indemnify
and hold harmless Purchaser and its successors and their
respective shareholders, officers, directors, and agents from
and against any and all damages, losses, liabilities, costs,
and expenses, including reasonable and actually incurred
attorneys' fees (and costs and reasonable and actually
incurred attorneys' fees in respect of any suit to enforce
this provision) (each a "Loss" and collectively, "Losses"),
arising from or relating to (a) any misrepresentation, breach
of warranty, or nonfulfillment of any of the covenants or
agreements of Seller or Clinsite in this Agreement (including
any failure to collect Accounts Receivable within 90 days of
the date such Accounts Receivable are due and payable), or in
any document, certificate, or affidavit delivered by Seller or
Clinsite pursuant to the provisions of this Agreement; (b) any
liability, obligation, or commitment of any nature (absolute,
accrued, contingent, or other) of Seller or Clinsite or
relating to the Acquired Assets or the operation of the
Business arising out of transactions entered into or events
occurring prior to the Closing and not expressly assumed by
Purchaser pursuant to this Agreement; (c) any Environmental
Expenses, any Environmental Claims, any Environmental
Conditions, or any material violation of Environmental
Requirements relating to any time on or before the Closing
Date; and (d) any and all actions, suits, investigations,
proceedings, demands, assessments, audits, and judgments
arising out of any of the foregoing. Purchaser acknowledges
and agrees that (i) other than the representations and
warranties of Clinsite and Seller specifically contained in
this Agreement or in any other instrument or document executed
pursuant hereto, there are no representations or warranties of
Clinsite or Seller either expressed or implied with respect to
the transactions contemplated hereby, Clinsite, Seller, the
Business or the Acquired Assets; (ii) Purchaser shall have no
claim or right of indemnification pursuant to Section 12.02
with respect to any information, documents or materials
furnished by Clinsite or Seller or any of its officers,
directors, employees, agents, or advisors to Clinsite or
Seller in expectation of the transactions contemplated hereby
other than this Agreement, the Schedules hereto and any
instruments and documents executed pursuant hereto and (iii)
if the Closing occurs, Purchaser's sole and exclusive remedy
with respect to any and all Losses relating to this Agreement
or any document or instrument delivered by Clinsite or Seller
pursuant hereto, the transactions contemplated hereby,
Clinsite, Seller, the Business and the Acquired Assets shall
be pursuant to the indemnification provisions set forth in
this Section
<PAGE>
12.01 (other than Losses arising or otherwise claimed under
common law or statutory fraud which may be brought
independently).
In addition, Seller and Clinsite shall jointly and severally, indemnify
and hold SFBC and Purchaser and their lenders, if any, harmless from and against
any Loss which SFBC and Purchaser and/or the Acquired Assets may suffer insofar
as such Loss arises out of or is based upon a breach or alleged breach of, or
failure to comply with any provision of, or to give any notice or make any
filing pursuant to, any bulk sales law or similar statute. SFBC and Purchaser
understand that no notices or filings are being made in respect of the Acquired
Assets under any such law or statute.
(b) Notwithstanding anything to the contrary contained in this
Agreement, no claim can be made against Clinsite or Seller or
shall be payable by Clinsite or Seller, for indemnification
pursuant to this Section 12.01 with respect to any individual
item of Loss, unless Purchaser has suffered, incurred,
sustained or become subject to Losses in excess of $50,000 in
the aggregate; provided, however, that once such threshold has
been satisfied, Purchaser may recover for all such Losses as
if there has been no threshold. For purposes of this Section
12.01, in computing such aggregate amounts of Losses, the
amount of each Loss shall be deemed to an amount (i) net of
any Tax benefit to Purchaser or any Affiliate thereof, and
(ii) net of any insurance proceeds with respect thereto.
Section 12.02. Indemnification by SFBC and Purchaser. SFBC and
Purchaser shall jointly and severally indemnify and hold harmless Seller and
Clinsite and their successors and their respective shareholders, officers,
directors, and agents from and against any and all Losses resulting from or
relating to (a) any misrepresentation, breach of warranty, or nonfulfillment of
any of the covenants or agreements of SFBC and Purchaser in this Agreement, (b)
any Assumed Liability; (c) liabilities or obligations incurred by Purchaser
resulting from the operation of the Business or any of the Acquired Assets after
the Closing Date and (d) any and all suits, actions, investigations,
proceedings, demands, assessments, audits, and judgments arising out of any of
the foregoing. Clinsite and Seller acknowledges and agrees that (i) other than
the representations and warranties of SFBC and Purchaser specifically contained
in this Agreement or in any other instrument or document executed pursuant
hereto, there are no representations or warranties of SFBC or Purchaser either
expressed or implied with respect to the transactions contemplated hereby, SFBC
or Purchaser; (ii) Clinsite and Seller shall have no claim or right of
indemnification pursuant to Section 12.02 with respect to any information,
documents or materials furnished by SFBC or Purchaser or any of its officers,
directors, employees, agents, or advisors to Clinsite or Seller in expectation
of the transactions contemplated hereby other than this Agreement, the Schedules
hereto and any instruments and documents executed pursuant hereto and (iii) if
the Closing occurs, Clinsite's and Seller's sole and exclusive remedy with
respect to any and all Losses relating to this Agreement or any document or
instrument delivered by SFBC or Purchaser pursuant hereto, the transactions
contemplated hereby, SFBC or Purchaser shall be pursuant to the indemnification
provisions set forth in this Section 12.02 (other than Losses arising or
otherwise claimed under common law or statutory fraud which may be brought
independently).
<PAGE>
Section 12.03. Procedure.
(a) Promptly (and in any event within 15 days after the service of
any citation or summons) after acquiring knowledge of any
claim for which one of the parties hereto (the "Indemnified
Party") may seek indemnification against another party (the
"Indemnifying Party") pursuant to this Article 12, the
Indemnified Party shall give written notice thereof to the
Indemnifying Party. Failure to provide notice shall not
relieve the Indemnifying Party of its obligations under this
Article 12 except to the extent that the Indemnifying Party
demonstrates actual damage caused by that failure. The
Indemnifying Party shall have the right to assume the defense
of any claim with counsel reasonably acceptable to the
Indemnified Party upon delivery of notice to that effect to
the Indemnified Party. If the Indemnifying Party, after
written notice from the Indemnified Party, fails to take
timely action to defend the action resulting from such claim,
the Indemnified Party shall only have the right to defend the
action resulting from such claim by counsel of its own
choosing, but at the cost and expense of the Indemnifying
Party. The Indemnified Party shall only have the right to
settle or compromise any claim related to any Loss against it,
and, as the case may be, recover from the Indemnifying Party
any amount paid in settlement or compromise thereof, if it has
given written notice thereof to the Indemnifying Party and the
Indemnifying Party has failed to take timely action to defend
the same. The Indemnifying Party; shall only have the right to
settle or compromise any claim related to any Loss against the
Indemnified Party without the consent of the Indemnified
Party; provided that the terms of the settlement or compromise
provide for the unconditional release of the Indemnified Party
and require the payment of monetary damages only.
(b) Upon its receipt of any amount paid by the Indemnifying Party
pursuant to this Article 12, the Indemnified Party shall
deliver to the Indemnifying Party such documents as it may
reasonably request assigning to the Indemnifying Party any and
all rights, to the extent indemnified, that the Indemnified
Party may have against third parties with respect to the claim
related to a Loss for which indemnification is being received.
ARTICLE 13
NO SOLICITATION; VOTING AGREEMENT
Section 13.01. No Solicitation.
(a) Without limitation of Seller's or Clinsite's other obligations
under this Agreement, Seller and Clinsite agrees that neither
it nor any of its Subsidiaries nor any of the officers and
directors of it or its Subsidiaries shall, and that it shall
use its commercially reasonable efforts to cause its and its
Subsidiaries' employees, agents and representatives (including
any investment banker, attorney or accountant retained by it
or any of its Subsidiaries) not to, directly or indirectly,
initiate, solicit, encourage or knowingly facilitate
(including by way of furnishing
<PAGE>
information) any inquiries or the making of any proposal or
offer with respect to a merger, reorganization, share
exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar
transaction involving Seller, or any purchase or sale of the
assets (including without limitation, equity securities of
Seller) of Seller or any purchase or sale of, or tender or
exchange offer for, 10% or more of the equity securities of
Seller (any such proposal or offer other than a proposal or
offer made by SFBC or an Affiliate thereof is referred to as
an "Acquisition Proposal"). Seller and Clinsite further agrees
that neither it nor any of its Subsidiaries nor any of the
officers and directors of it or its Subsidiaries shall, and
that it shall use its commercially reasonable efforts to cause
its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to,
directly or indirectly, have any discussion with or provide
any confidential information or data to any Person relating to
an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal, or knowingly facilitate
any effort or attempt to make or implement an Acquisition
Proposal or accept an Acquisition Proposal. Notwithstanding
anything in this Agreement to the contrary, each of Seller and
Clinsite or its respective board of directors shall be
permitted, solely to the extent necessary to fulfill its
fiduciary duties under the law of the state of its
incorporation, to engage in any discussions or negotiations
with, or provide any information to, any Person in response to
an unsolicited bona fide written Acquisition Proposal by any
such Person, if and only to the extent that (i) it has
received an unsolicited bona fide written Acquisition Proposal
from a third party and its board of directors concludes in
good faith that such Acquisition Proposal constitutes a
Superior Proposal or, its board of directors concludes in good
faith that there is a reasonable likelihood that such
Acquisition Proposal could result in a Superior Proposal, (ii)
prior to providing any information or data to any Person in
connection with an Acquisition Proposal by any such Person,
its board of directors receives from such Person an executed
confidentiality agreement containing terms at least as
stringent as those contained in any confidentiality agreement
with SFBC existing on the date hereof and (iii) prior to
providing any information or data to any Person or entering
into discussions or negotiations with any Person, such party
notifies SFBC promptly of such inquiries, proposals or offers
received by, any such information requested from, or any such
discussions or negotiations sought to be initiated or
continued with, any of its representatives indicating, in
connection with such notice, the name of such Person and the
material terms and conditions of any inquiries, proposals or
offers. Seller agrees that it will promptly keep SFBC informed
of the status and terms of any such proposals or offers and
the status and terms of any such discussions or negotiations.
(b) Seller and Clinsite agree that each will, and will cause its
officers, directors and representatives to, immediately cease
and cause to be terminated any activities, discussions or
negotiations existing as of the date of this Agreement with
any parties conducted with respect to any Acquisition
Proposal. Seller and Clinsite agree that each will use
commercially reasonable efforts to promptly inform its
directors, officers, key employees, agents and representatives
of the obligations undertaken in this Section 13.01. Nothing
in this Section 13.01 shall (x) permit Seller or Clinsite to
terminate this Agreement (except as
<PAGE>
specifically provided in Article 14 hereof) or (y) affect any
other obligation of Seller or Clinsite under this Agreement.
Neither Seller nor Clinsite shall submit to the vote of its
shareholders any Acquisition Proposal, provided, however, if
the board of directors of Seller or Clinsite receives an
Acquisition Proposal prior to the termination of this
Agreement for any reason which constitutes, or the respective
board of directors concludes that such Acquisition Proposal is
reasonably likely to result in a Superior Proposal, and is
required by state law to submit such Superior Offer to its
shareholders, the board of directors receiving such
Acquisition Proposal shall inform SFBC immediately and shall
allow SFBC to prepare a revised proposal if SFBC at its sole
discretion chooses to do so.
ARTICLE 14
TERMINATION
Section 14.01. Termination of Agreement. Certain of the parties may
terminate this Agreement as provided below:
(a) SFBC and Purchaser and Seller and Clinsite may terminate this
Agreement by mutual written consent at any time prior to the
Closing;
(b) SFBC and Purchaser may terminate this Agreement at any time
prior to Closing by giving written notice to Seller and
Clinsite if SFBC and Purchaser are not satisfied with the
results of its continuing business, legal, and accounting due
diligence regarding Seller;
(c) SFBC and Purchaser may terminate this Agreement by giving
written notice to Seller and Clinsite at any time prior to the
Closing (i) in the event that Seller or Clinsite has breached
any material representation, warranty, or covenant contained
in this Agreement in any material respect, SFBC or Purchaser
has notified Seller and Clinsite of the breach, and the breach
has continued without cure for a period of 10 days after the
notice of breach or (ii) if the Closing shall not have
occurred on or before March 30, 2000.
(d) Seller and Clinsite may terminate this Agreement by giving
written notice to SFBC and Purchaser at any time prior to the
Closing (i) in the event SFBC or Purchaser has breached any
material representation, warranty, or covenant contained in
this Agreement in any material respect, Seller and Clinsite
have notified SFBC and Purchaser of the breach, and the breach
has continued without cure for a period of 10 days after the
notice of breach, (ii) if the Closing shall not have occurred
on or before March 30, 2000, or (iii) they conclude they can
accept a Superior Proposal.
Section 14.02. Effect of Termination. If any party terminates this
Agreement pursuant to Section 14.01 above, (a) each party will redeliver all
documents, work papers and other material of the other party or parties relating
to the transactions contemplated hereby, whether so obtained before or after the
execution
<PAGE>
hereof, to the party furnishing the same; (b) no information received by any
party hereto with respect to the business of the other party or their affiliated
companies (other than information which is a matter of public knowledge or which
has heretofore been or is hereafter published in any publication for public
distribution or filed or available as public information with any governmental
authority) shall at any time be used for the advantage of, or disclosed to third
parties, by such party for any reason whatsoever; and (c) all rights and
obligations of the parties hereunder shall terminate without any Liability of
any party to any other party, except to the extent such claim or obligation has
accrued prior termination of this Agreement is as a result of a material breach
as provided in Sections 14 (c)(i) and (d)(i) above, in which case the
terminating party's right to pursue any remedy available at law shall not be
waived.
ARTICLE 15
MISCELLANEOUS
Section 15.01. Public Announcements. No party shall make any press
release or public announcement concerning this transaction prior to or after the
Closing Date, except as expressly permitted by the other party, except that
either party may make any press release or public announcement if and to the
extent required by securities law or stock exchange requirement or other
applicable law or legal compulsion, provided that such party who proposes to
make such legally-required disclosure provide the other party with notice as
promptly as practicable of the circumstances that it believes creates a duty to
make such disclosure and an opportunity to review such disclosure and comment
thereon.
Section 15.02. Expenses. Except as otherwise provided herein, each of
the parties hereto shall pay its own expenses in connection with this Agreement
and the transactions contemplated hereby, including, without limitation, any
legal and accounting fees, whether or not the transactions contemplated hereby
are consummated.
Section 15.03. Severability. In the event any parts of this Agreement
are found to be void, the remaining provisions of this Agreement shall
nevertheless be binding with the same effect as though the void parts were
deleted.
Section 15.04. 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. The execution of this
Agreement may be by actual or facsimile signature.
Section 15.05. Benefit. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their legal representatives, successors
and assigns.
Section 15.06. Notices and Addresses. All notices, offers, acceptance
and any other acts under this Agreement (except payment) shall be in writing,
and shall be sufficiently given if delivered to the addressees in person, by
Federal Express, United Parcel Service, or similar receipted delivery, by
facsimile delivery or, if mailed, postage prepaid, by certified mail, return
receipt requested, as follows:
<PAGE>
If to SFBC or Purchaser, to: SFBC International, Inc.
11190 Biscayne Boulevard
North Miami, Florida 33181
Telephone: (305) 895-0304
Attention: Mr. Arnold Hantman,
Chief Executive Officer
with a copy to: Michael D. Harris, Esq.
Michael Harris, P.A.
1645 Palm Beach Lakes Blvd.
Suite 550
West Palm Beach, FL 33401
Facsimile (561) 478-1817
and with a copy to: Pacific Capital, L.P.
2401 Plymouth Road, Suite B
Ann Arbor, Michigan
Attention: Ian R. N. Bund
If to Seller or Clinsite, to: Clinical Site Services Corp.
8701 Mallard Creek Road
Charlotte, NC 28262
Attention: D. Scott Davis, President
With a copy to: J. Lynn Thorneburg, Esq.
Alston & Bird LLP
1211 E. Morehead Street
Charlotte, NC 28204
and with a copy to: Pacific Capital, L.P.
2401 Plymouth Road, Suite B
Ann Arbor, Michigan
Attention: Ian R. N. Bund
or to such other address as any party, by notice to the other parties may
designate from time to time. Time shall be counted to, or from, as the case may
be, the date of delivery.
<PAGE>
Section 15.07. Attorney's Fees. In the event that there is any
controversy or claim arising out of or relating to this Agreement, or to the
interpretation, breach or enforcement thereof, and any action or proceeding
including an arbitration proceeding is commenced to enforce the provisions of
this Agreement, the prevailing party shall be entitled to an award by the court
or arbitrator, as appropriate, of reasonable and actually incurred attorney's
fees, including the fees on appeal, costs and expenses.
Section 15.08. Oral Evidence. This Agreement constitutes the entire
Agreement between the parties and supersedes all prior or contemporaneous oral
and written agreements between the parties hereto with respect to the subject
matter hereof. Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, except by a statement in writing signed
by all parties hereto.
Section 15.09. Arbitration. Any controversy, dispute or claim arising
out of or relating to this Agreement, or its interpretation, application,
implementation, breach or enforcement which the parties are unable to resolve by
mutual agreement, shall be settled by submission by either party of the
controversy, claim or dispute to binding arbitration in Washington, D.C. (unless
the parties agree in writing to a different location), before a panel of three
arbitrators in accordance with the rules of the American Arbitration Association
then in effect. In any such arbitration proceeding the parties agree to provide
all discovery deemed necessary by the arbitrators. The decision and award made
by the arbitrators shall be final, binding and conclusive on all parties hereto
for all purposes, and judgment may be entered thereon in any court having
jurisdiction thereof.
Section 15.10. Headings. The article, section, and paragraph headings
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
Section 15.11. Construction.
(a) The parties have participated jointly in the negotiation and
drafting of this Agreement, and, in the event of an ambiguity
or a question of intent or a need for interpretation arises,
this Agreement shall be construed as if drafted jointly by the
parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
(b) (i) The parties intend that each representation,
warranty, and covenant herein shall have independent
significance. If any party has breached any
representation, warranty, or covenant contained
herein in any respect, the fact that there exists
another representation, warranty, or covenant
relating to the same subject matter (regardless of
the relative levels of specificity) which the party
has not breached shall not detract from or mitigate
the fact that the party is in breach of the first
representation, warranty, or covenant, as the case
may be.
<PAGE>
(ii) Words of any gender used in this Agreement shall be
held and construed to include any other gender; words
in the singular shall be held to include the plural;
and words in the plural shall be held to include the
singular; unless and only to the extent the context
indicates otherwise.
(iii) Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder,
unless the context requires otherwise.
(iv) The word "including" means "including, without
limitation."
(v) The terms "To the Knowledge of Seller and Clinsite,"
"known to Seller or Clinsite," or words of similar
import have the meanings set forth in Article 1.
(vi) The terms "To the Knowledge of SFBC or Purchaser,"
"known to SFBC or Purchaser," or words of similar
import have the meanings set forth in Article 1.
Section 15.12. Governing Law; Jurisdiction. This Agreement shall be
construed and enforced in accordance with, and governed by, the laws of the
State of Delaware (without giving effect to the principles of choice of or
conflicts of laws thereof), except to the extent that the laws of any
jurisdiction in which Acquired Assets are situated may be applicable hereto.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or caused to be
executed by their duly authorized representatives, this Agreement as of the date
first above written.
Witnesses: PHARMACEUTICAL DEVELOPMENT
ASSOCIATES, INC.
-----------------------
By: /S/ D. SCOTT DAVIS
------------------------------------------
----------------------- D. Scott Davis, President
----------------------- CLINICAL SITE SERVICES CORP.
----------------------- By: /S/ D. SCOTT DAVIS
------------------------------------------
D. Scott Davis, President
----------------------- SFBC/PHARMACEUTICAL DEVELOPMENT
ASSOCIATES, INC.
-----------------------
By: /S/ ARNOLD HANTMAN
------------------------------------------
Arnold Hantman, Vice President
----------------------- SFBC INTERNATIONAL, INC.
----------------------- By: /S/ ARNOLD HANTMAN
------------------------------------------
Arnold Hantman, Chief Executive Officer
Schedules and Exhibits to Follow
<PAGE>
SCHEDULES
Introduction
These Schedules are qualified in their entirety by reference to the
specific provisions of the Asset Purchase Agreement to which they are attached
(the "Agreement") and are not intended to constitute and shall not be construed
as constituting, representations or warranties of any Person except as and to
the extent provided in the Agreement. Headings have been inserted on the
sections of these Schedules for convenience of reference only and shall to no
extent have the effect of amending or changing the express description of the
Sections as set forth in the Agreement. Unless otherwise defined in these
Schedules, capitalized terms used in these Schedules have the meanings set forth
in the Agreement.
<PAGE>
Schedule 1
Accounts Receivable
See attached. In addition to the Accounts Receivable set forth on the attached
schedule, all Accounts Receivable incurred by PDA or Clinsite (with respect to
the Business) from March 1, 2000 through March 29, 2000.
PDA Estimated Closing Assets and Liabilities
Scott Davis
December 31, 1999 February 29, [2000]
Cash 219,701
Accounts Receivable 319,592 431,449
Fixed Assets 114,254 113,254
433.346 764,404
Accounts Payable 327,537 318,261
[illegible] 125,903 518,049
453,440 836,310
Deficit (19,594) (71,906)
<PAGE>
Schedule 1A
Employees and Officers of Clinsite and Seller
D. Scott Davis
George K. Gessner
<PAGE>
Schedule 1B
To the
Asset Purchase Agreement
Dated as of March 29, 2000
By and Among
SFBC International, Inc.,
SFBC/Pharmaceutical Development Associates, Inc.
Pharmaceutical Development Associates, Inc.
And
Clinical Sites Services Corp.
Purchaser's and SFBC
Employees and Officers
Lisa Krinsky, M.D.
Arnold Hantman
Dr. Gregory Holmes
Jerry Seifer
<PAGE>
Schedule 2.04
Customer Contracts
A. General Agreement dated December 15, 1999, between PDA and
Alcon Research, Ltd. ("Alcon").
1. Exhibit I-97 between PDA and Alcon dated November 21,
1997, for AL-6221 Study; Addendum dated January 23,
1998.
B. General Agreement dated March 2, 1992, between PDA and
Allergan, Inc. ("Allergan").
1. Exhibit E-97, Addendum 2, dated October 7, 1999,
between PDA and Allergan for Cyclosporin Study No.
192371-004-00.
C. Services Agreement dated December 15, 1999, between PDA and
Altana, Inc. ("Altana").
1. Exhibit A-99 dated December 15, 1999 between PDA and
Altana for Protocol No. ALT 709.
D. Study Agreement dated March 20, 2000 between PDA (listed as
CDAI) and Altana for Protocol No. ALT 001.
E. Services Agreement dated November 1, 1999, between PDA and
Inspire Pharmaceuticals, Inc. ("Inspire").
1. Exhibit A-99 dated November 22, 1999, between PDA and
Inspire for the Phase II Dry Eyes Study (No. INS365).
F. General Agreement dated June 11, 1997, between PDA and
Medarex, Inc. ("Medarex").
1. Exhibit A-97 development plan dated August 24, 1997,
between PDA and Medarex for Product 4197X-RA. Addenda
dated July 23, 1999.
G. Services Agreement dated October 1, 1999, between PDA and
Senju Pharmaceutical Co., Ltd. ("Senju").
1. Exhibit B-99 dated February 14, 2000, between PDA
(incorrectly named as Clinsites/PDA) and Senju for
Protocol No. TIMLA-301.
<PAGE>
H. Letter Agreement dated November 22, 1999, between PDA and
Lilly Research Laboratories related to the Randomized Phase II
Trial of Gemcitabine Plus Docetoxal.
I. General Agreement dated April 9, 1998 among PDA (listed as
Clinsites/CDAI), Clay Park Labs, Inc. ("Clay Park") and Agis
Industries, Ltd. ("Agis").
1. Exhibit C98 dated September 3, 1998 among PDA (listed
as Clinsites/CDAI), Clay Park and Agis for Protocol
CPL 808.
2. Exhibit D98 dated November 6, 1998 among PDA (listed
as Clinsites/CDAI), Clay Park and Agis for Protocol
CPL 809.
H. Services Agreement dated January 28, 2000, between PDA (listed
as Clinsites/CDAI) and Paddock Laboratories, Inc. ("Paddock").
1. Study Agreement dated June 1, 1999, between PDA
(listed as Clinsites/CDAI) and Paddock for Study NO.
PAD 801 and Addendum dated September 10, 1999.
2. Exhibit A-00 dated February 15, 2000, between PDA
(listed as Clinsites/CDAI) and Paddock for Protocol
PAD-801E.
I. Letter of Intent dated March 9, 2000, between PDA (listed as
CDAI) and Bertek Laboratories, Inc. for Protocol BTK001.
J. Letter of Intent dated December 1, 1999 among PDA (listed as
CDAI), Clay Park and Agis for Protocol CPL 912.
K. Various oral agreements between PDA and Clay Park relating to
the projects CPL 801, 808, 822, 824, 901, 911 and 001, each of
which is part of the pending Preferred Provider Proposal.
<PAGE>
Schedule 3.03(c)
To the
Asset Purchase Agreement
Dated as of March 29, 2000
By and Among
SFBC International, Inc.,
SFBC/Pharmaceutical Development Associates, Inc.
Pharmaceutical Development Associates, Inc.
And
Clinical Sites Services Corp.
Example of Earn-Out
of Purchaser
<TABLE>
<CAPTION>
------------------------------ -------------------- ---------------------- --------------------------
Years 2000 2001 2002
------------------------------ -------------------- ---------------------- --------------------------
<S> <C> <C> <C>
Adjusted Net Income $300,000 $350,000 $400,000
------------------------------ -------------------- ---------------------- --------------------------
Average $300,000 $325,000 $350,000
------------------------------ -------------------- ---------------------- --------------------------
(of 2000) (of 2000 and 2001) (of 2000,2001 and 2002)
------------------------------ -------------------- ---------------------- --------------------------
Threshold $133,333 $133,333 $133,333
------------------------------ -------------------- ---------------------- --------------------------
Excess $166,667 $191,667 $216,667
------------------------------ -------------------- ---------------------- --------------------------
Multiply Excess x 4.5 $750,000 $862,500 $975,000
------------------------------ -------------------- ---------------------- --------------------------
1st Year Cap $600,000
------------------------------ -------------------- ---------------------- --------------------------
Less Cumulative - $600,000 $862,500
------------------------------ -------------------- ---------------------- --------------------------
Due to Seller $600,000 $262,500 $112,500
------------------------------ -------------------- ---------------------- --------------------------
Cumulative $600,000 $862,500 $975,000
------------------------------ -------------------- ---------------------- --------------------------
</TABLE>
<PAGE>
Schedule 5.01
Fictitious Names of PDA
Clinsites/Pharmaceutical Development Associates, Inc.
Pharmaceutical Development Associates, Inc. of New England
Clinsites/PDA
Clinsites, Inc.
Clinsites/CDAI
Clinical Development Associates, Inc.
Clinsites/Clinical Development Associates, Inc.
<PAGE>
Schedule 5.02
Qualification to Do Business as a Foreign Corporation
None.
<PAGE>
Schedule 5.04
Breach of Material Contracts
The Business Loan Agreement dated April 21, 1999 among Clinsites, the direct and
indirect subsidiaries of Clinsites, White Pines Management L.L.C. and certain
other "Lenders."
The Security Agreement dated April 21, 1999 among PDA and the Lenders.
The Security Agreement dated April 21, 1999 among Clinsites and the Lenders
Lease agreement dated May 28, 1998 between Copelco Capital and Clinsites for
KONAN specular microscope.
Finance Agreement dated July 3, 1998 between HPSC, Inc. and Clinsites for a
Lombart specular microscope.
Finance Agreement dated August 21, 1998 between HPSC, Inc. and Clinsites for a
Lombart specular microscope.
<PAGE>
Schedule 5.05
Required Consents
White Pines Management L.L.C. as agent for the "Lenders" under the Business Loan
Agreement dated April 21, 1999, and the Loan Documents (as defined in the
Business Loan Agreement).
<PAGE>
Schedule 5.06
Financial Statements of Seller
<PAGE>
Pharmaceutical Development Associates, Inc.
Balance Sheet
As of December 31, 1999
Dec 31, '99
------------
ASSETS
Current Assets
Checking/Savings
Intercompany-PDA 347,806.30
Checking First Commerce 503.34
------------
Total Checking/Savings 348,309.64
Accounts Receivable
WIP 84,965.68
A/R Sponsors 295,836.98
Allowance for doubtfull account (61,210.28)
Total Accounts Receivable 319,592.38
Other Current Assets
Income tax receivable 750.00
Due from CDAI 127,394.99
Prepaid Expenses
Legal 850.33
American Express 2,462.24
Total Prepaid Expenses 3,312.57
Employee Advances 443.45
Total Other Current Assets 131,901.01
Total Current Assets 799,803.03
Fixed Assets
Computer equipment 2,217.28
Computer Software 5,969.80
Medical Equipment 71,392.91
Furniture & Fixtures 40,833.70
Office Equipment 118,317.92
Accum Depreciation (124,477.41)
Total Fixed Assets 114,254.20
Other Assets
Investment in CDAI 150,000.00
Security Dep -Leases 3,324.93
Net Organizational Costs
Organizational Costs 1,661.53
Accum. Amort. - Organizational (1,661.46)
------------
Total Net Organizational Costs 0.07
Excess Purchase Price
Unallocated Purchase Price 682,598.40
Accum. Amort. - Unallocated Pur (193,258.00)
------------
Total Excess Purchase Price 469,340.40
Total Other Assets 622,665.40
------------
TOTAL ASSETS 1,536,722.63
============
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
Accounts Payable 327,536.62
Inter-Company A/P
AP - Clinsites 455,110.82
A/P - CDAI 41,029.00
A/P - FPRC 16,155.00
A/P - LeeCoast 7,078.89
A/P - Louisiana 14,670.00
A/P - Sorra 8,889.40
------------
Total Inter-Company A/P 542,933.11
Page 1
<PAGE>
Pharmaceutical Development Associates, Inc.
Balance Sheet
As of December 31, 1999
Dec 31, '99
------------
Total Accounts Payable 870,469.73
Other Current Liabilities
Due to Clinsitee (PMRI) 27,470.00
Fedex due CSSC (100.60)
Unearned Revenue
Alcon C-97-73 30,000.00
Eyenet 1,154.00
Inspire #03-103 61,651.44
Medarex 4197X-RA 33,097.32
------------
Total Unearned Revenue 125,902.76
------------
Total Other Current Liabilities 153,272.16
------------
Total Current Liabilities 1,023,741.89
Long Term Liabilities
Note Payable HSPC (Steven) 14,577.23
Note Payable HSPC (Olander) 12,395.47
Note Payable Copelco (Schone) 9,809.61
N/P - Gessner 100,000.00
------------
Total Long Term Liabilities 136,782.31
------------
Total Liabilities 1,160,524.20
Equity
Common Stock 1,910.00
Additional Paid-in Capital 710,772.77
1110 - Retained Earnings 131,100.44
Net Income (467,584.78)
------------
Total Equity 376,198.43
------------
TOTAL LIABILITIES & EQUITY 1,536,722.63
============
Page 2
<PAGE>
Pharmaceutical Development Associates, Inc.
Profit and Loss
January through December 1999
Jan - Dec '99
-------------
Ordinary Income/Expense
Income
Sales 2,206,660.77
------------
Total Income 2,206,660.77
Cost of Goods Sold
5000 - Cost of Goods Sold 0.00
Cost of Goods Sold
Statistical Services 6,600.00
Investigators 748,056.07
Travel expenses 311,352.09
Monitors 18,400.00
IRB Fees 9,130.10
Miscellaneous Proj Exp 130,188.29
Cost of Goods Sold - Other 4,832.67
------------
Total Cost of Goods Sold 1,226,559.22
------------
Total COGS 1,226,559.22
------------
Gross Profit 980,101.55
Expense
Compensation and Benefits
Corporate allocation 162,023.74
Salaries 640,660.45
Vacation salary expense (513.44)
Payroll Taxes 51,368.27
Employment Agency Fee 6,166.66
401K expenses 299.85
Group Health 44,275.50
Officer's Health Insurance (668.00)
Life insurance 308.40
Disability Insurance 3,121.55
Life/Disability (Officer's) 3,458.11
Workers Compensation 1,766.05
Payroll Services 478.00
------------
Total Compensation and Benefits 912,745.14
Rent
Rent - Office 60,336.13
Rent - Storage 2,020.11
------------
Total Rent 62,356.24
Selling, General & Admin.
Bad debt expense 61,210.28
Corporate expense allocations 66,282.26
Training 237.01
Advertising 2,298.29
Bank service charges 117.50
Copier Lease 9,401.03
Dues, Subscr. & Licenses 3,251.86
Entertainment 276.63
Furniture 50.00
Insurance 2,896.24
Meals 755.12
Meetings/Trainings/Books 1,364.87
Mileage 3.52
Miscellaneous 796.76
Misc. Taxes and Licenses 4,864.89
Moving Expense 11,376.06
Office Equipment Expense 231.99
Office Supplies 10,652.43
Postage & Delivery 5,388.13
Printing 475.99
Professional Fees 63,251.49
Software expense 5,371.00
Page 1
<PAGE>
Pharmaceutical Development Associates, Inc.
Profit and Loss
January through December 1999
Jan - Dec '99
-------------
Telephone 14,299.43
Travel 34,196.93
Selling, General & Admin. - Other 281.22
------------
Total Selling, General & Admin 299,330.93
------------
Total Expense 1,274,432.31
------------
Net Ordinary Income (294,330.76)
Other Income/Expense
Other Expense
Write down of goodwill 0.00
Timing difference 0.00
Interest Expense 12,425.28
Depreciation 90,960.89
Amortization expense 66,592.85
Income Tax 3,275.00
------------
Total Other Expense 173,254.02
------------
Net Other Income (173,254.02)
------------
Net Income (467,584.78)
============
Page 2
<PAGE>
Pharmaceutical Development Associates, Inc.
Balance Sheet
As of December 31, 1998
Dec 31, '98
------------
ASSETS
Current Assets
Checking/Savings
Checking First Commerce 51.65
------------
Total Checking/Savings 51.65
Accounts Receivable
A/R Sponsors 404,677.70
------------
Total Accounts Receivable 404,677.70
Other Current Assets
Income tax receivable 750.00
Employee Advances 227.83
Due from ClinSites 112,585.50
Undeposited Funds 125,468.74
------------
Total Other Current Assets 239,032.07
------------
Total Current Assets 643,761.42
Fixed Assets
Furniture & Fixtures 34,515.40
Office Equipment 33,915,26
Accum Depreciation (20,121.84)
------------
Total Fixed Assets 48,308.82
Other Assets
Investment in CDAI 150,000.00
Security Dep -Leasee 1,090.00
Net Organizational Costs
Organizational Costs 1,661.53
Accum. Amort. - Organizational (1,329.18)
------------
Total Net Organizational Costs 332.35
Excess Purchase Price
Unallocated Purchase Price 682,598.40
Accum. Amort. - Unallocated Pur (126,997.43)
------------
Total Excess Purchase Price 535,600.97
------------
Total Other Assets 687,023.32
------------
TOTAL ASSETS 1,379,093.66
============
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
Accounts Payable 179,653.91
Inter-Company A/P
A/P - CDAI 41,029.00
A/P - FPRC 6,125.00
A/P - LeeCoast 11,038.15
A/P - Louisiana 8,305.00
A/P - Sorra 6,464.00
------------
Total Inter-Company A/P 72,961.15
------------
Total Accounts Payable 252,815.06
Other Current Liabilities
Payroll Liabilities 1,702.66
Accrued Vacation Salary 513.44
Unearned Revenue
AGN Spirometry 14,950.00
AGN Detroit Sites II 3,464.14
Alcon C-97-67 6,612.39
Alcon C-97-73 9,692.71
Alcon C-97-80 14,035.67
Page 1
<PAGE>
Pharmaceutical Development Associates, Inc.
Balance Sheet
As of December 31, 1998
Dec 31, '98
------------
Clay Park CPL-808 46,117.50
Effcon KEF610 unearned 33,005.96
Eyenet 1,154.00
Medarex 4197X-RA 46,227.42
R-Tech Aldose Reductase Inhibit 5,219.40
Total Unearned Revenue 180,479.19
------------
Total Other Current Liabilities 182,695.29
Total Current Liabilities 435,310.35
Long Term Liabilities
N/P - Gessner 100,000.00
------------
Total Long Term Liabilities 100,000.00
------------
Total Liabilities 535,310.35
Equity
Common Stock 1,910.00
Additional Paid-in Capital 710,772.77
1110 - Retained Earnings 123,543.38
Net Income 7,557.06
Total Equity 843,783.21
------------
TOTAL LIABILITIES & EQUITY 1,379,093.56
============
Page 2
<PAGE>
Pharmaceutical Development Associates, Inc.
Profit and Loss
January through December 1998
Jan - Dec '98
-------------
Ordinary Income/Expense
Income
Sales 3,151,593.41
------------
Total Income 3,151,593.41
Cost of Goods Sold
Cost of Goods Sold
Investigators 840,450.89
Travel expenses 677,983.66
Monitors 123,442.55
IRB Fees 21,515.30
Miscellaneous Proj Exp 227,676.71
Cost of Goods Sold - Other 16,159.65
------------
Total Cost of Goods Sold 1,907,228.76
------------
Total COGS 1,907,228.76
------------
Gross Profit 1,244,364.65
Expense
Compensation and Benefits
Corporate allocation (20,326.49)
Salaries 774,914.06
Contract Labor 21,261.18
Vacation salary expense (9,486.58)
Payroll Taxes 64,339.67
Employment Agency Fee 12,333.34
Group Health 47,159.57
Officer's Health Insurance 249.00
Life insurance 295.60
Disability Insurance 1,047.95
Life/Disability (Officer's) 6,774.08
Workers Compensation 3,072.23
Payroll Services 1,076.60
------------
Total Compensation and Benefits 902,710.23
Rent
Rent - Office 34,891.24
Rent - Storage 570.81
Rent - Other 20,982.00
------------
Total Rent 56,444.05
Selling, General & Admin
Corporate expense allocations 43,792.55
Bank service charges 44.00
Dues, Subscr. & Licenses 3,104.52
Entertainment 387.47
Insurance 11,031.40
Meals 1,426.95
Meetings/Trainings/Books 2,973.07
Miscellaneous 282.65
Misc. Taxes and Licenses 2,937.79
Moving Expense 15,009.46
Office Equipment Expense 16,960.66
Office Supplies 23,928.97
Postage & Delivery 4,233.97
Printing 1,702.84
Professional Fees 14,207.37
Software expense 1,496.66
Telephone 15,132.05
Travel 26,808.11
Total Selling, General & Admin 185,460.49
------------
Total Expense 1,144,614.77
------------
Page 1
<PAGE>
Pharmaceutical Development Associates, Inc.
Profit and Loss
January through December 1998
Jan - Dec '98
-------------
Net Ordinary Income 99,749.88
Other Income/Expense
Other Income
Interest Income 301.50
------------
Total Other Income 301.50
Other Expense
Interest Expense 12,000.00
Depreciation 13,902.13
Amortization expense 66,592.19
Income Tax 0.00
------------
Total Other Expense 92,494.32
Net Other Income (92,192.82)
------------
Net Income 7,557.06
============
Page 2
<PAGE>
Pharmaceutical Development Associates, Inc.
Balance Sheet
As of December 31, 1997
Dec 31, '97
------------
ASSETS
Current Assets
Checking/Savings
Checking First Commerce (54,988.03)
Petty Cash 289.26
------------
Total Checking/Savings (54,718.77)
Accounts Receivable
A/R Sponsors 379,229.41
Total Accounts Receivable 379,229.41
Other Current Assets
Due From Stockholders 18,639.19
Employee Advances 4,627.83
Total Other Current Assets 23,267.02
------------
Total Current Assets 347,777.66
Fixed Assets
Furniture & Fixtures 7,730.05
Office Equipment 23,801.58
Accum Depreciation (6,219.71)
------------
Total Fixed Assets 25,311.90
Other Assets
Investment in CDAI 150,000.00
Security Dep -Leases 1,090.00
Govt Printing 42.40
Net Organizational Costs
Organizational Costs 1,661.63
Accum. Amort. - Organizational (996.90)
------------
Total Net Organizational Costs 664.63
Excess Purchase Price
Unallocated Purchase Price 662,598.40
Accum. Amort. - Unallocated Pur (60,737.52)
Total Excess Purchase Price 601,860.88
------------
Total Other Assets 753,657.91
------------
TOTAL ASSETS 1,126,747.47
============
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
Accounts Payable 62,126.67
Inter-Company A/P 5,500.00
------------
Total Accounts Payable 67,626.67
Credit Cards
American Express (2,655.66)
------------
Total Credit Cards (2,655.66)
Other Current Liabilities
Due To ClinSites (203,602.68)
Payroll Liabilities 25.20
Accrued Vacation Salary 10,000.00
Unearned Revenue
Alcon C-97-63 46,200.00
Alcon C-97-54 30,560.00
Alcon C-97-57 33,460.00
AGN TCHM-136-8941 6,025.77
AGN Spirometry 14,950.00
AGN Detroit Sites II 3,464.14
Alcon C-97-73 73,061.50
Page 1
<PAGE>
Pharmaceutical Development Associates, Inc.
Balance Sheet
As of December 31, 1997
Dec 31, '97
------------
Eyenet 1,654.00
Medarex 4197X-RA 74,262.99
Paddock Lachydrin 35,489.39
Total Unearned Revenue 319,127.79
------------
Total Other Current Liabilities 125,550.31
------------
Total Current Liabilities 190,521.32
Long Term Liabilities
N/P - Gessner 100,000.00
------------
Total Long Term Liabilities 100,000.00
Total Liabilities 290,521.32
Equity
Common Stock 1,910.00
Additional Paid-in Capital 710,772.77
Net Income 123,543.38
------------
Total Equity 836,226.15
TOTAL LIABILITIES & EQUITY 1,126,747.47
============
Page 2
<PAGE>
Pharmaceutical Development Associates, Inc.
Profit and Loss
January through December 1997
Jan - Dec '97
-------------
Ordinary Income/Expense
Income
Miscellaneous Income 0.00
Sales 1,231,644.79
Total Income 1,231,644.79
Cost of Goods Sold
Cost of Goods Sold
Investigators 90,020.00
Travel expenses 247,751.87
Monitors 61,199.55
IRB Fees 9,000.00
Miscellaneous Proj Exp 100,049.15
------------
Total Cost of Goods Sold 508,020.57
Total COGS 508,020.57
------------
Gross Profit 723,624.22
Expense
Compensation and Benefits
Salaries 369,789.59
Contract Labor 945.45
Vacation salary expense 10,000.00
Payroll Taxes 32,751.03
Group Health 18,552.48
Officer's Health Insurance 988.73
Life/Disability (Officer's) 8,675.65
Workers Compensation 850.92
Payroll Services 1,004.41
------------
Total Compensation and Benefits 443,538.26
Rent
Rent - Office 22,028.15
------------
Total Rent 22,028.15
Selling, General & Admin.
Advertising 558.34
Bank service charges 154.00
Dues, Subscr. & Licenses 2,476.50
Entertainment 416.93
Insurance 526.00
Meals 971.77
Meetings/Trainings/Books 8,055.93
Miscellaneous 125.00
Misc. Taxes and Licenses 2,159.60
Moving Expense 375.50
Office Equipment Expense 6,222.83
Office Supplies 10,332.03
Postage & Delivery 2,421.42
Printing 919.93
Professional Fees 5,240.06
Telephone 14,582.70
Travel 9,271.59
------------
Total Selling, General & Admin. 64,810.13
------------
Total Expense 530,376.54
------------
Net Ordinary Income 193,247.68
Other Income/Expense
Other Income
Interest Income 9,388.25
------------
Total Other Income 9,388.25
Other Expense
Page 1
<PAGE>
Pharmaceutical Development Associates, Inc.
Profit and Loss
January through December 1997
Jan - Dec '97
-------------
Interest Expense 11,830.73
Depreciation 6,219.71
Amortization expense 61,042.11
Income Tax 0.00
------------
Total Other Expense 79,092.55
Net Other Income (69,704.30)
------------
Net Income 123,643.38
============
Page 2
<PAGE>
Schedule 5.07
Material Events since Seller's Balance Sheet Date
None.
<PAGE>
Schedule 5.09
Material Liabilities not Disclosed on Balance Sheet
None.
<PAGE>
Schedule 5.11
Leased Real Property
PDA was the lessee under a Lease dated November 1, 1996 between PDA and the Ben
Craig Center relating to Suite 134 at 8701 Mallard Creek Road, Charlotte, NC,
which was extended on October 17, 1997, and a Lease dated June 1, 1996 between
PDA and the Ben Craig Center relating to Suites 130 and 132 at 8701 Mallard
Creek Road, Charlotte, NC. These leases expired on March 31, 1999 and May 31,
1999, respectively, and PDA now leases the property on a month-to-month basis.
PDA's rights are subject to a lien in favor of the "Lenders" under the Business
Loan Agreement dated April 21, 1999 pursuant to the Security Agreement dated
April 21, 1999.
<PAGE>
Schedule 5.12
Material Equipment, Machinery and Related Liens
1996 Dodge Intrepid (owned by Research Resources, Inc., subject to a lien in
favor of Regions Bank to be paid in full February 23, 2000)
KONAN Specular Microscope (leased from Copelco Capital by Clinsites, consent
required to transfer lease)
Two (2) Lombart Specular Microscopes (each leased from HPSC, Inc. by Clinsites,
consent required to transfer lease)
<PAGE>
Schedule 5.14
Intellectual Property
Common law rights to the service marks Pharmaceutical Development Associates,
Inc. and PDA
PDA is also a licensee under the Lotus Notes, Passport Program, Contract number
45115.
All intangible property of PDA is subject to a security interest in favor of the
"Lenders" in the Business Loan Agreement dated April 21, 1999 pursuant to
Security Agreements dated April 21, 1999.
<PAGE>
Schedule 5.15
Compliance with Laws
None.
<PAGE>
Schedule 5.16
Litigation
None.
<PAGE>
Schedule 5.17(c)
Employee Benefits Plans
Clinical Site Services Corp. 401(k) Principal Financial Group
Provident Long Term Disability Insurance
Blue Cross Blue Shield Health and Dental Insurance
Fortis Life Insurance
Clinical Site Services Corp. Employee Manual
Clinical Site Services Corp. Stock Option Plan
<PAGE>
Schedule 5.17(d)
Liabilities under Employee Benefits Plans
Accrued Vacations as listed below.
Last Name First Name Middle Hours Accrued
Beaver Linda 13.32
Buchanan Noranda S. 10.66
Davis David Scott 26.66
Gates Louann P. 13.32
Gessner George K. 26.66
Harris Thomas Grier 13.32
Huselton Brett C. 13.32
Kays William Todd 20
Kelley Jill K. 13.32
King Jessica W. 5.32
Locke Traci A. 26.66
Phelps Kimberly J. 6.66
Rhinevault Patricia J. 13.32
Smith Karolina Gisela 13.32
Sultzman Pamela 6.66
Watson Judith C. 26.66
Young Stephen G.
<PAGE>
Schedule 5.17(e)
Litigation involving Employee Benefits Plans
None.
<PAGE>
Schedule 5.19
Licenses and Permits
City of Charlotte & Mecklenburg County Privilege License for PDA dated 7/2/99.
<PAGE>
Schedule 5.20(a)
Employees and Compensation
Last Name First Name M. Salary
Beaver Linda $ [*]
Buchanan Noranda S. $ [*]
Davis David Scott $101,760.00
Gessner George K. $ 90,000.00
Harris Thomas Grier $ [*]
Huselton Brett C. $ [*]
Kays William Todd $ [*]
Kelley Jill K. $ [*]
King Jessica W. $ [*]
Locke Traci A. $ [*]
Male Dragana
Phelps Kimberly J. $ [*]
Rhinevault Patricia J. $ [*]
Smith Karolina G. $ [*]
Sultzman Pamela $ [*]
Watson Judith C. $ [*]
Young Stephen G. $ [*]
[*] CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
<PAGE>
Schedule 5.20(b)
Disputes involving Employees
None.
<PAGE>
Schedule 5.21
Property and Casualty Insurance
Mikos/Kampakis Insurance Services, Inc.
2104 Rocky Ridge Road
Birmingham, AL 35216
<TABLE>
<CAPTION>
------------------------------------------ -------------------------- ---------------- ----------------- ----------------
Type of Coverage Policy Number Premium Expiration Coverage Amount
------------------------------------------ -------------------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Property CR-IMA610092A $ 5,995 2/26/00 $ 104,000
------------------------------------------ -------------------------- ---------------- ----------------- ----------------
Excess Liability CR-IXG366860 $10,376 2/26/00 $3,000,000
------------------------------------------ -------------------------- ---------------- ----------------- ----------------
Fiduciary Liability CR-077FF103182922B $ 1,108 5/21/00 $1,000,000
------------------------------------------ -------------------------- ---------------- ----------------- ----------------
Comprehensive General Liability IYG-356360 $37,500 2/26/00 $3,000,000
------------------------------------------ -------------------------- ---------------- ----------------- ----------------
Directors & Officers/Employment Practice ZXB004061 $11,690 5/21/00 $1,000,000
------------------------------------------ -------------------------- ---------------- ----------------- ----------------
Automobile Liability 01CE58025010 $ 3,622 4/29/00 $1,000,000
------------------------------------------ -------------------------- ---------------- ----------------- ----------------
Worker's Compensation - Employer's AME-99WCNC139814 $17,746 8/12/00 $1,000,000
Liability
------------------------------------------ -------------------------- ---------------- ----------------- ----------------
</TABLE>
<PAGE>
Schedule 5.22
Material Contracts
Employment Agreement dated November 1, 1996, between PDA and David Scott Davis.
Confidentiality and Non-Compete Agreement dated November 1, 1996, between PDA
and David Scott Davis.
Employment Agreement dated January 1, 2000, between PDA and George K. Gessner.
Confidentiality and Non-Compete Agreement dated January 1, 1997, between
ClinSites and George K. Gessner.
Non-negotiable Promissory Note dated January 29, 1997, in the amount of $100,000
from PDA to George K. Gessner and Lynne N. Gessner due January 1, 1999.
Business Loan Agreement dated April 21, 1999 and the Loan Documents (as defined
therein).
Customer contracts listed on Schedule 2.04 (to be assigned subject to Section
2.04).
Lotus Notes Passport Agreement (to be assigned).
Lease agreements listed on Schedule 5.04 (to be assigned).
<PAGE>
Schedule 5.23
Customers and Suppliers
See Attached.
<PAGE>
Schedule 5.24
Certain Business Practices
None.
<PAGE>
Schedule 5.25
Severance Arrangements
Current employment agreements with Scott Davis, George Gessner and Judith Watson
contain provisions relating to severance payments.
Severance Policy, Memo dated 5/26/99
Employment up to 6 Months
(Including 90 Day Probation) No Severance Pay
6 Months to 1 Year 1 Week Severance Pay
1 Year to 5 Years 2 Weeks Severance Pay
5 Years to 10 Years 3 Weeks Severance Pay
Over 10 Years 1 Month Severance Pay
No severance is to be paid upon termination for cause or if the employee
resigns. No severance is paid until all company equipment is returned.
Last Name First Name Middle Date of Hire Severance
Beaver Linda 12/6/99 No Severance
Buchanan Noranda S. 1/2/96 2 Weeks
Davis David Scott 4/20/88 1 Month
Gates Louann P. Feb-96 2 Weeks
Gessner George K. 1/1/90 1 Month
Harris Thomas Grier 8/12/98 2 Weeks
Huselton Brett C. 7/27/98 2 Weeks
Kays William Todd 9/21/98 2 Weeks
Kelley Jill K. 2/24/97 2 Weeks
King Jessica W. 12/9/97 2 Weeks
Locke Traci A. 5/1/88 1 Month
Phelps Kimberly J. 2/1/00 No Severance
Rhinevault Patricia J. 7/20/98 2 Weeks
Smith Karolina Gisela 9/21/98 2 Weeks
Sultzman Pamela 1/24/00 No Severance
Watson Judith C. 7/1/90 1 Month
Young Stephen G. 1/1/98 2 Weeks
<PAGE>
Schedule 5.26
Shareholders
Clinsites owns all of the issued and outstanding shares of PDA.
<PAGE>
Schedule 5.27
Year 2000 Warranties
Clinsites and PDA have made express Year 2000 warranties to certain customers,
including Allergan and Alcon, and other third parties.
<PAGE>
Schedule 6.01(b)
To the
Asset Purchase Agreement
Dated as of March 29, 2000
By and Among
SFBC International, Inc.,
SFBC/Pharmaceutical Development Associates, Inc.
Pharmaceutical Development Associates, Inc.
And
Clinical Sites Services Corp.
Capitalization of
SFBC and Purchaser
SFBC International, Inc.
Common Stock, par value $.001 per share, 20,000,000 shares authorized
and 2,337,760 shares issued and outstanding.
Preferred Stock, par value $.10 per share, 5,000,000 shares authorized
and no shares issued or outstanding
SFBC/Pharmaceutical Development Associates, Inc.
Common Stock, par value $.10 per share, 10,000 shares authorized and
1,000 shares issued and outstanding.
<PAGE>
Schedule 6.05
To the
Asset Purchase Agreement
Dated as of March 29, 2000
By and Among
SFBC International, Inc.,
SFBC/Pharmaceutical Development Associates, Inc.
Pharmaceutical Development Associates, Inc.
And
Clinical Sites Services Corp.
Financial Statements of SFBC
See attached
<PAGE>
FINANCIAL STATEMENTS
Balance Sheet F-3
Statements of Operations and Deficit F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders South Florida Kinetics, Inc. Miami,
Florida We have audited the accompanying balance sheet of South Florida
Kinetics, Inc. as of December 31, 1998 and the related statements of operations
and deficit and cash flows for each of the two years in the period ended
December 31, 1998. 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 audit.
We conducted our audit 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 audit provides 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 South Florida Kinetics, Inc. as
of December 31, 1998 and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles.
Kaufman, Rossin & Co.
Miami, Florida April 2, 1999 (except for Note 8, as to which the date is June 9,
1999)
SOUTH FLORIDA KINETICS, INC. BALANCE SHEET DECEMBER 31, 1998
ASSETS
CURRENT ASSETS
Cash $ 55,751
<PAGE>
Accounts receivable (Notes 2 and 3) 1,410,287
Prepaid expenses 60,074
Total current assets 1,526,112
LOAN RECEIVABLE FROM STOCKHOLDER (NOTE 4) 92,965
PROPERTY AND EQUIPMENT (NOTE 5) 213,891
OTHER ASSETS 77,500
TOTAL ASSETS $ 1,910,468
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 360,135
Notes payable (Note 6) 1,924,154
Accrued liabilities 303,312
Accrued interest (Note 6) 508,152
Advance billings (Note 3) 61,455
Total current liabilities 3,157,208
COMMITMENTS (NOTES 7 AND 8)
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 10,000 shares authorized, issued and outstanding
1,000 Additional paid-in capital 100,000 Deficit (1,347,740)
Total stockholders' equity (1,246,740)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,910,468
See accompanying notes.
SOUTH FLORIDA KINETICS, INC. STATEMENTS OF OPERATIONS AND DEFICIT YEARS ENDED
DECEMBER 31, 1998 AND 1997
<PAGE>
<TABLE>
<CAPTION>
========================================================================================================
1998 1997
========================================================================================================
<S> <C> <C>
NET SALES $ 5,869,987 $ 4,261,505
COST OF SALES 3,838,923 2,801,192
--------------------------------------------------------------------------------------------------------
GROSS PROFIT 2,031,064 1,460,313
GENERAL AND ADMINISTRATIVE EXPENSES 1,323,764 1,383,356
--------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 707,300 76,957
INTEREST EXPENSE 199,584 239,707
--------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) 507,716 (162,750)
DEFICIT - BEGINNING (1,855,456) (1,692,706)
--------------------------------------------------------------------------------------------------------
DEFICIT - ENDING $(1,347,740) $(1,855,456)
========================================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (Basic and Diluted) 10,000 10,000
========================================================================================================
NET INCOME (LOSS) PER COMMON SHARE (Basic and Diluted) $ 50.77 $ (16.28)
========================================================================================================
</TABLE>
See accompanying notes.
SOUTH FLORIDA KINETICS, INC. STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31,
1998 AND 1997
<TABLE>
<CAPTION>
======================================================================================================
1998 1997
======================================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 507,716 $(162,750)
------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation 56,945 54,047
Provision for bad debts 14,066 30,372
Accrued interest on notes payable - purchase of assets 35,297 32,270
Changes in operating assets and liabilities:
Accounts receivable (752,950) (113,146)
Prepaid expenses 1,829 6,039
Other assets (6,225) (7,281)
Accounts payable 47,631 12,254
Accrued liabilities (11,591) 113,123
Accrued interest 118,363 120,601
Advance billings 35,455 3,205
------------------------------------------------------------------------------------------------------
Total adjustments (461,180) 251,484
------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 46,536 88,734
------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (25,445) (9,318)
Loans to stockholder (92,965) --
------------------------------------------------------------------------------------------------------
Net cash used in investing activities (118,410) (9,318)
------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of notes payable - insurance (3,242) (4,341)
Principal payments on notes payable - stockholders -- (46,715)
Principal payments on notes payable - purchase of assets (3,903) (7,826)
------------------------------------------------------------------------------------------------------
Net cash used in financing activities (7,145) (58,882)
------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (79,019) 20,534
CASH AT BEGINNING OF PERIOD 134,770 114,236
------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 55,751 $ 134,770
======================================================================================================
Supplemental Disclosures:
------------------------------------------------------------------------------------------------------
Interest paid $ 81,221 $ 119,106
======================================================================================================
Income taxes paid $ -- $ --
======================================================================================================
</TABLE>
See accompanying notes.
----------------
SOUTH FLORIDA KINETICS, INC. NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
South Florida Kinetics, Inc., d/b/a South Florida Bioavailability Clinic (the
"Company"), was incorporated in 1995 in the State of Florida. The Company is a
contract research organization located in Miami, Florida, that provides clinical
research and drug development services to pharmaceutical and biotechnology
companies.
REVENUE AND COST RECOGNITION
Revenues from contracts are recognized on the percentage-of-completion method,
measured by the percentage of costs incurred to date to estimated total costs
for each contract. This method is used because management considers total costs
incurred to be the best available measure of progress on the contracts.
Contract costs include all direct costs related to contract performance.
Selling, general and
<PAGE>
administrative costs are charged to expense as incurred. Provisions for
estimated losses, if any, on uncompleted contracts are made in the period in
which losses are determined.
Changes in job performance and estimated profitability may result in revisions
to costs and income and are recognized in the period in which the revisions are
determined. Due to the inherent uncertainties in estimating costs, it is at
least reasonably possible that the estimates used will change in the near term
and the change could be material. Revenue recognized on contracts in progress at
December 31, 1998 amounted to approximately $1,600,000.
Included in accounts receivable are unbilled amounts, which represent revenue
recognized in excess of amounts billed. Advance billings represent amounts
billed in excess of revenue recognized.
CASH
The Company, from time to time, maintains cash balances with financial
institutions in amounts that exceed federally insured limits.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Expenditures for major betterments
and additions are charged to the asset accounts while replacements, maintenance
and repairs which do not improve or extend the lives of the respective assets
are charged to expense currently. F-6
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEPRECIATION
Depreciation is computed using the straight-line method based upon the estimated
useful lives of the assets. The range of useful lives is as follows: Furniture
and fixtures 7 years Machinery and equipment 5 - 7 years
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 revenues and expenses during the respective reporting
period. Actual results could differ from those estimates.
The allowance for changes in contracts is an estimate established through
reductions to sales while the allowance for doubtful accounts is an estimate
established through charges to general and administrative expenses. Management's
judgment in determining the adequacy of the allowances is based upon several
factors which include, but are not limited to, analysis of subsequent changes to
contracts, analysis of delinquent accounts, the nature and volume of the
accounts, the payment histories of the accounts and management's judgment with
respect to current economic conditions. Given the nature of accounts receivable,
it is reasonably
<PAGE>
possible the Company's estimate of the allowances will change in the near term.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to credit risk
consist principally of trade receivables. The Company performs services and
extends credit based on an evaluation of the customers' financial condition
without requiring collateral. Exposure to losses on receivables is expected to
vary by customer due to the financial condition of each customer. The Company
monitors exposure to credit losses and maintains allowances for anticipated
losses considered necessary under the circumstances.
INCOME TAXES
No provision for income taxes has been made in the accompanying financial
statements as the Company has elected, with the consent of the stockholders, to
be taxed under S Corporation provisions of the Internal Revenue Code. Under
these provisions, the taxable income of the Company is reflected by the
stockholders on their personal income tax returns.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
If the proposed initial public offering of securities is successful (see Note
8), the Company's S Corporation status would terminate and accordingly, the
Company prospectively would pay income taxes on its taxable income. At December
31, 1998 the aggregate temporary differences was approximately $422,000 and
approximately $159,000 would have been recorded as a deferred tax liability if
the Company was a "C" corporation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash, loan receivable from stockholder and accrued
liabilities approximate their fair values due to the short-term maturity of
these instruments. The fair value of the accrued interest and notes payable are
discussed in Note 6.
NET INCOME (LOSS) PER SHARE
The Company applies Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (FAS 128). FAS 128 requires dual presentation of net income
per share; Basic and Diluted. Net income per share - Basic excludes dilution and
is computed by dividing net income by the weighted average number of common
shares outstanding during the reported period. Net income per share - Diluted
reflects the potential dilution that could occur if stock options and warrants
were exercised. As there is no potential dilution, net income per share - Basic
and net income per share - Diluted are the same for the years ended December 31,
1998 and 1997.
IMPACT OF THE "YEAR 2000" COMPUTER ISSUE
Because computers frequently use only two digits to recognize years, on January
1, 2000,
<PAGE>
many computer systems, as well as equipment that uses embedded computer chips,
may be unable to distinguish between the years 1900 and 2000. If not remediated,
this problem could create system errors and failures resulting in the disruption
of normal business operations. In the event the Company fails to identify or
correct a material Year 2000 problem, there could be disruptions in normal
business operations, which could have a material adverse effect on the Company's
results of operations, liquidity or financial condition. Further, there may be
some third parties, such as governmental agencies, utilities, telecommunication
companies, vendors, suppliers and customers who may not be able to continue
business with the Company due to their own year 2000 problems. There can be no
assurance that any efforts made will fully mitigate the effect of Year 2000
issues.
NOTE 2. MAJOR CUSTOMERS
During the year ended December 31, 1998, sales to four customers amounted to
approximately 58% of net sales. At December 31, 1998, four customers accounted
for approximately 61% of accounts receivable.
During the year ended December 31, 1997, sales to three customers accounted for
approximately 52% of net sales. F-8
NOTE 3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following at December 31, 1998:
Accounts receivable - billed $ 870,205 Accounts receivable - unbilled 726,520
Less allowance for changes in contracts (142,000) Less allowance for doubtful
accounts (44,438)
$ 1,410,287
Accounts receivable are billed when certain milestones defined in customer
contracts are achieved. All unbilled accounts receivable are expected to be
billed and collected within one year.
Advance billings at December 31, 1998 amounted to $61,455.
NOTE 4. LOAN RECEIVABLE FROM STOCKHOLDER
Loan receivable from stockholder consists of certain expenses paid by the
Company on behalf of its majority stockholder. The loan is non-interest bearing
and due on demand.
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1998:
<PAGE>
Furniture and fixtures $ 31,866 Machinery and equipment 377,378
409,244 Less accumulated depreciation 195,353
$213,891
Depreciation of property and equipment for the years ended December 31, 1998 and
1997 amounted to $56,945 and $54,047, respectively.
NOTE 6. NOTES PAYABLE
Notes payable consisted of the following at December 31, 1998:
Notes payable - stockholders $1,083,863 Notes payable - purchase of assets
798,962 Notes payable - insurance 41,329
$1,924,154
NOTES PAYABLE - STOCKHOLDERS
During 1995 and 1996, the Company issued notes payable and shares of common
stock to private investors. These notes are unsecured and bear interest at 10%
per annum, with principal and interest due one year from the date of the note.
No interest and minimal principal payments have been made through December 31,
1998. The present value of the notes at December 31, 1998, at an imputed
interest rate of approximately 14% per annum, was $1,083,863 plus accrued
interest of $508,152. The difference between the present value of the notes and
the cash received represents the consideration received for the stock, and is
included in additional paid-in-capital in the accompanying financial statements.
As described in Note 8, subsequent to year-end, the Company offered these note
holders the option to convert the principal balances and accrued interest into
common stock.
NOTES PAYABLE - PURCHASE OF ASSETS
In connection with a purchase of assets in 1995, the Company entered into
promissory notes for $298,471 and $650,000. The $298,471 promissory note bears
interest at 9% per annum and is secured by all of the assets of the Company with
principal and interest payable monthly. The $650,000 promissory note is
non-interest bearing and is secured with payments due monthly based on the net
sales of the Company. The Company imputed interest on this note at a rate of 9%
per annum. Actual payments have not been in accordance with the terms of the
notes. At December 31, 1998, the balance of the notes, including accrued
interest was $798,962. Based on borrowing rates currently available to the
Company for loans with similar terms and maturities, the fair value of notes
payable approximates carrying value.
<PAGE>
Interest expense on all indebtedness amounted to $199,584 and $239,707, for the
years ended December 31, 1998 and 1997, respectively.
NOTE 7. COMMITMENTS
FACILITIES LEASE
The company leases its facilities on a month-to-month basis. Rent expense under
this lease agreement amounted to $270,706 and $238,512 for the years ended
December 31, 1998 and 1997, respectively.
LEASE COMMITMENTS
The Company is obligated under two operating leases on equipment expiring from
2001 through 2003. The approximate minimum annual lease commitments on these
leases are $7,000 per year for 1999 through 2001 and $4,000 per year for 2002
and 2003.
NOTE 8. SUBSEQUENT EVENTS
RECAPITALIZATION - RESTRUCTURING OF DEBT
In June 1999, the Company entered into an Agreement and Plan of Merger with a
newly formed wholly-owned subsidiary of SFBC International, Inc. (SFBC), a
non-operating company that is the creditor with respect to the notes payable -
purchase of assets discussed in Note 6. The agreement provides for, among other
things, that SFBC acquire all of the common stock of the Company. The resulting
ownership of SFBC is 54% by the former majority stockholder of the Company, 19%
by the former minority stockholders of the Company and 27% by the former sole
stockholder of SFBC. In connection with the merger, SFBC entered into a letter
of intent regarding a proposed initial public offering of securities. Concurrent
with the merger, approximately $300,000 of the notes payable - purchase of
assets was extinguished and the original notes were replaced with three new
notes aggregating $500,000. These notes bear interest at 8% per annum, are
secured by all of the assets of the Company and are personally guaranteed by an
officer of the Company. The notes are due upon the closing of the registered
initial public offering of securities of SFBC. If the offering is not completed
by December 31, 1999 the notes are payable in aggregate monthly installments of
$20,000 plus interest, starting January 1, 2000.
STOCKHOLDER NOTES
In April 1999, the Company offered the holders of the notes payable -
stockholders, the option to convert their note balances and accrued interest
into new three year, 10% convertible notes. Upon the closing of the registered
initial public offering of securities of SFBC, these new notes would be required
to be converted into common stock of
<PAGE>
SFBC. In the conversion, the note holders would receive shares of SFBC at a 20%
discount off the initial public offering price and one warrant for each share of
stock issued. The warrants would be exercisable at 120% of the initial public
offering price and have a three-year life.
NOTE 8. SUBSEQUENT EVENTS (CONTINUED)
EMPLOYMENT CONTRACT
In February 1999, in contemplation of the recapitalization discussed above, the
Company entered into a one-year employment agreement with the Executive Vice
President of Clinical Operations. This agreement automatically renews annually
and may be terminated without cause by either party with 90-day notice. Pursuant
to the agreement, the employee received an option to purchase 200,000 shares of
common stock of SFBC at an exercise price of $1.00 per share. The option is
exercisable in four equal annual installments of 50,000 shares each, commencing
on March 15, 1999. No options had been exercised through June 9, 1999.
SFBC INTERNATIONAL, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
=====================================================================================
ASSETS
=====================================================================================
<S> <C>
CURRENT ASSETS
Cash $ 452,502
Accounts receivable, net of allowances of $199,438 1,510,280
Prepaid expenses 90,278
-------------------------------------------------------------------------------------
Total current assets 2,053,060
LOAN RECEIVABLE FROM STOCKHOLDER 92,965
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $226,091 219,290
OTHER ASSETS 82,500
-------------------------------------------------------------------------------------
TOTAL ASSETS $ 2,447,815
=====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
=====================================================================================
CURRENT LIABILITIES
Accounts payable $ 366,133
Notes payable-shareholders 283,996
Accrued liabilities 310,338
Accrued interest 206,721
Advance billings 3,764
Current portion of long-term debt 100,000
Deferred tax liability 204,000
-------------------------------------------------------------------------------------
Total current liabilities 1,474,952
-------------------------------------------------------------------------------------
LONG-TERM DEBT 1,575,899
-------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
-------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value, 5,000,000 shares authorized,
zero shares issued and outstanding --
Common stock, $.001 par value, 20,000,000 shares authorized,
2,080,000 shares issued and outstanding 2,080
Additional paid-in capital 425,623
Deficit (1,030,739)
-------------------------------------------------------------------------------------
Total stockholders' equity (603,036)
-------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,447,815
=====================================================================================
</TABLE>
See accompanying notes.
----------------
SFBC INTERNATIONAL, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
June 30, 1999 June 30, 1998
NET SALES $ 3,944,523 $ 2,045,273
COST OF SALES 2,379,293 1,367,950
GROSS PROFIT 1,565,230 667,323
GENERAL AND ADMINISTRATIVE EXPENSES 904,952 702,390
INCOME (LOSS) FROM OPERATIONS 660,278 (25,067)
INTEREST EXPENSE 102,277 95,766
INCOME (LOSS) BEFORE INCOME TAXES 558,001 (120,833)
INCOME TAXES 241,000 --
NET INCOME (LOSS) $ 317,001 $ (120,833)
See accompanying notes.
<PAGE>
SFBC INTERNATIONAL, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY SIX MONTH PERIOD ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Common stock, $.001 par
value; 20,000,000
shares authorized Additional
------------------------- Paid-In
Shares Par Value Capital Deficit Total
=============================================================================================================================
<S> <C> <C> <C> <C> <C>
BALANCES - JANUARY 1, 1999 1,520,000 $ 1,520 $ 99,480 $(1,347,740) $(1,246,740)
Acquisition of assets of SFBC International, Inc. 560,000 560 326,143 -- 326,703
Net income -- -- -- 317,001 317,001
-----------------------------------------------------------------------------------------------------------------------------
BALANCES - JUNE 30, 1999 2,080,000 $ 2,080 $ 425,623 $(1,030,739) $ (603,036)
=============================================================================================================================
</TABLE>
See accompanying notes.
SFBC INTERNATIONAL, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
==========================================================================================
June 30, June 30,
1999 1998
==========================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 317,001 $(120,833)
------------------------------------------------------------------------------------------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation 30,738 26,982
Provision for bad debts - -- 10,066
Accrued interest on notes payable - purchase of assets 25,347 35,195
Changes in operating assets and liabilities:
Accounts receivable (99,993) 89,302
Prepaid expenses (30,204) 37,837
Other assets (5,000) (30,000)
Accounts payable 5,998 (78,267)
Accrued liabilities 7,026 (23,214)
Accrued interest 74,601 59,193
Advance billings (57,691) (26,000)
Deferred tax liability 204,000 --
Total adjustments 154,822 101,094
------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 471,823 (19,739)
------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (36,137) (14,786)
Loans to stockholder -- (13,964)
Cash balance of Company acquired 2,394 --
------------------------------------------------------------------------------------------
Net cash used in investing activities (33,743) (28,750)
------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments of notes payable - insurance (41,329) (44,571)
Principal payments on notes payable - purchase of assets -- (10,000)
------------------------------------------------------------------------------------------
Net cash used in financing activities (41,329) (54,571)
------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 396,751 (103,060)
CASH AT BEGINNING OF PERIOD 55,751 134,770
------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 452,502 $ 31,710
==========================================================================================
Supplemental Disclosures:
------------------------------------------------------------------------------------------
Interest paid $ 27,676 $ 36,573
==========================================================================================
Income taxes paid $ -- $ --
==========================================================================================
</TABLE>
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
In June 1999, the Company reduced long-term debt by $324,309 through the
issuance of common stock.
In June 1999, the Company converted $376,032 of accrued interest to long-term
debt.
See accompanying notes.
----------------
SFBC INTERNATIONAL, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying financial statements do not include all of the disclosures made
in South Florida Kinetics, Inc. balance sheet as of December 31, 1998 and the
related statements of operations and deficit and cash flows for each of the two
years in the period ended December 31, 1998, which should be read in conjunction
with these statements. The financial information included herein has not been
audited. However, in the opinion of management, the statements reflect all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results of the periods presented. The results for the
<PAGE>
periods presented is not necessarily indicative of the results for the full
fiscal years. The consolidated financial statements include the accounts of SFBC
International, Inc. a Delaware corporation and its subsidiary, South Florida
Kinetics, Inc. a Florida corporation. SFBC owns 100% of the subsidiary. All
material intercompany balances and transactions have been eliminated in
consolidation.
NOTE 2. OTHER EVENTS
RECAPITALIZATION
On June 7, 1999, all of the outstanding stock of the subsidiary was acquired by
SFBC. For accounting purposes, the acquisition has been treated as an
acquisition of the assets of SFBC by the subsidiary and as a recapitalization of
the subsidiary. The historical financial statements prior to June 7, 1999 are
those of the subsidiary.
STOCK SPLIT
In June 1999, SFBC effected a four-for-five reverse stock split. All stock data
and per share amounts in the consolidated financial statements have been
restated to give effect to the stock split.
INCOME TAXES
Through June 7, 1999, our subsidiary had elected, with the consent of the
stockholders, to be taxed under S Corporation provisions of the Internal Revenue
Code. Under these provisions, the taxable income of our subsidiary is reflected
by the stockholders on their personal income tax returns. Effective June 8,
1999, our subsidiary terminated its S Corporation status and in connection
therewith, it recorded a deferred tax liability of $204,000, through a charge to
the statement of operations. In addition, our subsidiary recorded a current
income tax liability of $37,000 related to taxable income for the period from
June 8, 1999 through June 30, 1999.
NOTE 2. OTHER EVENTS (Continued)
LONG-TERM DEBT
In August 1999, certain holders of the notes payable - stockholders, converted
their note balances and accrued interest in the aggregate amount of $1,175,899
into new three year, 10% convertible notes. Upon the closing of the registered
initial public offering of securities of SFBC, these new notes would be required
to be converted into common stock of SFBC. In the conversion, the note holders
would receive shares of SFBC at a 20% discount off the initial public offering
price and one warrant for each share of stock issued. The warrants would be
exercisable at 120% of the initial public offering price and have a three-year
life.
LOAN RECEIVABLE FROM STOCKHOLDER
<PAGE>
Loan receivable from stockholder consists of a promissory note providing for
annual payments of interest at a rate of 6% per annum, with principal due in
August 2002.
<PAGE>
Schedule 6.06
To the
Asset Purchase Agreement
Dated as of March 29, 2000
By and Among
SFBC International, Inc.,
SFBC/Pharmaceutical Development Associates, Inc.
Pharmaceutical Development Associates, Inc.
And
Clinical Sites Services Corp.
Certain Material Changes
Or Events of SFBC
SFBC International, Inc. entered into a revolving line of credit
agreement with Heller Healthcare Finance, Inc. as described as Schedule 6.07.
<PAGE>
Schedule 6.07
To the
Asset Purchase Agreement
Dated as of March 29, 2000
By and Among
SFBC International, Inc.,
SFBC/Pharmaceutical Development Associates, Inc.
Pharmaceutical Development Associates, Inc.
And
Clinical Sites Services Corp.
Undisclosed Material Liabilities of SFBC
SFBC International, Inc. has a $1,500,000 revolving line of credit with Heller
Healthcare Finance, Inc. pursuant to that certain Loan and Security Agreement
dated January 31, 1999, as amended.
<PAGE>
Schedule 6.08
To the
Asset Purchase Agreement
Dated as of March 29, 2000
By and Among
SFBC International, Inc.,
SFBC/Pharmaceutical Development Associates, Inc.
Pharmaceutical Development Associates, Inc.
And
Clinical Sites Services Corp.
Compliance with Law of SFBC and its Business
None.
<PAGE>
Schedule 6.09(a)
To the
Asset Purchase Agreement
Dated as of March 29, 2000
By and Among
SFBC International, Inc.,
SFBC/Pharmaceutical Development Associates, Inc.
Pharmaceutical Development Associates, Inc.
And
Clinical Sites Services Corp.
Pending Litigation of SFBC and its Business
Lawsuit brought by Hector Conrado Cerna v. South Florida Bioavailability Clinic,
et al., Case No. 96-22084 CA-32. Pfizer, Inc. is indemnifying South Florida
Kinetics, Inc. under an indemnification agreement for any liability incurred in
connection with this lawsuit.
<PAGE>
Schedule 6.10
To the
Asset Purchase Agreement
Dated as of March 29, 2000
By and Among
SFBC International, Inc.,
SFBC/Pharmaceutical Development Associates, Inc.
Pharmaceutical Development Associates, Inc.
And
Clinical Sites Services Corp.
Related Party Transactions of SFBC
SFBC International, Inc. recently paid off certain investor notes which
had been personally guaranteed by Mr. Arnold Hantman, its Chief Executive
Officer.
<PAGE>
Schedule 6.11
To the
Asset Purchase Agreement
Dated as of March 29, 2000
By and Among
SFBC International, Inc.,
SFBC/Pharmaceutical Development Associates, Inc.
Pharmaceutical Development Associates, Inc.
And
Clinical Sites Services Corp.
Year 2000 Compliance of SFBC
(b) To the Knowledge of SFBC, all of SFBC International, Inc.'s critical
customers and suppliers are Year 2000 compliant.
(c) None.
<PAGE>
Schedule 6.14(b)
To the
Asset Purchase Agreement
Dated as of March 29, 2000
By and Among
SFBC International, Inc.,
SFBC/Pharmaceutical Development Associates, Inc.
Pharmaceutical Development Associates, Inc.
And
Clinical Sites Services Corp.
Hazardous Materials
South Florida Kinetics, Inc., a subsidiary of SFBC, collects blood and other
medical wastes which may be required to be disposed of in accordance with
Environmental requirements. A third party disposes of these wastes.
<PAGE>
Schedule 6.15
To the
Asset Purchase Agreement
Dated as of March 29, 2000
By and Among
SFBC International, Inc.,
SFBC/Pharmaceutical Development Associates, Inc.
Pharmaceutical Development Associates, Inc.
And
Clinical Sites Services Corp.
Insurance
<PAGE>
SCHEDULE OF INSURANCE
Prepared on 3/28/00
<TABLE>
<S> <C>
PREPARED FOR A SERVICE OF:
SFBC International, Inc.; Collinsworth, Alter, Nielson, Fowler & Dowling, Inc.
South Florida Kenetics, Inc. d/b/a Insurance & Bonds
South Florida Bioavailability Clinic 5979 NW 151 Street, Miami Lakes, Florida 33014
11190 Biscayne Blvd. Dade Tel: (350) 822-7800 Broward Tel: (954) 463-8601
Miami, FL 33181 Fax Number: (305) 362-2443
</TABLE>
<TABLE>
<CAPTION>
COVERAGE LIMITS INCEPTION EXPIRATION CARRIER POLICY # PREMIUM COMMENTS
-------- ------ -------------------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
GENERAL LIABILITY 9/30/99-00 Admiral Ins. Co. A98AG05420 $ 8,500
General Aggregate Limit $3,000,000 Includes Hired/Non-
Prod.-Comp/Op. Agg. $3,000,000 Owned Auto 1000000 &
Pers. & Adv. Injury $3,000,000 $5,000 BI/PD Deductible
Each Occurrence $3,000,000 Per Claim
Fire Damage $ 50,000
Medical Expense Excluded
PROPERTY 9/30/99-00 Pacific Ins. Co. ZG0015025 $10,666
11190 Biscayne Blvd., Miami, FL
Personal Property $ 350,000
Business Income $1,200,000
$2,500 Per Occurrence Deductible
$31,000 Per Occurrence Wind & Hail
AUTOMOBILE 1/26/00-01 National Casualty CAO0126641 $ 5,330
Liability $1,000,000
Personal Injury Protection $ 1,000
Uninsured Motorist (Non-Stacked) $1,000,000
Comprehensive Deductible $ 1,000
Collision Deductible $ 1,000
</TABLE>
We present this schedule so you may get an overall picture of your insurance
protection. If you have policies from other insurance offices we suggest you add
them to this list to present the compete picture. Please examine this schedule
with particular reference to the amount of limits of you insurance. Today's
property values and liability judgments are higher and insurance should be
arranged to cover. Please refer to your policies for exact coverages provided.
We will be glad to discuss this schedule with you at your convenience. Please
call if you have any questions.
<PAGE>
SCHEDULE OF INSURANCE
<TABLE>
<S> <C>
PREPARED FOR A SERVICE OF:
SFBC International, Inc.; Collinsworth, Alter, Nielson, Fowler & Dowling, Inc.
South Florida Kenetics, Inc. d/b/a Insurance & Bonds
South Florida Bioavailability Clinic 5979 NW 151 Street, Miami Lakes, Florida 33014
11190 Biscayne Blvd. Dade Tel: (350) 822-7800 Broward Tel: (954) 463-8601
Miami, FL 33181 Fax Number: (305) 362-2443
</TABLE>
<TABLE>
<CAPTION>
COVERAGE LIMITS INCEPTION EXPIRATION CARRIER POLICY # PREMIUM COMMENTS
-------- ------ -------------------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
PROFESSIONAL LIABILITY 9/30/99-00 Admiral Ins. Co. A99PL09026 $49,410 Claims Made Policy
Each Claim $3,000,000 Retroactive Date
Each Aggregate $3,000,000 12/30/90
Deductible Per Claim $ 5,000 Including:
Pharmacological
Clinical Trials
WORKERS COMPENSATION 1/16/00-01 Comp Options UB151D904700 $10,644
Bodily Injury by Accident-
Each Accident $ 100,000
Bodily Injury by Disease-
Policy Limit $ 500,000
Bodily Injury by Disease-
Each Employee $ 100,000
8832 @1,300,000
</TABLE>
We present this schedule so you may get an overall picture of your insurance
protection. If you have policies from other insurance offices we suggest you add
them to this list to present the compete picture. Please examine this schedule
with particular reference to the amount of limits of you insurance. Today's
property values and liability judgments are higher and insurance should be
arranged to cover. Please refer to your policies for exact coverages provided.
We will be glad to discuss this schedule with you at your convenience. Please
call if you have any questions.
<PAGE>
Schedule 7.3
Allocation of Purchase Price
[to be provided by SFBC]
<PAGE>
Schedule 8.01(a)
Transactions Outside the Ordinary Course of Business
None.
<PAGE>
Schedule 9.02(k)
Non-Competition Agreements
The following individuals have executed Non-Competition Agreements in the form
attached hereto:
Scott Davis
George K. Gessner
<PAGE>
Schedule 10.10
Employment
Purchaser shall offer to employ the following individuals immediately after the
Closing:
Last Name First Name Middle
Beaver Linda
Buchanan Noranda S.
Davis David Scott
Gessner George K.
Harris Thomas Grier
Huselton Brett C.
Kays William Todd
Kelley Jill K.
King Jessica W.
Locke Traci A.
Male Dragana
Phelps Kimberly J.
Rhinevault Patricia J.
Smith Karolina Gisela
Sultzman Pamela
Watson Judith C.
Young Stephen G.
The employment of the following individuals will be terminated by PDA as of the
Closing:
None.
<PAGE>
(561) 478-7077
[email protected]
April 3, 2000
<PAGE>
VIA FACSIMILE
Lynn Thorneburg, Esq.
Alston & Bird, LLP
1211 East Morehead Street
Charlotte, NC 28234
VIA FACSIMILE
Perry M. Kantner, Esq.
Kantner and Associates
661 Airport Boulevard, Ste. 2A
Ann Arbor, MI 48108
Re: SFBC International, Inc./Clinsite Closing
Gentlemen:
This letter sets forth the agreement of our respective clients
concerning the Asset Purchase Agreement by and among SFBC International, Inc.,
SFBC/Pharmaceutical Development, Inc., Pharmaceutical Development Associates,
Inc., and Clinical Site Services Corp. dated as of March 29, 2000 (the
"Agreement").
The Agreement shall be amended and substituted pages inserted as
follows:
Section 3.03(d) shall be revised by replacing "July 1" with
"May 15" in the first sentence and 3.03(f)(ii) shall be revised by
replacing "June" in the first sentence with "April".
By substituting changed pages with the above dates, each of our clients
agree that it is not necessary to re-circulate and re-execute the various
agreements. We shall undertake to e-mail to you as soon as possible clean copies
of revised documents containing the above changes.
If anybody has any questions, please call me. I would appreciate if you
would each execute a copy of this letter agreeing to the above arrangements.
Sincerely yours,
/s/ Michael D. Harris
Michael D. Harris
cc: Mr. Arnold Hantman (via e-mail)
We hereby agree to the foregoing.
/s/ J. Lynn Thorneburg
-------------------------------------------
J. Lynn Thorneburg on
behalf of Alston & Bird, LLP,
Attorneys for Clinical Site Services Corp.,
<PAGE>
Pharmaceutical Development Associates, Inc. and
S. Scott Davis
/s/ Perry M. Kantner
---------------------------------------------------
Perry M. Kantner, on behalf of
Kantner and Associates, as Attorneys for
White Pines Ltd./Pacific Capital and other Lenders
referenced in the Asset Purchase Agreement.
