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As filed with the Securities and Exchange Commission on March 29, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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eResearchTechnology, Inc.
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(Exact name of registrant as specified in its charter)
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Delaware 7389 23-3027275
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(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
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30 South 17th Street
Philadelphia, Pennsylvania 19103
(215) 972-0420
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(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Joseph A. Esposito
President and Chief Executive Officer
eResearchTechnology, Inc.
30 South 17th Street
Philadelphia, Pennsylvania 19103
(215) 972-0420
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(Name and address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Thomas G. Spencer, Esquire Nils H. Okeson, Esquire
Duane, Morris & Heckscher LLP Alston & Bird LLP
4200 One Liberty Place One Atlantic Center
Philadelphia, PA 19103-7396 1201 West Peachtree Street
Atlanta, GA 30309-3424
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box:
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering:
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering:
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering:
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box:
CALCULATION OF REGISTRATION FEE
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=================================================================================================
Proposed Maximum Amount of
Title of Each Class of Aggregate Offering Registration
Securities to be Registered Price(1) Fee
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Common Stock, $.01 par value per share $75,000,000 $19,800
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(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457(o) under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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We will amend and complete the information in this prospectus. Although we are
permitted by the U.S. federal securities law to offer these securities using
this prospectus, we may not sell them or accept your offer to buy them until
the documentation filed with the SEC relating to these securities has been
declared effective by the SEC. This prospectus is not an offer to sell these
securities or our solicitation of your offer to buy these securities in any
jurisdiction where that would not be permitted or legal.
SUBJECT TO COMPLETION, DATED MARCH 29, 2000
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PROSPECTUS
_____________, 2000
[LOGO]
eResearchTechnology
Enabling the Clinical Advantage
____________ Shares of Common Stock
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Market and Proposed Symbol: The Offering:
o We have applied for quotation on the Nasdaq o The underwriters have an option to purchase
National Market with the symbol ERES an additional ________ shares from us to
cover over-allotments.
o This is our initial public offering, and no
public market currently exists for our shares.
We anticipate that the initial public offering
price will be between $___________ and
$__________ per share.
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Per Share Total
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Public offering price:
Underwriting fees:
Proceeds to eResearchTechnology:
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This investment involves risk. See "Risk Factors" beginning on page 7.
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Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination of whether anyone should buy these securities. Any representation
to the contrary is a criminal offense.
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Donaldson, Lufkin & Jenrette
SG Cowen
J.C. Bradford & Co.
DLJdirect Inc.
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================================================================================
ERT PRODUCTS AND SERVICES IN RELATION TO THE
TRADITIONAL CLINICAL TRIAL PROCESS
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TRADITIONAL CLINICAL TRIAL \ \ TIME AND COST SAVINGS
PROCESS ------------ eResNet SOLUTION ------------ PROPOSITION
/ /
- ------------------------------ ------------------------------ ---------------------------------------------
| Study Setup | | eStudy | | Reuse established infrastructure. |
| | | Conduct | | Minimal set-up necessary |
- ------------------------------ ------------------------------ ---------------------------------------------
| |
\|/ \|/
- ------------------------------ ------------------------------ ---------------------------------------------
| Investigator | | Completed | | eResNet based on therapeutic |
| Identification | | through eResNet | | groups. Minimal set-up necessary |
- ------------------------------ ------------------------------ ---------------------------------------------
| |
\|/ \|/
- ------------------------------ ------------------------------ ---------------------------------------------
| Patient | | ePatient | | Internet-based patient |
| Recruitment | | | | self-referral. Reduces costs per |
| | | | | patient per trial. Speeds up patient |
| | | | | recruitment |
- ------------------------------ ------------------------------ ---------------------------------------------
| |
\|/ \|/
- ------------------------------ ------------------------------ ---------------------------------------------
| Diagnostic | | eECG | | Centralized electronic |
| Measurement | | | | collection and interpretation of |
| (e.g. Electrocardiograms) | | | | electrocardiograms |
- ------------------------------ ------------------------------ ---------------------------------------------
| |
\|/ \|/
- ------------------------------ ------------------------------ ---------------------------------------------
| Adverse Event | | eSafety | | Internet-based identification and |
| Reporting | | | | reporting of adverse events |
- ------------------------------ ------------------------------ ---------------------------------------------
| |
\|/ \|/
- ------------------------------ ------------------------------ ---------------------------------------------
| Data Collection | | eData | | Internet-based and other forms of |
| & Double Key Stroke | | Entry | | remote data entry |
| Entry | | | | |
- ------------------------------ ------------------------------ ---------------------------------------------
| |
\|/ \|/
- ------------------------------ ------------------------------ ---------------------------------------------
| Data | | eData | | Access to frequently updated |
| Analysis | | Management | | centralized data base through the |
| | | | | Internet for multiple users |
- ------------------------------ ------------------------------ ---------------------------------------------
| |
\|/ \|/
- ------------------------------ ------------------------------ ---------------------------------------------
| Query | | eResearch | | Internet-based presentation and analysis |
| Resolution | | Dashboard | | of trial data for early decision making |
- ------------------------------ ------------------------------ ---------------------------------------------
| |
\|/ \|/
- ------------------------------ ------------------------------ ---------------------------------------------
| New Drug | | eNDA | | Speeds up application process |
| Application | | | | |
- ------------------------------ ------------------------------ ---------------------------------------------
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TABLE OF CONTENTS
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Prospectus Summary ......................... 3 Business ................................. 23
Risk Factors ............................... 7 Management ............................... 34
Forward-Looking Statements ................. 13 Related Party Transactions ............... 37
Use of Proceeds ............................ 13 Principal Stockholders ................... 40
Dividend Policy ............................ 13 Description of Capital Stock ............. 41
Capitalization ............................. 14 Shares Eligible for Future Sale .......... 43
Dilution ................................... 15 Underwriting ............................. 45
Selected Financial Data .................... 16 Legal Matters ............................ 47
Management's Discussion and Analysis of Experts .................................. 47
Financial Condition and Results of Where You Can Find Additional Information 47
Operations .............................. 17 Index to Financial Statements ............ F-1
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2
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PROSPECTUS SUMMARY
This prospectus summary highlights selected information contained
elsewhere in this prospectus. This summary may not contain all of the
information that you should consider before investing in our common stock. You
should read the entire prospectus carefully, including the Risk Factors section
starting on page 7 and the financial statements, before making an investment
decision.
eResearchTechnology, Inc.
Our Company
We are a business-to-business provider of integrated software applications
and technology consulting services to the pharmaceutical, biotechnology and
medical device industries. We offer Internet and other technology-based
solutions designed to streamline the clinical trials process by enabling our
customers to automate many parts of a clinical trial. We offer our products and
services on an individual basis or as integrated end-to-end solutions. We are
also a leading provider of centralized collection and interpretation of
electrocardiograms, one of the most frequently used tests in clinical trials.
Our solutions improve the accuracy, timeliness and efficiency of trial set-up,
data collection, management and interpretation and new drug or device
application preparation.
As part of our integrated solutions, we offer electronic research
networks, which we call eResNets, that link important data with the key
participants in a clinical trial: sponsoring manufacturers, investigating
physicians, patients or subjects and any clinical research organization that a
sponsor may use to help in conducting a clinical trial. We are currently
implementing an eResNet for the Breast Cancer International Research Group that
we expect eventually will connect at least 400 investigator sites in over 20
countries.
Our Market Opportunity
New drugs and medical devices generally require regulatory approval before
they can be sold to the public. In order to receive these approvals, sponsors
conduct clinical trials to assure the safety and efficacy of a product. During
1998, sponsors spent more than $15 billion on new drug development, a
substantial portion of which they spent on clinical trials. The market for
clinical trials has grown significantly over the past decade and we believe
that it will continue to grow. This growth is being fueled by an increase in
new drug development, the introduction of more complex drugs and expanded
regulatory requirements for more sophisticated data regarding the effects of a
new drug or device.
The traditional clinical trial process for collecting, managing and
analyzing data is time consuming and inherently inefficient. These
inefficiencies result from the manual and paper-based processes that generate
large volumes of data, the need to coordinate the many participants in a
clinical trial and the labor-intensive organization of data into a new drug
application. On average, it costs $500 million and takes 10 to 12 years to
complete the development of a new drug. More than half of a product's patent
life can be lost in this process, which costs a sponsor in the form of lost
revenues. The combination of the increasing number of clinical trials and
increasing competitive pressures to bring drugs to market earlier are driving
sponsors to find more efficient ways to conduct clinical trials. We believe
these market dynamics will drive the adoption of our solutions.
Our Solution
We offer a suite of software applications and Internet and other
technology-based solutions that address the major elements of the clinical
trials process. Customers can implement these solutions
3
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individually or as part of an end-to-end solution. Our eResNets integrate many
of our products and provide customers with a reusable infrastructure to conduct
multiple clinical trials with minimal set-up time and preparation. We believe
that our solutions provide significant benefits to our customers including:
o accelerated time to market
o lower costs
o improved research quality
o enhanced investigator participation
Our Strategy
Our objective is to become the leading provider of Internet-based clinical
trial management products and services. To achieve this objective, we are
pursuing the following strategies:
o expand our relationships with existing customers by targeting other
research groups within those companies
o expand our customer base by targeting other large pharmaceutical,
biotechnology and medical device companies that conduct numerous and
complex trials and thus can benefit most from our integrated solutions
o establish a recurring revenue model by offering our solutions, such as
eResNets, in a manner that can be used in multiple clinical trials and by
offering our products as an application service provider
o build upon our technology leadership by enhancing the capability and
functionality of our products and services
o establish strategic alliances and pursue acquisitions that accelerate the
development and assist in the marketing of our products and services
o expand our international operations to support the increasingly global
scope of clinical trials
Recent Developments
In March 2000, we sold 95,000 shares of preferred stock and agreed to
issue at the closing of this offering a warrant to purchase a number of shares
of common stock equal to 2.5% of the common stock then outstanding to an
investor for an aggregate of $9.5 million. At the closing of this offering, the
preferred stock will automatically convert into a number of shares of common
stock equal to $9.5 million divided by the initial public offering price per
share net of underwriting discounts and commissions. The per share exercise
price of the warrant will be equal to 200% of the initial public offering price
per share net of underwriting discounts and commissions. Assuming an initial
public offering price of $______ per share, the preferred stock will convert
into _________ shares of common stock and the warrant will be exercisable for
______ shares of common stock at an exercise price of $______ per share. Also
in March 2000, we issued another warrant to a different third party for
business advisory services. This warrant represents the right to purchase a
number of shares of common stock equal to $1.0 million divided by the initial
public offering price per share with a per share exercise price equal to the
initial public offering price per share. Assuming an initial public offering
price of $_______, this second warrant will be exercisable for ______ shares of
common stock at an exercise price of $______ per share. Following the
completion of this offering, both warrants will be fully vested and exercisable
for a period of two years.
We were incorporated under the laws of Delaware in December 1999 as a
wholly owned subsidiary of Premier Research Worldwide, Ltd. Our principal
executive offices are located at 30 South 17th Street, Philadelphia,
Pennsylvania, 19103 and our telephone number is (215) 972-0420. The information
contained on our website, www.eRT.com, is not part of this prospectus.
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The Offering
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Common stock offered ........................... ___________ shares
Common stock to be outstanding after this
offering ..................................... ___________ shares
Use of proceeds ................................ For product development, sales and marketing, capital
expenditures, working capital and general corporate
purposes, which may include strategic acquisitions or the
establishment of strategic alliances. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol ......... ERES
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Common stock outstanding after this offering is based on the number of shares
outstanding as of January 1, 2000 and excludes:
o ______ shares of common stock issuable upon the exercise of a warrant
with a per share exercise price equal to $_________, assuming an initial
public offering price of $____ per share
o ______ shares of common stock issuable upon the exercise of a warrant
with a per share exercise price equal to $_________, assuming an initial
public offering price of $___ per share
Assumptions That Apply to This Prospectus
Unless we indicate otherwise, all information in this prospectus reflects:
o the automatic conversion of the outstanding series A convertible
preferred stock into an aggregate of ___ shares of common stock, assuming
an initial public offering price of $____ per share
o no exercise by the underwriters of their over-allotment option to
purchase up to _________ additional shares of common stock
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Summary Financial Information
We were formed in December 1999 as a wholly owned subsidiary of Premier
Research Worldwide. Effective January 1, 2000, Premier Research Worldwide
contributed all of its technology and operating businesses to us in exchange
for all of our issued and outstanding common stock. Accordingly, our historical
financial statements present our operations as a division of Premier Research
Worldwide and essentially represent all of Premier Research Worldwide's
historical operating assets, liabilities, revenues and expenses. The statement
of operations data for 1999 are also presented on a pro forma basis to reflect
the December 31, 1999 sale of the domestic clinical research operations, as if
the sale had occurred on January 1, 1999. The pro forma balance sheet data
reflect the preferred stock sale, the automatic conversion of the preferred
stock into common stock and the issuance of two common stock warrants. The pro
forma statement of operations data do not reflect a charge related to the value
of the warrants and the value of the beneficial conversion price of the
preferred stock. The as adjusted balance sheet data we present below gives
effect to the sale of ________ shares of common stock in this offering at an
assumed initial public offering price of $_____ per share and our application
of the estimated net proceeds of this offering after deducting underwriting
discounts and commissions and estimated offering expenses. The financial data
presented below should be read in conjunction with "Management's Discussion of
Financial Condition and Results of Operations" and our financial statements and
the related notes to the financial statements contained in this prospectus.
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Year Ended December 31,
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1999
------------------------
1997 1998 Actual Pro Forma
------------ ----------- ----------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues:
Licenses and services ....................................... $ 7,695 $ 19,753 $ 26,075 $ 26,075
Clinical research services .................................. 6,468 12,054 16,710 721
--------- -------- -------- --------
Total net revenues ......................................... 14,163 31,807 42,785 26,796
Cost of revenues:
Cost of licenses and services ............................... 5,270 9,269 12,897 12,897
Cost of clinical research services .......................... 6,806 10,488 12,512 1,115
--------- -------- -------- --------
Total cost of revenues ..................................... 12,076 19,757 25,409 14,012
--------- -------- -------- --------
Gross margin ............................................... 2,087 12,050 17,376 12,784
Operating expenses:
Selling and marketing ....................................... 2,492 3,764 5,124 2,985
General and administrative .................................. 2,873 4,966 6,565 5,422
Research and development .................................... 357 3,131 2,472 2,472
Acquired in-process research and development ................ 7,883 -- -- --
--------- -------- -------- --------
Total operating expenses ................................... 13,605 11,861 14,161 10,879
--------- -------- -------- --------
Income (loss) before income taxes ............................ (11,518) 189 3,215 1,905
Income tax provision (benefit) ............................... (4,530) 64 1,286 754
--------- -------- -------- --------
Net income (loss) ............................................ $ (6,988) $ 125 $ 1,929 $ 1,151
========= ======== ======== ========
Basic and diluted net income (loss) per common share ......... $ (6,988) $ 125 $ 1,929 $ 1,151
========= ======== ======== ========
Shares used in computing net income (loss) per share ......... 1 1 1 1
========= ======== ======== ========
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As of December 31, 1999
----------------------------------------
Actual Pro Forma As Adjusted
----------- ----------- ------------
(In thousands)
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Balance Sheet Data:
Cash and cash equivalents ....................................... $ -- $ 9,500 $
Working capital (deficit) ....................................... (2,199) 7,301
Total assets .................................................... 13,325 22,825
Stockholders' equity ............................................ 5,262 14,762
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RISK FACTORS
Any investment in our common stock involves a high degree of risk. You should
carefully consider the following risk factors and all other information
contained in this prospectus before purchasing our common stock.
Risks Related to Our Business
Our success is uncertain because clinical trial sponsors and clinical research
organizations may not shift from their existing paper-based methods of
collecting and managing clinical trial data to an electronic system.
Our efforts to establish a standardized, electronic process to collect,
manage and analyze clinical trial data are a significant departure from the
traditional clinical research process. If participants conducting clinical
trials are unwilling to adopt our technology solutions and new ways of
conducting business, our business will suffer. We estimate that the vast
majority of clinical trials today use manual, paper-based data entry,
management and analysis tools. Each clinical trial can involve a multitude of
participants, including the sponsor, a clinical research organization, regional
site managers, investigators and patients. With so many participants involved
in a clinical trial, it may be difficult to convince a sponsor or clinical
research organization to accept new methods of conducting a clinical trial. We
may not be successful in persuading these participants to change the manner in
which they have traditionally operated and to accept our products and services.
Our customers may not adopt the electronic research network solution that we
offer.
A key element of our business strategy is the establishment of electronic
research networks that integrate a combination of our products and services. If
we are not successful in establishing electronic research networks and
collecting monthly user-access fees, we will not generate the volume of
recurring revenues in the future that we are expecting and our business will
suffer. To date, we have established only one electronic research network.
Therefore, the electronic research network model remains unproven and is
subject to uncertain market acceptance. Our customers may not adopt the concept
of electronic research networks and may, instead, continue to use our products
or services on an individual or a modular basis. In addition, the concept of a
monthly user-access fee is new and our customers may not agree to pay those
types of fees.
Our growth may be impaired if new customers do not accept our planned change in
pricing methods that includes the implementation of user-access fees.
Historically, revenues from sales of our technology products and services
have come predominantly from upfront perpetual license fees together with
annual maintenance and support fees. We expect to generate an increasing
percentage of our revenues in the future through transaction-based pricing
pursuant to which we intend to charge our customers a monthly user-access fee
for each site that connects to an electronic research network in each trial. We
may lose business if our customers do not accept these new pricing methods.
Also, lack of acceptance of the transaction-based pricing method may impede
sales of our solutions and impair our growth in new markets and with new
customers.
We have several large customers from whom we derive substantial revenue and
therefore the loss of even a few of our customers could significantly harm our
business.
We currently derive and expect to continue to derive a significant portion
of our revenues from a limited number of customers. Breast Cancer International
Research Group accounted for approximately 12% of our 1999 licenses and
services revenues, and another seven customers collectively accounted for
approximately 43% of our 1999 licenses and services revenues. Customers
terminate or delay trials for a variety of reasons including the failure of the
product being tested to satisfy safety or efficacy requirements, unexpected or
undesired clinical results, the customer's decision to forgo a particular
study, insufficient patient enrollment or investigator recruitment, and
production problems resulting in shortages of required supplies. If we lose
existing customers and do not replace them with new customers, our revenues
will decrease and may not be sufficient to cover our costs.
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We expect to incur losses and may never re-achieve or maintain profitability.
We have incurred losses from time to time in the past and we expect to
incur losses for 2000 as we invest substantial resources in product
development, sales and customer support and in the general growth of our
organization. In 2000, we will also record a charge related to the value of two
common stock warrants and the value of the beneficial conversion price of our
preferred stock. As a result, we will need to increase our revenues in order to
achieve future profitability. Because our business strategies may not be
successful, we may not be profitable in future periods. Failure to re-achieve
or maintain profitability could materially and adversely affect the market
price of our common stock.
Consolidation among our customers could adversely impact our customer base and
the market for our products.
Consolidation in the pharmaceutical, biotechnology and medical device
industries and among clinical research organizations has accelerated in recent
years, and we expect this trend to continue. The new companies or organizations
that result from such consolidation may decide that our products and services
are no longer needed because of their own internal processes or the use of
alternative systems. As a result, our customer base could decline and we may
not be able to expand sales of our products and services to new customers. In
addition, as these industries consolidate, competition to provide products and
services to industry participants will become more intense and the importance
of establishing relationships with large industry participants will become
greater. These industry participants may try to use their market power to
negotiate price reductions for our products and services. Our operating results
may suffer if we reduce our prices without achieving corresponding reductions
in our expenses.
Our future operating results are uncertain and are likely to fluctuate.
Our operating results have varied widely in the past and we expect that
they will continue to fluctuate in the future. In addition, our future
operating results may not follow any past trends. It is difficult to predict
the timing or amount of our revenues because:
o we generate a significant percentage of our revenues from a limited
number of customers
o our sales cycles are generally lengthy and variable
o sponsors and clinical research organizations may unexpectedly cancel,
postpone or reduce the size of clinical trials
We make decisions on operating expenses based on anticipated revenue trends and
available resources. Because many of our expenses are fixed and we are
committed to making a significant investment in our organization, delays in
recognizing revenues could cause our operating results to fluctuate from period
to period. If our operating results in any future period fluctuate
significantly, or do not meet the expectations of market analysts, the market
price of our common stock will likely decline.
We depend entirely on the clinical trial market.
Our business depends entirely on the clinical trials that pharmaceutical,
biotechnology and medical device companies conduct. The number and scope of
clinical trials is affected primarily by the number of products they develop,
the number of competing companies developing those products and government
regulatory requirements for getting new drugs and devices approved. Our
business will suffer if there is less competition in the pharmaceutical,
biotechnology or medical device industries, which would result in fewer
products under development and decreased pressure to accelerate a product
approval. Our business will also suffer if the U.S. Food and Drug
Administration or similar agencies in foreign countries loosen their
requirements, thereby decreasing the complexity of conducting clinical trials.
Any other developments that adversely affect the pharmaceutical, biotechnology
or medical device industries generally, including product liability claims, new
technologies or products or general business conditions, could also have an
adverse effect on our business.
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We may not be able to expand our business or manage growth successfully.
Our growth strategy depends on our ability to expand and improve our field
sales, marketing and services organization, our technology operations and our
corporate and administrative organizations, both in the United States and
throughout the world. Difficulties in managing any future growth could have a
significant negative impact on our business operations, increase our costs and
make it more difficult for us to achieve or maintain profitability. In order to
grow, we will need to hire additional personnel. There are a limited number of
experienced personnel with an adequate knowledge of our industry, and
competition for their services is intense. In addition, we may not be able to
project the rate or timing of increases in the use of products and services
accurately or to expand and upgrade our systems and infrastructure to
accommodate the increases. The expansion of our foreign operations also will
require us to assimilate differences in foreign business practices, overcome
language barriers and hire and retain qualified personnel abroad.
We depend on strategic alliances to support the growth of our business and the
improvement of our products and services.
We rely significantly on companies with whom we have strategic business
alliances to provide complementary technologies that improve the functionality
of our products and services while allowing us to focus on our core areas of
expertise. Our strategic partners also support our sales and marketing efforts.
We do not generally have long-term contracts with our strategic partners, so
they may cease doing business with us on relatively short notice. Our business
will suffer if we do not maintain and expand our existing alliances or
establish new ones, or if our strategic partners do not perform to our
expectations.
We may not be successful in competing against others providing similar products
and services.
Our competitors include internal research departments of pharmaceutical,
biotechnology and medical device companies, clinical research organizations,
site management companies, software vendors and clinical trial data service
companies. Our targeted customers, sponsors and clinical research
organizations, may decide to choose other technology-based products and
services generated internally by them or from another source. If our products
and services do not achieve widespread acceptance by these customers, our
revenues may not grow and our financial position could suffer. Many of our
competitors have substantially greater financial and other resources, greater
name recognition and more extensive customer bases than we do. In addition,
many competitors focus their efforts on providing software or services for
discrete aspects of the clinical trials process and may compare favorably to us
on those discrete aspects. We may be unable to compete successfully against our
competitors.
We are dependent on continued growth in Internet use and infrastructure.
One important aspect of our solution is the ability to connect clinical
trial participants over the Internet. Despite significant increases in Internet
use, many companies have been reluctant to incorporate the Internet into their
businesses for a number of reasons, including:
o inconsistent service quality resulting in part from inadequate
infrastructure of servers, routers, switches, telecommunications links and
other components
o lack of confidence in the security and privacy of data transmitted over
the Internet
o limited internal resources and technical expertise
o reluctance to dedicate resources to an alternative method of
communicating that may render substantial personnel and infrastructure
investments obsolete
If the infrastructure of the Internet does not keep pace with the growth of
Internet usage and if our targeted customers do not grow comfortable using the
Internet, our business will suffer.
System failures or capacity constraints could result in the loss of or
liability to customers.
The success of our products and services depends on the ability to protect
against:
o software or hardware malfunctions that interrupt operation of our
applications
o power loss or telecommunications failures
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o overloaded systems
o human error
o natural disasters
If our customers experience any significant level of these problems, it will
further impede our ability to persuade our customers to change from a manual,
paper-based process and will likely have an adverse impact on our existing
customer base and the overall market acceptance of our solutions. In addition,
when we offer our software products as an application service provider, our
network infrastructure may be vulnerable to computer viruses, break-ins and
similar disruptive problems caused by our customers or other Internet users.
This could also lead to delays, loss of data, interruptions or cessation of
service to our customers for which we may be liable. There is no current
technology that provides absolute protection against these events, and the cost
of minimizing these security breaches could be prohibitive.
Our software products are complex and may contain undetected software errors,
which could lead to an increase in our costs or a reduction in our revenues.
Complex software products such as those included in our technology
solutions frequently contain undetected errors when first introduced or as new
versions are released. We have, from time to time, found errors in the software
products included in our solutions, and in the future we may find additional
errors. In addition, we combine our solutions with software and hardware
products from other vendors. As a result, we may experience difficulty in
identifying the source of an error. The occurrence of hardware and software
errors, whether caused by our solutions or another vendor's products, could:
o cause sales of our solutions to decrease and our revenues to decline
o cause us to incur significant warranty and repair costs
o divert the attention of our technical personnel away from product
development efforts
o cause significant customer relations problems
Rapidly changing technology may impair our ability to develop and market our
solutions.
Because our business relies on technology, it is susceptible to:
o rapid technological change
o changing customer needs
o frequent new product introductions
o evolving industry standards
As the Internet, computer and software industries continue to experience rapid
technological change, we must quickly modify our solutions to adapt to such
changes. The demands of operating in such an environment may delay or prevent
our development and introduction of new or enhanced products and services that
continually meet changing market demands and that keep pace with evolving
industry standards. We have experienced development delays in the past and may
experience similar or more significant delays in the future. In addition,
competitors may develop products superior to our solutions, which could make
our products obsolete.
We depend on certain key employees.
Our future performance will depend significantly on the continued service
and performance of our key executives. We also depend on our key technical,
customer support, sales and other managerial employees. We believe that it
would be costly and time consuming to find suitable replacements for these
employees. The loss of the services of one or more of these employees could
negatively affect our business and would likely impede our ability to expand
our operations.
Because our products and services rely on technology that we own, our business
will suffer if we fail to protect our intellectual property rights to that
technology against infringement by competitors.
We currently have no patents or registered trademarks. To protect our
intellectual property rights, we rely on a combination of copyright and trade
secret laws and restrictions on disclosure. Despite our efforts to protect our
proprietary rights, unauthorized parties may copy or otherwise obtain and use
our products and technology. Monitoring unauthorized use of our solutions is
difficult and the steps we have taken may not
10
<PAGE>
prevent unauthorized use of our technology, particularly in foreign countries
where the laws may not protect our proprietary rights as fully as in the United
States. If we fail to protect our intellectual property from infringement,
other companies may use our intellectual property to offer competitive products
at lower prices. If we fail to compete effectively against these companies, we
could lose customers and experience a decline in sales of our solutions and
revenues.
Efforts to protect our intellectual property or our alleged misuse of the
intellectual property of others may cause us to become involved in costly and
lengthy litigation.
Although we are not currently involved in any intellectual property
litigation, we may be a party to litigation in the future either to protect our
intellectual property or as a result of an alleged infringement by us of the
intellectual property of others. These claims and any resulting litigation
could subject us to significant liability or invalidate our ownership rights in
the technology used in our solutions. Litigation, regardless of the merits of
the claim or outcome, could consume a great deal of our time and money and
would divert management time and attention away from our core business.
Any potential intellectual property litigation could also force us to do
one or more of the following:
o stop using the challenged intellectual property or selling our products
or services that incorporate it
o obtain a license to use the challenged intellectual property or to sell
products or services that incorporate it, which could be costly or
unavailable
o redesign those products or services that are based on or incorporate the
challenged intellectual property, which could be costly and time consuming
or could adversely affect the functionality and market acceptance of our
products
If we must take any of the foregoing actions, we may be unable to sell our
solutions, which would substantially reduce our revenues.
Extensive governmental regulation of the clinical trial process could require
costly modifications to our products or could adversely affect prospective
customers' willingness to use our products and services.
The clinical trial process is subject to extensive regulation by
government agencies in the United States and throughout the world. The U.S.
Food and Drug Administration has published guidelines addressing a broad range
of matters relating to the use of computerized systems to collect, manage and
analyze data from clinical trials. Moreover, electronic data entry, management
and analysis of medical information pertaining to subjects in clinical trials
is a recent concept that will be subject to state and federal government
regulations that are not yet finalized. Conforming our products and services to
these guidelines or to future changes in regulation could substantially
increase our expenses. Our customers and prospective customers may not use our
products and services if they do not believe our solutions satisfy the
requirements of these or other government guidelines and regulations. See
"Business -- Government Regulation."
Our international operations expose us to significant risks.
A key element of our business strategy is to expand our global operations.
We will face a number of risks that are inherent in operating in foreign
countries, including government regulations, trade restrictions, foreign taxes,
currency exchange rate fluctuations and other risks.
We will be subject to a variety of government regulations in the countries
where we market our products and services. We currently operate in the United
Kingdom through a foreign subsidiary and may operate in other countries through
additional foreign subsidiaries. Our foreign subsidiaries may need to withhold
taxes on earnings or other payments they distribute to us. Generally, we can
claim a foreign tax credit against our federal income tax expense for these
taxes. However, the United States tax laws have a number of limitations on our
ability to claim that credit or to use any foreign tax losses. We may also need
to include our share of our foreign subsidiaries' earnings in our income even
if the subsidiaries do not distribute money to us.
Our global operations may involve transactions in a variety of currencies.
Fluctuations in currency exchange rates could have a significant effect on our
results of operations.
The agreements that we sign with customers outside the United States may
be governed by the laws of the countries where we provide our products and
services. We may also need to resolve any disputes under these agreements in
the courts or other dispute resolution forums in those countries. This could be
expensive or could distract management's attention away from our core business.
11
<PAGE>
We may incur liability as a result of providing electrocardiogram analysis and
interpretation services.
We provide centralized analysis and interpretation of electrocardiograms
in connection with our customers' clinical trials. It is possible that
liability may be asserted against us and the physicians who interpret the
electrocardiograms for us for failing to accurately diagnose a medical problem
indicated by the electrocardiogram or for failing to disclose a medical problem
to the investigator responsible for the subject being tested. The contractual
protections included in our customer contracts and our insurance coverage may
not be sufficient to protect us against such liability. If the protections are
not adequate, our business may be adversely affected.
Risks Related to this Offering
Premier Research Worldwide will be able to control matters requiring
stockholder approval and may have interests that differ from our other
investors.
Following the closing of this offering, Premier Research Worldwide will
beneficially own approximately _____% of the outstanding shares of our common
stock, or _____% if the underwriters exercise their over-allotment option in
full. As a result, Premier Research Worldwide will be able to control all
matters requiring stockholder approval including the election of directors.
Premier Research Worldwide may have interests that differ from our other
investors. In addition, this concentration of ownership may delay, deter or
prevent acts that would result in a change of control, which in turn could
reduce the market price of our common stock.
We will have broad discretion as to use of proceeds from this offering.
We have broad discretion as to the use of proceeds from this offering. As
of the date of this prospectus, we have only designated $12.5 million of the
proceeds from this offering for specific purposes. Accordingly, you will have
to rely on our management to apply a significant portion of these proceeds in
an effective manner. Moreover, our intended use of proceeds may change as a
result of many factors, including a change in our business strategy. Our
failure to apply these proceeds effectively could impair the value of your
investment in our common stock.
Future sales of our common stock may depress our stock price.
Sales of a substantial number of shares of common stock in the public
market following this offering or the perception that sales may occur could
reduce the market price of our common stock. All the shares sold in this
offering will be freely tradable. The remaining shares of common stock
outstanding after this offering will be available for sale in the public
market, subject to compliance with Rule 144, as follows:
Date of Availability for Sale Number of Shares
- ------------------------------- -----------------
January 1, 2001
March 24, 2001
The holder of the shares of common stock that would otherwise be available
for sale on March 24, 2001 has the right beginning six months after this
offering to require us to register those shares for sale to the public prior to
March 24, 2001. We plan to grant options to purchase shares of our common stock
under an equity compensation plan prior to completion of this offering and
additional shares will be reserved for future grants. We intend to register all
shares of common stock issuable or reserved for issuance under the plan within
180 days after the consummation of this offering, which would make these shares
eligible for public sale.
New investors in our common stock will experience immediate and substantial
dilution.
The initial public offering price is substantially higher than the book
value per share of our common stock. Investors purchasing our common stock in
this offering will, therefore, incur immediate dilution of $________ in the pro
forma net tangible book value per share of our common stock, based on an
assumed initial public offering price of $__ per share. See "Dilution."
If our stock is volatile, there could be stockholder suits, which would be
distracting and potentially costly to us.
Securities class action claims have been brought against companies whose
stock prices have been volatile. Our stock price may be volatile. This kind of
litigation could be very costly and could divert our management's attention and
resources. Any adverse determination in this type of litigation could also
subject us to significant liabilities, any or all of which could seriously harm
our business and financial condition.
12
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements which involve risks
and uncertainties. These forward-looking statements are often accompanied by
words such as believe, anticipate, plan, expect and similar expressions. These
statements include, without limitation, statements about our market opportunity
and our growth strategy. These statements may be found in the sections of this
prospectus entitled Prospectus Summary, Risk Factors, Use of Proceeds,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, Business and elsewhere in this prospectus generally. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including all the risks discussed in
Risk Factors and elsewhere in this prospectus.
USE OF PROCEEDS
We expect to receive approximately $________ million in net proceeds from
the sale of the ___________ shares of common stock in this offering, at an
assumed initial public offering price of $_________ per share, after deducting
underwriting discounts and commissions and estimated offering expenses. We
expect to receive approximately $________ million in net proceeds if the
underwriters' over-allotment option is exercised in full.
We currently estimate that we will use approximately $6.0 million of the
net proceeds of this offering for product development, approximately $3.5
million to expand our sales and marketing capabilities, approximately $3.0
million for capital expenditures and the remainder for working capital and
general corporate purposes. We may also use a portion of the net proceeds to
acquire additional businesses, products and technologies or to establish
strategic partnerships or alliances that we believe will complement our current
or future business. However, currently we have no specific agreements or
commitments to do so. The amounts that we actually expend for the specified
purposes may be greater than or less than our estimates and may vary
significantly depending on a number of factors, including any change to our
business strategy, future revenue growth, if any, and the amount of cash we
generate from operations. If our business strategy changes, we may use proceeds
from this offering to acquire or develop new products or engage in businesses
not currently contemplated by our present business strategy. In addition, if
our future revenue growth and available cash are less than we currently
anticipate, we may need to support our ongoing business operations with
proceeds from this offering that we otherwise would use to support growth and
expansion. As a result, we will retain broad discretion in the allocation of
the net proceeds of this offering and may spend such proceeds for any purpose,
including purposes not presently contemplated. Pending the uses described
above, we will invest the net proceeds in short-term, interest-bearing,
investment-grade securities.
DIVIDEND POLICY
We currently intend to retain any future earnings to fund the development
and growth of our business. Therefore, we do not anticipate paying any cash
dividends in the foreseeable future.
13
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of January 1, 2000.
We present capitalization:
o on an actual basis
o on a pro forma basis to reflect the sale of the preferred stock, the
automatic conversion of the preferred stock into common stock immediately
upon the closing of this offering and the issuance of two common stock
warrants, assuming an initial public offering price of $_______ per share
o as adjusted to reflect the sale of __________ shares of common stock in
this offering at an assumed initial public offering price of $_______ per
share and our application of the estimated net proceeds of approximately
$________ million
You should read this table in conjunction with our "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our historical financial information contained elsewhere in this prospectus.
<TABLE>
<CAPTION>
January 1, 2000
-------------------------------------
Actual Pro Forma As Adjusted
-------- ----------- ------------
(In thousands)
<S> <C> <C> <C>
Long-term debt and capital lease obligations ................. $ -- $ -- $ --
------ ------- -----
Stockholders' equity:
Preferred stock, no par value, 10,000,000 shares authorized,
none issued and outstanding ............................... -- -- --
Common stock, $.01 par value, 50,000,000 shares authorized,
1,000 shares issued and outstanding, actual; _______ shares
issued and outstanding, pro forma; and _________ shares
issued and outstanding, as adjusted ....................... --
Common stock warrants ....................................... --
Additional paid-in capital .................................. 5,262
Retained earnings (accumulated deficit) ..................... --
------ -------
Total stockholders' equity ................................ 5,262 14,762
------ -------
Total capitalization ...................................... $5,262 $14,762 $
====== ======= =====
</TABLE>
14
<PAGE>
DILUTION
As of January 1, 2000, our pro forma net tangible book value, after giving
effect to the sale of the preferred stock and the conversion of the preferred
stock into common stock immediately upon the closing of this offering assuming
an initial public offering price of $____ per share, was $12,918,000 or $______
per share of common stock. Pro forma net tangible book value per share
represents the amount of our total pro forma tangible assets reduced by the
amount of our total liabilities, divided by the pro forma number of shares of
common stock outstanding. Dilution in pro forma net tangible book value per
share represents the difference between the amount per share paid by purchasers
of common stock in this offering and the pro forma net tangible book value per
share of our common stock immediately afterwards. Assuming our sale of _______
shares of common stock in this offering at an assumed initial public offering
price of $____ per share, and after deducting underwriting discounts and
commissions and estimated offering expenses, our pro forma net tangible book
value at January 1, 2000 would have been $________ or $________ per share. This
represents an immediate increase in pro forma net tangible book value of
$______ per share to existing stockholders and an immediate dilution in pro
forma net tangible book value of $______ per share to new investors. The
following table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share ............................. $
Pro forma net tangible book value per share at January 1, 2000 ............ $
Increase per share attributable to new investors ..........................
------
Adjusted pro forma net tangible book value per share after the offering .....
------
Dilution per share to new investors ......................................... $
======
</TABLE>
The following table shows, on a pro forma basis as of January 1, 2000, the
differences between the number of shares of common stock purchased from us, the
total consideration paid and the average price per share paid by existing
stockholders and by new investors purchasing shares in this offering. We have
assumed an initial public offering price of $______ per share, and we have not
deducted underwriting discounts and commissions and estimated offering expenses
in our calculations.
<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration
-------------------- -------------------- Price
Number Percent Amount Percent Per Share
-------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Existing stockholders ......... % $ % $
New investors ................. -- -- -- -- --
Total ...................... 100% $ 100%
=== ==== ===
</TABLE>
15
<PAGE>
SELECTED FINANCIAL DATA
We were formed in December 1999 as a wholly owned subsidiary of Premier
Research Worldwide. Effective January 1, 2000, Premier Research Worldwide
contributed all of its technology and operating businesses to us in exchange
for all of our issued and outstanding common stock. Accordingly, our historical
financial statements present our operations as a division of Premier Research
Worldwide and essentially represent all of Premier Research Worldwide's
historical operating assets, liabilities, revenues and expenses. The statement
of operations data for 1999 are also presented on a pro forma basis to reflect
the December 31, 1999 sale of the domestic clinical research operations, as if
the sale had occurred on January 1, 1999.The pro forma balance sheet data
reflect the preferred stock sale, the automatic conversion of the preferred
stock into common stock and the issuance of two common stock warrants. The pro
forma statement of operations data do not reflect a charge related to the value
of the warrants and the value of the beneficial conversion price of the
preferred stock. The financial data presented below should be read in
conjunction with "Management's Discussion of Financial Condition and Results of
Operations" and our financial statements and the related notes to the financial
statements contained in this prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
Pro Forma
1995 1996 1997 1998 1999 1999
--------- ---------- ------------ ---------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues:
Licenses and services ...................... $ 7,721 $12,035 $ 7,695 $19,753 $26,075 $26,075
Clinical research services ................. 4,343 3,248 6,468 12,054 16,710 721
------- ------- --------- ------- ------- -------
Total net revenues ........................ 12,064 15,283 14,163 31,807 42,785 26,796
Cost of revenues:
Cost of licenses and services .............. 4,881 6,440 5,270 9,269 12,897 12,897
Cost of clinical research services ......... 3,564 3,815 6,806 10,488 12,512 1,115
------- ------- --------- ------- ------- -------
Total cost of revenues .................... 8,445 10,255 12,076 19,757 25,409 14,012
------- ------- --------- ------- ------- -------
Gross margin .............................. 3,619 5,028 2,087 12,050 17,376 12,784
Operating expenses:
Selling & marketing ........................ 1,057 1,163 2,492 3,764 5,124 2,985
General & administrative ................... 2,010 2,365 2,873 4,966 6,565 5,422
Research and development ................... -- -- 357 3,131 2,472 2,472
Acquired in-process research and
development ............................... -- -- 7,883 -- -- --
------- ------- --------- ------- ------- -------
Total operating expenses .................. 3,067 3,528 13,605 11,861 14,161 10,879
------- ------- --------- ------- ------- -------
Income (loss) before income taxes and
minority interest .......................... 552 1,500 (11,518) 189 3,215 1,905
Minority interest in limited liability
company .................................... 48 332 -- -- -- --
------- ------- --------- ------- ------- -------
Income (loss) before income taxes ........... 600 1,832 (11,518) 189 3,215 1,905
Income tax provision (benefit) .............. 259 773 (4,530) 64 1,286 754
------- ------- --------- ------- ------- -------
Net income (loss) ........................... $ 341 $ 1,059 $ (6,988) $ 125 $ 1,929 $ 1,151
======= ======= ========= ======= ======= =======
Basic and diluted net income (loss) per
share ...................................... $ 341 $ 1,059 $ (6,988) $ 125 $ 1,929 $ 1,151
======= ======= ========= ======= ======= =======
Shares used to compute net income (loss)
per share .................................. 1 1 1 1 1 1
======= ======= ========= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
----------------------------------------------------------------------
1995 1996 1997 1998 1999 1999
-------- -------- --------- --------- ----------- ----------
Actual Pro Forma
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents .................. $ -- $ -- $ -- $ -- $ -- $ 9,500
Working capital (deficit) .................. 1,696 97 (102) 3,398 (2,199) 7,301
Total assets ............................... 4,367 4,250 15,011 22,553 13,325 22,825
Stockholders' equity ....................... 2,625 1,018 8,704 13,322 5,262 14,762
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
our financial statements and the related notes to the financial statements
appearing elsewhere in this prospectus. The following includes a number of
forward-looking statements that reflect our current views with respect to
future events and financial performance. We use words such as anticipate,
believe, expect, future, and intend, and similar expressions to identify
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
These forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from historical results or our
predictions. For a description of these risks, see the section entitled "Risk
Factors."
Overview
We are a business-to-business provider of technology-based products and
services used to manage clinical trials and collect, analyze and report
clinical data. We also are a leading provider of centralized collection and
interpretation of electrocardiograms, one of the most frequently used
diagnostic tests in a clinical trial. We offer our products and services to our
customers in the pharmaceutical, biotechnology and medical device industries
and to clinical research organizations serving those industries.
We were formed in December 1999 as a wholly owned subsidiary of Premier
Research Worldwide. Effective January 1, 2000, Premier Research Worldwide
contributed all of its technology and operating businesses to us in exchange
for all of our issued and outstanding common stock. Accordingly, our historical
financial statements present our operations as a division of Premier Research
Worldwide and essentially represent all of Premier Research Worldwide's
historical operating assets, liabilities, revenues and expenses.
Through our parent and predecessor companies, we have been continuously
committed to the effective use of technology in clinical applications for over
20 years. This commitment included our filing of the first computer-assisted
new drug application with the Food and Drug Administration in 1985, our
introduction of a technology-enhanced electrocardiogram service in 1988 and our
acquisition of DLB Systems in October 1997. The research and development and
baseline technology obtained in the DLB Systems acquisition provided the
platform for the development of our current software applications. Over time we
have also conducted various clinical and diagnostic operations, including
operating a clinical research organization from 1995 until December 31, 1999.
See note 3 of the notes to our historical financial statements. The sale of our
domestic clinical research operations on December 31, 1999 marked the
completion of our efforts to cease providing clinical research services and
allowed us to focus exclusively on providing technology-based solutions to the
clinical trials market. Following this sale, our operations consisted solely of
the business operations described in this prospectus which, as mentioned above,
were contributed to us by Premier Research Worldwide on January 1, 2000.
In March 1999, we signed a two-year consulting agreement with
AmericasDoctor.com to help it develop Internet-based clinical trial patient
recruitment and referral services. Our relationship with AmericasDoctor.com
has been critical to the development of our Internet-based patient recruitment
product. In August 1999, we signed agreements with Breast Cancer International
Research Group, under which we are providing some of our software applications
through an eResNet we are implementing and that we expect will eventually
connect at least 400 investigator sites in more than 20 countries.
Our license and services revenues consist of upfront software license
revenues, consulting and training service revenues, software maintenance
service revenues and usage service revenues that we generate from repeated use
of our products and services. To date, usage service revenues have consisted
primarily of fees generated from our centralized electrocardiogram services.
Prior to the December 1999 sale of the domestic clinical research service
business, we also generated revenues from managing clinical trials. We have not
accounted for the clinical research service business as a discontinued
operation because it was not a separate reportable segment. We will not
generate any future revenues from clinical research services.
17
<PAGE>
We are shifting our strategy to create more of a recurring revenue
business model by deploying eResNets and modular solutions under agreements
that permit their use in multiple clinical trials at any number of sites and
charge for their use on a per user, per trial, per site basis. We anticipate
that an increasing portion of our revenues will be attributable to these types
of usage service revenues. However, this business model is in an emerging state
and its revenue and income potential is unproven. Furthermore, our historical
revenue sources will likely continue to be major contributors to our overall
revenues.
We expect to incur losses in 2000 for two primary reasons. First, we plan
to invest substantial resources in product development, sales and customer
support and the general growth of our organization. Second, we will record a
charge related to the value of two common stock warrants and the value of the
beneficial conversion price of our preferred stock.
We recognize software revenues in accordance with Statement of Position
97-2, Software Revenue Recognition, as amended by Statement of Position 98-9.
Accordingly, we recognize license revenues when a formal agreement exists,
delivery of the software and related documentation has occurred, collectibility
is probable and the license fee is fixed or determinable. We recognize revenues
from software maintenance contracts on a straight-line basis over the term of
the maintenance contract, which is typically twelve months. We provide
consulting and training services on a time and materials basis and recognize
revenues as we perform the services. Usage service revenues consist of revenues
from services that we provide on a fee-for-service basis. We recognize usage
service revenues as the services are performed. Clinical research services were
generally based on fixed-price contracts, with variable components. Revenues
from clinical research services were recognized as services were rendered.
Usage service and clinical research service revenues vary based on the
conduct of our customers' clinical trials. Customers terminate or delay trials
for a variety of reasons, including the failure of the product being tested to
satisfy safety or efficacy requirements, unexpected or undesired clinical
results, the customer's decision to forgo a particular study, insufficient
patient enrollment or investigator recruitment, and production problems
resulting in shortages of required supplies. Customers frequently pay us a
portion of our fee for these services upon contract execution as an upfront
deposit, which is typically nonrefundable upon contract termination.
Cost of licenses and services includes the cost of licenses, the cost of
technology consulting and maintenance services and the cost of usage services.
Cost of licenses consists primarily of the cost of producing compact disks and
related documentation and royalties paid to third parties in connection with
their contributions to our product development. Cost of technology consulting
and maintenance services consists primarily of wages, fees paid to outside
consultants and other direct operating costs related to our consulting and
customer support functions. Cost of usage services consists primarily of direct
costs related to our centralized electrocardiogram services and includes wages,
fees paid to outside consultants, shipping expenses and other direct operating
costs. Cost of clinical research services consisted primarily of wages, fees
paid to outside consultants and other direct operating costs associated with
our clinical research operations. Selling and marketing expenses consist
primarily of salaries and commissions paid to sales and marketing personnel or
paid to third parties under marketing assistance agreements, travel expenses
and advertising and promotional expenditures. General and administrative
expenses consist primarily of salaries, benefits and direct costs for our
finance, administrative and executive management functions, in addition to
professional service fees. Research and development expenses consist primarily
of salaries and benefits paid to our product development staff, costs paid to
outside consultants and direct costs associated with the development of our
technology products.
Historically, we operated through two business segments: technology
operations and clinical operations. See note 10 of the notes to our historical
financial statements. We conduct our operations on a global basis, with offices
in the United States and the United Kingdom. Our international net revenues
represented 6.9% of total net revenues in 1997, 14.5% of total net revenues in
1998 and 12.6% of total net revenues in 1999.
18
<PAGE>
Results of Operations
The following table presents certain financial data as a percentage of
total revenues:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1998 1999
---------- -------- --------
<S> <C> <C> <C>
Net revenues:
Licenses and services ................................ 54% 62% 61%
Clinical research services ........................... 46 38 39
-- -- --
Total net revenues ................................ 100 100 100
Cost of revenues:
Cost of licenses and services ........................ 37 29 30
Cost of clinical research services ................... 48 33 29
--- --- ---
Total cost of revenues ............................ 85 62 59
--- --- ---
Gross margin ...................................... 15 38 41
Operating expenses:
Selling and marketing ................................ 18 12 12
General and administrative ........................... 20 16 15
Research and development ............................. 3 9 6
Acquired in-process research and development ......... 55 -- --
--- --- ---
Total operating expenses .......................... 96 37 33
--- --- ---
Income (loss) before income taxes ..................... (81) 1 8
Income tax provision (benefit) ........................ (32) 1 3
--- --- ---
Net income (loss) ..................................... (49)% --% 5%
=== ==== ===
</TABLE>
Year ended December 31, 1999, compared to the year ended December 31, 1998
Total net revenues increased 34.6% or $11.0 million to $42.8 million in
1999 compared to $31.8 million in 1998.
License revenues declined 13.7% to $4.4 million in 1999 from $5.1 million
in 1998. During 1999, we sold fewer software licenses as we focused our
marketing efforts on larger, enterprise-wide software sales, which have a
longer sales cycle. Technology consulting and training service revenues
increased 6.7% to $1.6 million in 1999 compared to $1.5 million for the same
period in 1998. In addition, during 1999, we signed a two-year consulting
contract with AmericasDoctor.com to help it enhance its capabilities to
identify and recruit patients for clinical trials. We recognized $2.3 million
of consulting revenues from this contract during 1999. Software maintenance
revenue increased 12.1% to $3.7 million in 1999, compared to $3.3 million in
1998. The increase was due to a larger installed base of software licenses in
1999 compared to 1998. Usage service revenues increased 42.9% to $14.0 million
in 1999 from $9.8 million in 1998. Usage service revenues consisted primarily
of revenues from electrocardiogram services. This increase was due primarily to
increased contract signings during 1999 and the associated increase in the
number of procedures performed.
Clinical research services revenues increased 38.0% to $16.7 million in
1999 from $12.1 million in 1998. This increase was primarily due to the
increased volume of services under existing contracts and new contracts signed
in 1999.
Total cost of revenues increased 28.3% to $25.4 million in 1999, compared
to $19.8 million in 1998.
The cost of license revenues increased 131.2% to $319,000 in 1999 from
$138,000 in 1998. The increase was primarily due to a 5% royalty arrangement
with a third party on sales of two software products that first became payable
during 1999. The cost of consulting and software maintenance services increased
26.7% to $3.8 million in 1999 from $3.0 million in 1998. This increase was
primarily due to additional personnel, travel and other direct costs to support
the increase in maintenance and consulting revenues in addition to increased
facility and depreciation expenses. The cost of usage services increased 44.3%
to $8.8 million in 1999 from $6.1 million in 1998. The increase was primarily
due to additional personnel, subcontracted electrocardiogram interpretation
fees and shipping costs related to the increase in electrocardiogram services
revenues.
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The cost of clinical research services increased 19.0% to $12.5 million in
1999 from $10.5 million in 1998, primarily due to additional personnel and
direct costs to support clinical research revenue growth. As a percentage of
clinical research services revenue, cost of clinical research services
decreased to 74.9% in 1999 from 86.8% in 1998. The percentage decrease is due
to a significant portion of the costs being fixed in nature and revenues
increasing 38.0%.
Selling and marketing expenses increased 34.2% to $5.1 million in 1999
from $3.8 million in 1998. The increase was due primarily to increased
compensation expense due to additional personnel, commissions paid under new
marketing assistance agreements and increased direct selling expenses related
to the overall increase in our revenues.
General and administrative expenses increased 32.0% to $6.6 million in
1999 from $5.0 million in 1998. The increase was due primarily to increased
compensation expense due to salary increases and additional personnel and
increased professional fees.
Research and development expenses declined 19.4% to $2.5 million in 1999
from $3.1 million in 1998. The decline was due primarily to a decrease in 1999
in the use of third party product development consultants.
Our income tax provision, calculated on a separate-company basis, was $1.3
million in 1999 compared to $64,000 in 1998. Our effective income tax rate was
40.0% in 1999 and 33.9% in 1998. The 33.9% rate in 1998 was due to the majority
of our taxable income being generated in the United Kingdom at an effective tax
rate of 31.0%.
Year ended December 31, 1998, compared to the year ended December 31, 1997
Total net revenues increased 123.9% or $17.6 million to $31.8 million in
1998 compared to $14.2 million in 1997.
License revenues increased to $5.1 million in 1998 from $210,000 in 1997.
The increase was primarily attributable to the full year impact in 1998 of our
October 1997 acquisition of DLB Systems. Technology consulting and training
service revenues increased to $1.5 million for 1998 from $150,000 in 1997.
Software maintenance revenues increased to $3.3 million in 1998 from $438,000
in 1997. The increase in both consulting and training service revenues and
software maintenance revenues was primarily attributable to the full year
impact in 1998 of our October 1997 acquisition of DLB Systems. Usage service
revenues increased 42.0% to $9.8 million in 1998 compared to $6.9 million in
1997. Usage service revenues consisted primarily of electrocardiogram services.
The increase resulted primarily from increased contract signings in 1998, and
the associated increase in the number of procedures performed. In addition,
1998 usage service revenues included the recognition of a non-refundable
deposit and termination fee of $750,000 under a contract that was cancelled
before completion.
Clinical research services revenue increased 86.2% to $12.1 million in
1998 compared to $6.5 million in 1997. The increase in clinical research
services revenues was attributable to recognition of part of the 1997 backlog
and new contracts signed in 1998. The increase in clinical research services
revenues included $619,000 of revenues generated from our United Kingdom
operation, which did not offer such services until late 1997. The increase in
clinical research revenues was partially offset by a decrease in revenues from
our Phase I clinical research unit, which we closed during the first quarter of
1998. Phase I net revenues, which were included in clinical research services
revenues, declined 91.0% to $189,000 in 1998 compared to $2.1 million in 1997.
Total cost of revenues increased 63.6% to $19.8 million in 1998 compared
to $12.1 million for 1997.
The cost of license revenues increased to $138,000 in 1998 from $20,000
for 1997. This increase was primarily attributable to the full year impact in
1998 of our October 1997 acquisition of DLB Systems. The cost of consulting and
software maintenance revenues increased to $3.0 million in 1998 from $421,000
in 1997. This increase was primarily due to the full year impact in 1998 of our
October 1997 acquisition of DLB Systems. The cost of usage services increased
27.1% to $6.1 million in 1998 from $4.8 million in 1997. The increase was due
to increased direct labor and related expenses to support the growth in
revenues in 1998 and to support anticipated future revenue growth in addition
to increased depreciation expense.
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<PAGE>
The cost of clinical research services increased 54.4% to $10.5 million in
1998 compared to $6.8 million in 1997. The increase was due primarily to
increased direct labor expenses to support the increase in clinical research
services revenues and our expansion of the domestic and international clinical
research infrastructure to support anticipated future revenue growth, partially
offset by decreased costs related to our Phase I unit, which was closed during
the first quarter of 1998. As a percentage of clinical research services
revenues, cost of clinical research services decreased to 86.8% in 1998 from
104.6% in 1997. The percentage decrease is due to the majority of the costs
being fixed in nature and revenues increasing 86.2%.
Selling and marketing expenses increased 52.0% to $3.8 million in 1998
compared to $2.5 million in 1997. The increase in sales and marketing expenses
was due primarily to increased commissions related to our increased revenues
and the full year impact in 1998 of our October 1997 acquisition of DLB
Systems.
General and administrative expenses increased 72.4% to $5.0 million in
1998 from $2.9 million in 1997. The increase resulted primarily from building
our domestic and international infrastructure to support anticipated future
operations and from the full year impact in 1998 of our October 1997
acquisition of DLB Systems.
Research and development expenses increased to $3.1 million in 1998
compared to $357,000 in 1997. This increase was due primarily to the full year
impact in 1998 of our October 1997 acquisition of DLB Systems. Prior to the
acquisition of DLB Systems, we incurred no research and development expenses.
We had an income tax provision of $64,000 in 1998 compared to a tax
benefit of $4.5 million in 1997. Our effective income tax rate was 33.9% in
1998 and 39.3% in 1997. The 33.9% rate in 1998 was due to the majority of our
taxable income being generated in the United Kingdom at an effective tax rate
of 31.0%.
Liquidity and Capital Resources
Our business is generally not very capital intensive. Historically, our
principal cash needs related to funding working capital requirements. In 1999,
we generated cash from operating activities of $8.1 million compared to cash
used by operating activities of $1.8 million in 1998. The increase in operating
cash flow was due to increased income before depreciation and amortization and
decreased working capital needs. Our working capital needs decreased primarily
because of decreases in accounts receivable and prepaid expenses and increases
in accrued expenses partially offset by a decrease in deferred revenues.
In 1999, we had capital expenditures of $2.3 million compared to $3.4
million in 1998. The decrease in capital expenditures reflected our higher
level of spending on infrastructure in 1998 to accommodate future business
needs, anticipated growth and capital expenditures related to our planned move
to new facilities.
In 2000, we plan to invest substantial resources in the areas of product
development and sales and marketing, in addition to possible acquisitions or
investments in strategic alliances or partnerships. The execution of this plan
may have a significant, negative impact on our profitability and cash flows in
2000 and 2001.
We expect that the $9.5 million of proceeds from our sale of preferred
stock, cash flow from operations and proceeds from this offering will be
sufficient to meet our foreseeable cash needs for at least the next year.
Premier Research Worldwide has agreed to provide cash advances for our
operations as we need them under a Services and Support Agreement. However,
there may be acquisition and other growth opportunities that require additional
external financing and we may from time to time seek to obtain additional funds
from public or private issuances of equity or debt securities. There can be no
assurance that such financings will be available or available on terms
acceptable to us.
Inflation
We do not believe that the effects of inflation and changing prices
generally have a material effect on our results of operations or financial
condition.
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Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Risk
We operate on a global basis from locations in the United States and the
United Kingdom. All international net revenues are billed and expenses incurred
in either U.S. dollars or pounds sterling. Therefore, we face exposure to
adverse movements in the exchange rate of the pound sterling. As the currency
rate changes, translation of the income statement of our United Kingdom entity
from the local currency to US dollars affects year-to-year comparability of
operating results. We do not hedge translation risks because these risks have
not been material. We estimate that a 10% change in the exchange rate of the
pound sterling would have impacted the reported operating loss for
international operations by less than $100,000. The introduction of the Euro as
a common currency for members of the European Monetary Union took place in
January 1999. To date, the Euro has had no impact on our operations, as all of
our foreign transactions are billed in U.S. dollars.
Interest Rate Risk
Our future interest income will be sensitive to changes in the general
level of United States interest rates. However, we plan to invest our excess
cash in short-term, investment-grade, interest-bearing securities, and we have
concluded that there is no material market risk exposure relating to these
investments.
Recent Accounting Pronouncements
In March 1998, the AICPA issued SOP No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" (SOP No. 98-1). SOP
No. 98-1 requires entities to capitalize specified costs related to
internal-use software once criteria have been met. We adopted SOP No. 98-1 in
fiscal 1999. The adoption of SOP No. 98-1 did not have a material impact on our
financial position or results of operations.
In June 1998, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133). SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133, as recently amended, is effective for fiscal years beginning
after June 15, 2000. We do not believe the adoption of SFAS No. 133 will have a
material effect on our financial position or results of operations.
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BUSINESS
Our Company
We provide a full range of business-to-business software applications and
technology consulting services to the pharmaceutical, biotechnology and medical
device industries. We offer Internet and other technology-based solutions
designed to streamline the clinical trials process by enabling our customers to
automate many parts of a clinical trial. We offer our products and services on
an individual basis or as integrated end-to-end solutions. We are also a
leading provider of centralized collection and interpretation of
electrocardiograms, one of the most frequently used diagnostic tests in
clinical trials. Our solutions improve the accuracy, timeliness and efficiency
of trial set-up, data collection, management and interpretation and new drug or
device application preparation.
As part of our integrated solutions, we offer electronic research
networks, which we call eResNets, that link the key participants in a clinical
trial: the sponsor, the investigators, the patients, and any clinical research
organization that a sponsor may use to assist it in conducting the clinical
trial.
Our Market Opportunity
In order for sponsors to get their products to market, they must complete
an extensive clinical trial process. The current drug development process,
including clinical trials in which the sponsor uses investigators to test new
products on human patients, on average costs approximately $500 million per
drug and takes ten to twelve years to complete. This time consuming process
significantly reduces the period during which a sponsor can enjoy the
competitive advantages of patent protection for their products. Sponsors also
face competitive pressure to reduce high product development costs. We believe
our opportunity is being driven by the following factors:
A Large and Growing Clinical Trials Market
The global pharmaceutical, biotechnology and medical device industries
spent more than $15 billion in 1998 on the development of new drugs and
devices. A substantial portion of this spending involves clinical trials. We
believe the clinical trials market will continue to grow for the following
reasons:
o the number of products for which sponsors must conduct clinical trials is
increasing, primarily because of the growth of the biotechnology industry
o sponsors are developing drugs for more complex diseases and these drugs
require a greater number of more complicated clinical trials
o sponsors are increasingly conducting clinical trials on a global basis as
worldwide revenues become more important to offset high development costs
o expanded and more detailed regulatory requirements to produce more
sophisticated data regarding the safety and efficacy of new drugs and
medical devices are increasing the number and scope of clinical trials
The Traditional Clinical Trial is Inefficient
The successful development of new drugs, including clinical testing,
regulatory review and research setbacks, is a costly and time consuming
process. The current clinical trial model suffers from the following
inefficiencies that affect the timeliness and accuracy of the process:
o the near-exclusive reliance upon investigators to recruit patients for
participation can significantly prolong the patient enrollment process
o under existing manual and paper-based systems, investigators record data
that monitors then periodically review to generate inquiries regarding
errors or incomplete data entries for the investigators to resolve
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o the entry of trial data into many isolated, non-standardized databases
makes it difficult for a sponsor or clinical research organization to
promptly and accurately identify reliable trends or adverse events that
could affect the sponsor's decision to proceed with, change or cancel a
clinical trial
o the manual collection and organization of data from separate databases
for purposes of preparing and submitting new drug or device applications
is a labor-intensive and prolonged process
Clinical Trials Feature Multiple Participants Performing Varied Tasks
A clinical trial generally requires that a sponsor or clinical research
organization manage and coordinate the interaction of many parties. In a
typical clinical research trial, a sponsor, one or more clinical research
organizations, a multitude of investigators and a large number of patients
undertake a research process that generates a large volume of data. The trial
participants must interact with each other so that the sponsor can collect,
manage and, ultimately, organize this data into a new drug or device
application. The sponsor or clinical research organization must monitor sites
that may be located throughout the world. At each of these sites, investigators
usually collect data from a few to hundreds of patients and then edit and
report the data to the sponsor or clinical research organization for entry into
a database.
Our Solution
We provide a suite of software applications and Internet and other
technology-based solutions that are designed to accelerate the clinical trials
process. Our automated solutions allow our customers to migrate to electronic
forms of data collection, management and analysis. We also offer centralized
electrocardiogram analysis, which is an important part of most clinical trials.
We believe our products and services are most effective when customers
integrate them in the form of an eResNet that connects the multiple
participants in the clinical trial.
We believe our solutions provide the following significant benefits to
sponsors, clinical research organizations and investigators:
Accelerated Time-To-Market. Our products and services accelerate data
collection and resolution of errors and incomplete data entries, thereby
compressing the overall development timeline. Our Internet-based patient
recruitment service has the potential to accelerate the often prolonged process
of patient enrollment. Our electronic new drug application submission process
allows a sponsor or clinical research organization to access a centralized
database electronically, which reduces the time needed to prepare and submit
such applications. Because sponsors are focusing their research efforts on
drugs or devices with large market potential, virtually any shortening of the
clinical trial process provides a significant benefit to sponsors by allowing
them to bring products to market sooner.
Lower Costs. Our products and services increase the productivity of the
clinical research process by enabling:
o the rapid set-up of new trials
o the creation of customized reports and data analysis tools
o customers to capture and perform interim analysis of data needed for new
drug application submissions during the course of a clinical trial rather
than aggregating the data at the end of the trial
o customers to establish standardized data entry and management processes
that they can reuse in future trials with considerable time savings with
appropriate modifications for the particular trial or sponsor
o customers to make an earlier decision to modify or terminate a trial if
warranted, potentially providing considerable research and development
savings
Improved Research Quality. Our solution allows users to access and analyze
frequently updated clinical trial data that is captured quickly and accurately.
This enables sponsors and clinical research organizations to make adjustments
during the course of a clinical trial or cancel a clinical trial in response to
safety and efficacy information, thereby increasing the quality of research.
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Enhancing Investigator Participation in the Clinical Trial
Process. Sponsors and clinical research organizations must recruit numerous
investigators to participate in clinical trials. The sponsors and clinical
research organizations depend almost exclusively on investigators to recruit
patients for the trials and generally compensate investigators based on the
number of patients the investigator tests. We strengthen this investigator
relationship by:
o improving the quality of and access to research data as the trial is
being conducted, which provides investigators greater assurance that they
are satisfying their responsibilities to patients they recruit, as well as
to the sponsors
o allowing investigators, where appropriate, to compare their data with
data that other investigators generate and providing investigators with
access to other information about various treatment and research methods
o increasing the pool of potential trial participants through our Internet
patient recruitment service
Our Strategy
Our objective is to become the leading provider of Internet-based
solutions for sponsors and clinical research organizations that are evolving
from manual to automated methods of conducting clinical trials. To achieve this
objective, we intend to maintain our commitment to superior customer service
and pursue the following strategies:
We seek to expand our relationships with current customers. Generally,
large pharmaceutical companies have a number of divisions organized by areas of
medical specialty, each of which is responsible for its own clinical trial
process. Although we provide our products and services to the vast majority of
the world's largest pharmaceutical companies, we are not providing our products
and services to all of the divisions within any one company. We intend to use
the goodwill we have established with the divisions for which we do provide
products and services to increase the volume of business we do with them and to
market our products and services to other divisions within those companies.
We plan to target new customers and markets. We intend to continue
targeting other large and mid-sized pharmaceutical, biotechnology and medical
device companies and clinical research organizations. We believe these
customers are the types of organizations most likely to have the resources and
commercial and clinical needs to build eResNets that connect the customer to a
large number of investigator sites and that can be reused for multiple trials.
We also are developing an application service provider capability that will
allow us to target smaller biotechnology, pharmaceutical and medical device
companies by providing access to our electronic clinical research solutions
without significant investments in hardware, software and personnel.
We will seek to establish a recurring revenue model by deploying eResNets,
providing our solutions as an applications service provider and offering
modular solutions for use in multiple clinical trials. We believe that once we
have developed eResNets for our customers, they will continue to use our
products and services for future clinical trials rather than developing
separate networks offered by our competitors. Customers can use our products
and services as discrete modular solutions on a per user basis. We are also
establishing an application services provider capability that will allow our
customers to use our products and services on a subscription fee basis. We
believe that establishing such long-term relationships will allow us to:
o generate recurring per trial, per site user-access fees based on the
frequency of use of our of products and services
o capture incremental revenues by providing additional products and
services through an eResNet or on a modular basis
o capture subscription fees for providing services as an application
service provider
We intend to build upon our technology leadership. We intend to continue
enhancing our core technology by:
o furthering the development of the web-interfaces of our products
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o image-enabling our products to permit additional forms of data entry
o further enhancing our products' management of the flow of work throughout
the clinical trial, thereby improving clinical research practices
o facilitating integration with other vendors' products
o upgrading the functionality of our products to anticipate or address
technical or clinical developments
We will seek to establish strategic alliances and pursue acquisitions to
accelerate the development and marketing of our products and services. We are
fostering strategic alliances with industry leaders in the areas of hardware
systems, telecommunications, web-hosting and development, systems integration,
content, distance learning and clinical research services. We also intend to
pursue suitable acquisitions to supplement these alliances. We believe these
alliances and acquisitions will allow us to focus on our core area of expertise
while using complementary technologies that others have developed to provide
added functionality to our products and services. The alliances may involve
equity investments by one or both parties in the other.
We intend to expand our global operations. The high cost of product
development has led many sponsors to pursue clinical research only if they can
anticipate significant worldwide revenues from a particular product. To
generate these revenues sooner, sponsors are increasingly pursuing regulatory
approvals in multiple countries simultaneously. We currently have operations in
the United Kingdom and strategic alliances with clinical research organizations
operating in Canada, Sweden and Spain. We intend to increase our global
presence by expanding our field sales, marketing and services organization, our
operations capability and our strategic alliances in key international markets.
Our Products and Services
We offer a broad range of products and services that our customers can use
as an integrated enterprise solution or on a modular basis.
eResNet
We believe that customers will maximize the value of our products by
integrating them as part of an eResNet. An eResNet integrates
eResearchDashboard with any combination of our products and services that
includes eDataEntry and eDataManagement. The value of an eResNet is that it
will allow a sponsor or clinical research organization to establish an
infrastructure that connects multiple participants in the clinical trial
process and that can be used repeatedly for future clinical trials. As an
established infrastructure, an eResNet will allow a sponsor or clinical
research organization to improve the efficiency and speed of the clinical trial
by automating the process for conducting each new clinical trial. As we
establish additional eResNets, we intend to charge monthly user-access fees
that our customers will pay per investigator site and per clinical trial. These
fees will be in addition to the amounts our customers pay for the products and
services we integrate into the eResNet.
We are implementing one eResNet that utilizes all three modules of our
eTrials product suite and eSafetyNet and that we expect will eventually connect
at least 400 investigator sites in more than 20 countries. We are in the
process of negotiating the sale of two other eResNets.
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Modular Product and Service Offerings
<TABLE>
<CAPTION>
Product/Services Description
---------------- -----------
<S> <C>
eTrials A comprehensive trials management application comprised of
three modules: eStudyConduct, eDataEntry and
eDataManagement.
eStudyConduct A proprietary solution to set up clinical trials, establish
standards, track study activities, plan resources, distribute
supplies, manage the financials aspects of a trial and
electronically view clinical trial data on the Internet.
eDataEntry A data capture system permitting investigators to use
standard Internet browser tools to input data into a
centralized database in an online or offline environment.
eDataEntry accommodates traditional manual, paper-based
data entry, data entry using the Internet and other forms of
electronic data transmission. We anticipate that by mid-2000,
eDataEntry will also be able to capture data in the form of
electronic images. This proprietary product allows efficient
access to the clinical research patient data, permitting the
sponsor or clinical research organization to identify sites not
complying with trial protocols and clinical trial results
requiring further study.
eDataManagement An Internet-enabled proprietary software tool for collecting,
editing and managing clinical trial data in any computing
environment. Customers use this tool to analyze data, resolve
incomplete or erroneous data entries and support early
completion of the database for a particular trial. This product
easily integrates with a wide variety of third-party software
applications for imaging, workflow and data analysis.
eSafetyNet An Internet-enabled proprietary adverse event management
system. This application facilitates compliance by sponsors,
clinical research organizations and investigators with
regulatory reporting requirements regarding adverse events
and with the sponsor's or clinical research organization's own
internal requirements for safety data analysis. Sponsors or
clinical research organizations can configure this application
to match their own processes and forms.
eECG Analysis and interpretation of electrocardiograms performed
on research subjects by cardiologists in connection with our
customers' clinical trials. This application permits assessment
of the safety and/or efficacy of therapies by documenting the
occurrence of cardiac electrical change during daily living.
We expect that in mid-2000, eECG will permit
electrocardiogram images to be scanned for cardiologist
interpretation and viewed as side-by-side images for
comparison, supplemented by the ability to review all prior
patient tracings. We also expect that this upgrade will feature
an electronic signature that will allow a cardiologist to
review the image from a remote location through a secure
website.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Product/Services Description
---------------- -----------
<S> <C>
eNDA A set of services and non-proprietary tools to generate new
drug applications electronically using data collected
throughout the clinical trial process. eNDA categorizes and
organizes clinical data to help complete a new drug
application.
eResearchDashboard An Internet-based analytical processing tool using
non-proprietary software. This tool allows participants in the
clinical trial to follow the progress and conduct of a study
based on frequently-updated data using the Internet. This
product allows the participant to analyze data and generate
reports in a broad variety of formats that permits early
strategic intervention in the clinical trial.
ePatient An Internet-based service that assists in recruiting patients to
participate in clinical trials. This Internet service collects
self-referrals from prospective patients that we forward to
investigators based on geographic proximity. Currently, our
patient referrals are being provided from
AmericasDoctor.com, which forwards to us the referrals that
its website generates.
eTechnologyConsulting Clinical trial implementation and technology process
consulting. These consulting services can augment the
implementation efforts of customers by providing support in
strategic planning, methodology and technical
implementation of our products and services. The technical
implementation support includes system installation, project
planning, system configuration, network administration and
database set-up. We also provide education and training
services both as part of the initial installation and on an
ongoing basis. Following the implementation, we provide
on-site research and technology advisory services, support
services, including online support and a 24-hour, seven day
help desk, and maintenance.
eHealthEducation Trial-specific educational tool that allows clinical research
professionals to learn about technology developments, new
products, clinical protocols and other educational matters.
This application will also provide a link to our website,
www.eRT.com, where we intend to provide industry news,
therapeutic information, technology updates and chat rooms
for professionals.
</TABLE>
Our products use common interfaces, allowing clinical trial participants
to learn how to use additional applications with minimal training. By
establishing common naming standards for data that clinical trial participants
may share across applications, departments and global locations, sponsors and
clinical research organizations can improve data integrity and accelerate
reconciliation of information. Our products and services can work with and
connect to leading third party finance, enterprise resource planning and
research software through a batch load utility that we have developed.
Strategic Alliances
We work with our strategic partners to develop and enhance many of our
products and services. We are embedding into our eDataManagement product a
proprietary technology developed by one of our strategic
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partners, Winthrop Stuart Associates. This technology will collect data
electronically from case report form images and automatically route the data,
using proprietary work flow technology, to the clinical data base for
management action. Medical Advisory Systems is assisting the development of our
application service provider capability and will help us provide 24-hour,
seven-day coverage for our eSafetyNet service and make cardiologists available
to support our eECG application. Currently, we obtain our patient referrals
through AmericasDoctor.com, Inc. which forwards to us the referrals that its
website generates.
We have entered into marketing assistance agreements with a number of our
strategic partners, including systems integrators and clinical research
organizations, that provide collaborative resources to supplement our own
marketing efforts. These marketing assistance agreements typically have terms
of one year and automatically renew for additional one-year terms. In addition,
these agreements typically require us to make commission payments to the other
party based on the license fee or the license and maintenance fee generated by
sales for which the other party has provided assistance. The commissions range
from two to twenty percent depending on the agreement. We have entered into
marketing assistance agreements with clinical research organizations operating
in Canada, Sweden and Spain that provide co-branding and co-marketing services.
We also maintain strategic alliances with providers of complementary
technologies for co-marketing services and to assist our customers.
Our Customers
We target pharmaceutical, biotechnology and medical device companies as
well as clinical research organizations. We have provided our solutions to 17
of the 20 pharmaceutical companies that had the highest sales in 1999. We have
completed more than 120 installations of our products at 64 sites worldwide.
In August 1999, we signed agreements with Breast Cancer International
Research Group Limited, a clinical research organization based in Alberta,
Canada. Under our agreements, we are providing all three modules of our eTrials
product suite and eSafetyNet through an eResNet we are implementing and that we
expect will eventually connect at least 400 investigator sites in more than 20
countries. During 1999, we received approximately 12% of our licenses and
services revenues from these agreements. In addition, we are providing eECG
services for another customer in support of a pharmaceutical clinical trial
being conducted at more than 1,000 sites in 33 countries throughout the world.
Sales and Marketing
We market and sell products and service primarily through our
international direct sales, sales support and professional services
organization. As of March 1, 2000 our direct sales force consisted of seven
sales professionals located in Philadelphia, Pennsylvania, Bridgewater, New
Jersey and Peterborough, United Kingdom. Our 36 sales support and professional
services employees provide the pre- and post-sale support and consulting
services that are an integral part of our customer-driven business development
strategy.
We focus our marketing efforts toward educating our target market,
generating new sales opportunities and increasing awareness of our solutions.
We conduct a variety of marketing programs internationally including business
seminars, trade shows, press relations and industry analyst programs and
advisory councils.
Our marketing organization also serves an integral role in managing
customer and industry feedback in order to help provide direction to our
product development organization. We implemented this customer-driven approach
by establishing advisory council meetings made up of numerous industry experts.
In addition to providing information to prospective customers, advisory council
meetings provide a useful forum in which to share information, test product
concepts and collect data on customer and industry needs.
Our sales cycle generally begins with our response to a request from a
sponsor or clinical research organization for a proposal to address a
customer-specific research requirement. We ask prospective customers to
complete a survey to allow us to provide a comprehensive response. We then
engage in a series of consultations, workshops, implementation reviews, final
proposals and contract negotiations. During this
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process, we involve our sales, consulting and senior management personnel in a
collaborative approach. Our sales cycle can vary from a few weeks to as long as
nine months depending upon the scope of the products and services being
discussed and the scope of the clinical trial.
Technology
Our applications use a broad range of technologies. Our eTrials
applications use a Microsoft Windows-based PC platform through a graphical user
interface. The data are stored in an industry-standard Oracle database on a
database server. We developed these applications using Oracle Developer, which
provides rapid access to both the database and an extensive set of underlying
tools. Our philosophy of using industry tools allows us to focus our attention
on the applications and on our customers, who also use those tools to benefit
from our data models.
The user interface of our products is Oracle SQL Forms based. Our standard
reports use Oracle Reports. We use the Oracle database server to provide data
storage and database-level stored procedures and triggers to maintain
consistent processing of data and to minimize network traffic for the execution
of standard operations. By using the application partitioning provided by
Oracle Developer, customers can have greater control over the use of server and
network resources. Our supported client platforms are Windows 95 and Windows
NT.
Customers can use all of our products on the Internet using a Citrix
connection. In addition, eDataEntry and portions of eDataManagement are
currently Internet-based, and we expect to have the rest of our products
Internet-based during 2000. To accomplish this development we are using Java
technology thus enabling the applications to operate under any operating system
supporting the Java platform, including Windows NT, Windows 95, Windows 98 and
Solaris. To allow uniform client application behavior in differing Internet
browsers, we use the Java Plug-In, which is available free from Sun
Microsystems JavaSoft division. We intend to continue to develop our products
with both on-line connectivity and off-line processing capability.
Research and Development
We or our predecessors have been developing our products and services for
more than 20 years. Our applications have progressed from manual, paper-based
processing through client-server processing. We have developed or are
developing our software to take advantage of the power of the Internet. We
continue to advance our products by enhancing the human interface of some of
the modules.
We are also developing or partnering with other companies to obtain a
variety of other products, including eVitalSigns, a product that will allow
patients to measure blood pressure, heart rate, temperature, weight and other
important metrics at home and then transmit such information electronically to
our clinical data base. We expect to provide this product using technology and
equipment developed by one of our strategic partners.
Research and development expenses were $357,000 for 1997, $3.1 million for
1998 and $2.5 million for 1999.
Competition
The market for our products and services is extremely fragmented, with
hundreds of companies providing niche solutions to satisfy small parts of the
clinical research process. We believe we are the only provider of
technology-based solutions in the clinical research industry that offers
end-to-end research solutions that take advantage of the power of the Internet
while also addressing manual, paper-based processes used in clinical research.
The market for our solution is intensely competitive, continuously
evolving and subject to rapid technological change. The intensity of
competition has increased and is expected to further increase in the future.
This increased competition could result in price reductions, reduced gross
margins and loss of market share, any one of which could seriously harm our
business. Competitors vary in size and in the scope and breadth of the products
and services offered.
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We believe that the principal competitive factors affecting our market
include:
o customer service
o a significant base of reference customers
o breadth and depth of solution, including the ability to accommodate both
manual, paper-based research methods and electronic forms of data
collection, management and analysis
o product quality and performance
o core technology and product features
o ability to implement solutions
o price
Although we believe that our solutions currently compete favorably with respect
to these factors, our market is relatively new and is evolving rapidly. We may
not be able to maintain our competitive position against current and potential
competitors, especially those with significantly greater financial, marketing,
service, support, technical and other resources.
Government Regulation
Human and animal pharmaceutical products, biological products and blood
derivatives, and medical devices are subject to rigorous government regulation.
In the United States, the principal federal regulatory agency is the Food and
Drug Administration and there are some similar state agencies. Foreign
governments also regulate these products when they are tested or marketed
abroad. In the United States, the Food and Drug Administration has established
standards for conducting clinical trials leading to the approval for new
products. Under these standards, sponsors are responsible for:
o selecting qualified investigators
o providing investigators with protocols and other information
o monitoring the trial
o reporting changes in trial protocol to the Food and Drug Administration
o providing the Food and Drug Administration and the investigator reports
of serious and unexpected adverse experiences associated with the use of a
drug
o maintaining records concerning the study
Because our products and services assist the sponsor or clinical research
organization in conducting the trial and preparing the new drug or device
application, we must comply with these requirements. We also must comply with
corresponding foreign regulatory requirements that vary from country to country
but generally address similar issues.
If the Food and Drug Administration concludes that studies were not
conducted in accordance with minimum agency requirements, it may take a variety
of enforcement actions depending on the nature of the violation. These measures
may range from issuing a warning letter or seeking injunctive relief or civil
penalties to recommending criminal prosecution. If we are convicted of criminal
conduct relating to the approval of a new drug or device application or are
found to have otherwise violated Food and Drug Administration requirements, the
Food and Drug Administration could prohibit us from being involved in future
clinical trials. Where the agency finds irregularities during ongoing studies,
it may require changes to the study or may request termination of the study. In
the case of clinical trials submitted as part of a new drug or similar
application, the agency may require that additional clinical work be performed
before granting approval of the application. The agency may require that entire
studies be rerun, resulting in substantial delay in final approval. In extreme
cases, such as submission of fraudulent test data or giving or offering bribes,
the agency can refuse to approve a pending application.
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In April 1999, the Food and Drug Administration published guidelines
regarding the use of computerized systems to create, modify, maintain, archive,
retrieve or transmit clinical data intended for use in submissions to the
agency. The guidelines recommend that those who use computerized systems in
clinical trials design them so that they can satisfy applicable regulatory
requirements for recordkeeping and retention with the same degree of confidence
as exists with paper-based systems. The guidelines specifically address a broad
range of matters such as:
o confirming the authority of those with access to the data
o attributing edits to the data to the person making the edits
o providing quality control prompts to ensure the consistency of data and
to alert the person inputting the data if the data is outside expected
ranges
o facilitating inspection and review of data
o ensuring the adequacy of system security, dependability and controls
We believe that we have designed our products and services to be
consistent with the agency's recommendations and to comply with applicable
regulatory requirements.
The Health Insurance Portability and Accountability Act of 1996
established certain requirements relating to confidentiality and data security
for personal health information. These requirements were established under that
act to prevent unauthorized access to electronically transmitted patient
records and the misuse of personal health information. These laws affect almost
every organization or individual that comes into contact with patient
information, including health plans, health care clearinghouses and entities
that electronically maintain or transmit individually identifiable health
information. In addition, there are laws in numerous states that relate to the
protection of personal health information.
As enacted, the act had required the Secretary of Health and Human
Services to issue regulations by February 1998, and then given the health care
industry 24 months to comply with those regulatory requirements. A proposed
rule on privacy standards for individually identifiable health information was
released by the Health Care Financing Administration in November 1999, with a
comment period that was in effect until February 2000. Given the complexity of
the proposed rule, it is likely that a significant number of comments were
received by the administration. Based on these factors, we do not believe that
final rules are expected to be issued for at least 12 months. Therefore, there
are no final regulations with which we must comply at this time with regard to
confidentiality and data security for medical records. In anticipation of the
issuance of the final rules, we have undertaken efforts to review and document
our health information privacy policies and procedures, and we intend to
continue to monitor these regulatory developments.
Employees
At March 1, 2000, we had a total of 148 employees, with 118 employees (109
full-time, 9 part-time) at our locations in the United States and 30 employees
(29 full-time, 1 part-time) at our locations in the United Kingdom. We had 97
employees performing services directly for our clients, 21 employees in
research and development, 12 employees in sales and marketing and 18 employees
involved in general and administrative activities.
We are not a party to any collective bargaining agreements covering any of
our employees, have never experienced any material labor disruption and are
unaware of any current efforts or plans to unionize our employees. We consider
our relationships with our employees to be good.
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Properties
Our corporate headquarters are located at 30 South 17th Street,
Philadelphia, Pennsylvania, where we lease approximately 58,000 square feet,
all but approximately 20,000 square feet of which we sublease to a third party.
Our lease expires in August 2005. We also lease the following facilities:
Location Square Feet Lease Expiration
Bridgewater, New Jersey 14,088 April 2006
Peterborough, United Kingdom 8,840 October 2009
We anticipate that we will require additional space for our customer
network operations as we expand, and believe that suitable additional or
alternative space will be available in the future on commercially reasonable
terms.
Legal Proceedings
We are not involved currently in any pending legal proceedings that either
individually or taken as a whole will have a material adverse effect on our
business, financial condition and results of operations.
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MANAGEMENT
Directors and Executive Officers
Our directors and executive officers and their respective ages and
positions as of the date of this prospectus are as follows:
<TABLE>
<CAPTION>
Name Age Position
----- --- --------
<S> <C> <C>
Joel Morganroth, MD* .......... 54 Chairman, Chief Science Officer and a Director
Joseph A. Esposito* ........... 47 President, Chief Executive Officer and a Director
Bruce Johnson ................. 49 Senior Vice President and Chief Financial Officer
Vincent Renz .................. 43 Senior Vice President, Technology and Consulting and Chief
Technology Officer
Robert S. Brown ............... 44 Senior Vice President, Diagnostics Technology and Services
Sheldon M. Bonovitz* .......... 62 Director
Thomas L. Harrison ............ 52 Director
Howard D. Ross* ............... 48 Director
John M. Ryan* ................. 64 Director
</TABLE>
- ------------
* Also a director of Premier Research Worldwide. Mr. Bonovitz has advised us
that he intends to resign as a director of Premier Research Worldwide upon
closing of this offering.
Dr. Joel Morganroth has been our Chairman and a director since our
formation and Chief Science Officer since March 2000. He is also a consultant
to us. Dr. Morganroth has served Premier Research Worldwide as Chairman since
1999, Chief Executive Officer since 1993, a director since 1997 and a
consultant since 1976. Dr. Morganroth is an internationally recognized
cardiologist and clinical investigator. He has worked on the clinical
development of several large, well-known approved drugs. Dr. Morganroth served
for over ten years as a Medical Review Officer/Expert for the Food and Drug
Administration and since 1995 has served in a similar capacity for the Health
Protection Branch of Canada.
Joseph A. Esposito has been our President, Chief Executive Officer and a
director since our formation. Mr. Esposito has served Premier Research
Worldwide as President and Chief Operating Officer since April 1998, and he
served as President of the DLB Systems division from October 1997 to April
1998. From May 1997 through October 1997, he was President of DLB Systems, Inc.
Mr. Esposito was President of Worldwide Operations for Computron Software Inc.
from October 1994 to May 1997. He has 25 years experience in technology,
working closely with pharmaceutical companies in the areas of clinical
research, supply chain management and regulatory document management.
Bruce Johnson has been our Senior Vice President and Chief Financial
Officer since February 2000. Mr. Johnson has over 25 years of previous
experience in public accounting and financial management positions. From March
1999 to November 1999, Mr. Johnson served as Chief Operating Officer and Chief
Financial Officer of HealthAxis.com. From February 1988 to March 1999, Mr.
Johnson was employed by N2K Inc., most recently as Senior Vice President, Chief
Financial Officer and director. Mr. Johnson is a certified public accountant.
Vincent Renz has been our Senior Vice President, Technology and Consulting
and Chief Technology Officer since our formation. Mr. Renz served Premier
Research Worldwide as the Senior Vice President and General Manager of the DLB
Systems division from May 1998 to December 1999. Prior to joining Premier
Research Worldwide, from January 1998 to May 1998, he worked as a consultant in
defining the Client Services infrastructure for the DLB Systems division. Mr.
Renz was Vice President, Client Services for Computron Software Inc. from May
1988 to November 1997. Prior to that time, Mr. Renz worked as an information
technology consultant for Deloitte, Haskins and Sells from 1984 to 1988 and
Arthur Andersen from 1981 to 1984, serving a wide range of industries in the
design and implementation of large-scale information systems.
Robert S. Brown has been our Senior Vice President, Diagnostics Technology
and Services since our formation. From December 1997 to December 1999, Mr.
Brown was Vice President, Business Development for Premier Research Worldwide.
Mr. Brown was Senior Director, Research and Regulatory Services for Research
Data Worldwide, Inc. from November 1993 to its acquisition by Premier Research
Worldwide in December 1997.
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Sheldon M. Bonovitz has served on our Board of Directors since March 2000.
He has been a partner of the law firm of Duane, Morris & Heckscher LLP since
1969, where he currently serves as Chairman and Chief Executive Officer. Mr.
Bonovitz is also a director of Premier Research Worldwide, Comcast Corporation
and Surgical Laser Technologies, Inc.
Thomas L. Harrison has served on our Board of Directors since March 2000.
Mr. Harrison has served as Chairman and Chief Executive of the Diversified
Agency Services unit of Omnicom Group Inc. since May 1998, having previously
served as its President since February 1997. Mr. Harrison has also served as
Chairman of the Diversified Healthcare Communictions Group of Omnicom Group
Inc. since its formation in 1994. Mr. Harrison is also a director of Omnicom
Group Inc.
Howard D. Ross has served on our Board of Directors since December 1999.
He has been a partner of LLR Equity Partners, L.P., a venture capital fund,
since its founding in 1999. Mr. Ross was a partner in Arthur Andersen LLP from
1984 to 1999, serving as the partner-in-charge of Arthur Andersen's
Philadelphia Growth Company Practice for 15 years. He is also a director of
Premier Research Worldwide, Iron Mountain, Incorporated, Crothall Services
Group, Inc. and Omnient Corporation. Mr. Ross is a certified public accountant.
John M. Ryan has served on our Board of Directors since December 1999.
Since 1997, Mr. Ryan has been a principal in Devon Ventures, Inc. Mr. Ryan
founded SunGard Data Systems, Inc. in 1977 and served as its Chief Executive
Officer until 1986 and its Chairman until 1987. Mr. Ryan served as Chairman and
Acting Chief Executive Officer for DLB Systems from 1995 until its acquisition
by Premier Research Worldwide in 1997. Mr. Ryan is also a director of Premier
Research Worldwide, Neoware Systems, Inc., Thermacore International, Inc., IGP,
Inc., which conducts business as iGrandparents.com, and FAI, Inc., which
conducts business as VerticalFleet.com.
Our executive officers are elected by and serve at the discretion of our
board of directors. There are no family relationships among our directors and
officers.
Terms of Directors
Our Board of Directors is divided into three classes, with members serving
staggered three-year terms. The Board is comprised of two Class I directors
(Mr. Esposito and Mr. Harrison), whose term will expire in 2001, two Class II
directors (Dr. Morganroth and Mr. Bonovitz), whose term will expire in 2002,
and two Class III Directors (Mr. Ross and Mr. Ryan), whose terms will expire in
2003. At each annual meeting of stockholders commencing in 2001 the
stockholders will elect a class of directors for a three-year term to succeed
the directors of the same class whose terms are expiring.
Coordinating Committee
We and Premier Research Worldwide intend to establish a Coordinating
Committee following completion of this offering that will consist of two
independent directors from each company who do not also serve as directors of
the other company. The Coordinating Committee will be responsible for reviewing
and approving all matters between Premier Research Worldwide and us involving
actual or potential conflicts of interest, and its decisions will be binding on
both companies. In order for the Coordinating Committee to approve a
transaction between Premier Research Worldwide and us, our representatives on
the Coordinating Committee will need to conclude that the transaction is fair
and equitable to us. We anticipate that Mr. Bonovitz and Mr. Harrison will be
our representatives on the Coordinating Committee.
Board Committees
We have established a compensation committee and an audit committee. The
compensation committee consists of Mr. Harrison and Mr. Ryan. The compensation
committee:
o reviews and approves the compensation and benefits for our executive
officers and grants stock options under our stock option plans
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o makes recommendations to the board of directors regarding such matters
The audit committee consists of Mr. Bonovitz, Mr. Harrison and Mr. Ross.
The audit committee:
o reviews the results and scope of the audit and other services provided
by our independent auditors
o reviews and evaluates our audit and control functions
Compensation Committee Interlocks and Insider Participation
The compensation committee consists of Mr. Harrison and Mr. Ryan. None of
our directors, including Mr. Harrison and Mr. Ryan, is an executive officer of
any entity for which any of our executive officers serves as a director or a
member of the compensation committee.
Director Compensation
We reimburse each member of our board of directors for out-of-pocket
expenses incurred in connection with attending board meetings. No member of our
board of directors currently receives any additional cash compensation. Each
outside director will receive an annual grant of 5,000 options during their
term which will vest over five years.
Executive Compensation
Because we were formed only in December 1999 and did not obtain any assets
until January 1, 2000, we did not pay any compensation to our Chief Executive
Officer or any of our other executive officers in 1999.
We have an employment agreement with Mr. Esposito to serve as our
President and Chief Executive Officer for which we pay him an annual salary of
$270,000. Either Mr. Esposito or we may terminate the agreement at any time
upon written notice given at least 30 days prior to termination, but if we
terminate the agreement without cause, we must pay Mr. Esposito a lump sum
severance payment equal to his annual salary and continue to provide his
benefits for one year. We must provide the same benefit to Mr. Esposito, plus
any pro-rated bonus, if he resigns his employment after a change in control if
either (a) he is not offered a position with comparable responsibilities,
authority, location or compensation or (b) within the first year after the
change in control, Mr. Esposito decides that the responsibilities, authority,
location or compensations of the position he is offered are not acceptable.
Option Grants and Exercises and Long Term Incentive Plan Awards in Last Fiscal
Year
We did not grant any options during 1999 and, as a result, no options were
exercised during 1999 or outstanding at the end of the year. We do not have any
other long-term incentive plan.
Stock Option Plan
We intend to adopt a stock option plan prior to the closing of this
initial public offering. The plan will provide for grants of incentive stock
options and nonqualified stock options to our directors and those employees and
other individuals who provide services to us or otherwise have a relationship
with us or our subsidiaries and who the compensation committee shall determine
to be key individuals to our success.
Limitations on Liability and Indemnification of Directors and Officers
As permitted by the Delaware General Corporation Law, we have included in
our certificate of incorporation a provision to eliminate the personal
liability of our directors for monetary damages for breach or alleged breach of
their fiduciary duties as directors, other than breaches of their duty of
loyalty, actions not in good faith or which involve intentional misconduct, or
transactions from which they derive improper personal benefit. In addition, our
bylaws provide that we are required to indemnify our officers and directors
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<PAGE>
under specified circumstances, including those circumstances in which
indemnification would otherwise be discretionary, and we are required to
advance expenses to our officers and directors as incurred in connection with
proceedings against them for which they may be indemnified.
Any amendment to or repeal of such provisions will not eliminate or reduce
the effect of such provisions in respect of any act or failure to act, or any
cause of action, suit or claim that would accrue or arise prior to any such
amendment. If the Delaware General Corporation Law is subsequently amended to
provide for further limitations on the personal liability of directors of
corporations for breach of duty of care or other duty as a director, then the
personal liability of our directors will be further limited to the greatest
extent permitted by the Delaware General Corporation Law.
Our directors and officers are covered under liability insurance policies
with coverage in the amount of $10.0 million that Premier Research Worldwide
has purchased. We intend to purchase and maintain our own directors' and
officers' liability insurance policies.
At present, we are not aware of any pending or threatened litigation or
proceeding involving our directors, officers, employees or agents in which
indemnification would be required or permitted. We believe that our certificate
of incorporation and bylaw provisions and the liability insurance policy will
facilitate our ability to attract and retain qualified persons as directors and
officers.
RELATED PARTY TRANSACTIONS
Relationship with Premier Research Worldwide
Premier Research Worldwide is currently the owner of all of our
outstanding common stock. Upon completion of the offering, Premier Research
Worldwide will own approximately ___% of our outstanding common stock, or
approximately ___% if the underwriters' over-allotment option is exercised in
full, and thus will continue to have the ability to elect all of our directors
and otherwise exercise a controlling influence over our business and affairs.
Premier Research Worldwide obtained its shares of common stock on January 1,
2000 in exchange for the assignment to us of all of the assets, subject to all
of the liabilities, relating to Premier Research Worldwide's technology and
operating businesses.
For as long as Premier Research Worldwide continues to own shares of
common stock representing more than 50% of the voting power of our common
stock, Premier Research Worldwide will be able, among other things, to
determine the outcome of any corporate action requiring approval of holders of
common stock representing a majority of the voting ownership of our common
stock without the consent of our other stockholders. In addition, through its
control of the Board of Directors and ownership of common stock, Premier
Research Worldwide will be able to control decisions that include dividend
policy, our access to capital, including borrowing from third-party lenders and
issuing additional equity securities, mergers or other business combinations in
which we are involved, our acquisition or disposition of assets and any change
in our control.
Premier Research Worldwide has agreed to vote the common stock in favor of
nominees of our Board of Directors for election as directors so that we have at
least three directors who are independent and who are not affiliates, officers
or directors of Premier Research Worldwide.
Premier Research Worldwide has advised us that its current intent is to
continue to hold all of its outstanding shares of our common stock. Further,
Premier Research Worldwide has agreed, for a period of 180 days after the date
of this prospectus, subject to exceptions, that without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation, it will not:
o issue, offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of, directly
or indirectly, any shares of common stock or any securities convertible
into, exercisable or exchangeable for common stock
o enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock
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<PAGE>
However, after such 180-day period, there can be no assurance concerning the
period of time during which Premier Research Worldwide will maintain its
ownership of our common stock.
Our relationship with Premier Research Worldwide will also be governed by
a Tax Sharing Agreement and a Services and Support Agreement. Since we were a
wholly owned subsidiary of Premier Research Worldwide when these arrangements
were negotiated, none of these arrangements result from arm's length
negotiations, and therefore, the prices charged to us for services provided
thereunder may be higher or lower than prices that may be charged by third
parties. The descriptions of the agreements set forth below are only summaries
and, while material terms of the agreements are described below, you should
review the full provisions of these agreements, which we have filed with the
Securities and Exchange Commission as exhibits to our registration statement.
Tax Sharing Agreement. We currently are included as a member of Premier
Research Worldwide's consolidated group for federal income tax purposes and,
for certain state and local tax purposes, we also are included as a member of a
consolidated, combined or unitary group where Premier Research Worldwide files
a consolidated, combined or unitary state or local return. Upon completion of
the offering, if Premier Research Worldwide owns less than 80% of the value of
our outstanding stock, we will no longer be included as a member of Premier
Research Worldwide's consolidated group for federal tax purposes. Effective
January 1, 2000, we entered into a Tax Sharing Agreement with Premier Research
Worldwide. Pursuant to the Tax Sharing Agreement, we and Premier Research
Worldwide will make payments between ourselves such that, with respect to any
period, we will determine the amount of taxes we pay or the amount of the
benefit we receive by calculating the difference between Premier Research
Worldwide's consolidated combined unitary group tax liability with and without
our inclusion. Premier Research Worldwide will continue to have all the rights
of a common parent of a consolidated group, will be the sole and exclusive
agent for us in any and all matters relating to our income tax liability in
connection with consolidated or combined federal and state returns, will have
the sole and exclusive responsibility for the preparation and filing of
consolidated federal and consolidated or combined state income tax returns, and
will have the power and sole discretion to contest or compromise any asserted
tax adjustment or deficiency and to file, litigate or compromise any claim for
refund on our behalf. However, we will have the right to participate in any
such audit or proceeding concerning taxes for which we are liable. In addition,
Premier Research Worldwide will not contest, compromise or litigate any
assessment or assertion of liability with respect to any taxes for which we are
liable without our consent. Each member of a consolidated group for federal
income tax purposes is severally liable for the income tax liability of the
group for periods in which it was a member of the group. Though valid as
between Premier Research Worldwide and us, the Tax Sharing Agreement is not
binding on the Internal Revenue Service and does not affect the several
liability of any subsidiaries to the Internal Revenue Service for all federal
income taxes due with respect to Premier Research Worldwide's consolidated
federal tax returns.
In general, the Tax Sharing Agreement is effective only for tax periods in
which we are a member of the Premier Research Worldwide consolidated group for
federal income tax purposes. Once we are no longer a member of the Premier
Research Worldwide consolidated group, the effect of the Tax Sharing Agreement
is generally limited to matters relating to tax returns of the Premier Research
Worldwide consolidated group in which we were included as a member. The Tax
Sharing Agreement, however, does allow for us, if we should so choose, to carry
back any applicable net operating loss, net capital loss or tax credit that
arises in any taxable year in which we are not a member of the Premier Research
Worldwide consolidated group, to a tax return filed by the Premier Research
Worldwide consolidated group in which we were included as a member. In that
case, we would be entitled to receive from Premier Research Worldwide any
refund of taxes resulting from such carryback. Similar rules apply to state and
local taxes, as well.
Services and Support Agreement. Other than Joel Morganroth, Premier
Research Worldwide does not have any employees. We have agreed to provide a
broad range of financial and administrative services to Premier Research
Worldwide for which it will pay us a $10,000 monthly fee and reimburse us 6.5%
of our chief executive officer's salary and 25% of our chief financial
officer's salary. We will also provide office space for the Chairman and Chief
Executive Officer of Premier Research Worldwide. Premier Research Worldwide has
also agreed to:
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o provide any cash advances we reasonably need for our business and
operations, subject to a maximun of $10.0 million, for which we pay
interest at the prime rate
o allow us to use its bank accounts and management and administrative
systems while we establish our own accounts and systems
o provide a broad range of insurance coverage for us under its insurance
policies while we evaluate the merits of obtaining our own coverage
We will pay a portion of the premiums for any Premier Research Worldwide
insurance policies that provide coverage for us. The amount of the premium we
pay will be determined by the Coordinating Committee. Premier Research
Worldwide has also agreed to consider in good faith any adjustments that may be
necessary to the monthly fee if the resources we must provide under the
agreement are disproportionate to the fee.
Relationship with our Chairman
A professional corporation of which Joel Morganroth, M.D., our chairman,
is the sole stockholder and employee has agreed to provide services to us,
including serving as medical director and providing medical interpretation for
diagnostic tests. We have agreed to pay an annual fee of $156,000 in connection
with these services. The agreement expires December 31, 2000, but will continue
from year to year unless terminated.
Communicade Investment
In March 2000, we sold 95,000 shares of preferred stock and agreed to
issue a common stock warrant to Communicade Inc. for $9.5 million. The warrant
will entitle Communicade to purchase 2.5% of our outstanding common stock
following this offering, or ___ shares of common stock, assuming an initial
public offering price of $___ per share, at an exercise price equal to 200% of
the initial public offering price per share less the underwriting discounts and
commissions. Following consummation of this offering, the warrant will be fully
vested and exercisable for a period of two years. See "Description of Capital
Stock--Preferred Stock" and "Description of Capital Stock--Warrants."
We also entered into an Investor Rights Agreement under which we agreed to
provide Communicade registration rights for the common stock issuable on
conversion of the preferred stock. Under that agreement, Communicade agreed not
to sell any preferred stock until September 2000 without our consent and,
thereafter, to give us a right of first refusal to purchase any shares of
preferred stock it proposes to sell or transfer other than to specified
permitted transferees. We also agreed to give Communicade the right to
participate on a proportionate basis if we sell additional securities in the
future other than in specified types of transactions, which include this
offering. Communicade's participation right will terminate after the closing of
this offering. Prior to the completion of this offering, we have also agreed to
provide periodic financial information to Communicade and to allow Communicade
to designate one director. See "Description of Capital Stock--
Registration Rights."
Communicade is a wholly owned subsidiary of Omnicom Group Inc. One of our
directors, Thomas L. Harrison, is Chairman and Chief Executive Officer of the
Diversified Agency Services unit of Omnicom Group and serves as a director of
Omnicom Group.
Scirex Corporation
In March 2000, we issued a warrant to purchase shares of common stock to
Scirex Corporation for business advisory services it provided to us. The
warrant entitles Scirex to purchase a number of shares of common stock equal to
$1.0 million divided by the initial offering price, or ___ shares of common
stock, assuming an initial public offering price of $___ per share. The Scirex
warrant has a per share exercise price equal to the initial public offering
price per share. Following consummation of this offering, the warrant will be
fully vested and exercisable for a period of two years. See "Description of
Capital Stock -- Warrants."
We license our software applications and provide consulting and software
maintenance services to Scirex. In 1999, we had revenues of $1.4 million from
Scirex, representing approximately 5.4% of our licenses and services revenues.
One of our directors, Thomas L. Harrison, is also a director of Scirex.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of March 27, 2000, and as adjusted to reflect
the sale of common stock in this offering, by:
o All those known by us to own beneficially more than 5% of our outstanding
common stock
o Our chief executive officer
o Each of our directors
o All directors and executive officers as a group
Except as otherwise indicated, and subject to applicable community
property laws, the persons named in the table have sole voting and investment
power with respect to all shares of common stock held by them. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of common stock
subject to options or warrants held by that person that are currently
exercisable or will become exercisable within 60 days of March 27, 2000 are
deemed outstanding, while such shares are not deemed outstanding for purposes
of computing percentage ownership of any other person. Percentage ownership in
the following table is based on _____________ shares of common stock currently
outstanding and ____________ shares of common stock outstanding immediately
following the completion of this offering.
In addition, the following table assumes that the underwriters do not
exercise their over-allotment option.
<TABLE>
<CAPTION>
Percentage of Shares
Outstanding
-----------------------------------
Number of Shares
Name Beneficially Owned(1) Before Offering After Offering
- ------------------------------------- ----------------------- ----------------- ---------------
<S> <C> <C> <C>
Premier Research Worldwide 1,000 100%
30 South 17th Street
Philadelphia, PA 19103
Joseph A. Esposito --
Joel Morganroth, M.D. --
Sheldon M. Bonovitz --
Thomas L. Harrison --(1)
Howard D. Ross --
John M. Ryan --
All directors and executive officers
as a group (9 persons) --(1)
</TABLE>
- ------------
(1) Excludes 95,000 shares of our preferred stock owned by Communicade, which
will convert upon the closing of this offering into ___________ shares of
common stock, assuming an initial public offering price of $____ per
share. Also excludes the common stock issuable upon the exercise of a
warrant we will grant to Communicade upon closing of this offering to
purchase _____ shares of common stock, assuming an initial public offering
price of $____ per share. Communicade is a wholly owned subsidiary of
Omnicom Group. Mr. Harrison is a director of Omnicom Group and is Chairman
and Chief Executive Officer of its Diversified Services Agency unit. Mr.
Harrison disclaims beneficial ownership of these shares.
40
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
Our authorized capital stock consists of 50,000,000 shares of common
stock, par value $.01 per share, and 10,000,000 shares of preferred stock, no
par value per share. As of March 27, 2000, there were outstanding 1,000 shares
of common stock and 95,000 shares of preferred stock that will automatically
convert to shares of our common stock upon the completion of this offering. As
of March 27, 2000, we had one stockholder of our common stock and one
stockholder of our preferred stock.
The following description of our capital stock and our certificate of
incorporation and bylaws is only a summary. You should review the full
provisions of our certificate of incorporation and bylaws, which we have filed
with the Securities and Exchange Commission as exhibits to our registration
statement.
Common Stock
Holders of common stock are entitled to one vote for each share held on
all matters submitted to a vote of the stockholders, including the election of
directors. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election if they choose to do so. The certificate of incorporation
does not provide for cumulative voting for the election of directors. Holders
of common stock are entitled to receive ratably such dividends, if any, as may
be declared from time to time by the board of directors out of funds legally
available therefor, and shall be entitled to receive, pro rata, all of our
assets available for distribution to such holders upon liquidation. Holders of
common stock have no preemptive, subscription or redemption rights.
Preferred Stock
General. We are authorized to issue "blank check" preferred stock, which
may be issued from time to time in one or more series upon authorization by our
board of directors. The board of directors, without further approval of the
stockholders, is authorized to fix the dividend rights and terms, conversion
rights, voting rights, redemption rights and terms, liquidation, preferences
and any other rights, preferences, privileges and restrictions applicable to
each series of the preferred stock. The issuance of preferred stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting
power of the holders of common stock and, under certain circumstances, make it
more difficult for a third party to gain control of us, discourage bids for our
common stock at a premium or otherwise adversely affect the market price of our
common stock.
Series A Convertible Preferred Stock. As of March 27, 2000, we had 95,000
shares of preferred stock outstanding. Upon completion of this offering, the
outstanding preferred stock will automatically convert into the number of
shares of common stock equal to $9.5 million divided by the initial public
offering price per share, net of underwriting discounts and commissions.
Assuming an initial public offering price of $____ per share, the shares of
preferred stock will convert into ____ shares of common stock.
Warrants
On completion of this offering and assuming an initial public offering
price of $____ per share, we will have outstanding warrants to purchase:
o ____ shares of common stock exercisable at a price equal to the initial
public offering price per share
o ____ shares of common stock exercisable at a price equal to 200% of the
initial public offering price per share less the underwriting discounts
and commissions
Both warrants will expire two years after the completion of the offering.
The exercise price and the number of shares issuable upon exercise of the
warrants may be adjusted following specific events including stock splits,
stock dividends, reorganizations, recapitalizations, mergers or a sale of all
or substantially all of our assets.
41
<PAGE>
Registration Rights
Following completion of this offering, holders of the shares of common
stock into which the preferred stock is converted will have the right to have
those shares registered under the Securities Act of 1933. We provided these
rights in our Investor Rights Agreement with Communicade. This agreement
provides, in specific instances starting six months after completion of this
offering, the holders of these shares with the right to require us to file a
registration statement on their behalf. The agreement also provides these
holders with the right to require us to include these shares in future
registration statements we file under the Securities Act of 1933. If we
register shares of common stock pursuant to the exercise of these rights, the
shares we register would become freely tradeable without restriction under the
Securities Act of 1933 immediately upon the effectiveness of the registration
and may adversely affect our stock price.
Certain Certificate of Incorporation, Bylaw and Statutory Anti-Takeover
Provisions Affecting Stockholders
Classified Board. We have divided our board of directors into three
classes. Initially, Class I will serve until the annual meeting of stockholders
in 2001, Class II will serve until the annual meeting of stockholders in 2002
and Class III will serve until the annual meeting of stockholders in 2003.
Following this initial transition period, each class will serve for three
years, with one class being elected each year. Removal of a member of the board
of directors with or without cause requires a majority vote of the board of
directors or of the stockholders. A majority of the remaining directors then in
office, though less than a quorum, and the stockholders, are empowered to fill
any vacancy on the board of directors.
Advance Notice Bylaws. Our bylaws establish an advance notice procedure
for stockholder proposals to be brought before an annual meeting of
stockholders, including proposed nominations of persons for election to the
board. Stockholders at an annual meeting may only consider proposals or
nominations specified in the notice of meeting or brought before the meeting by
or at the direction of the board of directors or by a stockholder of record on
the record date for the meeting, who is entitled to vote at the meeting and who
has delivered timely written notice in proper form to our Secretary of the
stockholder's intention to bring such business before the meeting.
Section 203 of Delaware Law. We are subject to the "business combination"
statute of the Delaware General Corporation Law. In general, this statute
prohibits a publicly held Delaware corporation from engaging in various
"business combination" transactions with any "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an "interested stockholder," unless (a) the transaction is approved by
the board of directors of the corporation prior to the interested stockholder
attaining that status, (b) upon consummation of the transaction which resulted
in the shareholder becoming an "interested stockholder," the "interested
stockholder" owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purpose of
determining the number of shares outstanding those shares owned by (X) persons
who are directors and also officers and (Y) employee stock plans in which
employee participants do not have the right to determine confidentiality
whether shares held subject to the plan will be tendered in a tender or
exchange offer, or (c) on or subsequent to such date the "business combination"
is approved by the board of directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 662/3% of the
outstanding voting stock which is not owned by the "interested stockholder." A
"business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to a stockholder. An "interested stockholder"
is a person who, together with affiliates and associates, owns, or within three
years, did own, 15% or more of a corporation's voting stock. By virtue of our
decision not to elect out of the statute's provisions, the statute applies to
us. Premier Research Worldwide is not an "interested stockholder" because its
acquisition of shares was approved by our board of directors. The statute could
prohibit or delay the accomplishment of mergers or other takeover or change in
control attempts with respect to us and, accordingly, may discourage attempts
to acquire us.
Directors Liability. The certificate of incorporation provides that no
director shall be personally liable to us or our stockholders for monetary
damages for breach of fiduciary duty as a director notwithstanding any
provision of law imposing such liability, provided that, to the extent provided
by applicable law, the certificate
42
<PAGE>
of incorporation shall not eliminate the liability of a director for (a) any
breach of the director's duty of loyalty to us or our stockholders, (b) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) acts or omissions in respect of certain unlawful
dividend payments or stock redemptions or repurchases or (d) any transaction
from which such director derives improper personal benefit. The effect of this
provision is to eliminate our rights and our stockholders' rights, through
stockholder's derivative suits against us, to recover monetary damages against
a director for breach of the fiduciary duty of care as a director, including
breaches resulting from negligent or grossly negligent behavior, except in the
situations described in clauses (a) through (d) above. The limitations
summarized above, however, do not affect the ability of us or our stockholders
to seek non-monetary based remedies, such as an injunction or rescission,
against a director for breach of his fiduciary duty nor would such limitations
limit liability under the federal securities laws. Our bylaws provide that we
shall, to the extent permitted by Delaware law, as amended from time to time,
indemnify and advance expense to the currently acting and former directors,
officers, employees and agents of ours or of another enterprise if those
individuals are serving at our request against all expenses arising in
connection with their acting in such capacities. The provisions described above
may also have the effect of delaying stockholder actions with respect to
business combinations and the election of new members to our board of
directors. As such, the provisions could have the effect of discouraging open
market purchases of our common stock because they may be considered
disadvantageous by a stockholder who desires to participate in a business
combination with us or elect a new director to our board.
Transfer Agent
The transfer agent and registrar for the common stock is First Union
National Bank.
Nasdaq National Market Listing
We have applied to have our common stock quoted on the Nasdaq National
Market under the symbol ERES.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect the market price of our common stock. Upon completion of this
offering, we will have outstanding _______ shares of common stock, assuming no
exercise of the underwriters' over-allotment option and an initial public
offering price of $____ per share. Excluding the _________ shares of common
stock offered hereby and assuming no exercise of the underwriters'
over-allotment option and an initial public offering price of $____ per share,
as of the effective date of this registration statement, there will be
___________ shares of common stock outstanding, all of which will be restricted
shares under the Securities Act of 1933. All restricted shares are subject to
lock-up arrangements with the underwriters pursuant to which the holders of
those shares have agreed not to sell, pledge or otherwise dispose of such
shares for a period of 180 days after the date of this prospectus. Beginning
January 1, 2001, ____ of such restricted shares will become available for sale
pursuant to Rule 144. The remaining restricted shares will become available for
sale pursuant to Rule 144 on March 24, 2001 and may be sold to the public
sooner if the holders exercise their registration rights. The general
provisions of Rule 144 are described below. All of the restricted shares that
will become available for sale in the public market beginning January 1, 2001
will be subject to volume and other resale restrictions pursuant to Rule 144
because Premier Research Worldwide, the holder of those shares, is one of our
affiliates. Donaldson, Lufkin & Jenrette Securities Corporation may release the
shares subject to the lock-up agreements in whole or in part at any time with
or without notice. However, Donaldson, Lufkin & Jenrette Securities Corporation
has no current plans to do so.
Rule 144 and Rule 144(k)
In general, under Rule 144, any of our affiliates who has beneficially
owned restricted shares for at least one year will be entitled to sell in any
three-month period a number of shares that does not exceed the greater of (a)
1% of the then outstanding shares of our common stock, approximately _____
shares immediately after this offering, assuming no exercise of the
underwriters' over-allotment option and an initial public offering price of
$____ per share or (b) the average weekly trading volume during the four
calendar weeks preceding
43
<PAGE>
the date on which notice of the sale is filed with the Securities and Exchange
Commission. Sales pursuant to Rule 144 are subject to requirements relating to
manner of sale, notice and availability of current public information about us.
A person, or persons whose shares are aggregated, who is not deemed to have
been one of our affiliates at any time during the 90 days immediately preceding
the sale and who has beneficially owned his or her shares for at least two
years is entitled to sell such shares pursuant to Rule 144(k) without regard to
the limitations described above.
Stock Options
We intend to file, within 180 days after the date of this prospectus, a
Form S-8 registration statement under the Securities Act to register shares
issued in connection with option exercises. Shares of common stock issued upon
exercise of options after the effective date of the Form S-8 will be available
for sale in the public market, subject to Rule 144 volume limitations
applicable to affiliates and lock-up agreements.
Lock-Up Agreements
All of our officers, directors, stockholders and warrant holders have
agreed pursuant to lock-up agreements that, among other things, they will not
offer, sell, contract to sell, pledge, grant any option to sell, or otherwise
dispose of, directly or indirectly, any shares of common stock or securities
convertible or exchangeable for common stock, or warrant or other rights to
purchase common stock for a period of 180 days after the date of this
prospectus without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation.
44
<PAGE>
UNDERWRITING
Subject to the terms and conditions in an underwriting agreement, dated
________________, 2000, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, SG Cowen Securities
Corporation, J.C. Bradford & Co. and DLJdirect Inc., have severally agreed to
purchase from us the respective number of shares of common stock set forth
opposite their names below.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation
SG Cowen Securities Corporation
J.C. Bradford & Co.
DLJdirect Inc.
---------------
Total
===============
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock of
this offering are subject to approval by their counsel of legal matters and to
other conditions. The underwriters are obligated to purchase and accept
delivery of all the shares of common stock, other than those shares covered by
the over-allotment option described below, if any are purchased.
The underwriters initially propose to offer the shares of common stock in
part directly to the public at the initial public offering price set forth on
the cover page of this prospectus and in part to selected broker/dealers,
including the underwriters, and other broker/dealers not included in the table
above, at this price less a concession not in excess of $______ per share. The
underwriters may allow, and these dealers may re-allow, to other dealers a
concession not in excess of $_____ per share. After the initial offering of the
common stock, the representatives of the underwriters may change the public
offering price and other selling terms at any time without notice.
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
The following table shows the underwriting fees to be paid to the
underwriters by us in connection with this offering. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares of common stock.
No Exercise Full Exercise
------------- --------------
Per Share
Total
The expenses of this offering, other than the underwriting discount,
include the registration fees and the fees of financial printers, counsel and
accountants. We will pay these fees and expenses, estimated to be $__________.
An electronic prospectus will be made available on the website maintained
by DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation. Other than the prospectus in electronic format, the information on
the Internet site relating to this offering is not part of this prospectus, has
not been approved or endorsed by us or any underwriter and should not be relied
on by prospective purchasers.
45
<PAGE>
We have granted to the underwriters an option, exercisable within 30 days
after the date of this prospectus, to purchase, from time to time, in whole or
in part, up to an aggregate of _______ additional shares of common stock at the
initial public offering price less underwriting discounts and commissions. The
underwriters may exercise this option solely to cover over-allotments, if any,
made in connection with this offering. To the extent that the underwriters
exercise this option, each underwriter will become obligated, subject to
specified conditions, to purchase its pro rata portion of such additional
shares based on such underwriter's initial purchase commitment.
We have agreed to indemnify the underwriters against liabilities,
including liabilities under the Securities Act, or to contribute to payments
that the underwriters may be required to make in connection with those
liabilities. These liabilities generally consist of losses, claims, damages or
actions arising from or relating to the offer, purchase or sale of common stock
in this offering by the underwriters. Indemnification under the Securities Act
may be unenforceable as against public policy.
We and our executive officers, directors, stockholders and warrant holders
have agreed, for a period of 180 days after the date of this prospectus,
subject to exceptions, that without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation, that none of us will:
o issue, offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of, directly
or indirectly, any shares of common stock or any securities convertible
into, exercisable or exchangeable for common stock
o enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock
In addition, during such period, we also agreed not to file any
registration statement with respect to, and each of our officers, directors,
stockholders and warrant holders not to make any demand for, or exercise any
right with respect to, the registration of any shares of common stock or any
securities convertible into or exercisable or exchangeable for common stock
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation.
At our request, the underwriters have reserved for sale, at the initial
public offering price, ______ shares of common stock, representing
approximately __% of the shares of common stock offered by this prospectus, for
sale to our directors, officers and other persons we designate. The number of
shares of common stock available for sale to the general public will be reduced
to the extent any reserved shares are purchased. Any reserved shares not
purchased will be offered by the underwriters to the general public on the same
terms as the other shares offered by this prospectus.
Prior to this offering, there has been no established trading market for
our common stock. Consequently, the initial public offering price will be
determined by negotiations among us and the representatives of the
underwriters. The factors to be considered in determining the initial public
offering price are:
o the history of and prospects for our business and the industry in which
we compete
o an assessment of our management and the present state of our development
o our past and present revenues, earnings and cash flows
o our prospects for growth, revenues, earnings and cash flows
o the current state of the economy in the United States and the current
level of economic activity in the industry in which we compete and in
related or comparable industries
o currently prevailing conditions in the securities markets, including
current market valuations of publicly traded companies which are
comparable to us
We have applied for quotation of our common stock on the Nasdaq National
Market under the symbol ERES.
46
<PAGE>
Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of our common
stock offered by this prospectus in any jurisdiction where action for that
purpose is required. The shares of common stock offered by this prospectus may
not be offered or sold, directly or indirectly, nor may this prospectus or any
other offering material or advertisements in connection with the offer and sale
of any shares of our common stock be distributed or published in any
jurisdiction, except under circumstances that will result in compliance with
the applicable rules and regulations of such jurisdiction. Persons into whose
possession this prospectus comes are advised to inform themselves about, and to
observe, any restrictions relating to this offering and the distribution of
this prospectus. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any shares of our common stock offered by this
prospectus in any jurisdiction in which such an offer or solicitation is
unlawful.
In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or affect the price of our common stock.
Specifically, the underwriters may over-allot this offering, meaning syndicate
sales may be in excess of the offering size which creates a syndicate short
position. The underwriters may bid for and purchase shares of common stock in
the open market to cover the syndicate short position or to stabilize the price
of our common stock. In addition, the underwriting syndicate may reclaim
selling concessions from syndicate members if the syndicate repurchases
previously distributed common stock in syndicate covering transactions, in
stabilization transactions or in other transactions. Any of these activities
may stabilize or maintain the market price of our common stock above
independent market levels. The underwriters are not required to engage in these
activities, and may end any of these activities at any time.
LEGAL MATTERS
Duane, Morris & Heckscher, LLP, Philadelphia, Pennsylvania will provide us
an opinion relating to the validity of the common stock issued in this
offering. Sheldon M. Bonovitz, the Chairman and a partner of Duane, Morris &
Heckscher, LLP, is a director of both eResearchTechnology, Inc. and Premier
Research Worldwide. Certain legal matters in connection with this offering will
be passed upon for the underwriters by Alston & Bird LLP, Atlanta, Georgia.
EXPERTS
The financial statements and schedule included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to the common stock we are offering by this
prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information described in the
registration statement or the exhibits and schedules which are part of the
registration statement. For further information with respect to eRT and the
common stock, refer to the registration statement and the related exhibits and
schedules. You may read and copy any document we file at the Securities and
Exchange Commission's public reference rooms at 450 Fifth Street NW,
Washington, D.C., 20549, Seven World Trade Center, Suite 1300, New York, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information about the public reference rooms. Our Securities and
Exchange Commission filings are also available to the public from the
Securities and Exchange Commission's website at www.sec.gov. Upon completion of
this offering, we must comply with the information and periodic reporting
requirements of the Securities Exchange Act and will file periodic reports,
proxy statements and other information with the Securities and Exchange
Commission. These periodic reports, proxy statements and other information will
be available for inspection and copying at the Securities and Exchange
Commission's public reference room and the website of the Securities and
Exchange Commission.
47
<PAGE>
INDEX TO FINANCIAL STATEMENTS
eRESEARCHTECHNOLOGY, INC:
Pro Forma Financial Statement--
Basis of Presentation ............................ F-2
Pro Forma Statement of Operations ................ F-3
Historical Financial Statements--
Report of Independent Public Accountants ......... F-4
Balance Sheets ................................... F-5
Statements of Operations ......................... F-6
Statements of Stockholders' Equity ............... F-7
Statements of Cash Flows ......................... F-8
Notes to Financial Statements .................... F-9
DLB SYSTEMS, INC.:
Report of Independent Public Accountants ......... F-20
Statement of Operations .......................... F-21
Statement of Cash Flows .......................... F-22
Notes to Financial Statements .................... F-23
F-1
<PAGE>
eRESEARCHTECHNOLOGY, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENT
BASIS OF PRESENTATION
On December 31, 1999, our parent, Premier Research Worldwide, Ltd.
("Premier Research") sold the business and certain of the net assets of its
domestic clinical trials management and clinical data management operations
("clinical research operations"). The sale agreement provides for Premier
Research to receive consideration that could total $18,000,000, of which
$1,000,000 was paid on December 31, 1999 and $8,000,000 was paid on January 31,
2000, with the balance payable over time, subject to adjustments and earn-outs.
Effective January 1, 2000, Premier Research contributed its technology and
remaining operating business to us in exchange for all of our issued and
outstanding stock. Accordingly, our historical financial statements present the
Company as a division of Premier Research, but essentially represent all of
Premier Research's operating assets, liabilities, revenues and expenses,
including those related to the domestic clinical research operation. Our
historical financial statements exclude Premier Research's cash and cash
equivalents, marketable securities, investments, interest income, the gain on
the sale of the clinical research operations and related income tax amounts.
The Pro Forma Statement of Operations for the year ended December 31, 1999
presents the Company's results of operations, assuming that the divestiture
occurred as of January 1, 1999. The divestiture adjustments reflect the
adjustments required to remove the results of operations directly attributable
to the domestic clinical research operations and certain centralized selling,
general and administrative costs specifically identified with the domestic
clinical research operations totaling $3,105,000, that were historically
included in a corporate allocation. The Pro Forma Statement of Operations does
not consider any adjustments for the Company's international clinical research
operations, which were closed in the third quarter of 1999.
The Pro Forma Statement of Operations should be read in conjunction with
the historical financial statements and notes thereto included elsewhere in
this prospectus. The Pro Forma Statement of Operations is presented for
informational purposes only and is not intended to be indicative of the results
of operations that would have occurred had the divestiture been consummated as
of the beginning of the period presented, nor is it intended to be indicative
of future results of operations.
F-2
<PAGE>
eRESEARCHTECHNOLOGY, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Divestiture
Historical Adjustments Pro Forma
--------------- ---------------- ---------------
<S> <C> <C> <C>
Net revenues:
Licenses and services .............................. $ 26,075,000 $ -- $ 26,075,000
Clinical research services ......................... 16,710,000 (15,989,000) 721,000
------------ ------------- ------------
Total net revenues .............................. 42,785,000 (15,989,000) 26,796,000
Cost of revenues:
Cost of licenses and services ...................... 12,897,000 -- 12,897,000
Cost of clinical research services ................. 12,512,000 (11,397,000) 1,115,000
------------ ------------- ------------
Total cost of revenues .......................... 25,409,000 (11,397,000) 14,012,000
------------ ------------- ------------
Gross margin .................................... 17,376,000 (4,592,000) 12,784,000
------------ ------------- ------------
Operating expenses:
Selling and marketing .............................. 5,124,000 (2,139,000) 2,985,000
General and administrative ......................... 6,565,000 (1,143,000) 5,422,000
Research and development ........................... 2,472,000 -- 2,472,000
------------ ------------- ------------
Total operating expenses ........................ 14,161,000 (3,282,000) 10,879,000
------------ ------------- ------------
Income before income taxes .......................... 3,215,000 (1,310,000) 1,905,000
Income tax provision ................................ 1,286,000 (532,000) 754,000
------------ ------------- ------------
Net income .......................................... $ 1,929,000 $ (778,000) $ 1,151,000
============ ============= ============
Basic and diluted net income per share .............. $ 1,929 $ 1,151
============ ============
Shares used to compute net income per share ......... 1,000 1,000
============ ============
</TABLE>
See Unaudited Pro Forma Financial Statement -- Basis of Presentation
F-3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To eResearchTechnology, Inc.:
We have audited the accompanying balance sheets of eResearchTechnology, Inc.,
(a Delaware corporation and wholly-owned subsidiary of Premier Research
Worldwide, Ltd. -- see Note 1) as of December 31, 1998 and 1999, and the
related statements of operations, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of eResearchTechnology, Inc. as
of December 31, 1998 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with generally accepted accounting principles in the United States.
ARTHUR ANDERSEN LLP
Philadelphia, PA
January 31, 2000 (except with respect to
the matters discussed in Notes 11 and 12, as to
which the date is March 24, 2000)
F-4
<PAGE>
eRESEARCHTECHNOLOGY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
Equity
December 31, at
-------------------------------- December 31,
1998 1999 1999
--------------- -------------- --------------
<S> <C> <C> <C>
Assets
Current assets:
Accounts receivable, net .............................. $ 10,423,000 $ 4,537,000
Prepaid expenses and other ............................ 2,047,000 1,092,000
Deferred income taxes ................................. 159,000 235,000
------------ ------------
Total current assets ............................... 12,629,000 5,864,000
Property and equipment, net ............................ 4,110,000 2,705,000
Goodwill, net .......................................... 2,160,000 1,844,000
Other assets ........................................... 23,000 23,000
Deferred income taxes .................................. 3,631,000 2,889,000
------------ ------------
$ 22,553,000 $ 13,325,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ...................................... $ 2,519,000 $ 1,761,000
Accrued expenses ...................................... 1,099,000 3,322,000
Income taxes payable .................................. 57,000 576,000
Deferred revenues ..................................... 5,556,000 2,404,000
------------ ------------
Total current liabilities .......................... 9,231,000 8,063,000
------------ ------------
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock, no par value, 10,000,000 shares autho-
rized, none issued and outstanding .................. -- -- $ --
Common stock, $.01 par value, 50,000,000 shares autho-
rized, none issued and outstanding actual and ____
shares issued and outstanding pro forma ............. -- --
Additional paid-in capital ............................ -- --
Common stock warrants ................................. -- --
Retained earnings (accumulated deficit) ............... -- --
Division equity ....................................... 13,322,000 5,262,000 --
------------ ------------ -----------
Total stockholders' equity ......................... 13,322,000 5,262,000 $14,762,000
------------ ------------ ===========
$ 22,553,000 $ 13,325,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
eRESEARCHTECHNOLOGY, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1997 1998 1999
---------------- --------------- ---------------
<S> <C> <C> <C>
Net revenues:
Licenses and services ................................ $ 7,695,000 $ 19,753,000 $ 26,075,000
Clinical research services ........................... 6,468,000 12,054,000 16,710,000
------------- ------------ ------------
Total net revenues ................................ 14,163,000 31,807,000 42,785,000
Cost of revenues:
Cost of licenses and services ........................ 5,270,000 9,269,000 12,897,000
Cost of clinical research services ................... 6,806,000 10,488,000 12,512,000
------------- ------------ ------------
Total cost of revenues ............................ 12,076,000 19,757,000 25,409,000
------------- ------------ ------------
Gross margin ...................................... 2,087,000 12,050,000 17,376,000
------------- ------------ ------------
Operating expenses:
Selling and marketing ................................ 2,492,000 3,764,000 5,124,000
General and administrative ........................... 2,873,000 4,966,000 6,565,000
Research and development ............................. 357,000 3,131,000 2,472,000
Acquired in-process research and development ......... 7,883,000 -- --
------------- ------------ ------------
Total operating expenses .......................... 13,605,000 11,861,000 14,161,000
------------- ------------ ------------
Income (loss) before income taxes ..................... (11,518,000) 189,000 3,215,000
Income tax provision (benefit) ........................ (4,530,000) 64,000 1,286,000
------------- ------------ ------------
Net income (loss) ..................................... $ (6,988,000) $ 125,000 $ 1,929,000
============= ============ ============
Basic and diluted net income (loss) per share ......... $ (6,988) $ 125 $ 1,929
============= ============ ============
Shares used in computing net income (loss) per share 1,000 1,000 1,000
============= ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
eRESEARCHTECHNOLOGY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
------------------------ Paid-in Division
Shares Amount Capital Equity Total
---------- ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 ................. -- $ -- $ -- $ 1,018,000 $ 1,018,000
Net loss .................................. -- -- -- (6,988,000) (6,988,000)
Deemed distribution to Parent of
deferred tax asset ...................... -- -- -- (493,000) (493,000)
Net cash contribution from Parent ......... -- -- -- 15,167,000 15,167,000
-------- -------- -------- ------------ ------------
Balance, December 31, 1997 ................. -- -- -- 8,704,000 8,704,000
Net income ................................ -- -- -- 125,000 125,000
Deemed distribution to Parent of
deferred tax asset ...................... -- -- -- (647,000) (647,000)
Net cash contribution from Parent ......... -- -- -- 5,140,000 5,140,000
-------- -------- -------- ------------ ------------
Balance, December 31, 1998 ................. -- -- -- 13,322,000 13,322,000
Net income ................................ -- -- -- 1,929,000 1,929,000
Deemed distribution to Parent of
net assets of domestic clinical
research operations ..................... -- -- -- (4,150,000) (4,150,000)
Issuance of Parent common stock
option to non-employee .................. -- -- -- 30,000 30,000
Net cash distribution to Parent ........... -- -- -- (5,869,000) (5,869,000)
-------- -------- -------- ------------ ------------
Balance, December 31, 1999 ................. -- $ -- $ -- $ 5,262,000 $ 5,262,000
======== ======== ======== ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
eRESEARCHTECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1997 1998 1999
----------------- --------------- --------------
<S> <C> <C> <C>
Operating activities:
Net income (loss) ............................................. $ (6,988,000) $ 125,000 $ 1,929,000
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities--
Depreciation and amortization .............................. 709,000 1,606,000 2,167,000
Provision for losses on accounts receivable ................ -- -- 399,000
Issuance of stock option to non-employee ................... -- -- 30,000
Acquired in-process research and
development .............................................. 7,883,000 -- --
Deferred income taxes ...................................... (4,642,000) (5,000) 688,000
Loss on sales of property and equipment .................... 36,000 -- 20,000
Changes in operating assets and liabilities, excluding
effects of business acquisition and disposition: .........
Accounts receivable ..................................... (1,277,000) (5,254,000) 1,320,000
Prepaid expenses and other .............................. (524,000) (1,231,000) 955,000
Accounts payable ........................................ (295,000) 774,000 (550,000)
Accrued expenses ........................................ 21,000 11,000 2,128,000
Income taxes payable .................................... (512,000) (22,000) 497,000
Deferred revenues ....................................... 586,000 2,208,000 (1,470,000)
------------- ------------ ------------
Net cash provided by (used in)
operating activities ................................. (5,003,000) (1,788,000) 8,113,000
------------- ------------ ------------
Investing activities:
Purchases of property and equipment ......................... (1,509,000) (3,352,000) (2,317,000)
Proceeds from sales of property and equipment ............... -- -- 73,000
Net cash paid for business acquisition ...................... (8,655,000) -- --
------------- ------------ ------------
Net cash used in investing activities ................. (10,164,000) (3,352,000) (2,244,000)
------------- ------------ ------------
Financing activities:
Net contribution from (distribution to) Parent .............. 15,167,000 5,140,000 (5,869,000)
------------- ------------ ------------
Net increase in cash and cash equivalents ...................... -- -- --
Cash and cash equivalents, beginning of year ................... -- -- --
------------- ------------ ------------
Cash and cash equivalents, end of year ......................... $ -- $ -- $ --
============= ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-8
<PAGE>
eRESEARCHTECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Background and Basis of Presentation
eResearchTechnology, Inc. (the "Company") is a provider of integrated
software applications and technology consulting services to its customers in
the pharmaceutical, biotechnology and medical device industries and clinical
research organizations serving those industries. The Company is also a leading
provider of centralized collection and interpretation of electrocardiograms,
one of the most frequently used diagnostic tests in a clinical trial. Prior to
the December 31, 1999 sale of the domestic clinical research operations (see
Note 3), the Company also provided its customers clinical trial and data
management services. The clinical research operations were not a reportable
business segment and, therefore, the sale has not been reported as a
discontinued operation.
Historically, the Company operated through two business segments:
Technology Operations and Clinical Operations (see Note 10). Technology
Operations include software development, sales and support and consulting
services. Clinical Operations include clinical trial support services, which
consist primarily of the centralized collection and interpretation of
electrocardiograms, and clinical research operations, which consist primarily
of clinical trial and data management.
The Company was incorporated in December 1999 as a wholly owned subsidiary
of Premier Research Worldwide, Ltd. ("Premier Research"), a publicly traded
company. Effective January 1, 2000, Premier Research contributed its technology
and operating businesses to the Company in exchange for all of its issued and
outstanding capital stock, which consisted of 1,000 shares of common stock.
Accordingly, the historical financial statements present the Company as a
division of Premier Research through December 31, 1999, but essentially
represent all of Premier Research's historical operating assets, liabilities,
revenues and expenses for all periods presented. The Company's financial
statements exclude Premier Research's cash and cash equivalents, marketable
securities, investments, interest income, the gain on the sale of the domestic
clinical research operations and related income tax amounts.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenues
The Company's software revenues relate primarily to sales of perpetual
licenses to end-users. Revenues from software licenses are recognized when a
formal agreement exists, delivery of the software has occurred, collectibility
is probable and the license fee is fixed or determinable. Revenues from
software maintenance and support contracts are recognized on a straight-line
basis over the term of the contract, typically 12 months. Revenues from
training and consulting services are recognized as services are performed (see
Note 7). Revenues from usage-based services for which the Company charges a
contracted fee-for-service and clinical research services are generally
recorded when services are rendered. Usage services consist primarily of the
centralized collection and interpretation of electrocardiograms. The Company
often receives non-refundable deposits from its customers related to usage
services and clinical research services that are recorded as deferred revenues
in the accompanying consolidated balance sheets. Revenues for the year ended
December 31, 1998 include a $750,000 nonrefundable deposit and termination fee
under a contract that was cancelled before completion.
F-9
<PAGE>
eRESEARCHTECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (Continued)
The Company's net revenues consisted of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1997 1998 1999
--------------- -------------- --------------
<S> <C> <C> <C>
Licenses ........................................ $ 210,000 $ 5,142,000 $ 4,381,000
Consulting and software maintenance services..... 585,000 4,788,000 7,681,000
Usage services .................................. 6,900,000 9,823,000 14,013,000
Clinical research services ...................... 6,468,000 12,054,000 16,710,000
------------ ------------ ------------
$ 14,163,000 $ 31,807,000 $ 42,785,000
============ ============ ============
</TABLE>
Prepaid Expenses and Other
Prepaid expenses and other current assets includes advances of $989,000
and $282,000 at December 31, 1998 and 1999, respectively, made by the Company
for lease build-out costs reimbursed by landlords.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets ranging
from three to five years. Leasehold improvements are amortized using the
straight-line method over the shorter of the estimated useful life of the asset
or the remaining lease term. Repair and maintenance costs are expensed as
incurred. Improvements and betterments are capitalized. Gains or losses on the
disposition of property and equipment are included in operations. Depreciation
expense was $605,000, $1,228,000 and $1,851,000 for the years ended December
31, 1997, 1998 and 1999, respectively.
Goodwill
Goodwill is amortized using the straight-line method over eight years and
is net of accumulated amortization of $704,000 and $1,020,000 as of December
31, 1998 and 1999, respectively. The related amortization expense was $104,000,
$378,000 and $316,000 for the years ended December 31, 1997, 1998, and 1999,
respectively.
Long-Lived Assets
The Company continually evaluates whether later events and circumstances
have occurred that indicate the remaining estimated useful life may warrant
revision or that the remaining balance of long-lived assets may not be
recoverable. If factors indicate that long-lived assets should be evaluated for
possible impairment, the Company would use an estimate of the related
undiscounted cash flows in measuring whether long-lived assets should be
written down to their fair value, in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." Management believes that
there has been no impairment of long-lived assets as of December 31, 1999.
Accrued Expenses
Included in accrued expenses at December 31, 1998 and 1999 was accrued
compensation of $515,000 and $1,390,000, respectively. Also included in accrued
expenses at December 31, 1999 was a $620,000 commission payable to a
third-party under a marketing assistance agreement.
Software Development Costs
Research and development expenditures are charged to operations as
incurred. SFAS No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed," requires the capitalization of certain
software development costs subsequent to the establishment of technological
feasibility. The Company
F-10
<PAGE>
eRESEARCHTECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (Continued)
has determined that technological feasibility for its products is generally
achieved upon completion of a working model. Since software development costs
have not been significant after the completion of a working model, all such
costs have been charged to expense as incurred.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising expense
for the years ended December 31, 1997, 1998 and 1999 was $310,000, $473,000,
and $481,000 and respectively.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Prior to 2000, the Company was not a tax paying entity and was included in the
consolidated federal tax return of Premier Research. The accompanying financial
statements reflect the accounting for income taxes on a separate-company basis
as if the Company was a tax paying entity separate from Premier Research for
all periods presented. In 1997 and 1998, net operating loss carryforwards
generated by the Company on a separate-company basis were utilized by Premier
Research to offset nonoperating income. The corresponding reduction to the
Company's deferred income tax assets has been recorded as a deemed distribution
to Premier Research.
In 2000, the Company will be included in certain Premier Research
consolidated income tax filings and, accordingly, the Company and Premier
Research have entered into a tax sharing agreement that requires the Company to
pay Premier Research for the Company's portion of Premier Research's tax
liabilities, as defined. Under the agreement, Premier Research will reimburse
the Company for any tax benefit, as defined, generated by the Company (see Note
7).
Supplemental Cash Flow Information
The following table displays the net non-cash assets that were
consolidated (deconsolidated) as a result of the Company's 1997 business
acquisition (see Note 2) and 1999 business divestiture (see Note 3):
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1997 1999
-------------- -----------------
<S> <C> <C>
Non-cash assets (liabilities):
Accounts receivable ......................... $ 1,055,000 $ (4,167,000)
Prepaid expenses and other .................. 35,000 --
Property and equipment ...................... 386,000 (1,778,000)
Other assets ................................ 23,000 --
In-process research and development ......... 7,883,000 --
Goodwill .................................... 2,548,000 --
Accounts payable ............................ (1,209,000) 208,000
Accrued expenses ............................ (450,000) (95,000)
Deferred revenues ........................... (1,616,000) 1,682,000
------------ -------------
$ 8,655,000 $ (4,150,000)
============ =============
</TABLE>
Concentration of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to
concentration of credit risk consist primarily of trade accounts receivable
from companies operating in the pharmaceutical, biotechnology and
F-11
<PAGE>
eRESEARCHTECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (Continued)
medical device industries. For the years ended December 31, 1997 and 1998, no
single client accounted for greater than 10% of net revenues. For the year
ended December 31, 1999, one clinical research operations client accounted for
11.1% of net revenues. The loss of a significant customer could have a material
adverse effect on the Company's operations.
Translation of Foreign Financial Statements
Assets and liabilities of the Company's UK subsidiary are translated at
the exchange rate as of the end of each reporting period. The income statement
is translated at the average exchange rate for the period. Annual and
cumulative adjustments from translating the UK financial statements, are
immaterial.
Restatement of Certificate of Incorporation
Subsequent to year-end, the Company authorized new shares (see Note 12).
Net Income (Loss) Per Common Share
The Company follows SFAS No. 128 "Earnings per Share". This statement
requires the presentation of basic and diluted earnings per share. Basic net
income (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding during the year.
Diluted net income (loss) per share is computed by dividing net income (loss)
by the weighted average number of shares of common stock outstanding during the
year, adjusted for the dilutive effect of common stock equivalents. As the
Company did not have any common stock equivalents outstanding during the
periods presented, basic and diluted net income (loss) per share are the same
for the years ended December 31, 1997, 1998 and 1999. In addition, net income
(loss) per share has been calculated for all periods presented based on the
1,000 shares of common stock issued to Premier Research effective January 1,
2000.
2. ACQUISITION OF DLB SYSTEMS, INC.
Effective October 31, 1997, the Company acquired substantially all of the
assets of DLB Systems, Inc. ("DLB") for $6,500,000 in cash, its prior $1.0
million investment and the assumption of certain liabilities. The acquisition
was accounted for under the purchase method of accounting, whereby the purchase
price was allocated to the assets acquired and the liabilities assumed, based
on their fair market values at the acquisition date. The excess of the purchase
price over the estimated fair market value of the net assets acquired was
assigned to identifiable intangibles. The Company assigned $7,883,000 to
in-process research and development and such amount was charged to operations
in the accompanying consolidated statement of operations. The Company also
recorded goodwill of $2,548,000, which is being amortized on a straight-line
basis over eight years.
F-12
<PAGE>
eRESEARCHTECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
DLB's results of operations have been included in the Company's
consolidated financial statements from the effective date of the acquisition.
The following table summarizes the unaudited pro forma results of operations of
the Company as if the acquisition of DLB had occurred on January 1, 1996. The
pro forma information does not purport to be indicative of the results that
would have been attained if the operations had actually been combined during
the periods presented.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1996 1997
--------------- ---------------
<S> <C> <C>
Net revenues ................................. $ 21,615,000 $ 18,868,000
Operating loss ............................... (1,751,000) (5,687,000)
Net loss ..................................... (1,477,000) (3,527,000)
Basic and diluted net loss per share ......... (1,477) (3,527)
</TABLE>
The pro forma amounts do not include the one-time charge of $7,883,000
related to the write-off of in-process research and development.
3. SALE OF THE DOMESTIC CLINICAL RESEARCH OPERATIONS:
On December 31, 1999, Premier Research sold the business and certain of
the net assets of its domestic clinical research operation, which consisted of
clinical trial management and clinical data management operations. The sale
agreement provides for Premier Research to receive consideration that could
total $18,000,000, of which $1,000,000 was paid in cash on December 31, 1999
and $8,000,000 was received on January 31, 2000, with the balance payable over
time, subject to adjustments and earn-outs. The Company will receive no
proceeds from the sale as Premier Research will retain all proceeds.
Accordingly, we have not recognized in our operating results the $4,850,000
pre-tax gain realized by Premier Research in 1999 and we have recorded the
divestiture of the net assets of the domestic clinical research operation as a
deemed dividend to Premier Research.
4. ACCOUNTS RECEIVABLE:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1998 1999
--------------- --------------
<S> <C> <C>
Billed .................................. $ 10,307,000 $ 4,962,000
Unbilled ................................ 359,000 --
Allowance for doubtful accounts ......... (243,000) (425,000)
------------ -----------
$ 10,423,000 $ 4,537,000
============ ===========
</TABLE>
5. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1998 1999
-------------- --------------
<S> <C> <C>
Computer and other equipment .......... $ 9,466,000 $ 9,230,000
Furniture and fixtures ................ 1,436,000 1,154,000
Leasehold improvements ................ 808,000 480,000
------------ ------------
11,710,000 10,864,000
Less-Accumulated depreciation ......... (7,600,000) (8,159,000)
------------ ------------
$ 4,110,000 $ 2,705,000
============ ============
</TABLE>
F-13
<PAGE>
eRESEARCHTECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
6. INCOME TAXES:
Prior to 2000, the Company was not a tax paying entity and was included in
the consolidated federal tax return of Premier Research. The accompanying
financial statements reflect the accounting for income taxes on a
separate-company basis as if the Company was a tax paying entity separate from
Premier Research for all periods presented. In 2000, the Company will be
included in certain Premier Research consolidated income tax filings and,
accordingly the Company and Premier Research have entered into a tax sharing
agreement that requires the Company to pay Premier Research for the Company's
portion of Premier Research's tax liabilities, as defined. Under the agreement,
Premier Research will reimburse the Company for any tax benefit, as defined,
generated by the Company (see Note 7).
The income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1997 1998 1999
----------------- ------------- -------------
<S> <C> <C> <C>
Current provision :
Federal ................... $ -- $ -- $ 399,000
State ..................... 112,000 69,000 71,000
Foreign ................... -- -- 128,000
------------- ---------- ----------
112,000 69,000 598,000
------------- ---------- ----------
Deferred provision (benefit):
Federal ................... (3,100,000) (109,000) 547,000
State ..................... (1,113,000) (105,000) 141,000
Foreign ................... (429,000) 209,000 --
------------- ---------- ----------
(4,642,000) (5,000) 688,000
------------- ---------- ----------
$ (4,530,000) $ 64,000 $1,286,000
============= ========== ==========
</TABLE>
Foreign income (loss) before income taxes was $(1,300,000), $676,000 and
414,000 for the years ended December 31, 1997, 1998 and 1999, respectively.
The reconciliation between the federal statutory income tax rate and the
Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
---------- ------ --------
<S> <C> <C> <C>
Tax at federal statutory rate ................. (34)% 34% 34%
State and local taxes, net of federal ......... (6) -- 6
Other ......................................... 1 -- --
----- -- --
(39)% 34% 40%
===== == ==
</TABLE>
The components of the Company's net deferred tax asset are as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1998 1999
--------------- ---------------
<S> <C> <C>
Goodwill amortization ..................... $ 2,986,000 $ 2,876,000
Net operating loss carry-forwards ......... 652,000 33,000
Depreciation .............................. (7,000) (86,000)
Reserves and accruals ..................... 159,000 301,000
----------- -----------
$ 3,790,000 $ 3,124,000
=========== ===========
</TABLE>
F-14
<PAGE>
eRESEARCHTECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
7. RELATED PARTY TRANSACTIONS:
Transactions with the Company's Chairman
The Company's Chairman, who is the Chief Executive Officer of Premier
Research, is a cardiologist who provides medical services to the Company as an
independent contractor through his wholly-owned professional corporation (see
Note 9). Fees incurred under this consulting arrangement approximated $144,000,
$144,000 and $156,000 for the years ended December 31, 1997, 1998 and 1999,
respectively. In addition, at December 31, 1998 and 1999 amounts owed to the
Company's Chairman in connection with the consulting agreement were $48,000 and
$52,000, respectively. Premier Research and the Company's Chairman entered into
new employment and consulting agreements during 1999 (see Note 9).
Transactions with Premier Research
Effective January 1, 2000, the Company entered into a tax sharing
agreement with Premier Research. Pursuant to the tax sharing agreement, the
Company and Premier Research will make payments to one another that, with
respect to any period, will be determined by calculating the difference between
Premier Research's consolidated combined unitary group tax liability with and
without the Company's inclusion. In general, the tax sharing agreement is
effective only for tax periods in which the Company is a member of the Premier
Research consolidated group for federal income tax purposes. The tax sharing
agreement allows for the Company to carry back any net operating loss, net
capital loss or tax credit allowed under the tax law that arises in any taxable
year in which the Company is not a member of the Premier Research consolidated
group, to a tax return filed by the Premier Research consolidated group in
which the Company was included as a member. In that case, the Company would be
entitled to receive from Premier Research any refund of taxes resulting from
such carryback. Similar rules apply to state and local taxes, as well.
Effective January 1, 2000, the Company also entered into a services and
support agreement with Premier Research. Other than their CEO, who is the
Company's Chairman, Premier Research does not have any employees. The Company
has agreed to provide a broad range of financial and administrative services to
Premier Research for which Premier Research will pay a $10,000 monthly fee and
reimburse the Company 6.5% of its chief executive officer's salary and 25% of
its chief financial officer's salary. The Company will also provide office
space for the Chief Executive Officer of Premier Research. Premier Research has
also agreed to: (i) provide any cash advances the Company reasonably needs for
business and operations, subject to a $10.0 million limit, for which interest
will be paid at the prime rate; (ii) allow the Company to use its bank accounts
and management and administrative systems, (iii) provide a broad range of
insurance coverage for the Company under its insurance policies. The Company
will pay a portion of the premiums for any Premier Research insurance policies.
Premier Research has also agreed to consider in good faith any adjustments that
may be necessary to the monthly fee if the resources the Company provides under
the agreement are disproportionate to the fee.
Transactions with UM Holdings Ltd.
Prior to Premier Research's initial public offering in February 1997,
Premier Research was a wholly owned subsidiary of UM Holdings Ltd. ("UM"). The
Company leased its primary operating facility from UM (see Note 9) in 1997 and
1998 and participated in UM's 401(k) profit sharing plan in 1997. The Company
was charged $349,000 for rent under the facility lease for the years ended
December 31, 1997 and 1998, and $47,000 for profit sharing plan contributions
for the year ended December 31, 1997. The Company believes that all amounts
charged by UM were reasonable. In 1997, the Company paid UM $485,000 for 1996
income taxes and $90,000 for estimated 1997 income taxes due under the tax
sharing agreement between Premier Research and UM.
F-15
<PAGE>
eRESEARCHTECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
7. RELATED PARTY TRANSACTIONS: -- (Continued)
Consulting Agreement with AmericasDoctor.com
Premier Research owns an equity investment in AmericasDoctor.com, an
Internet company that provides physician referrals and healthcare events on
AOL's health web page. In 1999, the Company entered into a two-year, $4.6
million consulting contract with AmericasDoctor.com to help them develop their
clinical trial patient recruitment site. During 1999, the Company recognized
net revenues of $2.3 million under this consulting contract, of which, $575,000
was included in accounts receivable at December 31, 1999.
8. STOCK OPTION PLANS:
The Company intends to adopt a stock option plan that provides for the
grant of incentive and nonqualified stock options to Company employees,
directors and consultants.
9. COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases office space and equipment under operating leases.
During the years ended December 31, 1997 and 1998, the Company leased its
primary operating facility from UM under a lease agreement executed in June
1996 that was to expire in September 2003 (see Note 7). The Company terminated
the facility lease with UM, without penalty, on January 3, 1999 and moved into
a new facility under a lease agreement that expires in August 2005. Rent
expense for all operating leases for the years ended December 31, 1997, 1998
and 1999 was $708,000 $1,203,000, and $1,579,000, respectively. In connection
with the sale of the domestic clinical research operations, Premier Research
entered into a sublease agreement with the buyer to lease approximately
two-thirds of its primary operating facility through August 2005.
Future minimum lease payments and sublease income as of December 31, 1999
are as follows:
Gross Sublease
Obligation Income
-------------- -------------
2000 ............................... $ 1,693,000 $ 572,000
2001 ............................... 1,724,000 686,000
2002 ............................... 1,733,000 695,000
2003 ............................... 1,733,000 695,000
2004 ............................... 1,582,000 695,000
2005 and thereafter ................ 1,820,000 464,000
------------ ----------
$ 10,285,000 $3,807,000
============ ==========
Royalties
In 1997, the Company entered into a development agreement, as amended,
that provides for royalty-based payments on two of the Company's software
products. The agreement provides for a 5% royalty on certain net license
revenues during a three-year period, not to exceed total royalties of $775,000.
During 1999, the Company charged $131,000 to expense under this agreement.
Agreements with Management
Premier Research has entered into employment and consulting agreements
with its Chief Executive Officer, who is the Company's Chairman, for one-year
periods that commenced in September 1999 and July
F-16
<PAGE>
eRESEARCHTECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
9. COMMITMENTS AND CONTINGENCIES: -- (Continued)
1999, respectively. Either Premier Research or the Chairman may terminate the
employment agreement at any time, with or without cause. However, if Premier
Research terminates the employment agreement without cause, Premier Research
must continue to pay the Chairman's salary for a one-year period subsequent to
the termination. The consulting agreement with Premier Research has been
canceled and, in 2000, the Company entered into a consulting agreement with the
Chairman that relates to the Chairman's capacity as a medical doctor and
cardiologist and, among other things, requires the Chairman to serve as the
Company's medical director and chief science officer, in addition to providing
medical interpretations of diagnostic tests from time to time, as required.
Compensation under the consulting agreement is $156,000 per year.
The Company entered into employment agreements with certain of its
executive officers. Either the Company or the employee may terminate the
employment agreement(s) at any time, with or without cause. However, if the
Company terminates the employment agreement(s) without cause, the Company must
continue to pay certain salaries for up to a one-year period subsequent to
termination.
Litigation
The Company is involved in legal proceedings from time to time in the
ordinary course of its business. Management believes that none of these legal
proceedings will have a material adverse effect on the financial condition or
results of operations of the Company.
The Company believes it has adequate insurance coverage against possible
liabilities that may be incurred in connection with the conduct of its business
primarily as it relates to the testing of new drugs or medical devices. While
the Company believes it operates safely and prudently, in addition to managing
liability risks through contractual indemnification, the Company could be
materially and adversely affected if it were required to pay damages or incur
defense costs in connection with a claim that is beyond the scope of an
indemnity provision or insurance coverage, or if an indemnity is not upheld or
if the claim exceeds the insurance policy limits.
10. OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION:
The Company's operating segments are strategic business units that offer
different products and services to a common client base. The Company's products
and services are provided both in the United States and internationally through
two reportable business segments. Clinical Operations, which includes clinical
research support services, clinical trial management services and clinical data
management services; and Technology Operations, which includes software sales
and support and consulting services.
During 1997 and 1998, no single client accounted for more than 10% of a
segment's net revenues. In 1999, one client accounted for 15.5% of Clinical
Operations net revenues and three clients accounted for 25.9%, 19.1% and 11.7%,
respectively, of Technology Operations net revenues.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies (see Note 1). The Company
evaluates performance based on the net revenues and operating earnings
performance of the respective business segments.
<TABLE>
<CAPTION>
Year Ended December 31, 1997
------------------------------------------------------------------
Clinical
Operations Technology Other Total
--------------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Net revenues from external customers ......... $ 13,368,000 $ 795,000 $ -- $ 14,163,000
Loss from operations ......................... (3,207,000) (8,311,000) -- (11,518,000)
Identifiable assets .......................... 6,263,000 3,573,000 5,175,000 15,011,000
Depreciation and amortization ................ 634,000 75,000 -- 709,000
Capital expenditures ......................... 1,479,000 30,000 -- 1,509,000
</TABLE>
F-17
<PAGE>
eRESEARCHTECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
10. OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION: -- (Continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
-----------------------------------------------------------------
Clinical
Operations Technology Other Total
--------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Net revenues from external customers ......... $ 21,877,000 $ 9,930,000 $ -- $ 31,807,000
Income (loss) from operations ................ (851,000) 1,040,000 -- 189,000
Identifiable assets .......................... 14,189,000 4,588,000 3,776,000 22,553,000
Depreciation and amortization ................ 1,097,000 509,000 -- 1,606,000
Capital expenditures ......................... 2,864,000 488,000 -- 3,352,000
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1999
------------------------------------------------------------------
Clinical
Operations Technology Other Total
--------------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Net revenues from external customers ......... $ 30,723,000 $ 12,062,000 $ -- $ 42,785,000
Income (loss) from operations ................ (755,000) 3,970,000 -- 3,215,000
Identifiable assets .......................... 5,318,000 4,884,000 3,123,000 13,325,000
Depreciation and amortization ................ 1,585,000 582,000 -- 2,167,000
Capital expenditures ......................... 1,654,000 663,000 -- 2,317,000
</TABLE>
The Company operates on a worldwide basis with two locations in the United
States and two locations in the United Kingdom.
Geographic information is as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1997
---------------------------------------------------
United United
States Kingdom Total
--------------- --------------- ---------------
<S> <C> <C> <C>
Net revenues from external customers ......... $ 13,188,000 $ 975,000 $ 14,163,000
Loss from operations ......................... (10,218,000) (1,300,000) (11,518,000)
Identifiable assets .......................... 14,463,000 548,000 15,011,000
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1998
--------------------------------------------------
United United
States Kingdom Total
-------------- --------------- ---------------
<S> <C> <C> <C>
Net revenues from exernal customers ......... $27,187,000 $ 4,620,000 $ 31,807,000
Income (loss) from operations ............... 2,037,000 (1,848,000) 189,000
Identifiable assets ......................... 20,414,000 2,139,000 22,553,000
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1999
--------------------------------------------------
United United
States Kingdom Total
--------------- -------------- ---------------
<S> <C> <C> <C>
Net revenues from external customers ......... $ 37,378,000 $ 5,407,000 $ 42,785,000
Income (loss) from operations ................ 3,718,000 (593,000) 3,215,000
Identifiable assets .......................... 12,924,000 401,000 13,325,000
</TABLE>
F-18
<PAGE>
eRESEARCHTECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
11. SALE OF PREFERRED STOCK AND ISSUANCE OF COMMON STOCK WARRANT SUBSEQUENT TO
DECEMBER 31, 1999:
On March 24, 2000, the Company sold 95,000 shares of preferred stock and
agreed to issue a warrant to purchase 2.5% of the Company's outstanding common
stock, as defined, for $9.5 million. The preferred stock is automatically
convertible into Company common stock upon an initial public offering with
proceeds of at least $25 million at the initial public offering price per share
less the underwriting discounts and commissions. If the Company does not
complete an initial public offering before March 24, 2001, the holder of the
preferred stock has the right to require Premier Research to purchase the
preferred stock for a price equal to the holder's original purchase price, with
the purchase price being paid at Premier Research's option in cash or shares of
Premier Research common stock at the then market price, as defined. The warrant
is issuable concurrent with an initial public offering and is exercisable for a
two-year period at 200% of the initial public offering price per share less the
underwriting discounts and commissions. The Company issued a warrant to a
customer to purchase the number of shares of common stock equal to $1.0 million
divided by the initial public offering price per share. The warrant is
exercisable for a two-year period following the initial public offering at a
per share exercise price equal to the initial public offering price per share.
The warrant was issued in consideration of advisory services provided by the
customer with respect to the customer's relationship with the purchaser of the
preferred stock.
The value of the beneficial conversion feature of the preferred stock and
the value of the warrant issued to the preferred stockholder will be recorded
as a charge against net income available to common stockholders upon the
closing of the Company's initial public offering. The value of the warrant
issued for advisory services will be recorded as a charge against operations
upon the closing of the Company's initial public offering. The warrant values
have been estimated using the Black-Scholes option pricing model and the
following assumptions: volatility of 70%, risk-free interest rate of 6%, fair
market value of a share of common stock equal to the initial public offering
price and a term of two years.
The accompanying balance sheet presents the Company's stockholders' equity
on a pro forma basis to reflect the sale of the preferred stock and the
automatic conversion of the preferred stock, the warrant issuances and the
charges the Company will record in connection with the beneficial conversion
feature of the preferred stock and the value of the warrants.
12. RESTATEMENT OF CERTIFICATE OF INCORPORATION SUBSEQUENT TO DECEMBER 31,
1999:
On March 23, 2000 the Company's certificate of incorporation was restated
to authorize 10,000,000 shares of no par value preferred stock and 50,000,000
shares of $.01 par value common stock. The restatement has been retroactively
reflected in the accompanying financial statements.
F-19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To DLB Systems, Inc.:
We have audited the accompanying statements of operations and cash flows of DLB
Systems, Inc. (a Delaware corporation) for the ten months ended October 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States. 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 results of operations and cash flows of DLB Systems,
Inc. for the ten months ended October 31, 1997, in conformity with generally
accepted accounting principles in the United States.
ARTHUR ANDERSEN LLP
Philadelphia, PA
March 24, 2000
F-20
<PAGE>
DLB SYSTEMS, INC.
STATEMENT OF OPERATIONS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
Net revenue:
License fees ..................................................... $ 1,483,220
Software maintenance and support ................................. 2,275,489
Consulting and training services ................................. 946,017
------------
Net revenue ................................................... 4,704,726
Cost of revenue ..................................................... 1,276,857
------------
Gross margin .................................................. 3,427,869
------------
Operating expenses:
Selling and marketing ............................................ 1,366,311
Research and development ......................................... 2,231,263
General and administrative ....................................... 1,618,969
------------
Total operating expenses ...................................... 5,216,543
------------
Operating loss ................................................ (1,788,674)
Interest expense, net ............................................... (290,491)
------------
Net loss ............................................................ (2,079,165)
Preferred dividends ................................................. (250,000)
------------
Net loss to common shareholders ..................................... $ (2,329,165)
============
Basic and diluted net loss per common share ......................... $ (11.65)
============
Shares used to compute basic and diluted net loss per share ......... 200,000
============
</TABLE>
The accompanying notes are an integral part of this statement.
F-21
<PAGE>
DLB SYSTEMS, INC.
STATEMENT OF CASH FLOWS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss ................................................................... $ (2,079,165)
Adjustments to reconcile net loss to net cash used in operating activities--
Depreciation and amortization ............................................ 195,933
Provision for losses on accounts receivable .............................. 50,000
Loss of disposals of fixed assets ........................................ 2,171
Changes in operating assets and liabilities:
Accounts receivable ..................................................... 1,080,430
Prepaid expenses and other current assets ............................... 10,137
Other assets ............................................................ 41,074
Accounts payable ........................................................ 197,321
Accrued expenses ........................................................ (61,074)
Deferred revenue ........................................................ (161,816)
-------------
Net cash used in operating activities .............................. (724,989)
-------------
Cash flows from investing activities:
Purchases of fixed assets .................................................. (71,860)
-------------
Cash flows from financing activities:
Payments of capital lease obligations ...................................... (18,967)
Proceeds from financing arrangements ....................................... 1,818,789
Payments of principal on financing arrangements ............................ (1,647,287)
Proceeds from issuance of Series B redeemable cumulative preferred stock ... 1,000,000
-------------
Net cash provided by financing activities .......................... 1,152,535
-------------
Net increase in cash ........................................................ 355,686
Cash at beginning of period ................................................. 29,002
-------------
Cash at end of period ....................................................... $ 384,688
=============
Supplemental information:
Cash paid for interest ..................................................... $ 290,491
=============
Supplemental noncash financing activities:
Accrual of preferred stock dividend ........................................ $ 250,000
=============
</TABLE>
The accompanying notes are an integral part of this statement.
F-22
<PAGE>
DLB SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Operations
DLB Systems, Inc. (DLB or the Company) was incorporated in Delaware on
July 31, 1995 to continue to conduct certain business operations formerly
conducted by DLB Systems, Inc., a New Jersey corporation (DLB-NJ). DLB-NJ was
founded in 1992 as a wholly-owned subsidiary of DLB Systems, Ltd. (DLB-Ltd.), a
U.K.-based company. On August 1, 1995, substantially all of the assets and
liabilities of DLB-NJ were transferred to the Company under an asset purchase
agreement among DLB, DLB-NJ and DLB-Ltd. (the Agreement). The assets and
liabilities transferred to the Company had a negative net book value of
$(2,911,784). The transfer has been accounted for at historical book values
without any purchase accounting adjustments due to the common shareholders of
DLB and DLB-NJ.
The principal activities of the Company are the development and licensing
of computer software products and associated services to the pharmaceutical
industry to assist with clinical research and development and regulatory
compliance.
Revenue Recognition
Revenue is derived primarily from one-time software license fees, software
maintenance and support contracts and consulting and training services. DLB
recognizes revenue from software license transactions at the date of delivery
or upon customer acceptance, as appropriate. Revenue from software maintenance
and continuing support contracts is recognized on a straight-line basis over
the period in which the software maintenance and continuing support is
provided. Revenue from consulting and training services is recognized when
services are performed.
Income Taxes
The asset and liability method prescribed by Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," requires
recognition of deferred tax assets and liabilities for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of assets
and liabilities using tax rates in effect for the year in which the differences
are expected to reverse.
Differences between pre-tax book losses and taxable losses are generated
mainly from certain nondeductible permanent differences and temporary
differences such as accelerated methods of calculating tax depreciation. At
October 31, 1997, the Company had net Federal and state net operating losses
available for carryforward of approximately $8,000,000 and $6,000,000,
respectively, expiring through the years 2011 and 2003, respectively.
Research and Development and Software Development Costs
Research and development costs are charged to expense when incurred. Costs
incurred in the research and development of new software products and
enhancements to existing software products are also expensed as incurred until
the technological feasibility of the product or enhancement has been
established. After technological feasibility has been established and prior to
product release, any additional development costs are capitalized in accordance
with Statement of Financial Accounting Standards No. 86, "Accounting for the
Cost of Computer Software to be Sold, Leased or Otherwise Marketed," and are
included in the balance sheet. However, to date, software development costs on
DLB products, after achieving technological feasibility, have been immaterial.
F-23
<PAGE>
DLB SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
OCTOBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (Continued)
Stock-based Employee Compensation
Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. As such, compensation expense would be recorded on the date of
the grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS No. 123) No. 123, "Accounting for Stock-Based
Compensation," which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB No. 25 and provide pro forma net earnings disclosures for
employee stock option grants as if the fair-value-based method defined in SFAS
No. 123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and the pro forma disclosure required by SFAS
No. 123 is not material to the Company and, therefore, has not been presented.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. LEASE COMMITMENTS:
At October 31, 1997, the Company is obligated to pay $7,220 under
operating leases, which expire through 1998 for office space and equipment.
Rental expense for operating leases during the ten months ended October 31,
1997 was $196,106.
3. CONCENTRATION OF CREDIT RISK:
During the ten months ended October 31, 1997, one customer accounted for
approximately 11% of net revenue. Substantially all sales are made to customers
who are in the pharmaceutical industry. The Company performs periodic credit
evaluations of its customers' financial condition and frequently does not
require collateral.
4. RELATED-PARTY TRANSACTIONS:
DLB, DLB-NJ and DLB-Ltd. entered into a consulting agreement, which
provides for the payment of support service fees by DLB. These fees cover the
consulting and related costs of specified employees of DLB-NJ including two
directors of the Company. During the ten months ended October 31, 1997, DLB
paid $1,173,250 and $407,546, respectively in support service fees to DLB-Ltd.
and DLB-NJ.
DLB and its preferred stockholder entered into an Administrative Services
Agreement whereby the preferred stockholder will provide the Company with
certain administrative support services, as defined in the Administrative
Services Agreement, for which the preferred stockholder shall be paid an annual
fee equal to 1/2% of the Company's gross revenues. The Administrative Services
Agreement shall automatically continue on an annual basis, subject to
termination on the final day of any succeeding calendar year by delivery of 90
days' notice by either party prior to the termination date.
5. RETIREMENT SAVINGS PLAN:
The Company maintains a 401(k) retirement savings plan (the 401(k) Plan).
The Company administers the 401(k) Plan at its own expense and provides no
match to employee contributions.
F-24
<PAGE>
===============================================================================
___________________, 2000
[LOGO]
eResearchTechnology
Enabling the Clinical Advantage
____________ Shares of Common Stock
-------------------------------
PROSPECTUS
-------------------------------
Donaldson, Lufkin & Jenrette
SG Cowen
J.C. Bradford & Co.
DLJdirect Inc.
- --------------------------------------------------------------------------------
In making your investment decision relating to the shares offered hereby, you
should rely on the information contained in this prospectus and not on any
other information. We have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not making an offer to sell
these securities in any jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is accurate
only as of the date on the front cover of this prospectus. Our business and
financial condition may have changed since that date.
- --------------------------------------------------------------------------------
Until _____________, 2000 all dealers selling shares of the common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments and subscriptions.
- --------------------------------------------------------------------------------
<PAGE>
Part II
Information Not Required in Prospectus
Registration fee .................................................... $19,800
National Association of Securities Dealers, Inc. fee................. 8,000
Nasdaq National Market listing fee................................... *
Printing and engraving expenses...................................... *
Legal fees and expenses.............................................. *
Accountants' fees and expenses....................................... *
Blue sky fees and expenses........................................... 6,000
Transfer agent and registrar fees and expenses....................... *
Miscellaneous........................................................ *
--------
Total..................................................... $ *
========
* To be filed by amendment.
Item 14. Indemnification of Directors and Officers.
The Company's Bylaws provide for the maximum indemnification of our
directors and officers as Delaware law permits. Section 145 of the General
Corporation Law of the State of Delaware empowers a Delaware corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than an action by or in the right
of the corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgement, order, settlement, conviction, or upon plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
In the case of an action or suit by or in the right of the corporation to
procure a judgment in its favor, Section 145 empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by reason of the fact that he is
or was acting in any of the capacities set forth above against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that indemnification is not permitted
in respect of any claim, issue or matter as to which such person is adjudged to
be liable to the corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought determines upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court deems proper.
Section 145 further provides: that a Delaware corporation is required to
indemnify a present or former director or officer against expenses (including
attorneys' fees) actually and reasonably incurred by him in defense of any
action, suit or proceeding referred to above or in defense of any claim, issue
or matter therein as to which such person has been successful on the merits or
otherwise; that the indemnification provided for by Section 145 shall not be
deemed exclusive of any other rights to which the indemnified party may be
entitled; that the indemnification provided for by Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of such
II-1
<PAGE>
person's heirs, executors and administrators; and empowers the corporation to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under Section 145. A Delaware corporation
may provide indemnification only as authorized in the specific case upon a
determination that indemnification of the present or former director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct. Such determination is to be made (i) by a
majority vote of the directors who were not parties to such action, suit or
proceeding, even though less than a quorum or (ii) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (iii) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (iv) by the stockholders.
Article Sixth of the Company's Restated Certificate of Incorporation
limits the liability of the Company's directors to the fullest extent permitted
by Section 102(b)(7) of the General Corporation Law of the State of Delaware, as
the same may be amended and supplemented. Section 102(b)(7) permits the
certificate of incorporation of a Delaware corporation to include a provision
eliminating or limiting the personal liability of a director of a corporation to
the corporation or its stockholders for monetary damages for breach of his
fiduciary duty as a director; provided, however, that the provision may not
eliminate or limit the liability of a director for (i) any breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) the unlawful payment of dividends or unlawful purchase
or redemption of stock under Section 174 of the General Corporation Law of the
State of Delaware; or (iv) any transaction from which the director derived an
improper personal benefit.
The Company's directors and officers are covered under liability
insurance policies with coverage in the amount of $10 million that Premier
Research Worldwide, Ltd. has purchased. The Company intends to purchase and
maintain its own directors' and officers' liability insurance policies.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers or controlling
persons of the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Securities and Exchange Commission (the
"Commission") such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.
Item 15. Recent Sales of Unregistered Securities.
On January 1, 2000, in reliance upon the exemption contained in Section
4(2) of the Securities Act, the Company issued 1,000 shares of common stock to
Premier Research Worldwide, Ltd. in exchange for all of the assets and business
of that corporation's technology and operating business.
On March 24, 2000, in reliance upon the exemption contained in Section
4(2) of the Securities Act, the Company sold 95,000 shares of its series A
convertible preferred stock and agreed to issue a common stock warrant to
Communicade Inc. for $9.5 million. The warrant will entitle Communicade to
purchase a number of shares of common stock equal to 2.5% of the
then-outstanding shares of common stock, at an exercise price per share equal to
200% of the initial public offering price per share less the underwriting
discounts and commissions.
On March 27, 2000, in reliance upon the exemption contained in Section
4(2) of the Securities Act, the Company issued a warrant to purchase shares of
common stock to Scirex Corporation. The warrant entitles Scirex to purchase a
number of shares of common equal to $1 million divided by the initial public
offering price per share, at an exercise price per share equal to the initial
public offering price per share.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
- ------- -------
<S> <C>
1.1** Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Company.
3.2 Amended and Restated Bylaws of the Company.
4.1** Form of the Company's Common Stock certificate.
5.1** Opinion of Duane, Morris & Heckscher, LLP.
10.1* Management Consultant Agreement effective as of January 1, 2000 between Joel Morganroth, M.D., P.C. and
the Company.
10.2* Management Employment Agreement effective as of January 1, 2000 between Joseph A. Esposito and the
Company.
10.3* Management Employment Agreement effective as of January 1, 2000 between Bruce Johnson and the Company.
10.4* Management Employment Agreement effective as of January 1, 2000 between Vincent Renz and the Company.
10.5* Management Employment Agreement effective as of January 1, 2000 between Robert Brown and the Company.
10.6 Voting Agreement dated as of March 24, 2000 between Premier Research Worldwide, Ltd. and the Company.
10.7 Tax Sharing Agreement effective as of January 1, 2000 between Premier Research Worldwide, Ltd. and the
Company.
10.8 Services and Support Agreement effective as of January 1, 2000 between Premier Research Worldwide, Ltd.
and the Company.
10.9 Sublease Agreement dated June 25, 1998 between Raytheon Engineers & Constructors, Inc. and the Company (as
successor by assignment).
10.10 Lease Agreement dated May 14, 1999 between Fleet Bank, N.A. and the Company (as successor by assignment).
10.11 Lease Agreement effective October 1, 1999 between CAEC Howard (Arkwright) Limited and the Company (as
successor by assignment).
10.12 Marketing Service Agreement dated March, 1999 between the Company (as successor by assignment) and
AmericasDoctor.com, Inc.
10.13 Master Software License Agreement dated as of July 31, 1999 between the Company (as successor by assignment)
and Breast Cancer International Research Group Limited.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
- ------- -------
<S> <C>
10.14 Professional Services Agreement dated as of July 31, 1999 between the Company (as successor by assignment)
and Breast Cancer International Research Group Limited.
10.15 Series A Preferred Stock Purchase Agreement dated as of March 24, 2000 between the Company, Premier
Research Worldwide, Ltd. and Communicade Inc.
10.16 Investor Rights Agreement dated as of March 24, 2000 between the Company, Premier Research Worldwide,
Ltd. and Communicade Inc.
10.17 Form of Warrant to be issued by the Company in favor of Communicade Inc.
10.18 Warrant dated March 27, 2000 by the Company in favor of Scirex Corporation
11.1** Computation of Per Share Earnings.
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
24.1 Powers of Attorneys of certain signatories (included on the signature page).
27.1 Financial Data Schedule - eResearchTechnology, Inc.
27.2 Financial Data Schedule - DLB Systems.
</TABLE>
- -------
* Management contract or compensatory plan or arrangement.
** To be filed by amendment.
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes as follows:
1. That for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
2. That for purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To eResearchTechnology, Inc.:
We have audited in accordance with generally accepted auditing standards, the
financial statements of eResearchTechnology, Inc. included in this registration
statement and have issued our report thereon dated January 31, 2000. Our audit
was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The following schedule is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Philadelphia, PA
January 31, 2000
S-1
<PAGE>
SCHEDULE II
eRESEARCHTECHNOLOGY, INC.
VALUATION AND QUALIFYING ACCOUNTS
Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
Balance Balance
Beginning of Charges to Deductions End
Period Expense from Reserve Other of Period
-------------- ------------ -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1999 $243,000 $399,000 $217,000 $ -- $425,000
December 31, 1998 178,000 -- -- 65,000 243,000
December 31, 1997 140,000 -- 3,000 41,000 178,000
</TABLE>
S-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Philadelphia,
Pennsylvania on March 29, 2000.
ERESEARCHTECHNOLOGY, INC.
By: /s/ Joseph A. Esposito
----------------------------------
Joseph A. Esposito, President and
Chief Executive Officer
Know all men by these presents, that each person whose signature
appears below constitutes and appoints Joel Morganroth, M.D. and Joseph A.
Esposito, and each or either of them, as such person's true and lawful
attorneys-in-fact and agents, with full power of substitution, for him, and in
his name, place and stead, in any and all capacities, to sign any or all
amendments or post-effective amendments to this Registration Statement, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them or their substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Joseph A. Esposito President, Chief Executive March 29, 2000
- -------------------------------------- Officer and Director (principal
Joseph A. Esposito executive officer)
/s/ Joel Morganroth, M.D. Chairman and Director March 29, 2000
- --------------------------------------
Joel Morganroth, M.D.
/s/ Bruce Johnson Senior Vice President and Chief March 29, 2000
- -------------------------------------- Financial Officer (principal
Bruce Johnson financial and accounting officer)
/s/ Sheldon M. Bonovitz Director March 29, 2000
- --------------------------------------
Sheldon M. Bonovitz
/s/ Thomas L. Harrison Director March 29, 2000
- --------------------------------------
Thomas L. Harrison
/s/ Howard D. Ross Director March 29, 2000
- --------------------------------------
Howard D. Ross
/s/ John M. Ryan Director March 29, 2000
- --------------------------------------
John M. Ryan
</TABLE>
<PAGE>
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
<TABLE>
<CAPTION>
Exhibit
No. Exhibit
- ------- -------
<S> <C>
1.1** Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Company.
3.2 Amended and Restated Bylaws of the Company.
4.1** Form of the Company's Common Stock certificate.
5.1** Opinion of Duane, Morris & Heckscher, LLP.
10.1* Management Consultant Agreement effective as of January 1, 2000 between Joel Morganroth, M.D., P.C. and
the Company.
10.2* Management Employment Agreement effective as of January 1, 2000 between Joseph A. Esposito and the
Company.
10.3* Management Employment Agreement effective as of January 1, 2000 between Bruce Johnson and the Company.
10.4* Management Employment Agreement effective as of January 1, 2000 between Vincent Renz and the Company.
10.5* Management Employment Agreement effective as of January 1, 2000 between Robert Brown and the Company.
10.6 Voting Agreement dated as of March 24, 2000 between Premier Research Worldwide, Ltd. and the Company.
10.7 Tax Sharing Agreement effective as of January 1, 2000 between Premier Research Worldwide, Ltd. and the
Company.
10.8 Services and Support Agreement effective as of January 1, 2000 between Premier Research Worldwide, Ltd.
and the Company.
10.9 Sublease Agreement dated June 25, 1998 between Raytheon Engineers & Constructors, Inc. and the Company (as
successor by assignment).
10.10 Lease Agreement dated May 14, 1999 between Fleet Bank, N.A. and the Company (as successor by assignment).
10.11 Lease Agreement effective October 1, 1999 between CAEC Howard (Arkwright) Limited and the Company (as
successor by assignment).
10.12 Marketing Service Agreement dated March, 1999 between the Company (as successor by assignment) and
AmericasDoctor.com, Inc.
10.13 Master Software License Agreement dated as of July 31, 1999 between the Company (as successor by assignment)
and Breast Cancer International Research Group Limited.
10.14 Professional Services Agreement dated as of July 31, 1999 between the Company (as successor by assignment)
and Breast Cancer International Research Group Limited.
10.15 Series A Preferred Stock Purchase Agreement dated as of March 24, 2000 between the Company, Premier Research
Worldwide, Ltd. and Communicade Inc.
10.16 Investor Rights Agreement dated as of March 24, 2000 between the Company, Premier Research Worldwide,
Ltd. and Communicade Inc.
10.17 Form of Warrant to be issued by the Company in favor of Communicade Inc.
10.18 Warrant dated March 27, 2000 by the Company in favor of Scirex Corporation
11.1** Computation of Per Share Earnings.
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
24.1 Powers of Attorneys of certain signatories (included on the signature page).
27.1 Financial Data Schedule - eResearchTechnology, Inc.
27.2 Financial Data Schedule - DLB Systems.
</TABLE>
- --------
* Management contract or compensatory plan or arrangement.
** To be filed by amendment.
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
ERESEARCH TECHNOLOGY, INC.
ERESEARCH TECHNOLOGY, INC., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is eResearch Technology, Inc.
2. The original Certificate of Incorporation of the corporation was
filed with the Secretary of State of the State of Delaware on December 9, 1999.
3. This Restated Certificate of Incorporation amends and restates
the Certificate of Incorporation of the corporation.
4. This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
5. The text of the corporation's Certificate of Incorporation is
hereby amended and restated in full so as to read as follows:
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
ERESEARCHTECHNOLOGY, INC.
FIRST. The name of the corporation is eResearchTechnology, Inc.
(the "Corporation").
SECOND. The registered office of the Corporation in the State of
Delaware is located at 1013 Centre Street, in the City of Wilmington, County of
New Castle. The registered agent at this address is Corporation Service
Company.
THIRD. The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "GCL").
FOURTH. (a) The aggregate number of shares of stock that the
Corporation shall have authority to issue is 60,000,000 shares, consisting of
(i) 50,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock") and (ii) 10,000,000 shares of Series Preferred Stock, without par value
(the "Preferred Stock").
(b) The Preferred Stock may be issued from time to time by
the Board of Directors as herein provided in one or more series. The
designations, relative rights, preferences and limitations of the Preferred
Stock, and particularly of the shares of each series thereof, may, to the extent
permitted by law, be similar to or may differ from those of any other series.
The Board of Directors of the Corporation is hereby expressly granted authority,
subject to the provisions of this Article Fourth, to issue from time to time
Preferred Stock in one or more series and to fix from time to time before
issuance thereof, by filing a certificate pursuant to the GCL, the number of
shares in each such series and all designations, relative rights (including the
right, to the extent permitted by law, to convert into shares of any class or
into shares of any series of any class), preferences and limitations of the
shares in each such series. Except as provided to the contrary in the provisions
establishing a specific series of the Preferred Stock, the number of authorized
shares of any class or classes of stock may be increased or decreased (but not
below the number of shares then outstanding) by the affirmative vote of the
holders of a majority of the stock of the Corporation entitled to vote
irrespective of any other voting requirements set forth in Section 242(b)(2) of
the GCL.
<PAGE>
(c) All shares of the Preferred Stock of the same series
shall be identical in all respects, except that shares of any one series issued
at different times may differ as to the dates, if any, from which dividends
thereon may accumulate.
FIFTH. The Corporation shall have perpetual existence.
SIXTH. No director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, to the extent required by Section
102(b)(7) or any successor provision of the GCL, this Article Sixth shall not
eliminate or limit the liability of a director, to the extent such liability is
provided by applicable laws, (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the GCL, or (iv) for any transaction from which
the director derived an improper personal benefit. No amendment to or repeal of
this Article Seventh shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
The liability of a director of the Corporation shall be further eliminated or
limited to the fullest extent allowable under the GCL as it may in the future be
amended.
SEVENTH. In furtherance and not in limitation of the power conferred
upon the Board of Directros by law, the Board of Directors shall have the power
to adopt, amend and repeal from time to time bylaws of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed on its behalf by its duly authorized
officers this 23rd day of March, 2000.
Attest: eResearch Technology, Inc.
/s/ John Bauer By: /s/Joel Morganroth, M.D., Chairman
- ----------------------------- ----------------------------------
John Bauer, Secretary Joel Morganroth, M.D., Chairman
<PAGE>
CERTIFICATE OF DESIGNATION
OF SERIES A CONVERTIBLE PREFERRED STOCK
OF ERESEARCHTECHNOLOGY, INC.
(a Delaware corporation)
The undersigned, Joel Morganroth, the Chairman of eResearchTechnology,
Inc., does hereby certify, pursuant to Section 151 of the General Corporation
Law of the State of Delaware, that:
1. He is the duly elected and acting Chairman of eResearchTechnology,
Inc., a Delaware corporation (the "Company").
2. The Restated Certificate of Incorporation of the Company authorizes
10,000,000 shares of preferred stock, without par value, none of which have been
issued.
3. The following is a true and correct copy of resolutions duly adopted
by the Board of Directors at a duly convened meeting held on March 23, 2000 at
which a quorum was present and acting throughout, which constitutes all
requisite action on the part of the Company for adoption of such resolutions.
RESOLUTIONS
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Company by the provisions of its
Restated Certificate of Incorporation, the Board of Directors does hereby
establish and designate and provide for the issuance of a series of the
Preferred Stock of the Company designated as "Series A Convertible Preferred
Stock," which shall consist of 95,000 shares, and the Board of Directors does
hereby fix the terms, voting powers, preferences and relative rights,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof, to be as follows;
Section 1. Designation, Amount and Par Value. The series of Preferred
Stock shall be designated as the Series A Convertible Preferred Stock (the
"Series A Preferred"), and the number of shares so designated shall be 95,000.
Each share of Series A Preferred shall have no par value. Each share of Series A
Preferred shall have a stated value of $100.00 per share (the "Stated Value").
<PAGE>
Section 2. Dividends.
(a) Subject to Section 2(b) and to the rights of the holders of Senior
Securities, if any, the holders of the Series A Preferred shall be entitled to
receive cash dividends, out of any assets legally available therefor, at a per
annum rate (compounded on a quarterly basis) of 7% of the sum of (i) the Stated
Value plus (ii) the aggregate amount of any dividends which have then accrued
but remain unpaid, per share (as adjusted for any stock dividends, combinations
or splits with respect to such shares). The holders of the Series A Preferred
shall be entitled to receive dividends prior and in preference to any
declaration or payment of any dividend (payable other than in Common Stock or
other securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of the
Company) on the Common Stock or any other class or series of capital stock of
the Company. The party that holds the Series A Preferred on an applicable record
date for any dividend payment will be entitled to receive such dividend payment
and any accrued and unpaid dividends which were declared prior to such dividend
payment date, without regard to any sale or disposition of such Series A
Preferred subsequent to the applicable record date.
(b) Dividends on shares of the Series A Preferred shall not accrue and
no dividends will be payable if the Company consummates its initial Public
Offering on or before the six month anniversary of the Closing Date. If the
Company does not consummate its initial Public Offering on or before the six
month anniversary of the Closing Date, then dividends on shares of the Series A
Preferred shall be payable no later than the first anniversary of the Closing
Date and thereafter on the last business day of each fiscal quarter of the
Company until the Company's initial Pubic Offering to such stockholders of
record as determined on the 10th day preceding each such dividend payment date.
Dividends on the Series A Preferred shall accrue and be deemed to accrue from
the date on which the Series A Preferred is issued and from day to day whether
or not earned or declared, shall be cumulative and shall be compounded on a
quarterly basis as set forth in Section 2(a).
(c) In the event the Company shall declare a distribution payable in
securities of other persons, evidences of indebtedness issued by the Company or
other persons, assets (excluding cash dividends) or options or rights to
purchase any such securities or evidences of indebtedness, then, in each such
case, the holders of the Series A Preferred shall be entitled to a proportionate
share of any such distribution as though the holders of the Series A Preferred
were the holders of the number of shares of Common Stock of the Company into
which their respective shares of Series A Preferred are convertible as of the
record date fixed for the determination of the holders of Common Stock of the
Company entitled to receive such distribution. The conversion ratio for such
determination will be based upon the Stated Value of the total number of shares
of Series A
2
<PAGE>
Preferred outstanding divided by the value of the Company at that time as
determined in good faith by the Board of Directors with the approval of the
Series A Director (as defined below).
Section 3. Voting Rights; Protective Provisions.
(a) For so long as any shares of Series A Preferred are outstanding,
the Company shall not, without first obtaining the approval (by vote or written
consent, as provided in the Delaware General Corporation Law (the "DGCL")) of
the holders of a majority of the shares of Series A Preferred then outstanding,
voting as a separate class:
(i) Amend, alter or change the Restated Certificate of Incorporation or
bylaws of the Company so as to alter or change the rights, preferences or
privileges of the shares of Series A Preferred Stock so as to affect adversely
such shares;
(ii) Increase or decrease the total number of authorized shares of the
Series A Preferred;
(iii) Authorize or issue, or obligate itself to issue, any class or
series of Senior Securities;
(iv) Pay or declare any dividend with respect to outstanding shares of
Common Stock or any other class or series of capital stock of the Company; or
(v) Take any other action which requires the approval of the holders of
the shares of Series A Preferred, voting as a separate class, under the DGCL.
(b) For so long as any shares of Series A Preferred are outstanding,
the holders of the Series A Preferred then outstanding, voting as a separate
class, shall be entitled to elect one member of the Board of Directors (the
"Series A Director"). Subject to the DGCL, any Series A Director may be removed
during his term of office, either for or without cause, by, and only by, the
affirmative vote of the holders of a majority of the shares of Series A
Preferred, given at a special meeting of such holders duly called or by an
action by written consent for that purpose. Any vacancy in the Board of
Directors caused by the removal, resignation or death of the Series A Director
shall be filled by, and only by, the vote of the holders of a majority of the
shares of Series A Preferred then outstanding in accordance with the DGCL.
Section 4. Liquidation.
3
<PAGE>
(a) Subject to the rights of the holders of Senior Securities, if any,
upon any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary (a "Liquidation"), the holders of shares of Series A
Preferred shall be entitled to receive out of the assets of the Company, whether
such assets are capital or surplus, for each share of Series A Preferred then
outstanding an amount equal to the Stated Value plus any accrued but unpaid
dividends to the date of such payment on the Series A Preferred (the
"Liquidation Preference"), before any distribution or payment shall be made to
the holders of any Junior Securities, provided that such assets shall be shared
ratably with holders of shares of any class of the Company's capital stock
ranking pari passu with the Series A Preferred. If the assets of the Company
shall be insufficient to pay in full such amounts, then the entire assets to be
distributed shall be distributed, subject to the rights of the holders of Senior
Securities, if any, among the holders of Series A Preferred and other classes of
capital stock ranking pari passu with the Series A Preferred ratably, in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full.
(b) After payment or setting apart of payment of the amounts to which
the holders of Series A Preferred are entitled pursuant to Section 4(a), if
applicable, the remaining assets of the Company available for distribution to
stockholders shall be distributed among the holders of Junior Securities.
(c) For purposes of this Section 4, (i) any acquisition of the Company
by means of consolidation, merger or other form of corporate reorganization in
which outstanding shares of the Company are exchanged for securities or other
consideration issued, or caused to be issued, by the acquiring company or its
subsidiary (other than a mere reincorporation transaction), and pursuant to
which the holders of the issued and outstanding securities entitling such
holders to vote for the election of the members of the Board of Directors
generally ("Voting Securities") immediately prior to such consolidation, merger
or other form of corporate reorganization fail to hold Voting Securities
representing a majority of the voting power of the Company or surviving entity
immediately following such consolidation, merger or other form of corporate
reorganization, or (ii) a sale, lease or exchange of all or substantially all of
the assets of the Company, or (iii) any other transaction or series of related
transactions pursuant to which the holders of the outstanding Voting Securities
of the Company immediately prior to which transaction or series of transactions
fail to hold Securities representing a majority of the voting power of the
Company immediately following such transaction (clauses (i), (ii) and (iii)
being collectively referred to herein as a "Change of Control"), shall be
treated as a liquidation, dissolution or winding up of the Company and shall
entitle the holders of Series A Preferred to receive at the closing in cash,
securities or other property (valued as provided in Section 4(d) below) amounts
as specified in Section 4(a).
4
<PAGE>
(d) Whenever the distribution provided for in this Section 4 shall be
payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or other property
as determined in good faith by the Board of Directors with the approval of the
Series A Director.
Section 5. Mandatory Conversion.
(a) (i) Upon the occurrence of (A) a Public Offering resulting in
aggregate proceeds of less than $25,000,000 and with the written consent of a
majority of the holders of Series A Preferred then outstanding or (B) a
Qualified Public Offering, each outstanding share of Series A Preferred shall
automatically be converted into such number of shares of Common Stock as is
determined by dividing (x) the Stated Value by (y) the Per Share IPO Price. Any
mandatory conversion hereunder shall be effected automatically upon the
occurrence of the event giving rise to such conversion, without any action of
the holders thereof unless specifically required pursuant to Section 5(a)(i)(A)
and whether or not the certificates representing the shares of Series A
Preferred are surrendered to the Company or its transfer agent; provided,
however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Series A Preferred are either delivered
to the Company or its transfer agent as provided below, or the holder notifies
the Company or its transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement reasonably satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection with such
certificates.
(ii) All holders of record of shares of Series A Preferred will be
given at least three business days' prior written notice of the date fixed and
the place designated for mandatory conversion of all such shares of Series A
Preferred pursuant to this Section 5(a). On or before the date fixed for
conversion (the "Mandatory Conversion Date"), each holder of shares of Series A
Preferred shall surrender his or its certificate(s) for all such shares to the
Company at the place designated in such notice, and shall thereafter receive
certificate(s) for the number of shares of Common Stock to which such holder is
entitled pursuant to this Section 5(a). As soon as practicable after the
Mandatory Conversion Date and the surrender of the certificate(s) for Series A
Preferred, the Company shall cause to be issued and delivered to such holder, or
on his or its written order, such certificate(s) for the number of full shares
of Common Stock issuable on such conversion in accordance with the provisions
hereof and cash as provided in Section 5(a)(iii) in respect of any fraction of a
share of Common Stock otherwise issuable upon such conversion.
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(iii) The Company may, if it so elects, issue fractional shares of
Common Stock upon the conversion of shares of Series A Preferred. If the Company
does not elect to issue fractional shares, the Company shall pay to the holder
of the shares of Series A Preferred which were converted a cash adjustment in
respect of such fractional shares in an amount equal to the same fraction of the
Per Share IPO Price at the close of business on the Mandatory Conversion Date.
The determination as to whether or not any fractional shares are issuable shall
be based upon the total number of shares of Series A Preferred being converted
at any one time by any holder thereof, not upon each share of Series A Preferred
being converted.
(b) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series A Preferred, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Series A Preferred, and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred, the Company shall take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
(c) The issuance of certificates for shares of Common Stock on
conversion of Series A Preferred shall be made without charge to the holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the holder of such shares of Series A
Preferred so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(d) Shares of Series A Preferred converted into Common Stock shall be
canceled and shall have the status of authorized but unissued shares of
preferred stock.
Section 6. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"Closing Date" means March 24, 2000.
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"Common Stock" means shares now or hereafter authorized of the class of
Common Stock, par value $.01 per share, of the Company and stock of any other
class into which such shares may hereafter have been reclassified or changed.
"Junior Securities" means the Common Stock and any other class or
series of capital stock of the Company specifically ranking, by its terms,
junior to the Series A Preferred, as to distribution of assets upon liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, or
as to redemption rights.
"Per Share IPO Price" means the per share offering price (less
underwriters' commissions) in the Company's initial Public Offering.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Public Offering" means any sale of shares of Common Stock in an
underwritten public offering pursuant to an effective registration statement on
Form S-1 or similar form under the Securities Act of 1933, as amended, or any
successor statute.
"Purchase Agreement" means the Series A Preferred Stock Purchase
Agreement, dated as of March 24, 2000, among the Company and the Purchaser
identified therein.
"Qualified Public Offering" means any sale of shares of Common Stock
resulting in gross proceeds of at least $25,000,000 in a firm commitment
underwritten public offering pursuant to an effective registration statement on
Form S-1 or similar form under the Securities Act of 1933, as amended, or any
successor statute.
"Senior Securities" means any class or series of capital stock of the
Company specifically ranking, by its terms, pari passu or senior to the Series A
Preferred, as to distribution of assets upon liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary, or as to redemption rights.
RESOLVED FURTHER, that the Chairman of the Company be, and hereby, is
authorized and directed to prepare, execute, verify, and file in Delaware, a
Certificate of Designation in accordance with these resolutions and as required
by law.
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IN WITNESS WHEREOF, eResearchTechnology, Inc. has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Joel
Morganroth, its Chairman, this 24th day of March, 2000.
ERESEARCHTECHNOLOGY, INC.
By: /s/ Joel Morganroth
-----------------------
Joel Morganroth
Chairman
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Amended and Restated Bylaws
of
eResearchTechnology, Inc.
Article 1
CORPORATION OFFICE
Section 1.1. Registered Office. The registered office of the Corporation
shall be 1013 Centre Street, in the City of Wilmington, County of New Castle,
Delaware, or at such other place as may from time to time be selected by the
Board of Directors.
Section 1.2. Other Offices. The Corporation may also have such other
offices, either within or without the State of Delaware, as the Board of
Directors may from time to time designate or the business of the Corporation
may from time to time require.
Article 2
STOCKHOLDERS
Section 2.1. Place and Time of Meetings. All meetings of the stockholders
shall be held at such time and place as may be fixed from time to time by the
Board of Directors and stated in the notice of meeting or in a duly executed
waiver of notice thereof. If no such place is fixed by the Board of Directors,
meetings of the stockholders shall be held at the principal office of the
Corporation.
Section 2.2. Annual Meetings. The annual meeting of the stockholders
shall be held at such other place, date and time as shall be designated from
time to time by the Board of Directors and stated in the notice of meeting
or a duly executed waiver of notice thereof. At such annual meeting, the
stockholders shall elect successors to the directors whose terms shall
expire that year to serve for the following three years and until their
successors shall have been duly elected and qualified or until their earlier
resignation or removal. The stockholders also shall transact such other
business as may properly be brought before the meeting and as are consistent
with the provisions of the Certificate of Incorporation and these By-laws.
Section 2.3. Stockholder Proposals.
(a) Stockholder Proposals Relating to Nominations for and Election of
Directors.
(i) Nominations by a stockholder of candidates for election by
stockholders at a meeting of stockholders to the Board of Directors may be made
only if
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the stockholder complies with the procedures set forth in this Section 2.3(a),
and any candidate proposed by a stockholder not nominated in accordance with
such provisions shall not be considered or acted upon for execution at such
meeting of stockholders.
(ii) A proposal by a stockholder for the nomination of a
candidate for election by stockholders as a director at any meeting of
stockholders at which directors are to be elected may only be made by notice
in writing, delivered in person or by first class United States mail postage
prepaid or by reputable overnight delivery service, to the Board of
Directors of the Corporation to the attention of the Secretary of the
Corporation at the principal office of the Corporation, within the time
limits specified herein.
(iii) In the case of an annual meeting of stockholders, any
such written proposal of nomination must be received by the Board of
Directors not less than 90 calendar days nor more than 120 calendar days
before the first anniversary of the date on which the Corporation first
mailed its proxy statement to stockholders for the annual meeting of
stockholders in the immediately preceding year; provided, however, that in
the case of an annual meeting of stockholders that is called for a date that
is not within 30 calendar days before or after the first anniversary date of
the annual meeting of stockholders in the immediately preceding year, any
such written proposal of nomination must be received by the Board of
Directors not less than five business days after the date the Corporation
shall have mailed notice to its stockholders that an annual meeting of
stockholders will be held or shall have issued a press release, filed a
periodic report with the Securities and Exchange Commission or otherwise
publicly disseminated notice that an annual meeting of stockholders will be
held.
(iv) In the case of a special meeting of stockholders, any
such written proposal of nomination must be received by the Board of
Directors not less than five business days after the earlier of the date
that the Corporation shall have mailed notice to its stockholders that a
special meeting of stockholders will be held or shall have issued a press
release, filed a periodic report with the Securities and Exchange Commission
or otherwise publicly disseminated notice that a special meeting of
stockholders will be held.
(v) Such written proposal of nomination shall set forth (A)
the name and address of the stockholder who intends to make the nomination
(the "Nominating Stockholder"), (B) the name, age, business address and, if
known, residence address of each person so proposed, (C) the principal
occupation or employment of each person so proposed for the past five years,
(D) the number of shares of capital stock of the Corporation beneficially
owned within the meaning of Securities and Exchange Commission Rule 13d-1 by
each person so proposed and the earliest date of acquisition of any such
capital stock, (E) a description of any arrangement or understanding between
each person so proposed and the stockholder(s) making such nomination with
respect to such person's proposal for nomination and election as a director
and actions to be proposed or taken by such person if elected a director,
(F) the written consent of each
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person so proposed to serve as a director if nominated and elected as a director
and (G) such other information regarding each such person as would be required
under the proxy solicitation rules of the Securities and Exchange Commission if
proxies were to be solicited for the election as a director of each person so
proposed.
(vi) If a written proposal of nomination submitted to the
Board of Directors fails, in the reasonable judgment of the Board of
Directors or a nominating committee established by it, to contain the
information specified in clause (v) hereof or is otherwise deficient, the
Board of Directors shall, as promptly as is practicable under the
circumstances, provide written notice to the stockholder(s) making such
nomination of such failure or deficiency in the written proposal of
nomination and such nominating stockholder shall have five business days
from receipt of such notice to submit a revised written proposal of
nomination that corrects such failure or deficiency in all material
respects.
(b) Stockholder Proposals Relating to Other Than Nominations for and
Elections of Directors.
(i) A stockholder of the Corporation may bring a matter (other
than a nomination of a candidate for election as a director, which is
covered by subsection (a) of this Section 2.3) (a "Stockholder Matter")
before a meeting of stockholders only if (A) such Stockholder Matter is a
proper matter for stockholder action and such stockholder shall have
provided notice in writing, delivered in person or by first class United
States mail postage prepaid or by reputable overnight delivery service, to
the Board of Directors of the Corporation to the attention of the Secretary
of the Corporation at the principal office of the Corporation, within the
time limits specified in this Section 2.3(b) or (B) the stockholder complies
with the provisions of Rule 14a-8 under the Securities Exchange Act of 1934
relating to inclusion of stockholder proposals in the Corporation's proxy
statement.
(ii) In the case of an annual meeting of stockholders, any
such written notice of presentation of a Stockholder Matter must be received
by the Board of Directors not less than 90 calendar days nor more than 120
calendar days before the first anniversary of the date on which the
Corporation first mailed its proxy statement to stockholders for the annual
meeting of stockholders in the immediately preceding year; provided,
however, that in the case of an annual meeting of stockholders that is
called for a date which is not within 30 calendar days before or after the
first anniversary date of the annual meeting of stockholders in the
immediately preceding year, any such written notice of presentation of a
Stockholder Matter must be received by the Board of Directors not less than
five business days after the date the Corporation shall have mailed notice
to its stockholders that an annual meeting of stockholders will be held,
issued a press release, filed a periodic report with the Securities and
Exchange Commission or otherwise publicly disseminated notice that an annual
meeting of stockholders will be held.
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(iii) In the case of a special meeting of stockholders, any
such written notice of presentation of a Stockholder Matter must be received
by the Board of Directors not less than five business days after the earlier
of the date the Corporation shall have mailed notice to its stockholders
that a special meeting of stockholders will be held, issued a press release,
filed a periodic report with the Securities and Exchange Commission or
otherwise publicly disseminated notice that a special meeting of
stockholders will be held.
(iv) Such written notice of presentation of a Stockholder
Matter shall set forth information regarding such Stockholder Matter
equivalent to the information regarding such Stockholder Matter that would
be required under the proxy solicitation rules of the Securities and
Exchange Commission if proxies were solicited for stockholder consideration
of such Stockholder Matter at a meeting of stockholders.
(v) If a written notice of presentation of a Stockholder
Matter submitted to the Board of Directors fails, in the reasonable judgment
of the Board of Directors, to contain the information specified in clause
(iv) hereof or is otherwise deficient, the Board of Directors shall, as
promptly as is practicable under the circumstances, provide written notice
to the stockholder who submitted the written notice of presentation of a
Stockholder Matter of such failure or deficiency in the written notice of
presentation of a Stockholder Matter and such stockholder shall have five
business days from receipt of such notice to submit a revised written notice
of presentation of a matter that corrects such failure or deficiency in all
material respects.
(vi) Only Stockholder Matters submitted in accordance with the
foregoing provisions of this Section 2.3(b) shall be eligible for
presentation of such meeting of stockholders, and any Stockholder Matter not
submitted to the Board of Directors in accordance with such provisions shall
not be considered or acted upon at such meeting of stockholders.
Section 2.4. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Board of Directors, the
Chairman of the Board of Directors or the President of the Corporation. Any
request for a special meeting of stockholders shall be signed by the person
or persons making the request and shall state the purpose or purposes of the
proposed meeting. Upon receipt of any such request, it shall be the duty of
the Secretary of the Corporation to call a special meeting of stockholders
to be held at such time, not less than ten nor more than sixty days
thereafter, as the Secretary of the Corporation may fix. If the Secretary of
the Corporation shall neglect or refuse to issue such call within five days
from the receipt of such request, the person or persons making the request
may do so. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice of such meeting or a duly
executed waiver of notice thereof.
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Section 2.5. Notice of Meetings. Written notice of all meetings of
stockholders other than adjourned, postponed or continued meetings of
stockholders, stating the place, date and hour, and, in the case of special
meetings of stockholders, the purpose or purposes thereof, shall be given
not fewer than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote thereat at such address as appears on
the books of the Corporation. Such notices may be given at the discretion
of, or in the name of, the Board of Directors, the President, any Vice
President, the Secretary or any Assistant Secretary. When a meeting is
adjourned, postponed or continued it shall not be necessary to give any
notice of the adjourned, postponed or continued meeting or of the business
to be transacted at the adjourned, postponed or continued meeting, other
than by announcement at the meeting at which such adjournment, postponement
or continuation is taken.
Section 2.6. Quorum of and Action by Stockholders. The presence, in
person or by proxy, of stockholders entitled to cast a majority of the votes
which all stockholders are entitled to cast on the particular matter shall
constitute a quorum for purposes of considering such matter, and, unless
otherwise specifically provided by statute, the acts of such stockholders at
a duly organized meeting shall be the acts of stockholders with respect to
such matter. If, however, such quorum shall not be present at any meeting of
the stockholders, the stockholders entitled to vote thereat present in
person or by proxy may, except as otherwise provided by statute, adjourn,
postpone or continue the meeting from time to time to such time and place as
they may determine, without notice other than an announcement at the
meeting, until a quorum shall be present in person or by proxy. At any
adjourned, postponed or continued meeting at which a quorum had been
present, stockholders present in person or by proxy at a duly organized and
constituted meeting, can continue to do business with respect to any matter
properly submitted to the meeting until adjournment, postponement or
continuation thereof notwithstanding the withdrawal of enough stockholders
to leave less than a quorum for the purposes of considering any particular
such matter.
Section 2.7. Voting. Except as may be otherwise provided by statute or
by the Certificate of Incorporation, at every meeting of the stockholders,
every stockholder entitled to vote thereat shall have the right to one vote
for every share having voting power standing in his name on the stock
transfer books of the Corporation on the record date fixed for the meeting.
No share shall be voted at any meeting if any installment is due and unpaid
thereon. When a quorum exists at any meeting, the oral vote of the holders
of a majority of the stock having voting power present in person or by proxy
shall decide any question brought before such meeting, unless the question
is one for which, by express provision of statute or of the Certificate of
Incorporation or of these By-laws, a different vote is required. Upon demand
made by a stockholder at any election of directors before the voting begins,
the election shall be by ballot, in which event the vote shall be taken by
written ballot, and the inspector or inspectors of election or, if none, the
Secretary of the meeting, shall tabulate and certify the results of such
vote.
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Section 2.8. Voting by Proxy. Every stockholder entitled to vote at a
meeting of the stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons
to act for him by proxy. Every proxy shall be executed in writing by the
stockholder or his duly authorized attorney in fact and filed with the
Secretary of the Corporation. A proxy, unless coupled with an interest,
shall be revocable at will, notwithstanding any other agreement or any
provision in the proxy to the contrary, but the revocation of a proxy shall
not be effective until written notice thereof has been given to the
Secretary of the Corporation. No unrevoked proxy shall be voted or acted
upon after three years from the date of its execution, unless a longer time
is expressly provided therein. A proxy shall not be revoked by the death or
incapacity of the maker, unless, before the vote is counted or the authority
is exercised, written notice of such death or incapacity is given to the
Secretary of the Corporation.
Section 2.9. Record Date. The Board of Directors may fix a time, not
more than sixty nor less than ten days prior to the date of any meeting of
the stockholders, or the date fixed for the payment of any dividend or
distribution, or the date for the allotment of rights or the date when any
change or conversion or exchange of shares will be made or go into effect,
as the record date for the determination of the stockholders entitled to
notice of, or to vote at, such meeting, or to receive any such allotment of
rights or to exercise the rights in respect to any such change or conversion
or exchange of shares. In such case, only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to notice of,
or to vote at, such meeting or to receive payment of such dividend, or to
receive such allotment of rights or to exercise such rights, as the case may
be, notwithstanding any transfer of any shares on the books of the
Corporation after any record date fixed as aforesaid.
The Board of Directors may close the books of the Corporation against
transfers of shares during the whole or any part of such period, and in such
case written or printed notice thereof shall be mailed at least ten days
before the closing thereof to each stockholder of record at the address
appearing on the stock transfer books of the Corporation or supplied by him
to the Corporation for the purpose of notice. While the stock transfer books
of the Corporation are closed, no transfer of shares shall be made thereon.
If no record date is fixed by the Board of Directors for the
determination of stockholders who are entitled to receive notice of, or to
vote at, a meeting of the stockholders, or to receive payment of any such
dividend or distribution, or to receive any such allotment of rights or to
exercise the rights in respect to any such change or conversion or exchange
of shares, transferees of shares which are transferred on the stock transfer
books of the Corporation within the ten days immediately preceding the date
of such meeting, dividend, distribution, allotment of rights or exercise of
such rights shall not be entitled to notice of, or to vote at, such meeting,
or to receive payment of any dividend or distribution, or to receive any
such allotment of rights or to exercise the rights in respect to any such
change or conversion or exchange of shares.
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Section 2.10. Stockholders List. The officer or agent having charge of
the stock transfer books for shares of the Corporation shall make, at least
ten days before each meeting of the stockholders, a complete alphabetical
list of the stockholders entitled to vote at the meeting, with their
addresses and the number of shares held by each, which list shall be kept on
file either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting or if not so
specified, at the place where the meeting is to be held and shall be subject
to inspection by any stockholder for any purpose germane to the meeting at
any time during usual business hours for a period of at least ten days prior
to the meeting. Such list shall be produced at the meeting and shall be kept
open for inspection by any stockholder during the entire meeting. The
original stock transfer books of the Corporation shall be prima facie
evidence as to who are the stockholders entitled to exercise the rights of a
stockholder.
Section 2.11. Inspectors of Election. In advance of any meeting of the
stockholders, the Board of Directors shall appoint inspectors of election,
who need not be stockholders, to act at such meeting or any adjournment,
postponement or continuation thereof. If no inspector of election is able to
act at a meeting of stockholders, the chairman of any such meeting shall
make such appointment at the meeting. The number of inspectors of election
shall be one or three. No person who is a candidate for office shall act as
an inspector of election. The inspectors of election shall do all such acts
as may be proper to conduct the election or vote and such other duties as
may be prescribed by statute with fairness to all stockholders, and shall
make a written report of any matter determined by them and execute a
certificate as to any fact found by them. If there are three inspectors of
election, the decision, act or certificate of a majority shall be the
decision, act or certificate of all.
Section 2.12. Conduct of Meetings. The chairman of any meeting of the
stockholders shall determine the order of business and the procedure to be
followed at such meeting, including such regulation of the manner of voting
and the conduct of discussion as he shall deem to be fair and equitable.
Article 3
DIRECTORS
Section 3.1. Powers.
(a) General Powers. The Board of Directors shall have all the power and
authority granted by law to the Board of Directors, including all powers
necessary or appropriate to the management of the business and affairs of the
Corporation.
(b) Specific Powers. Without limiting the general powers conferred by the
last preceding clause and the powers conferred by the Certificate of
Incorporation and
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these By-laws of the Corporation, it is hereby expressly declared that the
Board of Directors shall have the following powers:
(i) To appoint any person, firm or corporation to accept and hold
in trust for the Corporation any property belonging to the Corporation or in
which it is interested, and to authorize any such person, firm or corporation to
execute any documents and perform any duties that may be requisite in relation
to any such trust;
(ii) To appoint a person or persons to vote shares of another
corporation held and owned by the Corporation;
(iii) To nominate candidates for election by stockholders to the
Board of Directors either directly or through a nominating committee established
by it;
(iv) By resolution adopted by a majority of the whole Board of
Directors, to designate one or more committees in accordance with Article 4 of
these By-laws;
(v) To fix the place, time and purpose of meetings of the
stockholders; and
(vi) To fix the compensation of directors and officers for their
services.
Section 3.2. Number and Terms of Directors. Directors shall be natural
persons of full age and need not be residents of Delaware or stockholders of
the Corporation. The Board of Directors shall consist of not less than three
nor more than thirteen directors, with the actual number of directors being
determined from time to time by resolution of the Board of Directors. Except
as hereinafter provided in the case of vacancies, directors shall be elected
by the stockholders, and each director shall be elected for a three-year
term and until his successor shall be elected, subject to removal as
provided by statute.
Section 3.3. Classes. The Board of Directors shall be divided into
three classes: Class I, Class II and Class III. At each annual meeting of
the stockholders, the successors to the directors of the class whose term
shall expire in that year shall be elected for a term of three years so that
the term of office of one class of directors shall expire in each year. The
number of directors in each class shall be as nearly equal as possible so
that, except for temporary vacancies, the number in any class shall not
exceed the number in any other class by more than one.
Section 3.4. Powers and Duties of the Chairman of the Board of Directors.
The Board of Directors shall appoint one of their number as a Chairman of the
Board who
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shall preside at all meetings of the Board of Directors and who shall have
such other powers and duties as set forth in these By-laws or as may be
assigned to him from time to time by the Board of Directors.
Section 3.5. Powers and Duties of the Vice Chairman of the Board of
Directors. The Board of Directors may, in its discretion, appoint one of its
number as a Vice Chairman of the Board of Directors. In the absence of the
Chairman of the Board of Directors, the Vice Chairman of the Board of
Directors shall preside at all meetings of the Board of Directors. In
addition, the Vice Chairman of the Board of Directors shall have such other
powers and duties as may be assigned to him from time to time by the Board
of Directors.
Section 3.6. Vacancies. Vacancies on the Board of Directors, including
vacancies resulting from an increase in the number of directors, shall be
filled by a majority of the remaining members of the Board of Directors,
though less than a quorum, or by the sole remaining director, as the case
may be, irrespective of whether holders of any class or series of stock or
other voting securities of the Corporation are entitled to elect one or more
directors to fill such vacancies or newly created directorships at the next
annual meeting of the stockholders. Each person so elected shall be a
director until his successor is elected by the stockholders at the annual
meeting of the stockholders at which the class of directors to which he was
elected is up for election or at any special meeting of the stockholders
prior thereto duly called for that purpose.
Section 3.7. Organization Meetings. The organization meeting of each
newly elected Board of Directors may be held immediately following the
meeting of the stockholders at which such directors were elected without the
necessity of notice to such directors to constitute a legally convened
meeting or at such time and place as may be fixed by a notice, or a waiver
of notice, or a consent signed by all of such directors.
Section 3.8. Regular Meetings. Regular meetings of the Board of
Directors shall be held without call or notice at such time and place as
shall from time to time be fixed by the Board of Directors.
Section 3.9. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President or the
Secretary of the Corporation upon his own initiative or upon request of a
majority of the Board of Directors on one day's notice to each director.
Section 3.10. Notices of Meetings. All meetings of the Board of
Directors may be held at such times and places as may be specified in the
notice of meeting or in a duly executed waiver of notice thereof.
Section 3.11. Participation at Meetings. One or more directors may
participate in any meeting of the Board of Directors, or of any committee
thereof, by means of a
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conference telephone or similar communications equipment which enables all
persons participating in the meeting to hear one another, and such
participation in a meeting shall constitute presence in person at the
meeting.
Section 3.12. Quorum. At all meetings of the Board of Directors, the
presence, in person or by telephonic or similar communications equipment, of
a majority of the members of the Board of Directors shall constitute a
quorum for the transaction of business, and the acts of a majority of the
directors present at a duly convened meeting at which a quorum is present
shall be the acts of the Board of Directors, except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation of the
Corporation or by these By-laws. If a quorum shall not be present, in person
or by telephonic or similar communications equipment, at any meeting of the
Board of Directors, the directors present may adjourn, postpone or continue
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be so present.
Section 3.13. Action by Unanimous Written Consent. Any action required
or permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board
of Directors or a committee thereof, as the case may be, consent thereto in
writing, and such consent is filed with the minutes of proceedings of the
Board of Directors, or committee.
Section 3.14. Compensation. Directors, as such, may receive a stated
salary for their services, or a fixed sum and expenses for attendance at
regular or special meetings of the Board of Directors, or any committee
thereof, or any combination of the foregoing as may be determined from time
to time by resolution of the Board of Directors, and nothing contained
herein shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 3.15. Reliance on Company Books and Records. A member of the
Board of Directors or of any committee thereof shall, in the performance of
his duties, be fully protected in relying in good faith upon the books of
account or reports made to the Corporation by any of its officers, or by an
independent certified public accountant, or by an appraiser selected with
reasonable care by the Board of Directors or by any committee thereof, or in
relying in good faith upon other records of the Corporation.
Article 4
COMMITTEES
Section 4.1. Board Committees. The Board of Directors, by a vote of a
majority of the whole Board of Directors, may from time to time designate
committees of the Board of Directors, with such lawfully delegable powers and
duties as it thereby confers,
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to serve at the pleasure of the Board of Directors and shall, for those
committees and any others provided for herein, elect a director or directors
to serve as a member or members and designate, if it desires, one or more
directors as alternate members who may replace any absent or disqualified
member at any meeting of the committee. Any committee so designated may
exercise the power and authority of the Board of Directors to declare a
dividend or to authorize the issuance of stock if the resolution that
designates the committee or a supplemental resolution of the Board of
Directors shall so provide. In the absence or disqualification of any member
of any committee and any alternate member in his place, the member or
members of the committee present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in
the place of any such absent or disqualified member. The Board of Directors
may, from time to time, suspend, alter, continue or terminate any committee
or the powers and functions thereof.
Section 4.2. Other Committees. The Board of Directors may appoint
commit tees consisting of officers or other persons, with chairmanships,
vice chairmanships and secretaryships and such duties and powers as the
Board of Directors may from time to time designate and prescribe. The Board
of Directors may from time to time suspend, alter, continue or terminate any
of such committees or the powers and functions thereof.
Section 4.3. Quorum. One-third of the members of any committee shall
constitute a quorum unless the committee shall consist of one or two
members, in which case one member shall constitute a quorum. All matters
properly brought before any committee shall be determined by a majority vote
of the members present.
Section 4.4. Action by Unanimous Written Consent. Any action that may
be taken by a committee at a meeting may be taken without a meeting if all
members thereof consent thereto in writing and such writing is filed with
the minutes of the proceedings of such committee.
Section 4.5. Procedures. Each committee may determine the procedural
rules for meeting and conducting its business and shall act in accordance
therewith, except as otherwise provided by law, by the Certificate of
Incorporation of the Corporation or by these By-laws. Adequate provision
shall be made for notice to all members of any committee of all meetings of
that committee.
Article 5
OFFICERS
Section 5.1. Election and Office. The officers of the Corporation shall be
elected annually by the Board of Directors at its organization meeting and shall
consist of a Chairman of the Board, a President, a Secretary and a Treasurer.
The Board of
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Directors may also elect one or more Vice Presidents and such other officers
and appoint such agents as it shall deem necessary. Each officer of the
Corporation shall hold office for such term, have such authority and perform
such duties as set forth in these By-laws or as may from time to time be
prescribed by the Board of Directors. Any two or more offices may be held by
the same person.
Section 5.2. Salaries. The salaries of all officers of the Corporation
shall be fixed by the Board of Directors.
Section 5.3. Removal and Vacancies. The Board of Directors may remove
any officer or agent elected or appointed at any time and within the period,
if any, for which such person was elected or employed whenever in the
judgment of the Board of Directors it is in the best interests of the
Corporation, and all persons shall be elected and employed subject to the
provisions hereof. If the office of any officer becomes vacant for any
reason, the vacancy shall be filled by the Board of Directors.
Section 5.4. Powers and Duties of the Chairman. The Chairman of the
Board shall be a director of the Corporation. The Chairman of the Board
shall preside at all meetings of the stockholders and of the Board of
Directors.
Section 5.5. Powers and Duties of the President. The President shall be
the chief executive officer with general supervision over and direction of
the affairs of the Corporation. In the exercise of these duties and subject
to the limitations of the laws of the State of Delaware or any other
applicable law, these By-laws and the actions of the Board of Directors, he
may appoint, suspend, and discharge employees, agents and assistant
officers, may fix the compensation of all officers and assistant officers
and, in the absence of the Chairman of the Board of Directors, shall preside
at all meetings of the stockholders and the Board of Directors. He shall
also do and perform such other duties as from time to time may be assigned
to him by the Board of Directors. Unless otherwise directed by the Board of
Directors from time to time, the President shall have the power to vote and
otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of
any other corporation in which the Corporation may hold securities and
otherwise to exercise any and all rights and powers which the Corporation
may possess by reason of its ownership of securities in such other
corporation.
Section 5.6. Powers and Duties of Vice Presidents. Each Vice President
shall have such duties as may be assigned to him from time to time by the
Board of Directors, the Executive Committee or the President. In the event
of a temporary absence of the President on vacation or business, the
President may designate a Vice President or Vice Presidents who will perform
the duties of the President in such absence. In the event of a prolonged
absence of the President due to illness or disability or for any other
reason, the Board of Directors shall designate a Vice President or Vice
Presidents who will perform the duties of the President during such absence.
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Section 5.7. Powers and Duties of the Secretary. The Secretary of the
Corporation shall attend all meetings of the Board of Directors and of the
stockholders and shall keep accurate records thereof in one or more minute
books kept for that purpose, shall give, or cause to be given, the required
notice of all meetings of the stockholders and of the Board of Directors,
shall keep in safe custody the corporate seal of the Corporation and affix
the same to any instrument requiring it, and when so affixed, it shall be
attested by his signature or by the signature of the Treasurer or any
Assistant Secretary or Assistant Treasurer of the Corporation. The Secretary
also shall keep, or cause to be kept, the stock certificate books, stock
transfer books and stock ledgers of the Corporation, in which shall be
recorded all stock issues, transfers, the dates of same, the names and
addresses of all stockholders and the number of shares held by each, shall,
when necessary, prepare new certificates upon the transfer of shares and the
surrender of the old certificates, shall cancel such surrendered
certificates and shall perform such other duties as may be assigned to him
by the President.
Section 5.8. Powers and Duties of the Treasurer. The Treasurer of the
Corporation shall have the custody of the Corporation's funds and
securities, shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation, shall deposit all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as shall be designated by the President,
shall disburse the funds of the Corporation as may be ordered by the
President or the Board of Directors, taking proper vouchers for such
disbursements, shall render to the President and the Board of Directors, at
the regular meetings of the Board of Directors or whenever they may require
it, an account of all his transactions as Treasurer and of the financial
condition of the Corporation and shall have the right to affix the seal of
the Corporation to any instrument requiring it, and to attest to the same by
his signature and, if so required by the Board of Directors, he shall give
bond in such sum and with such surety as the Board of Directors may from
time to time direct.
Section 5.9. Designation of a Chief Financial Officer. The Board of
Directors shall have the power to designate from among the President, any
Vice President or the Treasurer of the Corporation a Chief Financial Officer
who shall be deemed the principal financial and accounting officer. In the
event that the Treasurer is not designated by the Board of Directors as the
Chief Financial Officer, the Treasurer shall report to the Chief Financial
Officer from time to time concerning all duties which the Treasurer is
obligated to perform and the Chief Financial Officer shall, subject to the
reasonable direction of the President or the Board of Directors, at his
election, assume such of the duties of the Treasurer as are provided in
Section 5.8 hereof as he shall deem appropriate.
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Article 6
INDEMNIFICATION
Section 6.1. Indemnification. Subject to Section 6.2 hereof, the
Corporation shall indemnify any director or officer of the Corporation and
any director or officer of its subsidiaries against expenses, including
legal fees, judgments, fines and amounts paid in settlement, actually and
reasonably incurred by him to the fullest extent now or hereafter permitted
by law in connection with any threatened, pending or completed action, suit
or proceeding, whether derivative or nonderivative, and whether civil,
criminal, administrative or investigative, brought or threatened to be
brought against him by reason of his performance or status as a director or
officer of the Corporation, any of its subsidiaries or any other entity in
which he was serving at the request of the Corporation or in any other
capacity on behalf of the Corporation, its parent or any of its subsidiaries
if such officer or director acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner that he reasonably believed to be in, or not opposed to, the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Notwithstanding the foregoing, in the case of any threatened, pending
or completed action or suit by or in the right of the Corporation, no
indemnification shall be made in respect of any claim, issue or matter as to
which such officer or director shall have been adjudged to be liable to the
Corporation unless and only to the extent the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
The Board of Directors by resolution adopted in each specific instance
may similarly indemnify any person other than a director or officer of the
Corporation for liabilities incurred by him in connection with services
rendered by him for or at the request of the Corporation or any of its
subsidiaries.
The provisions of this Section 6.1 shall be applicable to all actions,
suits or proceedings commenced after its adoption, whether such arise out of
acts or omissions which occurred prior or subsequent to such adoption and
shall continue as to a person who has ceased to be a director or officer or
to render services for or at the request of the Corporation and shall inure
to the benefit of the heirs, executors and administrators of
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such a person. The rights of indemnification provided for herein shall not
be deemed the exclusive rights to which any director, officer, employee or
agent of the Corporation may be entitled.
Notwithstanding any provision of this Article 6 to the contrary, the
Corporation shall not be required to indemnify or advance expenses to any
person in connection with any action, suit, proceeding, claim or
counterclaim initiated by or on behalf of such person.
Section 6.2. Authorization and Determination of Indemnification. Any
indemnification under this Article 6, unless ordered by a court, shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer or employee is
proper in the circumstances because he has met the applicable standard of
conduct as specified in Section 6.1 of this Article 6. A person shall be
deemed to have met such applicable standard of conduct if his action is
based on the records or books of account of the Corporation or another
enterprise (provided that such records or books of account have in each case
been prepared by persons whom the person relying thereon reasonably believes
to be professionally or expertly competent to prepare such records or books
of account), or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser
or other expert selected with reasonable care by the Corporation or another
enterprise.
Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (ii) if such a quorum is not attainable
or, even if attainable, a majority vote of a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion or
(iii) by the stockholders. To the extent, however, that a director, officer
or employee of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding described above, or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses, including attorneys' fees, actually and reasonably
incurred by him in connection therewith, without the necessity of
authorization in the specific case.
The provisions of this Section 6.2 shall not be deemed to be exclusive
or to limit in any way the circumstances in which a person may be deemed to
have met such applicable standard of conduct.
Section 6.3. Advances. Expenses incurred in defending or investigating
a threatened or pending action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the director, officer
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or employee to repay such amount if it shall ultimately be determined that
he is not entitled to be indemnified by the Corporation as authorized in
this Article 6.
Section 6.4. Scope and Alteration of Indemnification Provisions. The
indemnification and advancement of expenses provided by, or granted pursuant
to, the other sections of this Article 6 shall not be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any By-law, agreement, contract, vote of the
stockholders or disinterested directors or pursuant to the direction,
howsoever embodied, of any court of competent jurisdiction or otherwise,
both as to action in his official capacity and as to action in another
capacity while holding such office, it being the policy of the Corporation
that indemnification of, and advancement of expenses to, the persons
specified in Section 6.1 of this Article 6 shall be made to the fullest
extent permitted by law.
To this end, the provisions of this Article 6 shall be deemed to have
been amended for the benefit of such persons effective immediately upon any
modification of the General Corporation Law of the State of Delaware which
expands or enlarges the power or obligation of corporations organized under
such law to indemnify, or advance expenses to, such persons. The provisions
of this Article 6 shall not be deemed to preclude the indemnification of, or
advancement of expenses to, any person who is not specified in this Section
6.4 or Section 6.1 of this Article 6 but whom the Corporation has the power
or obligation to indemnify, or to advance expenses for, under the provisions
of the General Corporation Law of the State of Delaware or otherwise.
Notwithstanding any contrary determination in the specific case under
Section 6.2 of this Article 6, and notwithstanding the absence of any
determination thereunder, any director, officer or employee may apply to any
court of competent jurisdiction in the State of Delaware for indemnification
to the extent otherwise permissible under Section 6.1 of this Article 6. The
basis of such indemnification by a court shall be a determination by such
court that indemnification of the director, officer or employee is proper in
the circumstances because he has met the applicable standards of conduct set
forth in Section 6.1 of this Article 6. Notice of any application for
indemnification pursuant to this Section 6.4 shall be given to the
Corporation promptly upon the filing of such application.
Section 6.5. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer or
employee of the Corporation, or is or was serving at the request of the
Corporation as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the Corporation would have the
power or the obligation to indemnify him against such liability under the
provisions of this Article 6.
Section 6.6. Definitions. For purposes of this Article 6, references to the
"Corporation" shall include, in addition to the resulting corporation, any
constituent
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corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer or
employee of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer or employee
of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article 6 with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence
had continued. The term "another enterprise" as used in this Article 6 shall
mean any other corporation or any partnership, joint venture, trust or other
entity of which such person is or was serving at the request of the
Corporation as a director, officer or employee and shall include employee
benefit plans.
Article 7
CAPITAL STOCK
Section 7.1. Stock Certificates. The certificates for shares of the
Corporation's capital stock shall be numbered and registered in a share
register as they are issued, shall bear the name of the registered holder,
the number and class of shares represented thereby and the par value of each
share or a statement that such shares are without par value, as the case may
be, shall be signed by the Chairman of the Board or the President or any
Vice President of the Corporation and the Secretary, any Assistant Secretary
or the Treasurer of the Corporation or any other person properly authorized
by the Board of Directors and shall bear the seal of the Corporation, which
seal may be a facsimile engraved or printed. Where the certificate is signed
by a transfer agent or a registrar, the signature of any corporate officer
on such certificate may be a facsimile engraved or printed. In case any
officer who has signed, or whose facsimile signature has been placed upon,
any share certificate shall have ceased to be such officer because of death,
resignation or otherwise, before the certificate is issued, it may be issued by
the Corporation with the same effect as if the officer had not ceased to be such
at the date of its issue.
Section 7.2. Transfer of Shares. Upon surrender to the Corporation of a
share certificate duly endorsed by the person named in the certificate or by
an attorney duly appointed in writing and accompanied where necessary by
proper evidence of succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto and the old
certificate canceled and the transfer recorded upon the stock transfer books
and share register of the Corporation.
Section 7.3. Lost Certificates. Should any stockholder of the
Corporation allege the loss, theft or destruction of one or more
certificates for shares of the Corporation and request the issuance by the
Corporation of a substitute certificate therefor, the Board of Directors may
direct that a new certificate of the same tenor and for the same number of
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shares be issued to such person upon such person's making of an affidavit in
form satisfactory to the Board of Directors setting forth the facts in
connection therewith, provided that prior to the receipt of such request the
Corporation shall not have either registered a transfer of such certificate
or received notice that such certificate has been acquired by a bona fide
purchaser. When authorizing such issuance of a new certificate, the Board of
Directors may, in its discretion and as a condition precedent to the
issuance of such certificate, require the owner of such lost, stolen or
destroyed certificate, or his heirs or legal representatives, as the case
may be, to advertise the same in such manner as the Board of Directors shall
require and/or to give the Corporation a bond in such form and for such sum
and with such surety or sureties, with fixed or open penalty, as shall be
satisfactory to the Board of Directors, as indemnity for any liability or
expense which it may incur by reason of the original certificate remaining
outstanding.
Article 8
CHECKS AND NOTES
All checks or demands for money and notes of the Corporation shall be
signed by such officer or officers or such other person or persons as the
Board of Directors may from time to time designate.
Article 9
FISCAL YEAR
The fiscal year of the Corporation shall be as determined from time to
time by resolution of the Board of Directors.
Article 10
SEAL
The seal of the Corporation shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal,
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
Article 11
NOTICES; COMPUTING TIME PERIODS
Section 11.1. Method and Contents of Notice. Whenever notice is required to
be given to any director, committee member, officer, stockholder, employee or
agent,
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whether pursuant to law, the Certificate of Incorporation of the Corporation
or these By-laws, it shall not be construed to mean personal notice, but
such notice may be given, in the case of stockholders, in writing, by
depositing the same in the mail, postage prepaid, or by overnight carrier
addressed to such stockholder at his last known address as the same appears
on the books of the Corporation, and, in the case of directors, committee
members, officers, employees and agents, by telephone, or by mail, postage
prepaid, or by prepaid telegram at his last known address as the same
appears on the books of the Corporation. All notices shall be deemed to be
given when mailed, telegraphed or telephoned.
Section 11.2. Waiver of Notice. Any written notice required to be given
to any person may be waived in a writing signed by the person entitled to
such notice whether before or after the time stated therein. Attendance of
any person entitled to notice, whether in person or by proxy, at any meeting
shall constitute a waiver of notice of such meeting, except where any person
attends a meeting for the express purpose of objecting to the transaction of
any business because the meeting was not lawfully called or convened. Where
written notice is required for any meeting, the waiver thereof must specify
the purpose only if it is for a special meeting of the stockholders.
Article 12
BOOKS AND RECORDS
The Board of Directors shall determine from time to time whether, when
and under what conditions and regulations, the books and records of the
Corporation (except such as may by statute be specifically open to
inspection) shall be open to the inspection of the stockholders, and the
stockholders' rights in this respect are and shall be restricted and limited
accordingly.
Article 13
AMENDMENTS
These By-laws may be altered, amended or repealed (i) by the
affirmative vote of the holders of at least a majority of the voting power
of the capital stock of the Corporation entitled to vote thereon at any
annual or special meeting duly convened after notice to the stockholders of
that purpose or (ii) by a majority vote of the members of the Board of
Directors at any regular or special meeting of the Board of Directors duly
convened after notice to the Board of Directors of that purpose, subject
always to the power of the stockholders to change such action of the Board
of Directors by the vote of the stockholders required in clause (i) of this
Article 13.
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Article 14
INTERPRETATION OF BY-LAWS
All words, terms and provisions of these By-laws shall be interpreted
and defined by and in accordance with the General Corporation Law of the
State of Delaware, as amended, and as amended from time to time hereafter.
Adopted March 21, 2000
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[LOGO]
eResearchTechnololgy
Enabling the Clinical Advantage
A Wholly Owned Subsidiary of Premier Research Worldwide, Ltd
MANAGEMENT CONSULTANT AGREEMENT
The following agreement is hereby entered into between, Joel Morganroth, M.D.,
P.C. (hereinafter known as Consultant) and eResearchTechnololgy (together with
its affiliated corporations hereinafter known as the "Company") and having its
principal offices at 30 S. 17th Street, Philadelphia, PA 19103
1. SCOPE OF PROJECT
a) Consultant agrees to serve as Medical Director and/or
principal investigator and to advise the Company on matters
related to the successful operation of the Company's Clinical
Research Business unit.
b) Consultant agrees to provide medical interpretation for
diagnostic tests as such reading is from time to time
required.
2. ETHICAL CONDUCT
Consultant will conduct himself in a professional and ethical manner
at all times and will comply with all Company policies as well as all
State and Federal regulations and laws as they may apply to the
services, products, and business of the Company.
3. Compensation
a) Fees shall be $156,000/year payable in twelve equal
installments by the 15th of each month
b) Consultant will be reimbursed for reasonable out of picket
disbursement properly documented.
c) Consultant agrees to maintain his medical licenses as required
to carry out the duties described herein.
d) Consultant shall be acting as an independent contractor and
not as an employee of the Company. Payment of any tax and/or
social security liabilities relative to this compensation
shall be the responsibility of the Consultant.
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4. NON-DISCLOSURE
Consultant acknowledges that consultancy for the Company requires him
to have access to confidential information and material belonging to
the Company, including customer lists, contracts, proposals,
operating procedures, and trade secrets. Upon termination of the
consulting relationship for any reason, Consultant agrees to return
to the Company any such confidential information and material in his
possession with no copies thereof retained. Consultant further
agrees, whether during the term of this agreement with the Company or
any time after the termination thereof (regardless of the reason for
such termination), he will not disclose nor use in any manner, any
confidential or other material relating to the business, operations,
or prospects of the Company except as authorized in writing by the
Company.
5. INVENTIONS
a) Consultant agrees to promptly disclose to the Company each
discovery, improvement, or invention conceived, made, or
reduced to practice during the term of employment. Consultant
further agrees to grant to the Company the entire interest in
all of such discoveries, improvements, and inventions and to
sign all patent/copyright applications or other documents
needed to implement the provisions of this paragraph without
additional consideration. Consultant further agrees that all
works of authorship subject to statutory copyright protection
developed jointly or solely, while employed shall be
considered property of the Company and any copyright thereon
shall belong to the Company. Any invention, discovery, or
improvement conceived, made, or disclosed, during the one year
period following the termination of this agreement shall be
deemed to have been made, conceived, or discovered during the
term hereof.
b) If publication of data generated from studies conducted under
the auspices of the Company is anticipated, Consultant agrees
to obtain permission from the Company for such publication
6. NO CURRENT CONFLICT
Employee hereby assures the Company that he/she is not currently
restricted by any existing employment or non-compete agreement that
would conflict with the terms of this Agreement.
7. TERM OF AGREEMENT
The term of this Agreement is one year commencing from January 1,
2000 and will continue from year to year unless terminated.
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8. TERMINATION
a) The Company may terminate consulting services at any time upon
without the need to show cause upon 180 days written notice to
Consultant.
b) The Company may terminate consulting services without notice
for failure to meet obligations under the Agreement. The
following, as determined by the Company in its reasonable
judgement, shall constitute failure to meet these obligations:
(1) Consultant's failure to perform services defined under
the scope of the project.
(2) Any misconduct which is injurious to the business or
interests of the Company.
(3) Violation of any federal, state, or local law
applicable to the business of the Company.
(4) Any material breach of this agreement.
c) Consultant may terminate employment at any time upon 60 days
written notice to the Company.
9. MISCELLANEOUS
a) This Agreement and any disputes arising herefrom shall be
governed by Pennsylavnia law.
b) In the event that any provision of this Agreement is held to
be invalid or unenforceable for any reason, including without
limitation the geographic or business scope or duration
thereof, this Agreement shall be construed as if such
provision had been more narrowly drawn so as not to be invalid
or unenforceable.
c) This Agreement supersedes all prior agreements, arrangements,
and understandings, written or oral, relating to the subject
matter.
d) The failure of either party at any time or times to require
performance of any provision hereof shall in no way affect the
right at a later time to enforce the same.
For Consultant: For the Company:
/s/ Joel Morganroth /s/ Joseph Esposito
- ----------------------------- ------------------------------
Date: 1-1-2000 Date: 1/1/2000
------------------------ -----------------------
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[LOGO]
eResearchTechnololgy
Enabling the Clinical Advantage
A Wholly Owned Subsidiary of Premier Research Worldwide, Ltd
MANAGEMENT EMPLOYMENT AGREEMENT
The following agreement is hereby entered into between, Joseph
Esposito(hereinafter known as Employee) and eResearchTechnology (together with
its affiliated corporations hereinafter known as the "Company") and having its
principal offices at 30 S. 17th Street, Philadelphia, PA 19103
1. DUTIES AND RESPONSIBILITIES
Employee agrees to hold the position of President and Chief Executive
Officer and shall be directly responsible to Board of Directors.
2. BEST EFFORTS
Employee agrees to devote his best efforts to his employment with the
Company, on a full-time (no less than 40 hours/week) basis. He further
agrees not to use the facilities, personnel or property of the Company
for personal or private business benefit.
3. ETHICAL CONDUCT
Employee will conduct himself in a professional and ethical manner at
all times and will comply with all company policies as well as all
State and Federal regulations and laws as they may apply to the
services, products, and business of the Company.
4. TERM OF THE AGREEMENT
This agreement will be for a period of one year, commencing January 1,
2000 and will continue from year to year unless terminated.
5. COMPENSATION
a. Salary shall be $270,000/year payable in equal installments as
per the company's payroll policy. Salary shall be considered
on an annual basis and adjusted based on performance.
b. Benefits shall be the standard benefits of the Company as they
shall exist from time to time with the exception of vacation
which will be four weeks.
c. Car Allowance of $700/month.
<PAGE>
6. NON-DISCLOSURE
Employee acknowledges that employment with the Company requires him/her
to have access to confidential information and material belonging to
the Company, including customer lists, contracts, proposals, operating
procedures, trade secrets and business methods and systems, which have
been developed at great expense by the Company and which Employee
recognizes to be unique assets of the Company's business. Upon
termination of employment for any reason, Employee agrees to return to
the Company any such confidential information and material in his
possession with no copies thereof retained. Employee further agrees,
whether during employment with the Company or any time after the
termination thereof (regardless of the reason for such termination), he
will not disclose nor use in any manner, any confidential or
proprietary material relating to the business, operations, or prospects
of the Company except as authorized in writing by the Company or
required during the performance of his duties.
7. BUSINESS INTERFERENCE; NONCOMPETITION
a. During employment with the Company and for a period of one
year (the "Restrictive Period") thereafter (regardless of the
reason for termination) Employee agrees he will not, directly
or indirectly, in any way for his own account, as employee,
stockholder, partner, or otherwise, or for the account of any
other person, corporation, or entity: (i) request or cause any
of the Company's suppliers, customers or vendors to cancel or
terminate any existing or continuing business relationship
with the Company; (ii) solicit, entice, persuade, induce,
request or otherwise cause any employee, officer or agent of
the Company to refrain from rendering services to the Company
or to terminate his or her relationship, contractual or
otherwise, with the Company; or (iii) induce or attempt to
influence any customer or vendor to cease or refrain from
doing business or to decline to do business with the Company
or any of its affiliated distributors or vendors.
b. The Employee agrees that, during the Restrictive Period, the
Employee will not, directly or indirectly, accept employment
with, provide services to or consult with, or establish or
acquire any interest in, any business, firm, person,
partnership, corporation or other entity which engages in any
business or activity that is the same as or competitive with
the business conducted by the Company in any state of the
United States of America and in any foreign country in which
any customer to whom the Company is providing services or
technology is located.
8. FORFEITURE FOR BREACH; INJUNCTIVE RELIEF.
a. Any breach of the covenants made in Sections 6 and 7 hereof
shall result in the forfeiture of the Employee's right to any
and all payments which may be required to be made under this
Agreement following such breach and shall relieve the Company
of any obligation to make such payments.
b. The Employee acknowledges that his compliance with the
covenants in Sections 6 and 7 hereof is necessary to protect
the good will and other proprietary interests of
<PAGE>
the Company and that, in the event of any violation by the
Employee of the provisions of Section 6 or 7 hereof, the
Company will sustain serious, irreparable and substantial
harm to its business, the extent of which will be difficult
to determine and impossible to remedy by an action at law
for money damages. Accordingly, the Employee agrees that, in
the event of such violation or threatened violation by the
Employee, the Company shall be entitle to an injunction
before trial from any court of competent jurisdiction as a
matter of course and upon the posting of not more than a
nominal bond in addition to all such other legal and
equitable remedies as may be available to the Company.
c. The rights and remedies of the Company as provided in this
Section 8 shall be cumulative and concurrent and may be
pursued separately, successively or together against Employee,
at the sole discretion of the Company, and may be exercised as
often as occasion therefor shall arise. The failure to
exercise any right or remedy shall in no event be construed as
a waiver or release thereof.
d. The Employee agrees to reimburse the Company for any expenses
incurred by it in enforcing the provisions of Sections 6 and 7
hereof if the Company prevails in that enforcement.
9. INVENTIONS
Employee agrees to promptly disclose to the Company each discovery,
improvement, or invention conceived, made, or reduced to practice
(whether during working hours or otherwise) during the term of
employment. Employee agrees to grant to the Company the entire interest
in all of such discoveries, improvements, and inventions and to sign
all patent/copyright applications or other documents needed to
implement the provisions of this paragraph without additional
consideration. Employee further agrees that all works of authorship
subject to statutory copyright protection developed jointly or solely,
while employed shall be considered a work made for hire and any
copyright thereon shall belong to the Company. Any invention,
discovery, or improvement conceived, made, or disclosed, during the one
year period following the termination of employment with the Company
shall be deemed to have been made, conceived, or discovered during
employment with the Company.
Employee acknowledges that the only discoveries, improvements, and
other inventions made prior to the date hereof which have not been
filed in the United States Patent Office are attached as Exhibit A.
10. NO CURRENT CONFLICT
Employee hereby assures the Company that he is not currently restricted
by any existing employment or non-compete agreement that would conflict
with the terms of this Agreement.
<PAGE>
11. TERM; TERMINATION AND TERMINATION BENEFITS
a. Employment is "at will" which means that either the Company or
Employee may terminate at any time, with or without cause or
good reason, upon written notice given at least 30 days prior
to termination.
b. This Agreement shall terminate upon the death of the Employee.
In addition, if, as a result of a mental or physical
condition which, in the reasonable opinion of a medical
doctor selected by the Company's board of directors, can be
expected to be permanent or to be of an indefinite duration
and which renders the Employee unable to carry out the job
responsibilities held by, or the tasks assigned to, the
Employee immediately prior to the time the disabling
condition was incurred, or which entitles the Employee to
receive disability payments under any long-term disability
insurance policy which covers the Employee for which the
premiums are reimbursed by the Company (a "Disability"), the
Employee shall have been absent from his duties hereunder on
a full-time basis for 120 consecutive days, or 180 days
during any twelve month period, and within thirty (30) days
after written notice (which may occur before or after the
end of such 120 or 180 day period), by the Company to
Employee of the Company's intent to terminate the Employee's
employment by reason of such Disability, the Employee shall
not have returned to the performance of his duties
hereunder, the Employee's employment hereunder shall,
without further notice, terminate at the end of said
thirty-day notice.
c. The Company may also terminate the Employee's employment under
this Agreement for Cause. For purposes of this Agreement the
Company shall have "Cause" to terminate the Employee's
employment if the Employee, in the reasonable judgment of
the Company, (i) fails to perform any reasonable directive
of the Company that may be given from time to time for the
conduct of the Company's business; (ii) materially breaches
any of his commitments, duties or obligations under this
Agreement; (iii) embezzles or converts to his own use any
funds of the Company or its Affiliates or any business
opportunity of the Company of its Affiliates; (iv) destroys
or converts to his own use any property of the Company or
its Affiliates, without the Company's consent; (v) is
convicted of, or indicted for, or enters a guilty plea or
plea of no contest with respect to, a felony; (vi) is
adjudicated an incompetent or (vii) violates any federal,
state, local or other law applicable to the business of the
Company or engages in any conduct which, in the reasonable
judgment of the Company, is injurious to the business or
interests of the Company.
d. Upon any termination of this Agreement, the Company shall have
no further obligation to Employee other than for Annual
Salary earned through the date of termination, and no
severance pay or other benefits of any kind shall be
payable; provided, however, that in the event the Company
terminates this Agreement
<PAGE>
other than for Cause or as a result of the death or
Disability of the Employee, the company will provide for a
one year severance package which will include base salary
and benefits. The Company must give the Employee written
notice of the Employee's breach under sections 11.c.(i.),
11.c.(ii), and 11.c(vii) and 15 days to cure before the
Employee is given notice of termination as required under
Section 11.a.
e. Notwithstanding any contrary provision contained in this
Employment Agreement, in the event that either (a) there is
a "Change of Control" (as hereafter defined) and neither the
Company nor the Buyer offers the Executive a position with
comparable responsibilities, authority, location or
compensation, or (b) after the date of the Change in Control
but before the first anniversary thereof, the Executive's
responsibilities, authority, location, or compensation are
not acceptable to the Executive the Executive may elect to
resign and receive severance equal to one year's annual
salary and applicable prorated bonus, hereunder, payable in
one lump sum in accordance with the Company's policy.
In addition, the Executive will continue to receive (subject
to payment of any applicable premium co-pay) standard health,
dental, disability, life and accident insurance benefits for
the one year period following the termination of employment.
The Executive must provide written notice of such election not
less than sixty days following the date of the Change of
Control or, if the Executive's new position is changed within
the time period and in the manner described above, within
thirty days following such event.
The term "Change of Control", as utilized herein, refers to:
(i) A change of control of a nature that would be
required to be reported in the Company's proxy
statement under the Securities Exchange Act of
1934, as amended;
(ii) The approval by the Board of Directors of a sale,
not in the ordinary course of business, of all or
substantially all of the Company's assets and
business to an unrelated third party and the
consummation of such transaction; or
(iii) The approval by the Board of Directors of any
merger, consolidation, or like business combination
or reorganization of the Company, the consummation
of which would result in the occurrence of any
event described in clause (i) or (ii) above, and
the consummation of such transaction.
<PAGE>
Except as expressly modified and amended hereby, the Employment Agreement and
its terms and provisions are hereby ratified, confirmed and approved in all
respects.
12. MISCELLANEOUS
a. This Agreement and any disputes arising herefrom shall be
governed by Pennsylvania law.
b. In the event that any provision of this Agreement is held to
be invalid or unenforceable for any reason, including without
limitation the geographic or business scope or duration
thereof, this Agreement shall be construed as if such
provision had been more narrowly drawn so as not to be invalid
or unenforceable.
c. This Agreement supersedes all prior agreements, arrangements,
and understandings, written or oral, relating to the subject
matter.
d. The failure of either party at any time or times to require
performance of any provision hereof shall in no way affect the
right at a later time to enforce the same. No waiver by either
party of any condition or of the breach by the other of any
term or covenant contained in this Agreement shall be
effective unless in writing and signed by the aggrieved party.
A waiver by a party hereto in any one or more instances shall
not be deemed or construed as a further or continuing waiver
of any such condition or breach or a waiver of any other
condition, or of the breach of any other term or covenant set
forth in this Agreement.
e. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
given when delivered in person, sent by certified mail,
postage prepaid, or delivered by a nationally recognized
overnight delivery service addressed, if to the Company at 30
S. 17th Street, 8th Floor, Philadelphia, PA 19103 Attn:
President and if to the Employee, at the address of his
personal residence as maintained in the Company's records.
For Employee: For the Company:
/s/ Joseph Esposito /s/ Joel Morganroth
- --------------------------- --------------------------
Date: 1/1/00 Date: 1/1/00
---------------------- ---------------------
<PAGE>
[LOGO]
eResearchTechnololgy
Enabling the Clinical Advantage
A Wholly Owned Subsidiary of Premier Research Worldwide, Ltd
MANAGEMENT EMPLOYMENT AGREEMENT
The following agreement is hereby entered into between, Bruce Johnson
(hereinafter known as Employee) and eResearchTechnology (together with its
affiliated corporations hereinafter known as the "Company") and having its
principal offices at 30 S. 17th Street, Philadelphia, PA 19103
1. DUTIES AND RESPONSIBILITIES
Employee agrees to hold the position of Chief Financial Officer and Sr.
Vice President and shall be directly responsible to Audit Committee.
2. BEST EFFORTS
Employee agrees to devote his best efforts to his employment with the
Company, on a full-time (no less than 40 hours/week) basis. He further
agrees not to use the facilities, personnel or property of the Company
for personal or private business benefit.
3. ETHICAL CONDUCT
Employee will conduct himself in a professional and ethical manner at
all times and will comply with all company policies as well as all
State and Federal regulations and laws as they may apply to the
services, products, and business of the Company.
4. TERM OF THE AGREEMENT
This agreement will be for a period of one year, commencing January 27,
2000 and will continue from year to year unless terminated.
5. COMPENSATION
a. Salary shall be $150,000/year payable in equal installments as
per the company's payroll policy. Salary shall be considered
on an annual basis and adjusted based on performance.
b. Benefits shall be the standard benefits of the Company as they
shall exist from time to time, except that a four week
vacation allowance will be provided for the calendar year 2000
and thereafter.
c. This position qualifies for the executive bonus plan of the
company in which your bonus will be $75,000 if the company
meets the Board approved budget for 2000.
<PAGE>
However, even if the company does not perform to this level,
you will receive a minimum bonus of $25,000 payable in
January 2001 if you are an employee at that time.
6. NON-DISCLOSURE
Employee acknowledges that employment with the Company requires him/her
to have access to confidential information and material belonging to
the Company, including customer lists, contracts, proposals, operating
procedures, trade secrets and business methods and systems, which have
been developed at great expense by the Company and which Employee
recognizes to be unique assets of the Company's business. Upon
termination of employment for any reason, Employee agrees to return to
the Company any such confidential information and material in his
possession with no copies thereof retained. Employee further agrees,
whether during employment with the Company or any time after the
termination thereof (regardless of the reason for such termination), he
will not disclose nor use in any manner, any confidential or
proprietary material relating to the business, operations, or prospects
of the Company except as authorized in writing by the Company or
required during the performance of his duties.
7. BUSINESS INTERFERENCE; NONCOMPETITION
a. During employment with the Company and for a period of one
year (the "Restrictive Period") thereafter (regardless of the
reason for termination) Employee agrees he will not, directly
or indirectly, in any way for his own account, as employee,
stockholder, partner, or otherwise, or for the account of any
other person, corporation, or entity: (i) request or cause any
of the Company's suppliers, customers or vendors to cancel or
terminate any existing or continuing business relationship
with the Company; (ii) solicit, entice, persuade, induce,
request or otherwise cause any employee, officer or agent of
the Company to refrain from rendering services to the Company
or to terminate his or her relationship, contractual or
otherwise, with the Company; or (iii) induce or attempt to
influence any customer or vendor to cease or refrain from
doing business or to decline to do business with the Company
or any of its affiliated distributors or vendors.
b. The Employee agrees that, during the Restrictive Period, the
Employee will not, directly or indirectly, accept employment
with, provide services to or consult with, or establish or
acquire any interest in, any business, firm, person,
partnership, corporation or other entity which engages in any
business or activity that is the same as or competitive with
the business conducted by the Company in any state of the
United States of America and in any foreign country in which
any customer to whom the Company is providing services or
technology is located.
<PAGE>
8. FORFEITURE FOR BREACH; INJUNCTIVE RELIEF.
a. Any breach of the covenants made in Sections 6 and 7 hereof
shall result in the forfeiture of the Employee's right to any
and all payments which may be required to be made under this
Agreement following such breach and shall relieve the Company
of any obligation to make such payments.
b. The Employee acknowledges that his compliance with the
covenants in Sections 6 and 7 hereof is necessary to protect
the good will and other proprietary interests of the Company
and that, in the event of any violation by the Employee of the
provisions of Section 6 or 7 hereof, the Company will sustain
serious, irreparable and substantial harm to its business, the
extent of which will be difficult to determine and impossible
to remedy by an action at law for money damages. Accordingly,
the Employee agrees that, in the event of such violation or
threatened violation by the Employee, the Company shall be
entitle to an injunction before trial from any court of
competent jurisdiction as a matter of course and upon the
posting of not more than a nominal bond in addition to all
such other legal and equitable remedies as may be available
to the Company.
c. The rights and remedies of the Company as provided in this
Section 8 shall be cumulative and concurrent and may be
pursued separately, successively or together against Employee,
at the sole discretion of the Company, and may be exercised as
often as occasion therefor shall arise. The failure to
exercise any right or remedy shall in no event be construed as
a waiver or release thereof.
d. The Employee agrees to reimburse the Company for any expenses
incurred by it in enforcing the provisions of Sections 6 and 7
hereof if the Company prevails in that enforcement.
9. INVENTIONS
Employee agrees to promptly disclose to the Company each discovery,
improvement, or invention conceived, made, or reduced to practice
(whether during working hours or otherwise) during the term of
employment. Employee agrees to grant to the Company the entire interest
in all of such discoveries, improvements, and inventions and to sign
all patent/copyright applications or other documents needed to
implement the provisions of this paragraph without additional
consideration. Employee further agrees that all works of authorship
subject to statutory copyright protection developed jointly or solely,
while employed shall be considered a work made for hire and any
copyright thereon shall belong to the Company. Any invention,
discovery, or improvement conceived, made, or disclosed, during the one
year period following the termination of employment with the Company
shall be deemed to have been made, conceived, or discovered during
employment with the Company.
<PAGE>
Employee acknowledges that the only discoveries, improvements, and
other inventions made prior to the date hereof which have not been
filed in the United States Patent Office are attached as Exhibit A.
10. NO CURRENT CONFLICT
Employee hereby assures the Company that he is not currently restricted
by any existing employment or non-compete agreement that would conflict
with the terms of this Agreement.
11. TERM; TERMINATION AND TERMINATION BENEFITS
a. Employment is "at will" which means that either the Company or
Employee may terminate at any time, with or without cause or
good reason, upon written notice given at least 30 days prior
to termination.
b. This Agreement shall terminate upon the death of the Employee.
In addition, if, as a result of a mental or physical condition
which, in the reasonable opinion of a medical doctor selected
by the Company's board of directors, can be expected to be
permanent or to be of an indefinite duration and which renders
the Employee unable to carry out the job responsibilities held
by, or the tasks assigned to, the Employee immediately prior
to the time the disabling condition was incurred, or which
entitles the Employee to receive disability payments under any
long-term disability insurance policy which covers the
Employee for which the premiums are reimbursed by the Company
(a "Disability"), the Employee shall have been absent from his
duties hereunder on a full-time basis for 120 consecutive
days, or 180 days during any twelve month period, and within
thirty (30) days after written notice (which may occur before
or after the end of such 120 or 180 day period), by the
Company to Employee of the Company's intent to terminate the
Employee's employment by reason of such Disability, the
Employee shall not have returned to the performance of his
duties hereunder, the Employee's employment hereunder shall,
without further notice, terminate at the end of said
thirty-day notice.
c. The Company may also terminate the Employee's employment under
this Agreement for Cause. For purposes of this Agreement the
Company shall have "Cause" to terminate the Employee's
employment if the Employee, in the reasonable judgment of the
Company, (i) fails to perform any reasonable directive of the
Company that may be given from time to time for the conduct of
the Company's business; (ii) materially breaches any of his
commitments, duties or obligations under this Agreement;
(iii) embezzles or converts to his own use any funds of the
Company or its Affiliates or any business opportunity of the
Company of its Affiliates; (iv) destroys or converts to his
own use any property of the Company or its Affiliates, without
the Company's consent; (v) is convicted of, or indicted for,
or enters a guilty plea or plea of no contest with respect to,
a felony; (vi) is adjudicated an incompetent or
(vii) violates any federal, state, local
<PAGE>
or other law applicable to the business of the Company or
engages in any conduct which, in the reasonable judgment of
the Company, is injurious to the business or interests of the
Company.
d. Upon any termination of this Agreement, the Company shall have
no further obligation to Employee other than for Annual Salary
earned through the date of termination, and no severance pay
or other benefits of any kind shall be payable; provided,
however, that in the event the Company terminates this
Agreement other than for Cause or as a result of the death or
Disability of the Employee, the company will provide for a six
months severance package, which will include base salary and
benefits, after you have been employed for six months. The
Company must give the Employee written notice of the
Employee's breach under sections 11.c.(i.), 11.c.(ii), and
11.c.(vii) and 15 days to cure before the Employee is given
notice of termination as required under Section 11.a.
e. Notwithstanding any contrary provision contained in this
Employment Agreement, in the event that either (a) there is a
"Change of Control" (as hereafter defined) and neither the
Company nor the Buyer offers the Executive a position with
comparable responsibilities, authority, location or
compensation, or (b) after the date of the Change in Control
but before the first anniversary thereof, the Executive's
responsibilities, authority, location, or compensation are not
acceptable to the Executive the Executive may elect to resign
and receive severance equal to six month's annual salary and
applicable prorated bonus, hereunder, payable in one lump sum
in accordance with the Company's policy.
In addition, the Executive will continue to receive (subject
to payment of any applicable premium co-pay) standard health,
dental, disability, life and accident insurance benefits for
the six month period following the termination of employment.
The Executive must provide written notice of such election not
less than sixty days following the date of the Change of
Control or, if the Executive's new position is changed within
the time period and in the manner described above, within
thirty days following such event.
The term "Change of Control", as utilized herein, refers to:
(i) A change of control of a nature that would be
required to be reported in the Company's proxy
statement under the Securities Exchange Act of
1934, as amended;
(ii) The approval by the Board of Directors of a sale,
not in the ordinary course of business, of all or
substantially all of the Company's assets and
business to an unrelated third party and the
consummation of such transaction; or
(iii) The approval by the Board of Directors of any
merger, consolidation, or like business combination
or reorganization of the Company, the consummation of
which would result in the occurrence of any event
described in clause (i) or (ii) above, and the
consummation of such transaction.
<PAGE>
Except as expressly modified and amended hereby, the Employment Agreement and
its terms and provisions are hereby ratified, confirmed and approved in all
respects.
12. MISCELLANEOUS
a. This Agreement and any disputes arising herefrom shall be
governed by Pennsylvania law.
b. In the event that any provision of this Agreement is held to
be invalid or unenforceable for any reason, including without
limitation the geographic or business scope or duration
thereof, this Agreement shall be construed as if such
provision had been more narrowly drawn so as not to be invalid
or unenforceable.
c. This Agreement supersedes all prior agreements, arrangements,
and understandings, written or oral, relating to the subject
matter.
d. The failure of either party at any time or times to require
performance of any provision hereof shall in no way affect the
right at a later time to enforce the same. No waiver by either
party of any condition or of the breach by the other of any
term or covenant contained in this Agreement shall be
effective unless in writing and signed by the aggrieved party.
A waiver by a party hereto in any one or more instances shall
not be deemed or construed as a further or continuing waiver
of any such condition or breach or a waiver of any other
condition, or of the breach of any other term or covenant set
forth in this Agreement.
e. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
given when delivered in person, sent by certified mail,
postage prepaid, or delivered by a nationally recognized
overnight delivery service addressed, if to the Company at 30
S. 17th Street, 8th Floor, Philadelphia, PA 19103 Attn:
President and if to the Employee, at the address of his
personal residence as maintained in the Company's records.
For Employee: For the Company:
/s/ Bruce Johnson /s/ Joseph Esposito
- ---------------------------- -----------------------------
Date: 1/27/00 Date: 1/27/00
----------------------- ------------------------
<PAGE>
[LOGO]
eResearchTechnology
Enabling the Clincial Advantage
A Wholly Owned Subsidiary of Premier Research Worldwide, Ltd
MANAGEMENT EMPLOYMENT AGREEMENT
The following agreement is hereby entered into between Vincent W. Renz, Jr.
(hereinafter known as Employee) and eResearchTechnology (together with its
affiliated corporations hereinafter known as the "Company") and having its
principal offices at 30 S. 17th Street, Philadelphia, PA 19103
1. DUTIES AND RESPONSIBILITIES
Employee agrees to hold the position of Sr. VP Technology and
Consulting and shall be directly responsible to President and CEO.
2. BEST EFFORTS
Employee agrees to devote his best efforts to his employment with the
Company, on a full-time (no less than 40 hours/week) basis. He further
agrees not to use the facilities, personnel or property of the Company
for personal or private business benefit.
3. ETHICAL CONDUCT
Employee will conduct himself in a professional and ethical manner at
all times and will comply with all company policies as well as all
State and Federal regulations and laws as they may apply to the
services, products, and business of the Company.
4. TERM OF THE AGREEMENT
This agreement will be for a period of one year, commencing January 1,
2000 and will continue from year to year unless terminated.
5. COMPENSATION
a. Salary shall be $150,000/year payable in equal installments as
per the company's payroll policy. Salary shall be considered on
an annual basis and adjusted based on performance.
b. Benefits shall be the standard benefits of the Company as they
shall exist from time to time.
c. Car allowance of $500 per month.
<PAGE>
6. NON-DISCLOSURE
Employee acknowledges that employment with the Company requires him/her
to have access to confidential information and material belonging to
the Company, including customer lists, contracts, proposals, operating
procedures, trade secrets and business methods and systems, which have
been developed at great expense by the Company and which Employee
recognizes to be unique assets of the Company's business. Upon
termination of employment for any reason, Employee agrees to return to
the Company any such confidential information and material in his
possession with no copies thereof retained. Employee further agrees,
whether during employment with the Company or any time after the
termination thereof (regardless of the reason for such termination), he
will not disclose nor use in any manner, any confidential or
proprietary material relating to the business, operations, or prospects
of the Company except as authorized in writing by the Company or
required during the performance of his duties.
7. BUSINESS INTERFERENCE; NONCOMPETITION
a. During employment with the Company and for a period of one year
(the "Restrictive Period") thereafter (regardless of the reason
for termination) Employee agrees he will not, directly or
indirectly, in any way for his own account, as employee,
stockholder, partner, or otherwise, or for the account of any
other person, corporation, or entity: (i) request or cause any of
the Company's suppliers, customers or vendors to cancel or
terminate any existing or continuing business relationship with
the Company; (ii) solicit, entice, persuade, induce, request or
otherwise cause any employee, officer or agent of the Company to
refrain from rendering services to the Company or to terminate
his or her relationship, contractual or otherwise, with the
Company; or (iii) induce or attempt to influence any customer or
vendor to cease or refrain from doing business or to decline to
do business with the Company or any of its affiliated
distributors or vendors.
b. The Employee agrees that, during the Restrictive Period, the
Employee will not, directly or indirectly, accept employment
with, provide services to or consult with, or establish or
acquire any interest in, any business, firm, person, partnership,
corporation or other entity which engages in any business or
activity that is the same as or competitive with the business
conducted by the Company in any state of the United States of
America and in any foreign country in which any customer to whom
the Company is providing services or technology is located.
8. FORFEITURE FOR BREACH; INJUNCTIVE RELIEF.
a. Any breach of the covenants made in Sections 6 and 7 hereof shall
result in the forfeiture of the Employee's right to any and all
payments which may be required to be made under this Agreement
following such breach and shall relieve the Company of any
obligation to make such payments.
b. The Employee acknowledges that his compliance with the covenants
in Sections 6 and 7 hereof is necessary to protect the good will
and other proprietary interests of the Company and that, in the
event of any violation by the Employee of the provisions of
Section 6 or 7 hereof, the Company will sustain serious,
irreparable and substantial harm to its business, the extent of
which will be difficult to
<PAGE>
determine and impossible to remedy by an action at law for money
damages. Accordingly, the Employee agrees that, in the event of
such violation or threatened violation by the Employee, the
Company shall be entitle to an injunction before trial from any
court of competent jurisdiction as a matter of course and upon
the posting of not more than a nominal bond in addition to all
such other legal and equitable remedies as may be available to
the Company.
c. The rights and remedies of the Company as provided in this
Section 8 shall be cumulative and concurrent and may be pursued
separately, successively or together against Employee, at the
sole discretion of the Company, and may be exercised as often as
occasion therefor shall arise. The failure to exercise any right
or remedy shall in no event be construed as a waiver or release
thereof.
d. The Employee agrees to reimburse the Company for any expenses
incurred by it in enforcing the provisions of Sections 6 and 7
hereof if the Company prevails in that enforcement.
9. INVENTIONS
Employee agrees to promptly disclose to the Company each discovery,
improvement, or invention conceived, made, or reduced to practice
(whether during working hours or otherwise) during the term of
employment. Employee agrees to grant to the Company the entire interest
in all of such discoveries, improvements, and inventions and to sign
all patent/copyright applications or other documents needed to
implement the provisions of this paragraph without additional
consideration. Employee further agrees that all works of authorship
subject to statutory copyright protection developed jointly or solely,
while employed shall be considered a work made for hire and any
copyright thereon shall belong to the Company. Any invention,
discovery, or improvement conceived, made, or disclosed, during the one
year period following the termination of employment with the Company
shall be deemed to have been made, conceived, or discovered during
employment with the Company.
Employee acknowledges that the only discoveries, improvements, and
other inventions made prior to the date hereof which have not been
filed in the United States Patent Office are attached as Exhibit A.
10. NO CURRENT CONFLICT
Employee hereby assures the Company that he is not currently restricted
by any existing employment or non-compete agreement that would conflict
with the terms of this Agreement.
11. TERM; TERMINATION AND TERMINATION BENEFITS
<PAGE>
a. Employment is "at will" which means that either the Company or
Employee may terminate at any time, with or without cause or good
reason, upon written notice given at least 30 days prior to
termination.
b. This Agreement shall terminate upon the death of the Employee. In
addition, if, as a result of a mental or physical condition
which, in the reasonable opinion of a medical doctor selected by
the Company's board of directors, can be expected to be permanent
or to be of an indefinite duration and which renders the Employee
unable to carry out the job responsibilities held by, or the
tasks assigned to, the Employee immediately prior to the time the
disabling condition was incurred, or which entitles the Employee
to receive disability payments under any long-term disability
insurance policy which covers the Employee for which the premiums
are reimbursed by the Company (a "Disability"), the Employee
shall have been absent from his duties hereunder on a full-time
basis for 120 consecutive days, or 180 days during any twelve
month period, and within thirty (30) days after written notice
(which may occur before or after the end of such 120 or 180 day
period), by the Company to Employee of the Company's intent to
terminate the Employee's employment by reason of such Disability,
the Employee shall not have returned to the performance of his
duties hereunder, the Employee's employment hereunder shall,
without further notice, terminate at the end of said thirty-day
notice.
c. The Company may also terminate the Employee's employment under
this Agreement for Cause. For purposes of this Agreement the
Company shall have "Cause" to terminate the Employee's employment
if the Employee, in the reasonable judgment of the Company, (i)
fails to perform any reasonable directive of the Company that may
be given from time to time for the conduct of the Company's
business; (ii) materially breaches any of his commitments, duties
or obligations under this Agreement; (iii) embezzles or converts
to his own use any funds of the Company or its Affiliates or any
business opportunity of the Company of its Affiliates; (iv)
destroys or converts to his own use any property of the Company
or its Affiliates, without the Company's consent; (v) is
convicted of, or indicted for, or enters a guilty plea or plea of
no contest with respect to, a felony; (vi) is adjudicated an
incompetent or (vii) violates any federal, state, local or other
law applicable to the business of the Company or engages in any
conduct which, in the reasonable judgment of the Company, is
injurious to the business or interests of the Company.
d. Upon any termination of this Agreement, the Company shall have no
further obligation to Employee other than for Annual Salary
earned through the date of termination, and no severance pay or
other benefits of any kind shall be payable; provided, however,
that in the event the Company terminates this Agreement other
than for Cause or as a result of the death or Disability of the
Employee, the company will provide for a six month's severance
package which will include base salary and benefits. The Company
must give the Employee written notice of the Employee's breach
under sections 11.c.(i.), 11.c.(ii), and 11.c.(vii) and 15
<PAGE>
days to cure before the employee is given notice of termination
as required under Section 11.a.
e. Notwithstanding any contrary provision contained in this
Employment Agreement, in the event that either (a) there is a
"Change of Control" (as hereafter defined) and neither the
Company nor the Buyer offers the Executive a position with
comparable responsibilities, authority, location or compensation,
or (b) after the date of the Change in Control but before the
first anniversary thereof, the Executive's responsibilities,
authority, location, or compensation are not acceptable to the
Executive the Executive may elect to resign and receive severance
equal to six month's annual salary and applicable prorated bonus,
hereunder, payable in one lump sum in accordance with the
Company's policy.
In addition, the Executive will continue to receive (subject to
payment of any applicable premium co-pay) standard health,
dental, disability, life and accident insurance benefits for the
six month period following the termination of employment.
The Executive must provide written notice of such election not
less than sixty days following the date of the Change of Control
or, if the Executive's new position is changed within the time
period and in the manner described above, within thirty days
following such event.
The term "Change of Control", as utilized herein, refers to:
(i) A change of control of a nature that would be
required to be reported in the Company's proxy
statement under the Securities Exchange Act of
1934, as amended;
(ii) The approval by the Board of Directors of a sale,
not in the ordinary course of business, of all or
substantially all of the Company's assets and
business to an unrelated third party and the
consummation of such transaction; or
(iii) The approval by the Board of Directors of any
merger, consolidation, or like business combination
or reorganization of the Company, the consummation
of which would result in the occurrence of any
event described in clause (i) or (ii) above, and
the consummation of such transaction.
Except as expressly modified and amended hereby, the Employment Agreement and
its terms and provisions are hereby ratified, confirmed and approved in all
respects.
12. MISCELLANEOUS
<PAGE>
a. This Agreement and any disputes arising herefrom shall be
governed by Pennsylvania law.
b. In the event that any provision of this Agreement is held to be
invalid or unenforceable for any reason, including without
limitation the geographic or business scope or duration thereof,
this Agreement shall be construed as if such provision had been
more narrowly drawn so as not to be invalid or unenforceable.
c. This Agreement supersedes all prior agreements, arrangements, and
understandings, written or oral, relating to the subject matter.
d. The failure of either party at any time or times to require
performance of any provision hereof shall in no way affect the
right at a later time to enforce the same. No waiver by either
party of any condition or of the breach by the other of any term
or covenant contained in this Agreement shall be effective unless
in writing and signed by the aggrieved party. A waiver by a party
hereto in any one or more instances shall not be deemed or
construed as a further or continuing waiver of any such condition
or breach or a waiver of any other condition, or of the breach of
any other term or covenant set forth in this Agreement.
e. Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been given when
delivered in person, sent by certified mail, postage prepaid, or
delivered by a nationally recognized overnight delivery service
addressed, if to the Company at 30 S. 17th Street, 8th Floor,
Philadelphia, PA 19103 Attn: President and if to the Employee, at
the address of his personal residence as maintained in the
Company's records.
For Employee: For the Company:
/s/ Vincent W. Renz, Jr. /s/ J. Esposito
- ------------------------------ ------------------------------
Vincent W. Renz, Jr. J. Esposito
Date: 3/17/00 Date: 1/1/00
------------------------ ------------------------
<PAGE>
[LOGO]
eResearchTechnology
Enabling the Clincial Advantage
A Wholly Owned Subsidiary of Premier Research Worldwide, Ltd
MANAGEMENT EMPLOYMENT AGREEMENT
The following agreement is hereby entered into between Robert Brown (hereinafter
known as Employee) and eResearchTechnology (together with its affiliated
corporations hereinafter known as the "Company") and having its principal
offices at 30 S. 17th Street, Philadelphia, PA 19103
1. DUTIES AND RESPONSIBILITIES
Employee agrees to hold the position of Sr. VP Diagnostic Technology
and Services and shall be directly responsible to President and CEO.
2. BEST EFFORTS
Employee agrees to devote his best efforts to his employment with the
Company, on a full-time (no less than 40 hours/week) basis. He further
agrees not to use the facilities, personnel or property of the Company
for personal or private business benefit.
3. ETHICAL CONDUCT
Employee will conduct himself in a professional and ethical manner at
all times and will comply with all company policies as well as all
State and Federal regulations and laws as they may apply to the
services, products, and business of the Company.
4. TERM OF THE AGREEMENT
This agreement will be for a period of one year, commencing January 1,
2000 and will continue from year to year unless terminated.
5. COMPENSATION
a. Salary shall be $150,000/year payable in equal installments as
per the company's payroll policy. Salary shall be considered on
an annual basis and adjusted based on performance.
b. Benefits shall be the standard benefits of the Company as they
shall exist from time to time.
<PAGE>
c. Annual bonus, based upon achieving 100% of targeted corporate and
department goals to be defined, of $100,000. (60% of the
department bonus willb e payable quarterly in four (4) equal
installments and 40% payable annually based on corporate
performance.)
d. Draw of $3,000 per month, for one year, against
commissions/bonuses earned. In the event draw balance is greater
than zero at the end of fiscal year, it will automatically revert
to zero.
e. Car allowance of $500 per month.
6. NON-DISCLOSURE
Employee acknowledges that employment with the Company requires him/her
to have access to confidential information and material belonging to
the Company, including customer lists, contracts, proposals, operating
procedures, trade secrets and business methods and systems, which have
been developed at great expense by the Company and which Employee
recognizes to be unique assets of the Company's business. Upon
termination of employment for any reason, Employee agrees to return to
the Company any such confidential information and material in his
possession with no copies thereof retained. Employee further agrees,
whether during employment with the Company or any time after the
termination thereof (regardless of the reason for such termination), he
will not disclose nor use in any manner, any confidential or
proprietary material relating to the business, operations, or prospects
of the Company except as authorized in writing by the Company or
required during the performance of his duties.
7. BUSINESS INTERFERENCE; NONCOMPETITION
a. During employment with the Company and for a period of one year
(the "Restrictive Period") thereafter (regardless of the reason
for termination) Employee agrees he will not, directly or
indirectly, in any way for his own account, as employee,
stockholder, partner, or otherwise, or for the account of any
other person, corporation, or entity: (i) request or cause any of
the Company's suppliers, customers or vendors to cancel or
terminate any existing or continuing business relationship with
the Company; (ii) solicit, entice, persuade, induce, request or
otherwise cause any employee, officer or agent of the Company to
refrain from rendering services to the Company or to terminate
his or her relationship, contractual or otherwise, with the
Company; or (iii) induce or attempt to influence any customer or
vendor to cease or refrain from doing business or to decline to
do business with the Company or any of its affiliated
distributors or vendors.
<PAGE>
b. The Employee agrees that, during the Restrictive Period, the
Employee will not, directly or indirectly, accept employment
with, provide services to or consult with, or establish or
acquire any interest in, any business, firm, person, partnership,
corporation or other entity which engages in any business or
activity that is the same as or competitive with the business
conducted by the Company in any state of the United States of
America and in any foreign country in which any customer to whom
the Company is providing services or technology is located.
8. FORFEITURE FOR BREACH; INJUNCTIVE RELIEF.
a. Any breach of the covenants made in Sections 6 and 7 hereof shall
result in the forfeiture of the Employee's right to any and all
payments which may be required to be made under this Agreement
following such breach and shall relieve the Company of any
obligation to make such payments.
b. The Employee acknowledges that his compliance with the covenants
in Sections 6 and 7 hereof is necessary to protect the good will
and other proprietary interests of the Company and that, in the
event of any violation by the Employee of the provisions of
Section 6 or 7 hereof, the Company will sustain serious,
irreparable and substantial harm to its business, the extent of
which will be difficult to determine and impossible to remedy by
an action at law for money damages. Accordingly, the Employee
agrees that, in the event of such violation or threatened
violation by the Employee, the Company shall be entitle to an
injunction before trial from any court of competent jurisdiction
as a matter of course and upon the posting of not more than a
nominal bond in addition to all such other legal and equitable
remedies as may be available to the Company.
c. The rights and remedies of the Company as provided in this
Section 8 shall be cumulative and concurrent and may be pursued
separately, successively or together against Employee, at the
sole discretion of the Company, and may be exercised as often as
occasion therefor shall arise. The failure to exercise any right
or remedy shall in no event be construed as a waiver or release
thereof.
d. The Employee agrees to reimburse the Company for any expenses
incurred by it in enforcing the provisions of Sections 6 and 7
hereof if the Company prevails in that enforcement.
<PAGE>
9. INVENTIONS
Employee agrees to promptly disclose to the Company each discovery,
improvement, or invention conceived, made, or reduced to practice
(whether during working hours or otherwise) during the term of
employment. Employee agrees to grant to the Company the entire interest
in all of such discoveries, improvements, and inventions and to sign
all patent/copyright applications or other documents needed to
implement the provisions of this paragraph without additional
consideration. Employee further agrees that all works of authorship
subject to statutory copyright protection developed jointly or solely,
while employed shall be considered a work made for hire and any
copyright thereon shall belong to the Company. Any invention,
discovery, or improvement conceived, made, or disclosed, during the one
year period following the termination of employment with the Company
shall be deemed to have been made, conceived, or discovered during
employment with the Company.
Employee acknowledges that the only discoveries, improvements, and
other inventions made prior to the date hereof which have not been
filed in the United States Patent Office are attached as Exhibit A.
10. NO CURRENT CONFLICT
Employee hereby assures the Company that he is not currently restricted
by any existing employment or non-compete agreement that would conflict
with the terms of this Agreement.
11. TERM; TERMINATION AND TERMINATION BENEFITS
a. Employment is "at will" which means that either the Company or
Employee may terminate at any time, with or without cause or good
reason, upon written notice given at least 30 days prior to
termination.
b. This Agreement shall terminate upon the death of the Employee. In
addition, if, as a result of a mental or physical condition
which, in the reasonable opinion of a medical doctor selected by
the Company's board of directors, can be expected to be permanent
or to be of an indefinite duration and which renders the Employee
unable to carry out the job responsibilities held by, or the
tasks assigned to, the Employee immediately prior to the time the
disabling condition was incurred, or which entitles the Employee
to receive disability payments under any long-term disability
insurance policy which covers the Employee for which the premiums
are reimbursed by the Company (a "Disability"), the Employee
shall have been absent from his duties hereunder on a full-time
basis for 120 consecutive days, or 180 days
<PAGE>
during any twelve month period, and within thirty (30) days after
written notice (which may occur before or after the end of such
120 or 180 day period), by the Company to Employee of the
Company's intent to terminate the Employee's employment by reason
of such Disability, the Employee shall not have returned to the
performance of his duties hereunder, the Employee's employment
hereunder shall, without further notice, terminate at the end of
said thirty-day notice.
c. The Company may also terminate the Employee's employment under
this Agreement for Cause. For purposes of this Agreement the
Company shall have "Cause" to terminate the Employee's employment
if the Employee, in the reasonable judgment of the Company, (i)
fails to perform any reasonable directive of the Company that may
be given from time to time for the conduct of the Company's
business; (ii) materially breaches any of his commitments, duties
or obligations under this Agreement; (iii) embezzles or converts
to his own use any funds of the Company or its Affiliates or any
business opportunity of the Company of its Affiliates; (iv)
destroys or converts to his own use any property of the Company
or its Affiliates, without the Company's consent; (v) is
convicted of, or indicted for, or enters a guilty plea or plea of
no contest with respect to, a felony; (vi) is adjudicated an
incompetent or (vii) violates any federal, state, local or other
law applicable to the business of the Company or engages in any
conduct which, in the reasonable judgment of the Company, is
injurious to the business or interests of the Company.
d. Upon any termination of this Agreement, the Company shall have no
further obligation to Employee other than for Annual Salary
earned through the date of termination, and no severance pay or
other benefits of any kind shall be payable; provided, however,
that in the event the Company terminates this Agreement other
than for Cause or as a result of the death or Disability of the
Employee, the company will provide for a six months severance
package which will include base salary and benefits. The Company
must give the Employee written notice of the Employee's breach
under sections 11.c.(I), and 11.c.(ii), and 11.c.(Vii) and 15
days to cure before the Employee is given notice of termination
as required under Section 11.1a
e. Notwithstanding any contrary provision contained in this
Employment Agreement, in the event that either (a) there is a
"Change of Control" (as hereafter defined) and neither the
Company nor the Buyer offers the Executive a position with
comparable responsibilities, authority, location or compensation,
or (b) after the date of the Change in Control but before the
first anniversary thereof, the Executive's responsibilities,
authority, location, or compensation are not acceptable to the
Executive the Executive may elect to resign and receive severance
equal to six month's annual salary and applicable prorated bonus,
hereunder, payable in one lump sum in accordance with the
Company's policy.
<PAGE>
In addition, the Executive will continue to receive (subject to
payment of any applicable premium co-pay) standard health,
dental, disability, life and accident insurance benefits for the
six month period following the termination of employment.
The Executive must provide written notice of such election not
less than sixty days following the date of the Change of Control
or, if the Executive's new position is changed within the time
period and in the manner described above, within thirty days
following such event.
The term "Change of Control", as utilized herein, refers to:
(i) A change of control of a nature that would be
required to be reported in the Company's proxy
statement under the Securities Exchange Act of
1934, as amended;
(ii) The approval by the Board of Directors of a sale,
not in the ordinary course of business, of all or
substantially all of the Company's assets and
business to an unrelated third party and the
consummation of such transaction; or
(iii) The approval by the Board of Directors of any
merger, consolidation, or like business combination
or reorganization of the Company, the consummation
of which would result in the occurrence of any
event described in clause (i) or (ii) above, and
the consummation of such transaction.
Except as expressly modified and amended hereby, the Employment
Agreement and its terms and provisions are hereby ratified, confirmed
and approved in all respects.
12. MISCELLANEOUS
a. This Agreement and any disputes arising herefrom shall be
governed by Pennsylvania law.
b. In the event that any provision of this Agreement is held to be
invalid or unenforceable for any reason, including without
limitation the geographic or business scope or duration thereof,
this Agreement shall be construed as if such provision had been
more narrowly drawn so as not to be invalid or unenforceable.
c. This Agreement supersedes all prior agreements, arrangements, and
understandings, written or oral, relating to the subject matter.
d. The failure of either party at any time or times to require
performance of any provision hereof shall in no way affect the
right at a later time to enforce the same. No waiver by either
party of any condition or of the breach by the other of any
term or covenant contained in this
<PAGE>
Agreement shall be effective unless in writing and signed by the
aggrieved party. A waiver by a party hereto in any one or more
instances shall not be deemed or construed as a further or
continuing waiver of any such condition or breach or a waiver of
any other condition, or of the breach of any other term or
covenant set forth in this Agreement.
e. Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been given when
delivered in person, sent by certified mail, postage prepaid, or
delivered by a nationally recognized overnight delivery service
addressed, if to the Company at 30 S. 17th Street, 8th Floor,
Philadelphia, PA 19103 Attn: President and if to the Employee, at
the address of his personal residence as maintained in the
Company's records.
For Employee: For the Company:
/s/ Robert Brown /s/ Joseph Esposito
- ----------------------------- ------------------------------
Robert Brown Joseph Esposito
Date: 1/1/00 Date: 1/1/00
------------------------ ------------------------------
<PAGE>
Exhibit 10.6
VOTING AGREEMENT
This Voting Agreement (this "Agreement") is made and entered into as of
this 24th day of March, 2000 by and between ERESEARCHTECHNOLOGY, INC., a
Delaware corporation ("eRT"), and PREMIER RESEARCH WORLDWIDE, LTD., a Delaware
corporation ("PRWW").
R E C I T A L S
eRT is preparing to file with the Securities Exchange Commission a Form
S-1 Registration Statement (the "Offering"). Following completion of the
Offering, PRWW will own at least a majority of the outstanding Common Stock, par
value $0.01 per share, of eRT, regardless of whether or not the Underwriters'
over-allotment option is exercised in whole or in part. In connection with the
Offering, PRWW and eRT have agreed to enter into this Agreement with respect to
and so as to ensure the election of at least three (3) independent directors of
eRT.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. After the completion of the Offering, PRWW agrees that it will vote
all of its shares of Common Stock at any meeting at which (or in any stockholder
action taken by written consent in lieu of a meeting in which) directors are
elected in favor of those nominees for election as eRT directors who are
nominated by the eRT Board of Directors and who are not affiliates of PRWW,
employees of PRWW or directors of PRWW ("Independent Directors") so that if such
nominees were elected there would be at least three (3) Independent Directors
who are members of the Board of Directors of eRT.
2. This Agreement will automatically terminate on that date upon which
PRWW beneficially owns shares of capital stock of eRT entitled to cast 30% or
less of all votes entitled to be cast for the election of directors at a meeting
at which stockholders holding all outstanding voting shares of eRT were present
and voting.
3. Miscellaneous:
a. Each party covenants that at any time, and from time to
time, it will execute such additional instruments and take such additional
actions as may be reasonably necessary or reasonably requested by the other
party to confirm or otherwise carry out the intent and purposes of this
Agreement.
b. The parties mutually agree that if a violation of Section 1
of this Agreement occurs, such violation or threatened violation will cause
irreparable injury to eRT and the remedy at law for any such violation or
threatened violation will be
<PAGE>
inadequate. PRWW therefore agrees that eRT shall be entitled to appropriate
equitable relief, including but not limited to specific performance, in addition
to any other remedy that might be available at law or in equity.
c. This Agreement may be modified or amended from time to time
only by a written instrument executed by the parties hereto.
d. This Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors and assigns.
e. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Pennsylvania, without regard to its
conflicts of law rule.
f. This Agreement embodies the entire understanding between
the parties hereto with respect to subject matters covered hereby and supersedes
any prior agreement or understanding between the parties with respect to such
matters.
g. This Agreement may be executed in multiple counterpart
copies, each of which shall be considered an original and all of which shall
constitute one and the same instrument.
h. This Agreement is not assignable.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
ERESEARCHTECHNOLOGY, INC.,
a Delaware corporation
By: /s/ Joseph Esposito
-----------------------------
Name:
-----------------------
Title:
-----------------------
PREMIER RESEARCH WORLDWIDE,
LTD., a Delaware corporation
By: /s/ Joel Morganroth
-----------------------------
Name:
-----------------------
Title:
-----------------------
<PAGE>
TAX SHARING AGREEMENT
---------------------
TAX SHARING AGREEMENT (the "Agreement") dated as of January 1, 2000
between Premier Research Worldwide, Ltd. ("PRWW") and eResearch Technology, Inc.
("ERT").
Whereas, PRWW and ERT have joined in the filing of a consolidated
federal income tax return for a group of affiliated companies of which PRWW is
the common parent and ERT is a member (the "PRWW Consolidated Group"); and
Whereas, PRWW and ERT wish to provide for the payment of tax
liabilities and entitlement to refunds, allocate responsibility and provide for
cooperation in the filing of tax returns, provide for the realization and
payment of tax benefits arising out of adjustments to the tax returns of the
parties, and to provide for certain other matters;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound, PRWW and ERT agree as follows:
1. Definitions.
For purposes of this Agreement:
(a) "Taxes" means all federal, state, local, foreign and other
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property (including,
without limitation, real property taxes and any assessments, special or
otherwise), windfall profits, customs, duties or other taxes, fees, assessments
or charges of any kind whatever, together with any interest and any penalties,
additions to tax or additional amounts with respect thereto (and "Tax" means any
one of the foregoing Taxes).
(b) "Returns" means all returns, declarations, reports,
statements and other documents required under a Tax Law (as hereinafter defined)
either (i) to be filed with a Governmental Authority (as hereinafter defined) in
respect of Taxes; or (ii) to be provided to a person other than a Governmental
Authority (and "Return" means any one of the foregoing Returns).
(c) "Code" means the Internal Revenue Code of 1986, as
amended. All citations to the Code, or to the Treasury Regulations promulgated
thereunder, shall include any amendments or any substitute or successor
provisions thereto.
<PAGE>
(d) "Section" means a section of this Agreement, unless
indicated otherwise.
(e) "Governmental Authority" means the government of the
United States or any foreign country or any state, province, municipality or
other political subdivision of the United States or any foreign identity, or any
agency, department, board, instrumentality, authority or commission (including
regulatory and administrative bodies) of any of the foregoing.
(f) "Tax Law" means a statute, regulation or administrative
rule enacted or promulgated for the determination, imposition, assessment or
collection of any Tax.
(g) "Separate Tax Liability" means the amount, if any, in
excess of (i) the "Tax Liability" (as herein defined) of the PRWW Consolidated
Group for a taxable year determined by including ERT and its subsidiaries as
members of that group as required under applicable Tax Law over (ii) the amount
of Tax Liability of the PRWW Consolidated Group for such year determined as if
ERT and its subsidiaries were not members of the group. If the amount calculated
in subsection (ii) of this Section (1)(g) exceeds the amount calculated in
subsection (i) of this Section (1)(g), such excess shall be a "Separate Tax
Benefit."
(h) "Tax Liability" means taxable income reduced by any loss
carryforwards and dividends received deduction multiplied by the applicable Tax
rate under federal Tax Law, less any credits, plus the Alternative Minimum Tax
(as defined in Section 55 of the Code), plus or minus any additional adjustments
required to compute the final Tax Liability under federal Tax Law.
(i) "Accounting Firm" means (i) the nationally recognized
accounting firm that is the principal independent auditor of both PRWW and ERT
at the time of a dispute governed by Section 7 hereof; or (ii) if the firm
described in clause (i) is unwilling or unable to serve under Section 7, the
nationally recognized accounting firm appointed by the firm described in clause
(i); or (iii) if PRWW and ERT do not use the same accounting firm as their
principal independent auditor, then the nationally recognized accounting firm
jointly selected by the principal independent auditors of PRWW and ERT at the
time of a dispute governed by Section 7 hereof.
(j) "Disaffiliation" means any event that results in ERT no
longer being a member of the PRWW Consolidated Group.
(k) "Disaffiliation Date" means the date on which
Disaffiliation occurs.
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<PAGE>
2. Returns and Payments.
(a)(i) Filing of Returns. PRWW shall timely prepare and file,
or cause to be timely prepared and filed, all consolidated Returns of PRWW that
include ERT and its subsidiaries. ERT and PRWW agree that they will treat the
Disaffiliation Date as the last day of a taxable period with respect to ERT and
its subsidiaries for any consolidated Taxes and will file all Tax Returns with
respect to such Taxes accordingly, unless such treatment is not permitted under
the applicable Tax Law. The preparation and filing of all Tax Returns with
respect to ERT and its subsidiaries for periods beginning after the
Disaffiliation Date are the sole responsibility of ERT. ERT agrees to cooperate
with PRWW in the preparation of any consolidated Returns of PRWW that include
ERT and its subsidiaries, or any portion thereof, and, at ERT's expense, to
provide PRWW at least 60 days before the applicable Return is required to be
filed (including extensions) with tax return packages and such other information
as PRWW shall reasonably request for the preparation of such Returns.
(ii) Payments. PRWW shall timely remit or cause to be
remitted, all Taxes payable with respect to Returns which PRWW is obligated to
prepare and file pursuant to Section 2(a)(i) and, except as otherwise provided
herein, shall be liable for all such Taxes and shall be entitled to any refund
of, or credit for, such Taxes. ERT agrees to pay to PRWW, with respect to any
Return filed by PRWW pursuant to Section 2(a)(i), an amount equal to the
Separate Tax Liability, if any, determined for the taxable year for which such
Return is filed. PRWW agrees to pay to ERT, with respect to any Return filed by
PRWW pursuant to Section 2(a)(i), an amount equal to the Separate Tax Benefit,
if any, determined for the taxable year for which such Return is filed. For all
tax periods beginning prior to the Disaffiliation Date, ERT will remit quarterly
estimated Tax payments to PRWW as though ERT and its subsidiaries were filing
their own separate federal income tax returns. The calculation of such estimates
shall be provided by ERT and submitted to PRWW for its approval (which shall not
be unreasonably withheld) at least 15 days prior to the date estimated Tax
payments would have otherwise been due. ERT will remit such quarterly estimated
payments to PRWW no later than five days before the PRWW Consolidated Group's
estimated Tax payments are due. No later than five days after ERT has received
from PRWW a final calculation of ERT's Separate Tax Liability under this Section
2(a)(ii) based on completed Tax Returns for the relevant taxable year, ERT will
pay to PRWW the excess, if any, of ERT's Separate Tax Liability over the sum of
all prior payments, if any, made by ERT to PRWW with respect to such year. If
such final calculation under this Section 2(a)(ii) demonstrates that ERT's
estimated payments exceed the Separate Tax Liability or that ERT has a Separate
Tax Benefit, the excess plus any Separate Tax Benefit will be credited to ERT's
Tax liability for the subsequent tax year, or if the subsequent tax year is a
year beginning after the Disaffiliation Date, PRWW will pay such excess or
Separate Tax Benefit to ERT no later than 30 days after filing all Tax Returns
related to periods beginning before the Disaffiliation Date. All payments
required under this Section 2(a)(ii) will be paid by ERT to PRWW or by PRWW to
ERT, as the case may be, regardless of whether ERT is a member of the PRWW
Consolidated Group.
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<PAGE>
(iii) Subsequent Adjustments. If the items used to determine
the Separate Tax Liability or Separate Tax Benefit under Section 2(a)(ii) are
adjusted by reason of an amended return, claim for refund, examination by a
Governmental Authority, or the final decision of any court, the amount due from
or to ERT under Section 2(a)(ii) shall be recomputed using the adjusted Separate
Tax Liability or adjusted Separate Tax Benefit. ERT agrees to pay to PRWW any
additional amount owed including statutory interest at the rate applicable to
underpayments of the PRWW Consolidated Group (with full credit given for any
prior payments for the year), and PRWW agrees to pay to ERT any overpayment made
by ERT including statutory interest at the rate applicable to overpayments of
the PRWW Consolidated Group.
Payments to be made by PRWW to ERT pursuant to this Section
2(a)(iii) shall be made, in the case of a refund, within 30 days after PRWW has
received such refund. In the case of a credit, such payments by PRWW to ERT
shall be made within 30 days after PRWW has received written notification from a
Governmental Authority reflecting adjustments for such credit to a Return of the
PRWW Consolidated Group. Payments to be made by ERT to PRWW shall be made, in
the case of any additional Tax, no later than five days before the due date of
any required Tax payment by PRWW. In the case of a reduction in credit of Tax,
such payment by ERT to PRWW shall be made within 30 days after PRWW has received
written notification from a Governmental Authority reflecting an adjustment for
such reduction to a Return of the PRWW Consolidated Group.
Notwithstanding anything in this Section 2(a)(iii), the
treatment of carrybacks of net operating losses, net capital losses and tax
credits shall be governed by Section 2(a)(iv). All additional payments required
under this Section 2(a)(iii) will be paid by ERT to PRWW or by PRWW to ERT, as
the case may be, regardless of whether ERT is a member of the PRWW Consolidated
Group.
(iv) Carrybacks. Where permitted by applicable Tax Law,
PRWW shall be allowed, if it so chooses, to carry back any consolidated net
operating loss, consolidated net capital loss or consolidated tax credit, as
defined in Treasury Regulation Sections 1.1502-21(e), 1.1502-22(b) and
1.1502-79(c) and (d) respectively, ("Consolidated Carryback Item") that arises
in any taxable year beginning before the Disaffiliation Date, to a taxable year
of any consolidated Return filed by PRWW. If a Consolidated Carryback Item is
carried back to a taxable year of any consolidated Return filed by PRWW, and is
absorbed or used in whole or in part in such year, PRWW shall pay ERT an amount
equal to the excess, if any, of the amount of such refund, credit or tax
reduction (net of any income taxes payable thereon) determined by including ERT
as a member of the PRWW Consolidated Group, over the amount of such items
determined by excluding ERT from the PRWW Consolidated Group, provided however,
that such excess shall be reduced by any amount due PRWW from ERT under Section
2(a)(ii) and (iii). Amounts due pursuant to this paragraph shall be paid in full
within 30 days after PRWW receives a refund or credit, or otherwise realizes the
benefit of the adjustment if no refund or credit is payable.
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<PAGE>
If a refund, credit or tax reduction attributable to a Consolidated
Carryback Item is later reduced (for example, as a result of a reduction in the
amount of a Consolidated Carryback Item caused by an audit adjustment), ERT
shall pay to PRWW an amount equal to the extent that such reduction is
attributable to ERT (determined in the same manner as in the immediately
preceeding paragraph) including statutory interest at a rate applicable to
underpayments of the PRWW Consolidated Group. Any such payment shall be made to
PRWW no later than five days before the due date of any required Tax payment by
PRWW or, if no payment is due, within 30 days after the final determination of
the amount of the reduction in such benefit.
Where permitted by applicable Tax Law, ERT and its subsidiaries shall
be allowed, if they so choose, to carry back any net operating loss, net capital
loss or tax credit ("ERT Carryback Item") that arises in any taxable year
beginning after the Disaffiliation Date, to a taxable year of any consolidated
Return filed by PRWW. If an ERT Carryback Item is carried back to a taxable year
of any consolidated Return filed by PRWW, and is absorbed or used in whole or in
part in such year, PRWW shall pay ERT an amount equal to any refund, credit or
tax reduction attributable to such ERT Carryback Item, provided that such refund
is received by PRWW or PRWW realizes the benefit of any credit or tax reduction.
The amount of any such refund, credit or tax reduction attributable to the ERT
Carryback Item shall be equal to the difference between the amount of such
refund, credit or tax reduction (net of any income taxes payable thereon) with
and without the ERT Carryback Item and shall be reduced by any amount due PRWW
from ERT under Section 2(a)(ii) and (iii). Amounts due pursuant to this
paragraph shall be paid in full within 30 days after PRWW receives a refund or
credit, or otherwise realizes the benefit of the adjustment if no refund or
credit is payable.
If a refund, credit or tax reduction attributable to an ERT
Carryback Item is later reduced (for example, as a result of a reduction in the
amount of an ERT Carryback Item caused by an audit adjustment), ERT shall pay to
PRWW the amount of such reduction including statutory interest at a rate
applicable to underpayments of the PRWW Consolidated Group. Any such payment
shall be made to PRWW no later than five days before the due date of any
required Tax payment by PRWW or, if no payment is due, within 30 days after the
final determination of the amount of the reduction in such benefit.
PRWW shall be responsible for preparing and filing (or
arranging for the preparation and filing of) any Returns required to carry back
an ERT Carryback Item to a taxable year of PRWW. ERT shall reimburse PRWW for
the reasonable out-of-pocket cost of preparation of any such Returns. ERT shall
indemnify PRWW for any penalty or interest incurred by PRWW that is attributable
to ERT Carryback Items.
ERT may choose at its own discretion to carry back an ERT
Carryback Item to taxable years in respect of any Return not originally filed by
PRWW pursuant to Section 2(a)(i). ERT shall be entitled to any refund, or the
benefit of any credit or tax reduction, resulting from such carryback and shall
be responsible for preparing and timely filing any Returns with respect to such
carryback.
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<PAGE>
(v) State Taxes. To the extent appropriate, rules similar to
the other provisions of Section 2 shall be applied to the filing of state
franchise or income tax Returns and the payment of state franchise or income tax
liabilities to which ERT and PRWW are subject and which are required to be
determined on a unitary, combined or consolidated basis.
(b)(i) Filing of Other Returns. ERT shall timely prepare and
file, or cause to be timely prepared and filed, all Returns of ERT and its
subsidiaries required to be filed before, on or after the Disaffiliation Date,
other than those Returns required to be filed by PRWW pursuant to Section
2(a)(i).
(ii) Payments. ERT shall be liable for, and shall timely pay,
or cause to be paid, all Taxes with respect to Returns which ERT is obligated to
prepare and file pursuant to Section 2(b)(i) and shall be liable for all Taxes
with respect to any other Returns filed by, or in respect of, ERT and its
subsidiaries, other than any Returns filed by PRWW pursuant to Section 2(a)(i),
and shall be entitled to any refund of, or credit for, such Taxes. PRWW shall
not be liable for any Taxes payable with respect to such Returns of ERT and its
subsidiaries.
3. Disaffiliation of ERT.
Except for Section 2(a)(iv) regarding Carrybacks, this Agreement shall
have no application and PRWW, the PRWW Consolidated Group or ERT shall have no
obligation to each under this Agreement with respect to any taxable period that
begins after the Disaffiliation Date; provided, that this Agreement shall apply
to any final short taxable period of ERT. After the filing of all Tax Returns
related to periods beginning before the Disaffiliation Date, ERT will be
informed of the amount of consolidated carryovers as of the end of such taxable
year or period that are attributable to ERT, as provided by applicable Tax Law.
4. Record Retention.
After the Disaffiliation Date, PRWW and ERT shall each make available
to the other, as reasonably requested, and to any Governmental Authority that is
duly authorized to request information, records or documents, all information,
records or documents of PRWW and ERT and its subsidiaries for all periods prior
to or including the Disaffiliation Date and shall preserve all such information,
records and documents until the expiration of any applicable statute of
limitations including extensions thereof, provided that notice of any such
extension is given to the party which did not grant the extension.
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<PAGE>
5. Audits and Contests.
PRWW shall, at its expense, have the right to control on the taxpayer's
behalf any Tax audit and any administrative or court proceeding concerning Taxes
for which PRWW is responsible for filing a Return under Section 2(a)(i) and to
concede, compromise or contest any assessment or assertion of liability with
respect to any such Taxes, provided, however, that ERT will be entitled to
participate in any such audit or proceeding concerning Taxes for which ERT is
liable under Section 2 and PRWW shall not concede, compromise or contest any
assessment or assertion of liability with respect to any such Taxes for which
ERT is liable under Section 2 without the consent of ERT (which consent shall
not be unreasonably withheld).
ERT shall, at its expense, have the right to control on the taxpayer's
behalf any Tax audit and any administrative or court proceeding concerning Taxes
for which ERT is responsible for filing a Return under Section 2(b)(i) and to
concede, compromise or contest any assessment or assertion of liability with
respect to any such Taxes.
6. Duty to Cooperate.
PRWW and ERT shall provide reasonable cooperation to each other in
connection with (i) the preparation or filing of any Return, Tax election, Tax
consent or certification, or any claim for refund, (ii) any determination of
liability for Taxes, and (iii) any audit, examination or other proceeding in
respect of Taxes of PRWW. Such cooperation shall include making available, on a
reasonable basis, employees of PRWW or ERT, as the case may be, whose out-
of-pocket costs, if any, such as travel and lodging, shall be reimbursed by the
party to which such employees are made available.
7. Dispute Resolution.
In the event of a dispute concerning this Agreement, the parties shall,
in good faith, attempt to resolve such dispute. If the dispute is not resolved
then the parties shall submit such dispute to the Accounting Firm whose decision
shall be binding on the parties. The Accounting Firm's fee shall be borne
equally by PRWW and ERT.
8. Notices.
All notices and other communications required or permitted hereunder
shall be in writing and shall be given by hand delivery, telecopier, commercial
courier service with guaranteed one-day delivery, or prepaid first class mail
to the following addresses:
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<PAGE>
If to PRWW:
Premier Research Worldwide, Ltd.
Attention: Chairman
30 South 17th Street
Philadelphia, PA 19103
If to ERT:
eResearchTechnology, Inc.
Attention: President and Chief Executive Officer
30 South 17th Street
Philadelphia, PA 19103
9. Successors.
This Agreement shall be binding on and inure to the benefit of any
successor, by merger, acquisition of assets or otherwise, to any of the parties
hereto (including but not limited to any successor of PRWW or ERT succeeding to
the tax attributes of either under Section 381 of the Code), to the same extent
as if the successor had been an original party to this Agreement.
10. Amendments.
This Agreement shall not be modified, amended, supplemented or
terminated except in writing executed by both parties hereto.
11. Governing Law.
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Pennsylvania.
Premier Research Worldwide, Ltd.
By: /s/ Joel Morganroth
------------------------
Joel Morganroth, M.D.
Chairman and Chief Executive Officer
eResearch Technology, Inc.
By: /s/ Joseph A. Esposito
---------------------------
Joseph A. Esposito,
President and Chief Executive Officer
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<PAGE>
SERVICES AND SUPPORT AGREEMENT
This Services and Support Agreement (the "Agreement") is made as of the
1st day of January, 2000 by and between Premier Research Worldwide, Ltd., a
Delaware corporation ("Premier") and eResearch Technology, Inc., a Delaware
corporation ("eRT").
WHEREAS, Premier owns 100% of the outstanding capital stock of eRT; and
WHEREAS, Premier has contributed to eRT all of Premier's technology and
operating business subject to the liabilities thereof; and
WHEREAS, the parties recognize that it is to their material advantage
to centralize certain administrative and financial services and that such
centralized services will be most efficiently administered by eRT.
NOW, THEREFORE, is consideration of the premises and the mutual
covenants contained herein, and intending to be legally bound, the parties
hereto agree as follows:
1. Services to Be Provided by eRT. Beginning on the date of this
Agreement, eRT through its corporate staff will provide or otherwise make
available to Premier certain general corporate services, including, but not
limited to the following:
1.1 Management Support. eRT will provide management support to
Premier, including reasonable access to key management personnel of eRT for
consultation and advice regarding strategic business planning, corporate
development, acquisitions and technology. eRT will also provide assistance to
develop and implement policies and procedures related to human resources and
employee training.
1.2 Risk Management. eRT will assist Premier in the
maintenance of an appropriate risk management program. eRT shall arrange for and
pay the premium cost of liability, property, casualty, and other normal business
insurance coverage (subject to allocation of such premium pursuant to Section
6.2 hereof), provide a centralized insurance purchasing service for such
insurance coverage and manage all insurance claims under Premier's insurance
policies.
1.3 Financial Services. eRT shall provide to Premier the
financial services listed in Exhibit I to this Agreement.
1.4 Securities. eRT will provide services and assistance to
enable Premier to comply with its reporting obligations under the Securities
Exchange Act of 1934 (the "1934 Act"), and the rules and regulations of the
Nasdaq Stock Market. Such assistance will include preparation of Forms 10-K,
10-Q and 8-K under the 1934 Act. eRT will provide necessary
<PAGE>
resources to enable Premier to make EDGAR filings with the SEC. eRT shall
provide internal audit support services for such filings and reports, including
accounting staff as required. Accounting and financial reporting policies and
procedures will be established by the Chief Financial Officer of eRT (the "eRT
CFO"). The parties acknowledge that Premier is a reporting company under the
1934 Act and that eRT may in the future become such a reporting company. Because
of eRT's status as a wholly-owned subsidiary of eRT, the parties also
acknowledge that each party has a material interest in the financial statements
and reports of the other to insure that accounting matters are treated
consistently between the parties. Therefore, before financial statements of
either party are released publicly or are included in a filing with the SEC or
the Nasdaq Stock Market, such financial statements will be furnished to the eRT
CFO and to Premier's Chief Financial Officer for review and comment. All public
releases of financial information will be authorized in advance by both parties'
Chief Financial Officer. eRT will administer a program to promote compliance by
the officers and directors of Premier with their reporting requirements under
Section 13 and 16 of the 1934 Act. eRT shall prepare documents necessary for
officer and director compliance under Section 16 of the 1934 Act, including
Forms 3, 4, 5, 13G and 13D. eRT shall maintain detailed records and SEC receipts
of all such filings and shall administer periodic reminders to Section 16
officers and directors. eRT shall periodically provide information to officers
and directors of Premier with respect to their responsibilities under Section 16
of the Act.
1.5 Corporate Record Keeping. eRT shall maintain detailed
records of Premier's historical and current financial data. In addition, eRT
shall assist in preparing the minutes of meetings of the boards of directors and
shareholders, and shall maintain records pertaining to stock offerings,
acquisition transactions, and annual meetings.
1.6 Annual Stockholders Meetings and Proxy Statement
Preparation. eRT shall provide assistance to conduct the annual meeting of
Premier stockholders. eRT shall assist in the preparation of the notice of the
annual meeting, proxies and proxy statements related thereto, the solicitation
of proxies, and the filing of any preliminary or definitive proxy statements
with the SEC. eRT shall assist Premier in design, preparation, drafting and
distribution of its annual reports to stockholders. Preparation and distribution
costs related to the proxy materials for the annual meeting shall be paid by
Premier.
1.7 Stock Plan Administration Services. Subject to the
direction of the administrative committees of Premier compensation stock plans,
shall administer Premier's stock option plans. eRT shall maintain records of
grant dates, shares covered by option grants, vesting schedules, expiration
dates and other information necessary for proper administration of the Premier
compensatory stock plans. eRT shall also prepare stock option grant agreements
and stock option exercise notices.
1.8 Investor and Media Relations. eRT shall prepare quarterly
stock reports, track outstanding shares, communicate appropriate information to
transfer agents, provide for missing stock certificates and perform general
services pertaining to the investor relations. eRT shall upon request provide
stock status reports including stockholder statistics, earnings
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<PAGE>
estimates, shares held by institutions and any other reports that can be
reasonably created using Premier data maintained by eRT. eRT shall assist
Premier to manage investor and media relations and to prepare press releases.
eRT shall assist Premier in its relationship with investment analysts and
institutional holders of Premier stock. eRT will also assist eRT regarding
presentations at financial conferences.
1.9 Tax Matters. eRT will assist Premier to prepare and file
state and federal income tax returns and will consult with Premier regarding tax
planning matters.
1.10 Other Services. Other routine services in addition to
those enumerated in subsections 1.1 through 1.9 shall be provided by eRT as
reasonably requested by Premier. Such other services shall include human
resources support, publications support, corporate training programs, video
teleconferencing, data and voice communications and trade show support.
2. Cooperation. Premier shall corporate with eRT in providing
information and data reasonably requested by eRT to perform its services
hereunder. The parties shall exert best efforts to coordinate with each other in
such a manner to enable eRT to furnish the services required hereunder.
3. Credit Support Services. Premier agrees to provide credit support
for eRT as eRT may reasonably require for its business and operations, subject
to a maximum financial commitment by Premier to eRT at any time of $10 million.
eRT shall reconcile on a quarterly basis cash provided by Premier and used by
eRT and shall calculate an average daily balance for such advances during each
such quarter. eRT shall be obligated to repay all such advances together with
interest on the average daily balance for each quarterly period at the prime
rate of interest as published from time to time in The Wall Street Journal.
4. Transition Support Services. Premier agrees to allow eRT to use
Premier's bank accounts and financial management and other administrative
services and systems for a reasonable period following the effective date of
this Agreement for eRT's own cash management and financial services
requirements. eRT shall use reasonable commercial efforts to establish such
accounts and systems for itself as promptly a practicable after the date hereof.
5. Insurance Programs. The parties acknowledge that Premier has in
force insurance programs that provide eRT coverage under general liability,
property and casualty, errors and omissions, umbrella liability, workers'
compensation, directors and officers liability and medical and other employee
benefit insurance programs. eRT shall evaluate the merits of having such
insurance policies transferred to eRT, continuing eRT's cover under the current
Premier programs or obtaining separate coverage for eRT. Pending such
determination, Premier agrees that eRT shall continue maintaining such coverage
in accordance with the provisions of Section 1.2 hereof for the benefit of both
Premier and eRT, subject to allocation of premiums therefor in accordance with
Section 6.2 hereof.
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<PAGE>
6. Compensation for Services.
6.1 In consideration for the services to be provided by eRT to
Premier hereunder, Premier shall provide the credit support and transition
support services specified in Section 3-4 hereof and shall pay eRT the following
amounts:
(a) 6.25% of the salary of eRT's President and
Chief Executive Officer;
(b) 25% of the salary of eRT's Chief Financial
Officer; and
(c) a fee of $10,000 per month.
eRT shall invoice Premier monthly for such charges.
6.2 For any period during the term hereof that eRT is included
in any Premier insurance programs or policies, eRT's Chief Financial Officer
shall recommend an allocation of the premium between eRT and Premier, which
allocation shall be subject to review and approval by the Boards of Directors of
each party or any authorized committee thereof. Promptly after agreement on such
allocation, eRT shall prepare an invoice from Premier to eRT for eRT's allocated
portion of such premiums.
6.3 All invoices delivered hereunder shall be due and payable
within 30 days of the invoice date.
6.4 In the event eRT is required to commit personnel on other
resources in the performance of its obligations hereunder that are
disproportionate to the projected fees set forth in Section 6.1 hereof, the
parties agree to negotiate in good faith to adjust the monthly fee payable
pursuant to Section 6.1(c) hereof or to consider in good faith payment by
Premier to eRT of a supplemental fee in addition to the scheduled monthly fee.
6.5 eRT will require third parties with which it contracts on
behalf of Premier hereunder, including without limitation accounting, legal and
other professional service firms, insurance companies and other vendors, to
invoice Premier for their respective charges. Premier acknowledges and agrees
that eRT will cause such invoices to be paid on Premier's behalf in accordance
with the invoice terms.
7. Office Space. eRT agrees to make available appropriate office space
to Premier's Chairman and Chief Executive Officer.
8. Premier's Directors and Officers. Nothing contained herein will be
construed to relieve the directors and officers of Premier from the performance
of their respective duties or to limit the exercise of their powers in
accordance with the charter or by-laws of Premier or in accordance with any
applicable statute or regulation.
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<PAGE>
9. Liabilities. In furnishing Premier with management advice and other
services as herein provided, neither eRT nor any of its officers, directors or
agents shall be liable to Premier or its creditors or shareholders for errors of
judgment or for anything except willful malfeasance, bad faith or gross
negligence in the performance of their duties or reckless disregard of their
obligations and duties under the terms of this Agreement. The provisions of this
Agreement are for the sole benefit of Premier and eRT and will not, except to
the extent otherwise expressly stated herein, inure to the benefit of any third
party.
10. Status. eRT shall be deemed to be an independent contractor, and
except as expressly provided or authorized in this Agreement, shall have no
authority to act for or represent Premier.
11. Notices. All notices, billings, requests, demands, approvals,
consents, and other communications which are required or may be given under this
Agreement shall be in writing and will be deemed to have been duly given if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid to the parties at their respective addresses set
forth below:
If to Premier:
Premier Research Worldwide, Ltd.
30 South 17th Street
Philadelphia, PA 19103
Attention: Chairman
If to eRT:
eResearch Technology, Inc.
30 South 17th Street
Philadelphia, PA 19103
Attention: President and Chief Executive Officer
12. No Assignment. This Agreement shall not be assignable except with
the prior written consent of the other party to this Agreement.
13. Applicable Law. This Agreement shall be governed by and construed
under the laws of the Commonwealth of Pennsylvania applicable to contracts made
and to be performed therein.
14. Paragraph Titles. The paragraph titles used in this Agreement are
for convenience of reference only and will not be considered in the
interpretation or construction of any of the provisions thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument by their duly authorized officers as of the date
first above written.
PREMIER RESEARCH WORLDWIDE, LTD.
By:/s/ Joel Morganroth
------------------------------------------
Joel Morganroth, M.D.
Chairman and Chief Executive Officer
eRESEARCH TECHNOLOGY, INC.
By: /s/ Joseph A. Esposito
------------------------------------------
Joseph A. Esposito
President and Chief Executive Officer
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<PAGE>
EXHIBIT I
FINANCIAL SERVICES PROVIDED TO PREMIER
Banking Services Administration
Select banks and establish accounts
Administer cash balances
Administer outstanding indebtedness
Administer any debt covenant compliance issues
Maintain a cash collections and disbursement system
Arrange letters of credit and cash transfers
Manage any foreign currency exchange needs
Financial Management and Information
Cash management
Pension fund management
Leasing management services
Customer financing
Information on financial markets and products
Information on foreign currency, risk assessment and hedge strategies
Arrange Credit Support
Insurance performance and bid bonds
Letters of credit
Corporate guarantees
Investment Banking Services
Advice and support for equity and debt financing
Manage relationships with debt rating agencies
Analysis, negotiations, advice and support for mergers and acquisitions
<PAGE>
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT ("Sublease") is entered into as of June 25, 1998 by and
between Sublandlord and Subtenant, each as defined below in Section A.
A. THE PARTIES
Sublandlord's Name and Raytheon Engineers & Constructors, Inc.
type of entity: a Delaware Corporation
Sublandlord's Address 30 South 17th Street
for Notices: Philadelphia, PA 19103
ATT: Real Estate Operations Manager
Sublandlord's Payment Raytheon Engineers & Constructors, Inc.
Address: P.O. Box 8500 - S5450
Philadelphia, PA 19178
Subtenant's Name and Premier Research Worldwide, Ltd.
type of entity: a Delaware Corporation
Subtenant's Address 124 South 15th Street
for Notices prior to Philadelphia, PA 19102-3010
Commencement Date: ATT: Fred M. Powell
Subtenant's Address 30 South 17th Street
for Notices after Philadelphia, PA 19103
Commencement Date: ATT: Fred M. Powell
Prime Landlord's Name Takaji Kobayashi and Takeshi Shiratori, as
and type on entity trustees of Shuwa Trust of Philadelphia, a
Pennsylvania Business Trust
Prime Landlord's address c/o Shuwa Corporation of New York
for Notices 1330 Avenue of the Americas
New York, N.Y. 10019
<PAGE>
B. DEFINITIONS AND BASIC TERMS
The following definitions and basic terms shall have the indicated
meanings when used in this Lease:
0.1 Building: The building located on the land
bounded by Ludlow Street, 17th Street,
Ranstead Street and 18th Street,
Philadelphia, Pennsylvania.
0.2 Demised Premises: Entire 8th and 9th floors of Building
0.3 Property: The Building, the parcel of land upon
which the Building is situated and any
other improvements located thereon.
0.4 Subtenant's Rentable 58,156 rentable square feet
Square Feet:
0.5 Total Rentable Square
Feet in the Building: 587,637 rentable square feet
0.6 Subtenant's Proportionate
Share: 9.9% which is the percentage
obtained by dividing (i)
Subtenant's Rentable Square
Feet by (ii) the total Rentable
Square Feet in the Building.
0.7 Commencement Date: The Commencement Date is defined in
Section 2.1.
0.8 Term: Commencing on the Commencement
Date and ending at 5:00 PM on August
30, 2005 subject to adjustment and
earlier termination as provided in the
Prime Lease.
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0.9 Base Rent:
BASE RATE SCHEDULE
------------------
================================================================================
Base Rent/ Annual Monthly
Year Sq Foot Base Rent Base Rent
- --------------------------------------------------------------------------------
1st Lease year $13.00 $756,028 $63,002.33
commencing with
Commencement Date
- --------------------------------------------------------------------------------
2nd lease year $15.00 $872,340 $72,695.00
- --------------------------------------------------------------------------------
3rd lease year $18.00 $1,046,808 $87,234.00
- --------------------------------------------------------------------------------
4th lease year until $18.25 $1,061,347 $88,445.58
lease expiration
================================================================================
0.10 Additional Rent: Additional Rent is defined in Section
3.2.
0.11 Rental: Base Rent, Additional Rent and all other
sums that Subtenant may owe to
Sublandlord under this Sublease.
0.12 Security Deposit: See Section 4.
0.13 Expense Stop/
Base Year: Base Year: 1998
0.14 Tax Stop/
Base Year: Base Year: 1998
0.15 Permitted Use: General office use and no other (See
Section 6 for further clarification).
0.16 Tenant Improvement
Allowance: See Section 17.
0.17 Option to Renew None.
0.18 Option to Terminate None.
0.19 Option to Expand None
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PRELIMINARY STATEMENT
---------------------
Whereas, a Lease Agreement was entered into on June 13, 1973,
between Paul F. Hellmuth, Gorden E. Emerson, Jr., Robert C. Elder and John M.
Hines as Trustees for Middle City Trust, as landlord (hereinafter called "Prime
Landlord," including any successors and assigns), and Sublandlord, as tenant,
for a portion of rentable floor area, consisting of 393,014 square feet, in the
building known as 30 South 17th Street, Philadelphia, Pennsylvania (hereinafter
called the "Building"). The Building is set on a parcel of land in Philadelphia
bounded by Ludlow Street, 17th Street, Ranstead Street and 18th Street
(hereinafter called the "Property"). The Property is more fully described in the
Prime Lease.
Whereas, the Lease Agreement has been amended by written amendments
dated October 22, 1973; April 9, 1974; July 18, 1974; November 12, 1974; January
10, 1975; May 5, 1976; April 17, 1979; December 19, 1983; February 9, 1984 and
October 25, 1994. The aforesaid Lease Agreement of June 13, 1973, and the
amendments thereto are hereinafter referred to as the "Prime Lease," a true (but
expurgated as to financial terms) copy of which has been delivered to the
Subtenant, and Subtenant hereby acknowledges receipt of same.
Whereas, Subtenant desires to sublet from Sublandlord a portion of
the premises covered by the Prime Lease, for the term, the rent and upon and
subject to the covenants, agreements, terms, conditions, limitations, exceptions
and reservations herein contained.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto for themselves, their successors
and assigns, hereby covenant and agree as follows:
1. Subleasing of Demised Premises.
1.1 Sublandlord hereby subleases to Subtenant, and Subtenant
hereby hires from Sublandlord the entire 8th and 9th floors of the Building
(which spaces are herein called the "Demised Premises"). For purposes of this
Sublease, the Demised Premises shall be deemed to contain 58,156 rentable
square feet.
1.2 Sublandlord shall make available to Subtenant four (4)
unreserved parking passes in the Building Parking Garage. Subtenant shall be
responsible to pay the monthly fee associated with the use of the parking
passes.
2. Term.
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<PAGE>
2.1 Demised Term. The term ("Demised Term") of this Sublease
shall, commence on the earlier of (i) the date on which Subtenant, with
Sublandlord's approval, shall take possession of the Demised Premises for the
operation of its business therefrom, or (ii) November 1, 1998. The dates for the
commencement and expiration of the Demised Term are referred to in this
Sublease as the "Commencement Date" and the "Expiration Date", respectively.
2.2 Confirmation of Commencement Date. When a Commencement Date
has been established in accordance with subparagraph 2.1 hereof, Sublandlord and
Subtenant shall, at the request of either, execute an instrument in form
reasonably satisfactory to Sublandlord setting forth said Commencement Date.
2.3 Recordation. This Sublease shall not be filed for record
with the recorder's office of the county in which the Demised Premises are
located.
2.4 Notwithstanding the generality of the foregoing, in the
event that Sublandlord has not made the Premises available to Subtenant on or
before June 10, 1998 for Tenant to begin its Tenant Improvements (the "Outside
Date") for any reason other than Prime Landlord's failure to grant its consent
to this Sublease, then Subtenant shall thereafter have the option to terminate
this Sublease by written notice delivered to Sublandlord at any time prior to
the date that Sublandlord so makes the Premises available to Subtenant; and, in
the event Subtenant timely delivers such notice (time being of the essence),
this Sublease shall be deemed null and void, and Sublandlord shall thereupon
promptly return all prepaid rent and security to Subtenant whereupon all further
obligations of the parties hereto shall end.
3. Base Rent, Additional Rent and Escalation.
3.1 Subtenant shall pay to Sublandlord, commencing on the
Commencement Date, in currency which at the time of payment is legal tender for
public and private debts in the United States of America, the Base Rent, except
that the first full monthly installment due under this Sublease is being paid on
the signing of this Sublease. The Base Rent shall be payable in advance in
monthly payments on the first day of each month in accordance with Base Rent
Schedule set forth in Section B. 0.9., provided that the Base Rent shall be paid
on a pro-rata basis for any partial month at the beginning or end of the Term.
The Base Rent shall include all services called for in the Prime Lease such as
janitorial, security, HVAC and normal electricity for normal business operations
provided that Subtenant shall pay for any increases in the cost of such services
as provided in Section 3.2 below. If the Prime Landlord has the right to impose
additional charges with respect to the Demised Premises pursuant to Exhibit D,
Item VI of the Prime Lease, such electrical needs will be separately metered and
paid for by Subtenant. Except as may be otherwise expressly provided for herein,
Base Rent and all other amounts payable by Subtenant to Sublandlord under the
provisions of this Sublease shall be paid promptly when due, without notice or
demand therefor,
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<PAGE>
and without deduction, abatement, counter-claim or set-off of any amount or for
any reason whatsoever. Base Rent and additional charges shall be paid to
Sublandlord at the address of Sublandlord set forth in the preamble of this
Sublease or to such other person and/or at such other address as Sublandlord may
from time to time designate by notice to Subtenant. No payment by Subtenant or
receipt by Sublandlord of any lesser amount than the amount stipulated to be
paid hereunder shall be deemed other than on account of the stipulated Base Rent
or additional charges; nor shall any endorsement or statement on any check or
letter be deemed an accord and satisfaction, and Sublandlord may accept any
check or payment without prejudice to Sublandlord's right to recover the balance
due or to pursue any other remedy available to Sublandlord.
3.2 In addition to its obligation to pay Base Rent, Subtenant
shall pay Subtenant's Proportionate Share of increases over the Base Year (as
defined below) in the Real Estate Tax Payment and Operating Expenses (as such
terms are defined or used in the Prime Lease) payable by Sublandlord with
respect to the Demised Premises ("Additional Rent") pursuant to the Prime Lease
except that for the purposes of this Agreement the Base Tax Year and the Base
Expense Year shall be calendar year 1998.
3.3 The sums for which Subtenant shall be liable pursuant to
subparagraph 3.3 above shall be deemed additional rent and shall be payable by
Subtenant to Sublandlord within thirty (30) days of the billing date. Such
billing shall be accompanied by copies of such bills as Sublessor shall have
received from Prime Landlord relating to such charges, and such supporting
documents and data as Prime Landlord shall have provided Sublandlord.
3.3.1 At any time during each Lease Year (which shall be a
calendar year unless otherwise defined in the Prime Lease), Sublandlord may
furnish to Subtenant a written statement or statements (an "Estimate
Statements") setting forth Sublandlord's reasonable estimate of the Operating
Expense Payment for such Lease Year (the "Estimated Payment"). Provided that an
Estimate Statement has been delivered to Subtenant fifteen (15) days prior to
such date, Subtenant shall pay to Sublandlord on the first day of each month an
amount equal to one-twelfth (1/12th) of the Estimated Payment for such Lease
Year. If Sublandlord furnishes an Estimate Statement for a Lease Year subsequent
to the commencement thereof, then (i) until the first day of the month following
the month in which the Estimate Statement is furnished to Subtenant, Subtenant
shall continue to pay to Sublandlord on the first day of each month an amount
equal to the monthly sum payable by Subtenant to Sublandlord with respect to the
next previous Lease Year; (ii) promptly after the Estimate Statement is
furnished to Subtenant, Sublandlord shall give notice to Subtenant stating
whether the amount previously paid by Subtenant to Sublandlord for the current
Lease Year was greater or less than the installments of the Estimated Payment to
be paid for the current Lease Year, and (a) if there shall be a deficiency,
Subtenant shall pay the amount
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<PAGE>
thereof within fifteen (15) days after demand therefor, or (b) if there shall
have been an overpayment, Sublandlord shall credit against the next installments
of the Base Rent and payments of Additional Rent payable under this Sublease,
the amount of Subtenant's overpayment (or in the event that no additional Base
Rent is due Sublandlord shall pay said overpayment directly to Subtenant; and
(iii) on the first day of the month following the month in which the Estimate
Statement is furnished to Subtenant, and monthly thereafter throughout the
remainder of the Lease Year, Subtenant shall pay to Sublandlord an amount equal
to one-twelfth (1/12th) of the Operating Expense Payment shown on the Estimate
Statement. Any amount owing to Subtenant subsequent to the expiration or earlier
termination of the Term shall be paid to Subtenant within fifteen (115) business
days after a final determination has been made of the amount due to Subtenant.
Subtenant's obligation for the Operating Expense Payment shall commence as of
the Commencement Date. The Operating Expense Payment shall be prorated for any
partial Lease Years in which the Commencement Date shall occur and the Term
shall end.
3.3.2 Subtenant shall pay to Sublandlord any amounts owed
with respect to Real Estate Taxes pursuant to Section 3.2 above when Sublandlord
is required to pay such Real Estate Taxes to the Prime Landlord pursuant to
Section 2.6 of the Prime Lease. Subtenant's obligation for Real Estate Taxes
shall commence as of the Commencement Date. The Real Estate Tax Payment shall be
prorated for any partial Lease Years in which the Commencement Date shall occur
and the Term shall end.
3.3.3 Within 15 days after receipt from Prime Landlord,
Sublandlord shall furnish to Subtenant an annual statement or statements (the
"Annual Statements ") setting forth the items constituting the Operating
Expenses and/or Real Estate Taxes during such Lease Year, which Annual
Statements shall be prepared based upon and accompanied by the statement of
Operating Expenses and/or Real Estate Taxes received by Sublandlord from Prime
Landlord. If the Annual Statements shows that the Operating Expense Payment (or
other payments) for such Lease Year exceeded the Operating Expense Payment which
should have been paid for such Lease Year, Sublandlord shall credit against the
next installments of Base Rent and payments of Additional Rent payable under
this Sublease, the amount of such excess; if the Annual Statement for such Lease
Year shows that the Estimated Operating Expense Payment for such Lease Year was
less than the Operating Expense Payment (or other payments) which should have
been paid for such Lease Year, Subtenant shall pay the amount of such deficiency
within fifteen (15) days after receipt of the Annual Statement. Any amount
owing to Subtenant subsequent to the expiration or earlier termination of the
Term shall be paid to Subtenant within fifteen (15) days after delivery of the
final Annual Statement.
3.3.4 Each Annual Statement shall be conclusive and binding
upon Subtenant unless, within six (6) months after receipt thereof, Subtenant
shall
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<PAGE>
notify Sublandlord that it disputes the correctness of the Annual Statement,
specifying in reasonable detail based on the information available to Subtenant
the manner in which the Annual Statement is claimed to be incorrect. If such
notice is sent, provided Subtenant shall pay to Sublandlord the amount shown to
be due to Sublandlord on the disputed Annual Statement, Sublandlord agrees to
use reasonable efforts to enforce its rights under the Lease to dispute the
correctness of the statements of Operating Expense and/or the Real Estate Taxes
delivered by Prime Landlord to Sublandlord the cost of which dispute shall be
equitably apportioned among Subtenant and such other subtenants of Sublandlord
at the Building who also request that Sublandlord dispute such statements.
Subtenant agrees to indemnify and hold Sublandlord harmless from and against any
and all claims, costs, expenses and liabilities in connection therewith,
including, without limitation, reasonable attorneys fees and disbursements. If
Prime Landlord shall revise the statements of Operating Expense Payment and/or
Real Estate Taxes disputed by Subtenant, Sublandlord shall deliver to Subtenant
a revised Annual Statement, and an appropriate payment or credit by Sublandlord,
or payment by Subtenant, as the case may be.
3.4 Anything to the contrary notwithstanding, if Subtenant shall
procure any additional services for the Demised Premises (such as those
contemplated by Section 4.1.2 of the Prime Lease) from Prime Landlord, Subtenant
shall pay for same at the rates charged therefor by Prime Landlord and shall
make such payment at the same time it pays the Base Rent to Prime Landlord or
Sublandlord as Sublandlord shall direct unless differently directed by the Prime
Landlord. Any sums payable pursuant to this subsection shall be deemed
Additional Rent and shall be collectible as such.
3.5 All Base Rent, Additional Rent and all other costs, charges
and sums payable by Subtenant hereunder (collectively, "Rental"), shall
constitute rent under this Sublease, and shall be payable to Sublandlord at its
address as set forth herein, unless Sublandlord shall otherwise so direct in
writing (or unless otherwise directed to the extent permitted by Section 3.4 by
the Prime Landlord.
3.6 If Subtenant shall fail to pay within ten (10) days after
due any installment of Rental, Subtenant shall pay to Sublandlord, in addition
to such installment of Rental, as a late charge and as Additional Rent, a sum
equal to interest at the Applicable Rate (hereinafter defined) per annum on the
amount unpaid, commencing from the date such payment was due to and including
the date of payment. The "Applicable Rate" shall be the rate equal to the lesser
of (a) two (2) percentage points above the then current rate publicly announced
by Citibank, N.A. or its successor as its "base rate" (or such other term as may
be used by Citibank, N.A. from time to time for the rate presently referred to
as its "base rate") or (b) the maximum rate permitted by applicable law.
3.7 Subtenant shall promptly pay the Rental as and when the same
shall become due and payable without set-off, offset or deduction of any kind
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<PAGE>
whatsoever, except as expressly set forth herein, and, in the event of
Subtenant's failure to pay the same when due (subject to grace periods provided
herein), Sublandlord shall have all of the rights and remedies provided for
herein or at law or in equity, in the case of non-payment of rent. Upon the
request of Subtenant, Sublandlord shall reasonably consider taking action under
Section 8.8.2 of the Prime Lease provided that Subtenant shall, in addition to
any other indemnity provided for herein, fully indemnify and hold Sublandlord
harmless from any and all cost and expenses incurred by Sublandlord (including
reasonable attorney fees) in complying with Subtenant's request.
3.8 Sublandlord's failure during the Term to prepare and deliver
any statements or bills required to be delivered to Subtenant hereunder, or
Sublandlord's failure to make a demand under this Article 3 or under any other
provisions of this Sublease shall not in any way be deemed to be a waiver of, or
cause Sublandlord to forfeit or surrender its rights to collect any Rental which
may have become due pursuant to this Article 3 during the Term. Subtenant's
liability for Rentals due under this Article 3 accruing during the Term shall
survive the expiration or sooner termination of this Sublease.
3.9 Subtenant shall pay to Sublandlord, upon the execution of
this Sublease, the amount of Sixty Three Thousand Two Dollars and thirty three
cents ($63,002.33) representing a prepayment of the first month's rental due
under this Sublease.
4. SECURITY DEPOSIT.
4.1 On the date of execution of this Sublease by Subtenant,
Subtenant shall deposit with Sublandlord, as security for Subtenant's
obligations under this Sublease, a Letter of Credit (as hereinafter defined) or
equivalent credit instrument (the "Equivalent Credit Instrument," and,
collectively with Letter of Credit, the "Security Instrument") such as a
certificate of deposit issued in the name of the Sublandlord, in the amount of
Six Hundred Thousand Dollars ($600,000.00) (the "Security"). In the event that
Subtenant seeks to use an Equivalent Credit Instrument as security, such
Equivalent Credit Instrument shall (1) be issued by a bank acceptable to
Sublandlord in its sole discretion, (2) shall have a liquidity that is cash
equivalent as determined by Sublandlord in its sole discretion, and (3) at all
times be in the possession of Sublandlord. Sublandlord shall have the right to
draw upon such Security Instrument any number of times up to the aggregate
amount equal to the face value of such of Security Instrument following a
default by Subtenant beyond notice and any applicable cure period. In the event
that Subtenant shall fully and faithfully comply with all of the terms,
provisions, covenants and conditions of the Sublease, the Security Instrument
shall be returned to Subtenant promptly after the date fixed as the end of the
Term and delivery of the entire possession of the Premises to Sublandlord in the
condition required pursuant to the Sublease. In the event Sublandlord applies or
retains any
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<PAGE>
portion or all of the Security Instrument deposited, Subtenant shall, within ten
(10) days following written demand therefor, pay to Sublandlord, with interest,
the amount so applied. Subtenant's failure to so pay such amount shall be deemed
a default by Subtenant in the payment of any installment of Base Rent.
4.2 The Letter of Credit shall be a clean, irrevocable, letter
of credit ("Letter of Credit") issued by any bank which is a member of
Philadelphia Clearing House Association (hereinafter referred to as the "Issuing
Bank"), which Letter of Credit shall have a term of not less than one (1) year,
be issued for the benefit of Sublandlord, be in the amount of the Security
during the period commencing on the date of such Letter of Credit as deposited
with Sublandlord and continuing through the Expiration Date. The Issuing Bank
shall pay to Sublandlord or its duly authorized representative in one
installment or in several partial installments an amount up to the face value of
the Letter of Credit upon presentment of the Letter of Credit and a sight draft
in the amount to be drawn and a letter signed by Sublandlord stating that
Sublandlord is entitled to draw upon the Letter of Credit in the amount
requested based on a default by Subtenant under the Sublease and, that any
applicable notice and cure period has expired. Subtenant shall provide a
replacement Letter of Credit no later than thirty (30) days prior to the
expiration of the then existing Letter of Credit. A failure by Subtenant to
provide a replacement Letter of Credit within the aforesaid period shall entitle
Sublandlord to draw the face amount under the then existing Letter of Credit and
shall constitute a default hereunder beyond any applicable cure period.
4.3 Any proceeds drawn by Sublandlord under a Security
Instrument shall be held by Sublandlord, to the extent that such proceeds are
not applied to the satisfaction of any of Subtenant's obligations under this
Sublease, as if the same were a cash security deposit.
4.4 Notwithstanding the foregoing, in the event that Subtenant
is not then in default of any term, condition or covenant of this Sublease, then
the Security may be periodically reduced beginning with the Commencement Date on
a straight line basis provided that the Security shall not be reduced to less
than Sixty Three Thousand Nine Hundred Ninety Two Dollars and thirty three cents
($63,992.33) at the expiration of the Term. Provided that Subtenant is not in
default under any of the terms or conditions of this Sublease, the balance of
the Security Instrument shall be released or returned to Subtenant within thirty
days after the expiration of the Term. All interest earned on the Certificate of
Deposit accrues to the benefit of the Subtenant.
5. Subordination to and Incorporation of the Lease.
5.1 This Sublease is in all respects subject and subordinate to
the terms and conditions of the Prime Lease (true and complete copies of which
have been furnished by Sublandlord to Subtenant), and to all matters to which
the Prime Lease are subject and subordinate. Subtenant shall indemnify
Sublandlord for, and shall hold it harmless from and against, any and all
losses, damages, penalties, liabilities, costs and
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expenses, including, without limitation, reasonable attorneys' fees and
disbursements, which may be sustained or incurred by Sublandlord by reason of
Subtenant's failure to keep, observe or perform any of the terms, provisions,
covenants, conditions and obligations on Sublandlord's part to be kept, observed
or performed under the Prime Lease with respect to the Demised Premises to the
extent same shall have been incorporated herein, or otherwise arising out of or
with respect to Subtenant's use and occupancy of the Demised Premises from and
after the Commencement Date. Sublandlord shall promptly provide Subtenant with a
copy of any notice it receives from Prime Landlord with respect to any alleged
breach and the same opportunity permitted by the Prime Lease to cure such breach
provided that the time to cure shall in no event extend beyond the date that
Sublandlord must effectuate any cure. Sublandlord shall indemnify Subtenant for,
and shall hold it harmless from and against, any and all losses, damages,
penalties, liabilities, costs and expenses, including, without limitation,
reasonable attorneys fees and disbursements, which may be sustained or incurred
by Subtenant by reason of Sublandlord's failure to keep, observe or perform any
of the terms, provisions, covenants, conditions and obligations on Sublandlord's
part to be kept, observed or performed under the Prime Lease.
5.2 Except as otherwise expressly provided in, or otherwise
inconsistent with, this Sublease, or to the extent not applicable to the
Demised Premises, the terms, provisions, covenants, stipulations, conditions,
rights, obligations, remedies and agreements contained in the Prime Lease
including but not limited to Sections 2.2 (first sentence only), 2.7 (as amended
by the Seventh and Eighth Lease Amendments), 2.8, 2.9, 3.3, 3.4 (first
paragraph), 3.6, 4.1.1, 4.1.2, 4.1.3, 4.1.5, 4.1.6, 4.1.7, 4.2, Article 5,
Article 6, Article 7, Article 8, Article 9 and Section 1 of the Ninth Lease
Amendment and Sections 6(e) and 6(f) of the Tenth Lease Amendment are
incorporated in this Sublease by reference, and are made a part hereof as if
herein set forth at length, Sublandlord being substituted for the "Landlord"
under the Prime Lease, Subtenant being substituted for the "Tenant" under the
Prime Lease, and Demised Premises being substituted for "Premises" under the
Prime Sublease except that the following provisions of the Lease shall be deemed
deleted therefrom and shall have no force and effect as between Sublandlord and
Subtenant: Article 1, Sections 2.1, 2.2 (except for the first grammatical
paragraph), 2.4, 2.5, 2.6, 2.10, 3.1, 3.2, 3.4 (second paragraph), 3.6, 4.1.4.
5.6, 5.7 (except that with respect to Sections 5.6 & 5.7 Subtenant shall have
all of the obligations to the Prime Landlord set forth therein) and Sections 3,
4 and 5 of the Tenth Amendment.
6. Use: Quiet Enjoyment
6.1 Subtenant shall use and occupy the Demised Premises for
general office use and for no other purpose provided that general office use
shall include a clinical testing laboratory but in no event shall any outpatient
or inpatient testing, treatment or services be permitted nor shall animal
testing or research be permitted.
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<PAGE>
6.2 Subtenant shall not permit the occupancy of any space in the
Building or Demised Premises for a use causing an unusually high degree of
traffic through or abuse of the lobby, elevators or common use areas in excess
of normal use for a first-class office building, or causing unusual
concentration of persons in the lobby, elevators or common areas, or resulting
in commotion, noise or generally disagreeable activities or conditions, or
employing or engaged in activities which result in a denser use of space than
customary in office buildings of the contemplated character of the Building
provided that a clinical testing laboratory shall not be deemed a generally
disagreeable activity.
6.3 As long as Subtenant shall pay the Rental due hereunder and
shall duly perform all the terms, covenants and conditions of this Sublease on
its part to be performed and observed, Subtenant shall peaceably and quietly
have, hold and enjoy the Demised Premises during the Term hereof, subject to
the provisions of this Sublease.
6.4 Sublandlord will not restrict Subtenant's access to the
Demised Premises on a 24 hour seven day a week basis provided that nothing
herein shall affect the rights of the Prime Landlord under the Prime Lease.
7. Covenants with Respect to the Lease.
7.1 Subtenant shall not do anything that would constitute a
default under the Prime Lease or omit to do anything that Subtenant is obligated
to do under the terms of this Sublease so as to cause there to be a default
under the Prime Lease.
7.2 The time limits set forth in the Prime Lease for the giving
of notices, making demands, performance of any act, condition or covenant, or
the exercise of any right, remedy or option, are changed for the purpose of this
Sublease, by lengthening or shortening the same in each instance, as
appropriate, so that notices may be given, demands made, or any act, condition
or covenant performed, or any right, remedy or option hereunder exercised, by
Sublandlord or Subtenant, as the case may be (and each party covenants that it
will do so) within five (5) days prior to the expiration of the time limit,
taking into account the maximum grace period, if any, relating thereto contained
in the Prime Lease. Each party shall promptly deliver to the other party copies
of all notices, requests or demands which relate to the Demised Premises or the
use or occupancy thereof after receipt of same.
7.3 Compliance with Laws. Subtenant shall at all times fully
comply with all applicable laws, ordinances, rules and regulations of all
governmental authorities ("Applicable Laws") with respect to its occupancy of
the Demised Premises and the operation of its business conducted therein. At
the request of Sublandlord,
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<PAGE>
Subtenant shall deliver copies of all permits, certificates and licenses
evidencing Subtenants compliance with all Applicable Laws.
8. Services and Repairs.
8.1 Notwithstanding anything to the contrary contained in this
Sublease or in the Prime Lease, Sublandlord shall not be required to provide any
of the services that Prime Landlord has agreed to provide, whether specified in
the Prime Lease or required by law, or furnish the electricity to the Demised
Premises that Prime Landlord has agreed to furnish pursuant to the Prime Lease
(or required by law), or make any of the repairs or restorations that Prime
Landlord has agreed to make pursuant to the Prime Lease (or required by law), or
comply with any laws or requirements of any governmental authorities with
respect to the Demised Premises, or take any other action that Prime Landlord
has agreed to provide, furnish, make, comply with, or take or, cause to be
provided, furnished, made, complied with or taken under the Prime Lease, but
Sublandlord agrees to use all diligent efforts as approved by Subtenant, at
Subtenant's sole cost and expense, to obtain the same from Prime Landlord
(provided, however, that Sublandlord shall not be obligated to use such efforts
or take any action which might give rise to a default under the Prime Lease),
and Subtenant shall rely upon, and look solely to, Prime Landlord for the
provision, furnishing or making thereof or compliance therewith. If Prime
Landlord shall default in the performance of any of its obligations under the
Prime Lease, including its obligation to comply with environmental and other
laws, Sublandlord shall, upon request and at the expense of Subtenant, timely
institute and diligently prosecute any action or proceedings which Subtenant, in
its reasonable judgment, deems meritorious, in order to have Prime Landlord make
such repairs, furnish such electricity, provide such services or comply with any
other obligation of Prime Landlord under the Prime Lease or as required by law.
Subtenant shall indemnify and hold harmless Sublandlord from and against any and
all such claims arising from or in connection with such request, action or
proceeding unless resulting from an negligent act or omission of Sublandlord.
This indemnity and hold harmless agreement shall include indemnity from and
against any and all liability, fines, suits, demands, costs and expenses of any
kind or nature, including, without limitation, reasonable attorneys' fees and
disbursements, incurred in connection with any such claim, action or proceeding
brought thereon. Subtenant shall not make any claim against Sublandlord for any
damage which may arise, nor shall Subtenant's obligations hereunder be
diminished, by reason of (i) the failure of Prime Landlord to keep, observe or
perform any of its obligations pursuant to the Prime Lease unless such failure
is due to Sublandlord's negligence or misconduct, or (ii) the acts or omissions
of Prime Landlord, its agents, contractors, servants, employees, invitees or
licensees. Sublandlord shall not be responsible for any failure or interruption,
for any reason whatsoever, of the services or facilities that may be appurtenant
to or supplied at the Building by the Prime Landlord or otherwise, including,
without limitation, heat, air conditioning, water, electricity, elevator service
and cleaning service, if any; and no failure to furnish, or interruption of, any
such services or facilities shall give rise to any
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(x) abatement, diminution or reduction of Subtenant's obligations under this
Sublease, (y) constructive eviction, whether in whole or in part, or (z)
liability on the part of the Sublandlord. The provisions of this Section 8 shall
survive the expiration or earlier termination of the Term hereof.
Notwithstanding anything herein to the contrary, if and to the
extent that Sublandlord obtains an abatement or reduction in rent under the
terms of the Prime Lease due to Prime Landlord's failure to deliver essential
services to the Premises, then Subtenant shall be entitled to a corresponding
abatement or reduction of rent under this Sublease.
9. Consents.
9.1 Sublandlord agrees that whenever its consent or approval is
required hereunder, or where something must be done to Sublandlord's
satisfaction, it shall not unreasonably withhold or delay such consent or
approval; provided, however, that whenever the consent or approval of Prime
Landlord or the lessor under a superior lease, or the mortgagee under a
mortgage, as the case may be, is also required pursuant to the terms of the
Prime Lease, if Prime Landlord or the lessor under a superior lease, or the
mortgagee under a mortgage shall withhold its consent or approval for any reason
whatsoever, Sublandlord shall not be deemed to be acting unreasonably if it
shall also withhold its consent or approval. However, Sublandlord shall
reasonably cooperate with Subtenant in obtaining such consent or approval. If
Prime Landlord shall withhold its consent or approval in connection with this
Sublease or the Demised Premises in any instance where, under the Prime Lease,
the consent or approval of Prime Landlord may not be unreasonably withheld,
Sublandlord, upon the request and at the expense of Subtenant, shall either (i)
timely institute and diligently prosecute any action or proceeding which
Subtenant, in its reasonable judgment, deems meritorious, in order to dispute
such action by Prime Landlord at the sole cost and expense of Subtenant, or (ii)
permit Subtenant, to the extent allowable under the Prime Lease, to institute
and prosecute such action or proceeding against Prime Landlord provided that
Subtenant shall keep Sublandlord informed of its actions and shall not take any
action which might give rise to a default under the Prime Lease.
9.2 If Subtenant shall request Sublandlord's consent and
Sublandlord has agreed, under the terms of this Sublease, that neither its
consent nor its approval shall be unreasonably withheld, and Sublandlord shall
fail or refuse to give such consent or approval, and Subtenant shall dispute the
reasonableness of Sublandlord's refusal to give its consent or approval, such
dispute shall be finally determined by a court of competent jurisdiction. In the
event that any action or proceeding is brought to enforce any term, covenant or
condition of this Sublease on the part of Sublandlord or Subtenant, the party
ultimately prevailing in such litigation shall be entitled to costs of such
litigation and to reasonable attorneys fees to be fixed by the court in such
action or proceeding, including any appeal or appeals therefrom.
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10. Termination of Lease. If the Prime Lease is terminated by
Prime Landlord pursuant to the terms thereof with respect to all or any portion
of the Demised Premises prior to the Expiration Date for any reason whatsoever,
including, without limitation, by reason of casualty or condemnation, this
Sublease shall thereupon terminate with respect to any corresponding portion of
the Demised Premises, and (unless such termination of the Prime Lease shall be
as a result of Sublandlord's default thereunder or a voluntary surrender of the
Demised Premises, other than a surrender of the Demised Premises permitted
under the Prime Lease with respect to a termination of the Prime Lease by reason
of casualty to or condemnation of the Demised Premises or the Building)
Sublandlord shall not be liable to Subtenant by reason thereof. In the event of
such termination, Sublandlord shall return to Subtenant that portion of the
Rental paid in advance by Subtenant with respect to such portion of the Demised
Premises, if any, prorated as of the date of such termination together with the
Letter of Credit.
11. Sublease, Not Assignment. Notwithstanding anything contained
herein, this Sublease shall be deemed to be a sublease of the Demised Premises
and not an assignment, in whole or in part, of Sublandlord's interest in the
Prime Lease.
12. Damage, Destruction, Fire and Other Casualty; Condemnation.
In the event that 50% or more of the Demised Premises is destroyed by fire or
other casualty such that Subtenant cannot use the Demised Premises for a period
of at least six consecutive months then either Sublandlord or Subtenant upon
thirty days written notice shall have the right to terminate this Sublease. In
the event of said fire or other casualty, rent shall abate in proportion to the
percentage of the Demised Premises Subtenant is unable to occupy.
13. No Waivers. Failure by Sublandlord in any instance to insist
upon the strict performance of any one or more of the obligations of Subtenant
under this Sublease, or to exercise any election herein contained, shall in no
manner be or be deemed to be a waiver by Sublandlord of any of Subtenant's
defaults or breaches hereunder or of any of Sublandlord's rights and remedies by
reason of such defaults or breaches, or a waiver or relinquishment for the
future of the requirement of strict performance of any and all of Subtenant's
obligations hereunder. Further, no payment by Subtenant or receipt by
Sublandlord of a lesser amount than the correct amount or manner of payment of
Rental due hereunder shall be deemed to be other than a payment on account, or
any letter accompanying any check or payment be deemed to effect or evidence an
accord and satisfaction, and Sublandlord may accept any checks or payments as
made without prejudice to Sublandlord's right to recover the balance or pursue
any other remedy in this Sublease or otherwise provided at law or equity.
14. Notices. Any notice, statement, demand, consent, approval,
advance or other communication required or permitted to be given, rendered or
made by either
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party to the other, pursuant to this Sublease or pursuant to any applicable law
or requirement of public authority (collectively, "communications") shall be in
writing and shall be deemed to have been properly given, rendered or made only
if sent by personal delivery, receipted by the party to whom addressed, or
certified mail, return receipt requested, posted in a United States post office
station in the continental United States, or by reputable overnight delivery
service, addressed to Sublandlord or Subtenant at their address first above
written. All such communications shall be deemed to have been given, rendered or
made when delivered and receipted by the party to whom addressed, in the case of
personal delivery, or three (3) business days after the day so mailed or one (1)
business day after overnight delivery service. Either party may, by notice as
aforesaid, designate a different address or addresses for communications
intended for it.
15. Broker. Each party hereto covenants, warrants and represents
to the other party that it has had no dealings, conversations or negotiations
with any broker other than Cushman & Wakefield and Preferred Real Estate
Advisors, Inc. (the "Brokers") concerning the execution and delivery of this
Sublease. Each party hereto agrees to indemnify and hold harmless the other
party against and from any claims for any brokerage commissions and all costs,
expenses and liabilities in connection therewith, including, without limitation,
reasonable attorneys' fees and disbursements, arising out of its respective
representations and warranties contained in this Section 15 being untrue.
Sublandlord shall pay any brokerage commissions due to the Brokers pursuant to a
separate agreement between Sublandlord and the Brokers. The provisions of this
Section 15 shall survive the expiration or earlier termination of the Term
hereof.
16. Renovation of the Demised Premises.
16.1 Subtenant Finish Architect/Subtenant Finish
Contractor.
16.1.1 Subtenant shall retain the services of a
qualified and experienced Subtenant finish architect (the "Subtenant Finish
Architect") and other consultants as shall be reasonably necessary for the
purposes of planning, designing and administering the design and construction of
the Demised Premises for Subtenant occupancy. The Subtenant Finish Architect
shall be responsible for the development, completion and submission of certain
design and construction documentation for Subtenant's, Sublandlord's and Prime
Landlord's review and approval as set forth herein.
16.1.2 Subtenant shall retain the services of a
qualified and experienced Subtenant finish general contractor (the "Subtenant
Finish Contractor") and such other specialty contractors as shall be reasonably
necessary for the purpose of constructing Subtenant finish work. The selection
of the Subtenant Finish Contractor
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by Subtenant shall be subject to the approval of Sublandlord, which approval
shall not be unreasonably withheld or delayed.
16.2 Determination of Subtenant's Space Requirement Program.
Subtenant Finish Architect shall determine Subtenant's Space Requirement
Program.
16.2.1 Based upon the requirements of Subtenant's Space
Requirement Program, the Subtenant Finish Architect shall develop and submit to
Subtenant and Sublandlord "Subtenant's Test Fit Plan", which shall generally
indicate the functional and organizational relationships of the Demised
Premises, the location and size of said Demised Premises, all demising
partitions, interior walls and doors, the location and configuration of office
areas, the layout of typical furniture and other special conditions and
requirements of Subtenant's space.
16.2.2 Upon completion of Subtenant's Test Fit Plan,
the Subtenant Finish Architect shall deliver copies of the completed Subtenant's
Test Fit Plan to Subtenant and two (2) copies to Sublandlord. Sublandlord shall
have one week to approve or reject Subtenant's Test Fit Plan.
16.3 Preparation and Approval of Subtenant Construction
Documents.
16.3.1 Subtenant shall authorize the preparation of
Subtenant Construction Documents which documents shall be completed and
delivered to Sublandlord. The Subtenant Construction Documents shall consist of
one set of architectural drawings signed and sealed by a registered Pennsylvania
architect. In addition, one set of signed and sealed engineered mechanical,
electrical and plumbing drawings will be required if necessary. Sublandlord
shall review and approve or reject the Subtenant Construction Documents within
one week of submission to Sublandlord.
16.3.2 Neither review nor approval by Sublandlord of
any of the Subtenant Construction Documents shall constitute a representation or
warranty by Sublandlord that such Subtenant Construction Documents either (i)
are complete or suitable for their intended purpose or (ii) comply with
applicable laws, ordinances, codes and regulations, it being expressly agreed by
Subtenant that Sublandlord assumes no responsibility or liability whatsoever to
Subtenant or to any other person or entity for such completeness, suitability or
compliance.
16.4 Construction of Subtenant Finish Work. Immediately
following the approval of Subtenant Construction Documents Subtenant shall cause
the Demised Premises to be improved and completed, in a good and workmanlike
manner and in accordance with Subtenant Construction Documents and in accordance
with all applicable laws.
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16.5 Except as expressly set forth in this Agreement,
Subtenant acknowledges and agrees that Sublandlord has not made, does not make
and specifically negates and disclaims any representations, warranties,
promises, covenants, agreements or guaranties of any kind or character
whatsoever, whether express or implied, oral or written, past, present or
future, of, as to, concerning or with respect to: (a) the nature, quality or
condition of the Demised Premises, (b) the suitability of the Demised Premises
for any and all activities and uses which Subtenant may conduct thereon, (d) the
compliance of or by the Demised Premises or its operation with any laws, rules,
ordinances or regulations of any applicable governmental authority or body, (e)
the manner or quality of the construction or materials, if any, incorporated
into the Demised Premises, (f) the manner, quality, state of repair or lack of
repair of the Demised Premises, or (h) compliance with any Environmental Laws or
any pollution or land use laws, rules, regulations, orders or requirements,
including the existence in or on the Demised Premises of Hazardous Materials,
(i) any other matter with respect to the Demised Premises. Additionally, unless
expressly set forth herein, no person acting on behalf of Sublandlord is
authorized to make, and by execution hereof of Subtenant acknowledges that no
person has made, any representation, agreement, statement, warranty, guaranty or
promise regarding the Demised Premises or the transaction contemplated herein;
and no such representation, warranty, agreement, guaranty, statement or promise
if any, made by any person acting on behalf of Sublandlord will be valid or
binding upon Sublandlord. Subtenant further acknowledges and agrees that having
been given the opportunity to inspect the Demised Premises, Subtenant is relying
solely on its own investigation of the Demised Premises and not on any
information provided or to be provided by Sublandlord except as expressly set
forth in this Agreement, and agrees to accept the Demised Premises at the
Commencement Date and waive all objections or claims against Sublandlord
(including, but not limited to, any right or claim of contribution) arising from
or related to the Demised Premises or to any Hazardous Materials on the
Demised Premises. Sublandlord shall not be liable or bound in any manner by any
oral or written statement, representation or information pertaining to the
Demised Premises furnished by any real estate broker, contractor, agent,
employee, servant or other.
16.6 Notwithstanding anything in this Section 16 to the
contrary, Prime Landlord will need to review and approve the plans for
Subtenant's Finish Work prior to the commencement of any construction, all in
accordance with the provisions of the Prime Lease. Any unreasonable delay
occasioned by Prime Landlord's review and approval process shall extend the
Commencement Date set forth in Section 2.1. Sublandlord shall solicit the
required consents from the Prime Landlord with the cooperation of Subtenant as
required.
16.7 Mailroom Monorail System. Subtenant acknowledges that
Sublandlord has previously installed a mailroom monorail between several floors
located in the core area of the Building. Sublandlord reserves the right at any
time to
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enter the Demised Premises to access the mailroom monorail area for repair or
maintenance to the mailroom monorail system or the shaft and Subtenant shall not
restrict or obstruct in any way Sublandlord's access to the area marked by cross
hatching on the attached Exhibit _________.
16.8 Waiver of Mechanic's Lien. Prior to commencing any
construction, Subtenant shall obtain from the Subtenant Finish Contractor a
Waiver of Mechanic's Lien in recordable form.
17. Tenant Improvement Allowance. Sublandlord shall make
available to Subtenant an improvement allowance of Nine Hundred Ninety Eight
Thousand Six Hundred Fifty Two Dollars ($998,652.00). Subtenant may use this
improvement allowance to offset construction costs for the Tenant Finish Work.
In the event that the total Tenant Improvement Allowance is not utilized at the
end of construction, then Subtenant shall have the right to either credit any
unutilized allowance against the Base Rent next due, or to apply any unused
allowance to supplement any other allowance category. Said Tenant Improvement
Allowance shall be paid to Subtenant or Subtenant's contractors within thirty
(30) days after Sublandlord is provided with evidence of paid invoices
representing the work in the case of payment made to Subtenant or partial of
final lien waivers in the case of payments made directly to contractors.
18. Consent of Prime Landlord to this Sublease. Subtenant hereby
acknowledges and agrees that this Sublease is subject to and conditioned upon
Sublandlord obtaining the written consent (the "Consent") of Prime Landlord as
provided in the Lease. Promptly following the execution and delivery hereof,
Sublandlord shall submit this Sublease to Prime Landlord. Subtenant hereby
agrees that it shall cooperate in good faith with Sublandlord and shall comply
with any reasonable requests made of Subtenant by Sublandlord or Prime Landlord
in the procurement of the Consent. In no event shall Sublandlord or Subtenant be
obligated to make any payment to Prime Landlord in order to obtain the Consent
or the consent to any provision hereof, other than as expressly set forth in the
Lease. In the event that Prime Landlord shall not have executed and delivered
the Consent within thirty (30) days after the date of this Sublease, or in the
event that Prime Landlord objects to this Sublease then either party shall have
the right to cancel this Sublease by written notice given to the other at any
time thereafter prior to the execution and delivery of the Consent, and with the
giving of such notice this Sublease shall be deemed canceled and of no further
force or effect and neither party shall have any liability or obligation to the
other in respect thereof, except for any obligations or liabilities which have
accrued prior to such cancellation. In the event that this Sublease is canceled
by reason of Prime Landlord's objection or failure to consent, Subtenant hereby
agrees to vacate the Demised Premises upon 24 hours written notice to do so.
19. Assignment, Subletting and Mortgaging.
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19.1 Subtenant shall not assign, sell, transfer (whether by
operation or law or otherwise), pledge, mortgage or otherwise encumber this
Sublease or any portion of its interest in the Demised Premises, nor sublet all
or any portion of the Demised Premises or permit any other person or entity to
use or occupy all or any portion of the Demised Premises, without the prior
written consent of Sublandlord and Prime Landlord. Upon the request of
Subtenant, Sublandlord, at Subtenant's sole cost and expense, shall request the
consent of the Prime Landlord and cooperate with Subtenant in obtaining any
consent.
19.2 Notwithstanding the above, Subtenant shall have the right
to assign this sublease in its entirety or to sublease all or any portion of the
Demised Premises without the consent of Sublandlord to: (i) a successor to all
of Subtenant's businesses if such succession takes place by merger or
consolidation, reorganization, active legislation or other, or (ii) any
affiliate or subsidiary of Subtenant ("Permitted Transferee").
19.3 If Subtenant desires at any time to assign this Sublease,
or sublet all or any portion of the Demised Premises, (except with respect to
transfers permitted pursuant to Section 19.2 above) Subtenant shall comply with
the following terms and conditions:
19.3.1 Subtenant shall first notify Sublandlord at least
sixty (60) days prior to the proposed effective date of the assignment or
sublease, in writing, of its desire to do so and shall submit in writing to
Landlord: (1) the name of the proposed subtenant or assignee, (2) the nature of
the proposed subtenant's or assignee's business to be carried on in the
Demised Premises, (3) the terms and conditions of the proposed sublease or
assignment, and (4) financial statements for the two most recent completed
fiscal years of the proposed Subtenant or assignee, and a bank reference.
Thereafter, Subtenant shall furnish such supplemental information as Sublandlord
may reasonably request concerning the proposed Subtenant or assignee. At any
time within fifteen (15) days after Sublandlord's receipt of the information
specified above, Sublandlord may by written notice to Subtenant elect to (1)
consent to the sublease or assignment, or (2) disapprove of the sublease or
assignment, said consent not to be unreasonably withheld or delayed. If
Sublandlord consents to the sublease or assignment within the fifteen (15) day
period, Subtenant may thereafter enter into such assignment or sublease of the
Demised Premises, or a portion thereof, upon the terms and conditions and as of
the effective date set forth in the information furnished by Subtenant to
Sublandlord, provided that nothing herein shall detract from Subtenant's
requirement to obtain Prime Landlord's consent to any sublease or assignment.
19.3.2 Notwithstanding Sublandlord having granted its
consent to any assignment or subleasing, prior to the effective date of any
assignment
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or commencement date of any sublease, Sublandlord shall be furnished with a copy
of the fully executed sublease or assignment of the sublease agreement.
19.3.3 No sublease of the Demised Premises or portion
thereof, or assignment of this sublease, shall be for a period of less than one
(1) year nor shall any sublease extend beyond the expiration date of the term of
this sublease.
19.3.4 Notwithstanding any other provision of this
Sublease, Subtenant may not enter into any sublease, license, concession or
other agreement for use, occupancy or utilization of space in the Demised
Premises which provides for a rental or other payment for such use, occupancy or
utilization based in whole or in part on the net income or profits derived by
any person from the property leased, occupied or utilized, or which would
require the payment of any consideration which would not fall within the
definition of "rents from real property" as that term is defined in Section
856(d) of the Internal Revenue Code of 1986, as amended.
19.4 Subtenant shall pay to Sublandlord as additional rent,
within five (5) business days following the due dates of such sums (after
subtracting therefrom the expenses of subletting including advertising,
brokerage commission, legal fees and alteration expenses) Fifty percent (50%) of
the amount by which (a) the rent payable by such assignee, sublessee or
sublessees to Subtenant, throughout the term exceeds the rent otherwise payable
by Subtenant to Sublandlord under this sublease; plus (b) fifty percent (50%) of
all other consideration payable for the assignment or sublease of this Sublease
for the area assigned or sublet, computed on the basis of an average rent per
rentable square foot of area assigned or sublet. The foregoing is a freely
negotiated arrangement between Sublandlord and Subtenant, respecting the
allocation of appreciated rentals. This covenant shall survive the expiration of
the term of this sublease.
19.5 Any notice by Subtenant to Sublandlord pursuant to this
Section 19 of a proposed assignment or subletting, shall be accompanied by
payment of Five Hundred Dollars ($500.00) as a non-refundable fee for
Sublandlord's time and the processing of Subtenant's request for Sublandlord's
consent. In addition to said fee, Subtenant shall reimburse Sublandlord for
reasonable attorneys' fees incurred by Sublandlord in connection with such
review and the preparation of documents in connection therewith.
19.6 Each permitted assignee, transferee or sublessee other than
Sublandlord shall assume and be deemed to have assumed this sublease and shall
remain liable jointly and severally with Subtenant for the payment of the rent
and for the due performance or satisfaction of all of the provisions, covenants,
conditions and agreements herein contained on Subtenant's part to be performed
or satisfied. No permitted assignment or sublease shall be binding on
Sublandlord unless such assignee, sublessee or Subtenant shall deliver to
Sublandlord a counterpart of such
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assignment or sublease which contains a covenant of assumption by the assignee
or sublessee, but the failure or refusal of the assignee or sublessee to execute
such instrument of assumption shall not release or discharge the assignee or
sublessee from its liability set forth above.
19.7 If this Sublease be assigned, or if the Demised Premises of
any part thereof be sublet (whether or not Sublandlord, and Prime Landlord shall
have consented thereto), Sublandlord, after default by Subtenant in its
obligations hereunder, may collect rent from the assignee or subtenant and apply
the amount collected to the Rental herein reserved, but no such assignment or
subletting shall be deemed the acceptance of the assignee or subtenant as a
tenant, or a release of Subtenant from the further performance and observance by
Subtenant of the covenants, obligations and agreements on the part of Subtenant
to be performed or observed herein. The consent by Sublandlord and Prime
Landlord to an assignment, sale, pledge, transfer, mortgage or subletting shall
not in any way be construed to relieve Subtenant from obtaining the express
consent in writing, to the extent required by this Sublease or the Prime Lease
or Prime Sublease, of Sublandlord and Prime Landlord and Landlord to any further
assignment, sale, pledge, transfer, mortgage or subletting.
19.8 If Subtenant is a partnership, the admission of new
Partners (hereinafter defined), the retirement, death, withdrawal, incompetency
or bankruptcy of any Partner, or the reallocation of partnership interests among
the Partners shall not constitute an assignment of this Sublease requiring the
prior consent of Sublandlord. The reorganization of Subtenant into a
professional corporation if Subtenant is a partnership, or the reorganization of
Subtenant from a professional corporation into a partnership, shall not
constitute an assignment of this Sublease requiring the prior consent of
Sublandlord, provided that (i) immediately following such reorganization the
Partners of Subtenant shall be not less than ninety percent (90%) of those
Partners existing immediately prior to such reorganization and (ii) any Partner
of Subtenant immediately prior to-such reorganization who is not a Partner of
Subtenant immediately after such reorganization shall be released from liability
under this Sublease only to the extent permitted by and in accordance with the
provisions of Section 19.2 hereof. Any such reorganization either at one time or
over a twelve (12) month period shall be considered the same reorganization. If
Subtenant shall become a professional corporation, each individual shareholder
in Subtenant and each attorney-employee of a professional corporation which is a
shareholder in Subtenant shall have the same personal liability as such
individual or attorney-employee would have under this Sublease if Subtenant were
a partnership and such individual or attorney-employee were a Partner of
Subtenant. Upon the request of Sublandlord, each such individual or
attorney-employee shall execute an agreement confirming such personal liability.
A "Partner" shall be any partner of Subtenant or any attorney-employee of a
professional corporation which is a partner of Subtenant and any shareholder of
Subtenant if Subtenant shall become a professional corporation.
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19.9 Except as set forth above, either a transfer (including the
issuance of treasury stock or the creation and issuance of new stock) of a
controlling interest in the shares of Subtenant (if Subtenant is a corporation,
other than a professional corporation, or trust) or a transfer of a majority of
the total interest in Subtenant (if Subtenant is a partnership) at any one time
or over a period of time through a series of transfers, shall be deemed an
assignment of this Sublease and shall be subject to all of the provisions of
this Agreement, including, without limitation, the requirements that Subtenant
obtain Sublandlord's prior consent thereto. The transfer of shares of Subtenant
(if Subtenant is a corporation or trust) for purposes of this Section shall not
include the sale of shares by persons other than those deemed "insiders" within
the meaning of the Securities Exchange Act of 1934, as amended, which sale is
effected through the "over-the-counter market" or through any recognized stock
exchange.
20. Insurance. Subtenant shall obtain and keep in full force and
effect during the term of the Sublease, at its own cost and expense,
comprehensive public liability and property damage insurance with a broad form
contractual liability endorsement with a minimum limit of liability of
$3,000,000 for injury or death and damages to any one person, of $3,000,000 for
injury or death arising out of one occurrence, and $3,000,000 for damage to
property, naming Sublandlord and Subtenant as insureds against any and all
claims for personal injury, death or property damage occurring in, upon,
adjacent to, or connected with the Subleased Demised Premises or any part
thereof. Said insurance is to be written in form reasonably satisfactory to
Sublandlord by good and solvent insurance companies of recognized standing,
admitted to do business in the State of Pennsylvania which shall be reasonably
satisfactory to Sublandlord. Subtenant shall pay all premiums and charges
therefor and upon failure to do so Sublandlord may, but shall not be obligated
to, make such payments, in which event Subtenant agrees to pay the amount
thereof to Sublandlord on demand. Such policies shall contain a provision that
no act or omission of Subtenant will affect or limit the obligation of the
insurance company to pay the amount of any loss sustained and shall be
noncancellable except upon thirty (30) days advance written notice to
Sublandlord. In the event Subtenant shall fail to obtain such insurance,
Sublandlord may, but shall not be obligated to, obtain the same, in which event
the amount of the premium paid shall be paid by Subtenant to Sublandlord upon
demand.
21. Partnerships If Subtenant is a partnership (or is comprised of
two (2) or more persons, individually or as co-partners of a partnership or
joint venture) or if Subtenant's interest in this Sublease shall be assigned to
a partnership (or two (2) or more persons individually or as co-partners of a
partnership or joint venture) or to a professional corporation pursuant to
Section 19 hereof (any such partnership, professional corporation and such
persons are referred to in this Article as "Partnership Subtenant"), then (i)
the liability of each of the parties comprising Partnership Subtenant shall be
joint and several, (ii) each of the parties comprising Partnership Subtenant
hereby consents in advance to, and agrees to be bound by, any written instrument
which may hereafter be executed by Subtenant, changing, modifying or discharging
this
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Sublease, in whole or in part, or surrendering all or any part of the Demised
Premises to Sublandlord, and by any notices, demands, requests or other
communications which may hereafter be given by Partnership Subtenant or by any
of the parties comprising Partnership Subtenant, (iii) any bills, statements,
notices, demands, requests or other communications given or rendered to or by a
Partner of Partnership Subtenant shall be binding upon Partnership Subtenant,
(iv) if any individual Partner of Partnership Subtenant is or becomes an
attorney-employee of a professional corporation, such individual shall have the
same personal liability under this Sublease as such individual would have if he
and not the professional corporation were a Partner of Partnership Subtenant,
and such individual, upon the request of Sublandlord, shall execute an agreement
confirming such personal liability, (v) if Partnership Subtenant shall admit new
Partners, all of such new Partners shall, by their admission to Partnership
Subtenant, be deemed to have assumed joint and several liability for the
performance of all of the terms, covenants and conditions of this Sublease on
Partnership Subtenant's part to be observed and performed, and (vi) Partnership
Subtenant shall give prompt notice to Sublandlord of the admission of any new
Partners and the death, retirement, withdrawal, incompetency or bankruptcy of
any Partner, and, upon demand of Sublandlord, shall cause each such new Partner
to execute and deliver to Sublandlord an agreement in form satisfactory to
Sublandlord, wherein each such new Partner shall assume joint and several
liability for the performance of all the terms, covenants and conditions of this
Sublease on Subtenant's part to be observed and performed (but neither
Sublandlord's failure to request any such agreement nor the failure of any such
new Partner to execute or deliver any such agreement to Sublandlord shall
vitiate the provisions of this Section 21).
22. Default
22.1 In additional to the remedies set forth in the Prime Lease,
in the event of a default by Subtenant under the terms or conditions of this
Sublease, Subtenant hereby agrees to the Confession of Judgment provisions set
forth below:
THE FOLLOWING PARAGRAPH SETS FORTH A WARRANT OR AUTHORITY FOR AN ATTORNEY (OR A
CLERK OF COURT OR A PROTHONOTARY) TO CONFESS JUDGMENT AGAINST TENANT. SINCE THIS
PARAGRAPH REQUIRES TENANT TO WAIVE IMPORTANT DUE-PROCESS RIGHTS AND OTHER
CONSTITUTIONAL RIGHTS, SUBTENANT AND SUBLANDLORD AGREE THAT IT IS APPROPRIATE
FOR SUBTENANT TO PROVIDE A SPECIAL ACKNOWLEDGMENT THAT SUBTENANT WAIVES THOSE
RIGHTS KNOWINGLY AND VOLUNTARILY. IN MAKING THIS SPECIAL ACKNOWLEDGMENT,
SUBTENANT EXPRESSLY, KNOWINGLY AND VOLUNTARILY MAKES THE FOLLOWING
REPRESENTATIONS, ACKNOWLEDGMENTS, AND ASSURANCES (IN WHICH "YOU" SHALL MEAN
SUBTENANT OR, IF APPROPRIATE SUBTENANT'S HEIRS, SUCCESSORS AND/OR ASSIGNS):
-24-
<PAGE>
(I) YOU HAVE DISCUSSED WITH YOUR OWN LEGAL COUNSEL THE CONSEQUENCES OF
GRANTING THE WARRANTS OR POWERS OF ATTORNEY IN THE SUBLEASE (OR YOU HAVE
WILLFULLY AND KNOWINGLY ELECTED NOT TO HAVE SUCH A DISCUSSION WITH AN ATTORNEY
WHO REPRESENTS YOU).
(II) YOU UNDERSTAND THE CONSEQUENCES OF GRANTING SUCH WARRANTS OR POWERS OF
ATTORNEY, INCLUDING BUT NOT LIMITED TO THE FACT THAT YOU ARE THEREBY WAIVING
IMPORTANT RIGHTS THAT YOU WOULD OTHERWISE HAVE UNDER THE CONSTITUTIONS OF THE
UNITED STATES OF AMERICA AND OF THE COMMONWEALTH OF PENNSYLVANIA.
(III) YOU UNDERSTAND THAT AMONG THE RIGHTS YOU WILL WAIVE BY GRANTING SUCH
WARRANTS OR POWERS OF ATTORNEY ARE: (A) THE RIGHT TO RECEIVE PRIOR NOTICE OF
PROCEEDINGS TO ENFORCE SUCH A JUDGMENT BY HAVING A SHERIFF OR MARSHAL EVICT YOU
FROM THE LEASEHOLD SPACE, AND (B) THE RIGHT TO HAVE A HEARING CONDUCTED BEFORE
YOU ARE DEPRIVED OR YOUR PROPERTY AS A RESULT OF SUCH ENFORCEMENT PROCEEDINGS.
(IV) NO ONE HAS EXERCISED ANY FORCE OR MADE ANY THREATS OR TAKEN ANY ACTS
THAT HAVE DEPRIVED YOU OF YOUR FREE WILL IN DECIDING WHETHER TO GRANT SUCH A
WARRANT OF ATTORNEY.
(V) YOU UNDERSTAND THAT SUBLANDLORD AND ITS ATTORNEYS AND AGENTS ARE
RELYING UPON YOUR ASSURANCE THAT THESE ACKNOWLEDGMENTS AND REPRESENTATIONS ARE
TRUE.
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<PAGE>
CONFESSION OF JUDGMENT
----------------------
1. Warrant and Power of Attorney to Confess Judgment in Ejectment. When
this Sublease and the Term thereof or Subtenant's right to possession of the
Demised Premises shall have been terminated on account of any Event of Default
by Subtenant hereunder, and also when the Term hereby created shall have
expired, it shall be lawful for any attorney to appear as attorney for
Subtenant, as well as for all persons claiming by, through or under Subtenant,
and to sign an agreement for entering in any competent court an amicable action
in ejectment against Subtenant and all persons claiming by, through or under
Subtenant and therein confess judgment for the recovery by Sublandlord of
possession of the Demised Premises. This Sublease shall be his sufficient
warrant, whereupon, if Sublandlord so desires, a writ of possession may issue
forthwith, without any prior writ or proceedings whatsoever. If for any reason
after such action shall have been commenced the same shall be determined and the
possession of the Demised Premises hereby demised remain in or be restored to
Subtenant, Sublandlord shall have the right for the same default and upon any
subsequent defaults, or upon the termination of this Sublease, to bring one or
more further amicable action or actions as hereinbefore set forth to recover the
possession of said Demised Premises and confess judgment for the recovery of
possession of the Demised Premises as hereinbefore provided.
2. Release. Subtenant hereby unconditionally and forever releases and
waives (i) all rights that Subtenant would otherwise have to object to,
interfere with, attack, seek to strike or open, or seek to stay the aforesaid
entry of judgment or judgments and/or the aforesaid issuance and consummation of
execution or executions thereon, (ii) any and all errors heretofore or hereafter
committed by Sublandlord in connection with this Sublease and/or in connection
with Sublandlord's enforcement of its rights under this paragraph, (iii)
inquisition and condemnation of any property seized or levied upon by virtue of
such execution, and (iv) any exemptions to which Subtenant would otherwise be
entitled under any statute, law, ordinance, regulation or rule of law.
4. Affidavit of Default. In any amicable action brought hereon, or other
action brought pursuant to the foregoing warrants and powers of attorney (to
confess judgment herein), Sublandlord shall cause to be filed in such action an
affidavit made by it or someone acting for it, setting forth the facts necessary
to authorize the entry of judgment, of which facts such affidavit shall be prima
facie evidence, and if a true copy of this Sublease (and of the truth of the
copy such affidavit shall be sufficient evidence) shall be filed in such suit,
action or actions, it shall not be necessary to file the original as a warrant
of attorney, any rule of court, custom or practice to the contrary
notwithstanding.
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<PAGE>
23. Holding Over. In the event Subtenant holds over after the expiration of
the term of this Lease, then, in addition to any other rights or remedies
Sublandlord may have as provided in the Prime Lease, Subtenant shall indemnify,
protect, defend and hold harmless Sublandlord, from and against any and all
claims, suits, demands, liability, damages and expenses, including direct and
consequential damages sustained by Sublandlord, together with reasonable
attorneys' fees and costs, if any, arising from or in connection with
Subtenant's failure to vacate the Demised Premises at the termination or sooner
expiration of the term of this Sublease.
24. Non-Disturbance Agreement. Upon Subtenant's request, Sublandlord will
use reasonable efforts to assist Subtenant in obtaining a Non-Disturbance
Agreement from the current lender on the property provided that: (i) the failure
of Subtenant to obtain such a Non-Disturbance Agreement shall not give Subtenant
the right to terminate this Sublease and provided further that Sublandlord shall
not be required to make any payments to the Prime Landlord or the current lender
to obtain such Non-Disturbance Agreement nor shall Sublandlord be required to
make any concessions with respect to the Prime Lease.
25. Miscellaneous.
25.1 This Sublease contains the entire agreement between the parties
and all prior negotiations and agreements are merged in this Sublease. Any
agreement hereafter made shall be ineffective to change, modify or discharge
this Sublease in whole or in part unless such agreement is in writing and signed
by the parties hereto. No provision of this Sublease shall be deemed to have
been waived by Sublandlord or Subtenant unless such waiver be in writing and
signed by Sublandlord or Subtenant, as the case may be. The covenants and
agreements contained in this Sublease shall bind and inure to the benefit of
Sublandlord and Subtenant and their respective permitted successors and assigns.
25.2 In the event that any provision of this Sublease shall be held to
be invalid or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions of this Sublease shall be unaffected
thereby.
25.3 The paragraph headings appearing herein are for purpose of
convenience only and are not deemed to be a part of this Sublease.
25.4 Capitalized terms used herein shall have the same meanings as are
ascribed to them in the Prime Sublease, unless otherwise expressly defined
herein.
25.5 This Sublease shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Pennsylvania.
-27-
<PAGE>
25.6 This Sublease is offered to Subtenant for signature with the
express understanding and agreement that this Sublease shall not be binding upon
Sublandlord unless and until Sublandlord shall have executed and delivered a
fully executed copy of this Sublease to Subtenant.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
of Sublease as of the day and year first above written.
Witness: Raytheon Engineers & Constructors, Inc.
By: /s/ signature illegible
- ------------------------------- -----------------------------------
Name: name illegible
-----------------------------------
Title: VP
-----------------------------------
Witness: Premier Research Worldwide, Ltd.
By: /s/ Fred M. Powell
- ------------------------------- -----------------------------------
Name: Fred M. Powell
-----------------------------------
Title: Chief Financial Officer
-----------------------------------
ACKNOWLEDGMENT OF SUBTENANT
---------------------------
Subtenant hereby acknowledges again its consent to the following provisions
of Section 22 of the Sublease as follows:
1. Warrant and Power of Attorney to Confess Judgment in Ejectment. When this
Sublease and the Term thereof or Subtenant's right to possession of the
Demised Premises shall have been terminated on account of any Event of Default
by Subtenant hereunder, and also when the Term hereby created shall have
expired, it shall be lawful for any attorney to appear as attorney for
Subtenant, as well as for all persons claiming by, through or under Subtenant,
and to sign an agreement for entering in any competent court an amicable action
in ejectment against Subtenant and all persons claiming by, through or under
Subtenant and therein confess judgment for the recovery by Sublandlord of
possession of the Demised Premises. This Sublease shall be his
-28-
<PAGE>
sufficient warrant, whereupon, if Sublandlord so desires, a writ of possession
may issue forthwith, without any prior writ or proceedings whatsoever. If for
any reason after such action shall have been commenced the same shall be
determined and the possession of the Demised Premises hereby demised remain in
or be restored to Subtenant, Sublandlord shall have the right for the same
default and upon any subsequent defaults, or upon the termination of this
Sublease, to bring one or more further amicable action or actions as
hereinbefore set forth to recover the possession of said Demised Premises and
confess judgment for the recovery of possession of the Demised Premises as
hereinbefore provided.
3. Release. Subtenant hereby unconditionally and forever releases and
waives (i) all rights that Subtenant would otherwise have to object to,
interfere with, attack, seek to strike or open, or seek to stay the aforesaid
entry of judgment or judgments and/or the aforesaid issuance and consummation of
execution or executions thereon, (ii) any and all errors heretofore or hereafter
committed by Landlord in connection with this Sublease and/or in connection with
Sublandlord's enforcement of its rights under this paragraph and (iii) any
exemptions to which Subtenant would otherwise be entitled under any statute,
law, ordinance, regulation or rule of law.
4. Affidavit of Default. In any amicable action brought hereon, or other
action brought pursuant to the foregoing warrants and powers of attorney (to
confess judgment herein), Sublandlord shall cause to be filed in such action an
affidavit made by it or someone acting for it, setting forth the facts necessary
to authorize the entry of judgment, of which facts such affidavit shall be prima
facie evidence, and if a true copy of this Sublease (and of the truth of the
copy such affidavit shall be sufficient evidence) shall be filed in such suit,
action or actions, it shall not be necessary to file the original as a warrant
of attorney, any rule of court, custom or practice to the contrary
notwithstanding.
Witness: Premier Research Worldwide, Ltd.
By: /s/ Fred M. Powell
- ------------------------------ -----------------------------
Name: Fred M. Powell
-----------------------------
Title: Chief Financial Officer
-----------------------------
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<PAGE>
CONSENT TO SUBLEASE
Shuwa Investments Corporation
515 South Flower Street, Suite 1270
Los Angeles, California 90071-2205
Telephone (213) 489-2757 / Telefax (213) 489-2762
June 30, 1998
Raytheon Engineers & Constructors, Inc.
30 South 17th Street
Philadelphia, Pennsylvania 19103
Re: Building: 30 South 17th Street
Sublet Premises: Entire 8th and 9th Floors
Date of Prime Lease: June 13, 1973 as amended
Date of Sublease: June 25, 1998
Landlord: Shuwa Trust of Philadelphia, a Pennsylvania
Business Trust
Prime Lessee: Raytheon Engineers & Constructors, Inc.
Sublessee: Premier Research Worldwide, Ltd.
Gentlemen:
Pursuant to the terms of your Lease Agreement ("Prime Lease") covering the
above captioned Sublet Premises, as said Prime Lease may have been amended to
the date hereof, you have requested our consent to a sublease (dated as
described in the above caption) to the above captioned Sublessee, a copy of
which sublease is annexed hereto and made a part hereof and is hereinafter
referred to as the "Sublease".
We hereby grant our consent to the Sublease upon the following express
terms and conditions:
1. The Sublease is subject and subordinate to the Prime Lease and to all of
its terms, covenants, conditions, provisions and agreements.
2. Neither the Sublease nor this consent thereto shall:
(a) release or discharge you from any liability, whether past, present
or future, under the Prime Lease;
(b) operate as a consent or approval by us to or of any of the terms,
covenants, conditions, provisions or agreement of the Sublease and we shall not
be bound thereby;
(c) be construed to modify, waive or affect any of the terms, covenants,
conditions, provisions or agreements of the Prime Lease, or to waive any breach
thereof,
<PAGE>
or any of our rights as Landlord thereunder, or to enlarge or increase our
obligations as Landlord thereunder; or
(d) be construed as a consent by us to any further subletting either by
you or by the Sublessee or to any assignment by you of the Prime Lease or
assignment by the Sublessee of the Sublease, whether or not the Sublease
purports to permit the same and, without limiting the generality of the
foregoing, both you and the Sublessee agree that the Sublessee has no right
whatsoever to assign, mortgage or encumber the Sublease nor to sublet any
portion of the Sublet Premises or permit any portion of the Sublet Premises to
be used or occupied by any other party.
3. In the event of your default under the provisions of the Prime Lease,
the rent due from the Sublessee under the Sublease shall be deemed assigned to
us and we shall have the right, under such default, at any time at any option,
to give notice of such assignment to the Sublessee. We shall credit you with any
rent received by us under such assignment but the acceptance of any payment on
account of rent from the Sublessee as the result of any such default shall in no
manner whatsoever be deemed an attornment by the Sublessee to us in the absence
of a specific written agreement signed by us to such an effect, or serve to
release you from any liability under the terms, covenants, conditions,
provisions or agreements under the Prime Lease.
Notwithstanding the foregoing, any payment other than rent from the
Sublessee directly to us, regardless of the circumstances or reasons therefore,
shall in no manner whatsoever be deemed an attornment by the Sublessee to us in
the absence of a specific written agreement signed by us to such an effect.
4. Prime Lessee and Sublessee agree and acknowledge that Landlord's consent
herein shall not create or be deemed to be the basis of creating any covenant,
representation or warranty, express or implied (including, without limitation,
any covenant of quiet enjoyment), on the part of Landlord with respect to the
terms of the Sublease, Sublessee's, use and enjoyment of the Sublet Premises, or
any other matter arising out of or in connection with the Sublease.
5. The term of the Sublease shall expire and come to an end on its natural
expiration date or any premature termination date thereof or concurrently with
the natural expiration date or any premature termination of the Prime Lease for
any reason whatsoever (including, without limitation, any termination by mutual
consent or other right, now or hereafter agreed to by Landlord or Prime Lessee,
or by operation of law or at Landlord's option in the event of a material
default by Prime Lessee).
6. This consent is not assignable, nor shall this consent be a consent to
any amendment, or modification of the Sublease, without Landlord's prior written
consent.
7. You and the Sublessee covenant and agree that, under no circumstances
shall we be liable for any brokerage commission or other charge or expense in
connection with the Sublease and you and the Sublessee agree to indemnify us
against same and against any cost or expense (including, but not limited to,
attorneys' fees) incurred by us in resisting any claim for any such brokerage
commission.
8. You and Sublessee understand and acknowledge that Landlord's consent
hereto is not a consent to any improvement or alteration work being performed in
the Sublet Premises, that Landlord's consent must be separately sought if and to
the extent provided in the Prime Lease and will not necessarily be given, and
that if such consent is
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<PAGE>
given the same will be subject to you and Sublessee signing Landlord's standard
form of Agreement with respect to work being performed by persons other than
Landlord.
9. Landlord's consent herein shall not constitute any agreement,
representation, warranty or verification that the Sublease is in compliance with
the Prime Lease.
10. Landlord hereby confirms that the letter from Landlord's building
manager attached hereto as Exhibit 1, accurately states the policy that tenants
of the Building have 24 hour access to their premises, provided that such access
may be subject to interruptions caused by the performance of repairs and
alterations or force majeure events.
The execution of a copy of this consent by you (as Prime Lessee) and by the
Sublessee shall indicate your joint and several confirmation of the foregoing
conditions and of your agreement to be bound thereby and shall constitute
Sublessee's acknowledgment that it has received a copy of the Prime Lease (with
principal economic terms omitted) from you.
Very truly yours,
LANDLORD:
SHUWA TRUST OF PHILADELPHIA,
a Pennsylvania Business Trust
By: /s/ Takaji Kobayashi
-------------------------------
Takaji Kobayashi
Its: Trustee
-3-
<PAGE>
CONFIRMED AND AGREED:
PRIME LESSEE:
RAYTHEON ENGINEERS & CONTRACTORS, INC.
a Delaware Corporation
By: /s/ signature illegible
---------------------------------
Name: name illegible
-------------------------------
[Print Name]
Its: VP
--------------------------------
CONFIRMED AND AGREED:
SUBLESSEE:
PREMIER RESEARCH WORLDWIDE, LTD.
a Delaware Corporation
By: /s/ Fred M. Powell
---------------------------------
Name: Fred M. Powell
-------------------------------
[Print Name]
Its: Chief Financial Officer
--------------------------------
-4-
<PAGE>
LEASE AGREEMENT
By and Between
FLEET BANK, N.A.
Landlord
and
PREMIER RESEARCH WORLDWIDE LTD.
as Tenant
Dated as of: May 14, 1999
Property location: 1125 Route 22 West
Bridgewater, NJ
1
<PAGE>
TABLE OF CONTENTS
Page
----
Article 1 - Premises 1
Article 2 - Term, Option 1
Article 3 - Rent; Additional Rent; Security Deposit 1
Article 4 - Possession; Quiet Enjoyment 4
Article 5 - Use of Premises 4
Article 6 - Taxes 4
Article 7 - Insurance 4
Article 8 - Indemnification 5
Article 9 - Utilities and Services: Parking 5
Article 10 - Repairs and Maintenance 6
Article 11 - Alterations 6
Article 12 - Trade Fixtures 6
Article 13 - Mechanic's Liens 7
Article 14 - Damage and Destruction 7
Article 15 - Condemnation 8
Article 16 - Environmental Provisions 8
Article 17 - Signs and Advertisements 9
Article 18 - Entry by Landlord 9
Article 19 - Assignment and Subletting 9
Article 20 - Subordination/Estoppel 10
Article 21 - Default 10
Article 22 - Return of Premises; Holdover 13
Article 23 - Notices 13
Article 24 - Broker's Commissions 14
Article 25 - Limitation of Landlord's Liability 14
Article 26 - Rules and Regulations 14
Article 27 - Recording of Lease 14
Article 28 - Miscellaneous 14
Exhibits
- --------
EXHIBIT A - Premises
EXHIBIT B - Tenant Improvements
1
<PAGE>
LEASE AGREEMENT
SUMMARY OF LEASE TERMS
DATE OF EXECUTION: May 14, 1999
LANDLORD: Fleet Bank, N.A.
TENANT: Premier Research Worldwide Ltd.
BUILDING ADDRESS: 125 Route 22 West
Bridgewater, NJ
PREMISES: Approximately 14,088 rentable square
feet
PERMITTED USE OF PREMISES: General Office Purposes
COMMENCEMENT DATE: May 1, 1999
RENT COMMENCEMENT DATE: August 1, 1999
TERMINATION DATE: April 30, 2006
ANNUAL RENT Years 1-2 $253,584.00
Years 3 -5 $281,760.00
Years 6-7 $295,848.00
BASE YEAR: 1999
TENANTS PROPORTIONATE SHARE: 14.71%
OPTION: One (1) additional term of five (5)
years.
LANDLORD'S ADDRESS FOR NOTICES: Fleet Bank, N.A.
Corporate Properties Transactions
Group
MA OF 0803
Attn: Director of Real Estate
Transactions
if by U.S. Mail: P.O. Box 2197
Boston, MA 02106-2197
if by Fedex or other private courier: One Federal Street
Boston, MA 02110-2010
with copy to
Legal Counsel: Fleet Financial Group
Legal Department, MA BO F10C
Attn: Real Estate Legal Counsel
if by U.S. Mail: P.O. Box 2197
Boston, MA 02106-2197
2
<PAGE>
if by Fedex or other private courier: 75 State Street
Boston, MA 02109
LANDLORD'S ADDRESS FOR PAYMENTS: Fleet Bank, N.A.
c/o CB Richard Ellis
Department 842
P.O. Box 40,000
Hartford, CT 06151-0842
TENANT'S ADDRESS FOR NOTICES: Premier Research Worldwide Ltd.
with copy to: James H. Carll, Esquire
Archer & Greiner
One Centennial Square
Haddonfield, NJ 08033-0968
EXHIBITS: The following Exhibits are attached hereto and made a part of this
lease agreement by reference thereto:
Exhibit A - Premises
Exhibit B - Tenant Improvements
3
<PAGE>
LEASE AGREEMENT
This LEASE AGREEMENT ("Lease"), dated as of this 14 day of, May 1999, is made by
and between Fleet Bank, N.A.("Landlord") with an address of c/o Corporate
Properties, MA OF 0803, P.O. Box 2197, Boston, MA 02106-2197, and Premier
Research Worldwide Ltd. having an address at 30 South 17th Street, Philadelphia,
PA 19103 ("Tenant").
Article 1 - Premises
Section 1.01. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, for the term and subject to the covenants, agreements and
conditions hereinafter set forth, those certain premises consisting of
approximately 14,088 square feet of space, known as (the "Premises"), shown on
Exhibit A attached hereto, and consisting of a portion of the first floor of the
building ("Building") located at 1125 Route 22 West, Bridgewater, NJ (the
Building and the land upon which it is situated hereinafter collectively, the
"Property").
Section 1.02. Landlord hereby also grants to Tenant the non-exclusive
right to use the common areas associated with the Building (the "Common Areas"),
which are defined herein as all areas and facilities outside the Premises
contained in or related to the Building that are provided for the general use
and convenience of Tenant and of other tenants of rental space in the Building
and their respective agents, invitees and customers. The Common Areas may
include, without limitation, pedestrian walkways, restrooms, stairways,
landscaped areas, sidewalks, service corridors, throughways, common lobbies,
elevators and private roads servicing the Building. The Common Areas shall not
include any parking facilities except, that Tenant shall have the non-exclusive
right to use no more than 56 parking spaces, as provided in Section 9.02. The
Landlord makes no representations or warranties as to what shall from time to
time constitute the Common Areas and reserves the right at its sole discretion
to alter and reconfigure the Common Areas provided that Tenant's access to the
Premises is not materially impaired.
Article 2 - Term
Section 2.01. The initial term (the "Initial Term") of this Lease shall
commence on May 1, 1999 (the "Commencement Date") and, subject to earlier
termination or extension as hereinafter provided, end on April 30, 2006 (the
"Expiration Date").
Section 2.02. Provided that this Lease is in full force and effect and
Tenant is not in default of its obligations hereunder either at the time of the
exercise of its rights hereunder or at the commencement of the Additional Term
(as herein defined), Tenant shall have the right to extend the term of this
Lease for one (1) additional five (5) year period (the "Additional Term") at the
rental rate described in Section 3.02 below. The Initial Term and the Additional
Term together shall constitute the "Term". Tenant shall exercise such right by
sending written notice to Landlord no later than September 30, 2005. If Tenant
fails to so notify Landlord, then its rights hereunder shall lapse and be of no
further force and effect. Time shall be of the essence.
4
<PAGE>
Article 3 - Rent; Additional Rent; Security Deposit
Section 3.01. Commencing August 1, 1999 and continuing through July 31,
2006, Tenant agrees to pay to Landlord annual rent ("Base Rent") for the use of
the Premises, in lawful money of the United States without advance notice,
demand, offset or deduction as follows: During the first and second years of the
Initial Term, Tenant agrees to pay Landlord Base Rent in the amount of Two
Hundred Fifty Three Thousand Five Hundred Eighty Four Dollars ($253,584.00)
payable in equal monthly installments of Twenty One Thousand One Hundred Thirty
Two Dollars ($21,132.00); during the third, fourth and fifth years of the
Initial Term, Tenant agrees to pay Landlord Base Rent in the amount of Two
Hundred Eighty One Thousand Seven Hundred Sixty Dollars ($281,760.00) payable in
equal monthly installments of Twenty Three Thousand Four Hundred Eighty Dollars
($23,480.00); during the sixth and seventh years of the Initial Term, Tenant
agrees to pay Landlord Base Rent in the amount of Two Hundred Ninety Five
Thousand Eight Hundred Forty Eight Dollars ($295,848.00), payable in equal
monthly installments of Twenty Four Thousand Six Hundred Fifty Four Dollars
($24,654.00). All installments of Base Rent shall be payable on the first day of
each month in advance to the Landlord at the following address: Fleet Bank,
N.A., c/o CB Richard Ellis, Department 842, P.O. Box 40,000, Hartford, CT
06151-0842. During the period May 1, 1999 through July 31, 1999, provided that
Tenant is not in default of its obligations under this Lease at any time during
such period, Tenant's obligation to pay Base Rent and Additional Rent shall be
abated and Tenant's obligation to pay rent shall commence on August 1, 1999
("Rent Commencement Date").
Section 3.02. In the event that Tenant exercises its option to extend
the term of the Lease as provided in Section 2.02, the annual Base Rent for such
Additional Term shall be the then Fair Market Rental Value, as hereinafter
defined, of the Premises, but in no event shall it be less than $295,848.00. The
Fair Market Rental Value of the Premises, as of any date, is defined as the
rental rates then being charged for untenanted premises otherwise similar to the
Premises in Bridgewater, NJ within five (5) miles of the Premises. Tenant shall
have the right to request from the Landlord, nine (9) months prior to the
expiration of the then term of the Lease, Landlord's opinion as to the Fair
Market Rental Value of the Premises, and Landlord shall respond in writing
within thirty (30) days. If Landlord and Tenant have not agreed upon a
designation of a Fair Market Rental Value on or before three months prior to the
commencement of such Additional Term, Landlord and Tenant each shall have the
right, by written notice given to the other, to submit such Fair Market Rental
Value to arbitration. Fair Market Rental Value shall be submitted to arbitration
as follows: Fair Market Rental Value shall be determined by impartial
arbitrators, one to be chosen by Landlord, one to be chosen by Tenant, and a
third to be selected, if necessary, as below provided. The unanimous written
decision of the two first chosen, without selection and participation of a third
arbitrator, or otherwise, the written decision of a majority of three
arbitrators chosen and selected as aforesaid, shall be conclusive and binding
upon Landlord and Tenant. Landlord and Tenant shall each notify the other of its
chosen arbitrator within ten (10) days following the call for arbitration and,
unless such two arbitrators shall have reached a unanimous decision within
thirty (30) days after their designation, they shall notify the President of the
American Arbitration Association (or such organization as may succeed to said
American Arbitration Association) and request it to select an impartial third
arbitrator, who shall be an office building owner, a real estate counselor or a
broker dealing with like types of properties, to determine Fair Market Rental
Value as hereinabove defined. Such third arbitrator and the first two chosen
shall, subject to the commercial arbitration rules of the American Arbitration
Association, hear the parties and their
5
<PAGE>
evidence and render their decision within thirty (30) days following the
conclusion of such hearing and notify Landlord and Tenant thereof. Landlord and
Tenant shall bear the expense of the third arbitrator (if any) equally. The
decision of the arbitrators shall be binding and conclusive and judgment upon
the award or decision of the arbitrators may be entered in any federal or state
court located in New Jersey; and the parties consent to the jurisdiction of such
court. If the dispute between the parties as to the Fair Market Rental Value has
not been resolved before the commencement of the Additional Term then Tenant
shall pay Base Rent based upon the annual Base Rent in effect immediately prior
to the commencement of the Additional Term in question until either the
agreement of the parties as to the Fair Market Rental Value, or the decision of
the arbitrators, as the case may be, at which time Tenant shall pay any
underpayment to Landlord.
Section 3.03. Increase in Operating Costs and Taxes Over Base Year.
(a) In the event that the amount of Operating Costs (hereinafter defined) during
any calendar year subsequent to the calendar year in which the Commencement Date
occurs (the "Operating Cost Base Year") shall exceed the Operating Base Year
Operating Costs, Tenant shall pay to Landlord, as additional rent (hereinafter
called "Additional Rent"), Tenants Proportionate Share, as hereinafter defined,
of such excess, prorated for the last year of the term of the Lease. "Operating
Costs" shall mean all reasonable costs incurred and expenditures made by
Landlord (including costs and expenditures for outside contractors, and
contractors who may be affiliated with Landlord to the extent that the contracts
are at reasonable rates consistent with the type and quality of the services
rendered) in the operation and management, for repairs, replacements, and
improvements, or for cleaning and maintenance of the Property including, without
limitation, parking areas, driveways and walkways on or related to the Property,
related equipment, facilities and appurtenances, elevators, cooling and heating
equipment owned by Landlord; and electricity deregulation compliance costs.
Operating Costs shall also include any costs directly or indirectly to ensure
that any building system (including, without limitation, elevator equipment,
security devices, alarm systems, HVAC equipment and utility equipment) will
accurately process date and/or time data relating to the year 2000 ("Y2K
Costs"). Notwithstanding the fact that under generally accepted accounting
practices, these Y2K Costs may be treated as capital expenditures, such costs
shall be deemed to be Operating Costs under this section. If less than 95% of
the rentable square feet in the Building is rented or occupied at any time
during the Operating Cost Base Year, Operating Costs for such Base Cost Year
shall be an amount equal to the Operating Costs which would normally be expected
to be incurred had 95% of the Building's rentable square feet been occupied and
had Landlord been supplying services to 95% of the Building's rentable square
feet throughout such Base Cost Year. Operating Costs shall not include the
following items:
(i) Any ground lease rental;
(ii) Costs of capital repairs or capital replacements, capital
improvements and equipment, including those incurred as
electricity deregulation compliance costs and Y2K Costs,
except where such capital repair, improvement, equipment or
replacement results in a net reduction in Operating Costs
after the cost of the improvement or replacement is amortized
and charged to Tenant over the useful life of the improvement
or replacement;
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(iii) Rentals for items (except when needed in connection with
normal repairs and maintenance of the of the Building which
shall be permitted) which if purchased, rather than rented,
under generally accepted accounting principles would
constitute a capital improvement, except where such item
results in a net reduction in Operating Costs after the cost
of the rental is charged to Tenant;
(iv) Costs incurred by Landlord for the repair or replacement of
damage to the Building or its contents cause by fire or other
casualty in excess of any applicable deductible under the
insurance policy covering the loss or damage;
(v) Costs, including permit, license and inspection costs,
incurred with respect to the installation of Tenant's or other
occupants improvements made for Tenant or other occupants in
the Building or incurred in renovating or otherwise improving,
decorating, painting or redecorating vacant space for Tenant
or other occupants of the Building;
(vi) Depreciation, amortization, lender's fees and interest
payments;
(vii) Leasing commissions, attorneys' fees, space planning costs and
other costs and expenses in connection with negotiation of
this Lease and with other present or prospective tenants of
other occupants of the Building;
(viii) Costs in connection with services or other benefits which are
not offered to Tenant but which are provided to another tenant
or occupant of the Building;
(ix) Costs incurred by Landlord due to the violation by Landlord or
any tenant or occupant of Building (other than Tenant) of the
terms and conditions of any lease of space in the Building;
(x) All items and services for which Tenant or any tenant or
occupant of the Building reimburses Landlord (other than
through Tenant's proportionate share of Operating Costs), or
which Landlord provides selectively to one or more tenants or
occupants (other than Tenant) without reimbursement;
(xi) Advertising and promotional expenditures, and the costs of
acquiring and installing signs in or on the Building
identifying the owner of the Building or any tenant or
occupant of the Building other than expenditures for the
repair and maintenance of existing signage;
(xii) Any costs associated with gift taxes, excise taxes, profit
taxes or capital levies;
(xiii) Tax penalties incurred as a result of Landlord's negligence,
inability or unwillingness to make payment when due, not
attributable to Tenant's failure to make payments to Landlord
for such items in accordance with the Lease;
(xiv) Any and all costs arising from the presence of Hazardous
Substances (defined in Article 16) now or hereafter pertaining
to the Building in or about the Building including, without
limitation Hazardous Substances in the groundwater or soil;
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(xv) Costs to repair defects in any of the tenant improvements
installed by Landlord in the Premises or to maintain the
structural portions of the Building;
(xvi) Capital costs for sculpture, paintings or other objects of
art;
(xvii) Costs (including all related attorney's fees and costs of
settlements, judgments and any payments in lieu thereof)
arising from claims, disputes or potential disputes between
Landlord and other tenants of the Building;
(xviii) Landlord's general corporate overhead;
(xix) Costs of any items for which Landlord is reimbursed by
insurance, or otherwise compensated by parties other than
tenants of the Building;
(xx) Costs for any separate utility meters Landlord may install for
other tenants of the Building, unless the installation is
required by a utility company or government entity;
(xxi) Costs for construction for Landlord to comply with or
penalties assessed against Landlord for Landlord's
noncompliance with, the Americans with Disabilities Act of
1990 (42 U.S.C. sec. 1281-1283);
(xxii) Installation costs of sprinklers, whether required now or in
the future; except where such installation results in a net
reduction in Operating Costs, including but not limited to
insurance costs, after the cost of the installation is
amortized and charged to Tenant over the useful life of the
installation;
(b) In the event that the amount of Property Taxes (hereinafter
defined) which are due to any taxing authority during the term of this Lease, in
any fiscal year subsequent to the year in which Commencement Date occurs (the
"Property Tax Base Year") shall exceed the Property Tax Base Year Property
Taxes, Tenant shall pay to Landlord, as Additional Rent, Tenant's Proportionate
Share, as hereinafter defined of such excess, prorated for the last year of the
term of the Lease. "Property Taxes" shall mean the sum of the real estate taxes
(including, without limitation, school and town taxes), payments in lieu of
taxes, water assessments, water rents, sewer assessments, governmental levies,
charges, impositions, or agreements, assessments and special assessments imposed
upon the Premises and any rights or interests appurtenant to either, whether
general or special, ordinary or extraordinary, foreseen or unforeseen
(including, without limitation, any tax, excise or fee measured by or payable
with respect to any rent levied against Landlord and/or all or any portion of
the Property). Property Taxes shall include all such amounts levied during the
Term of this Lease even if such taxes are billed after the Expiration Date, and
Tenant's obligations with respect thereto shall survive the termination of this
Lease. If at any time during the Term of this Lease the methods of taxation
prevailing at the commencement of the Term shall be altered so that in lieu of
or as an addition to or as a substitute for the whole or any part of the taxes,
assessments, levies, impositions or charges now levied, assessed or imposed on
real estate and the improvements thereon, there shall be levied, assessed or
imposed (i) a tax, assessment, levy, imposition or charge wholly or partially as
capital levy or otherwise on the rents
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received therefrom, or (ii) a tax, assessment, levy, imposition or charge
measured by or based in whole or in part upon the Property and imposed upon
Landlord, or (iii) a license fee or charge measured by the rents payable by
Tenant to Landlord, then all such taxes, assessments, levies, impositions or
charges, or the part thereof so measured or based, shall be deemed to be
included within the term "Property Taxes" for the purposes hereof.
(c) For purposes of this Article, the term Tenant's Proportionate Share
is 14.71 (14.71%) percent, calculated as follows: 14,088 square feet (Tenant's
space)/ 95,759 square feet (total number of square feet in the Building).
(d) Landlord shall deliver to Tenant annually written estimates with
respect to the amounts of Additional Rent payable pursuant to this Article 3 and
Tenant shall pay such estimated amount in equal monthly installments along with
the Base Rent due, in accordance with the payment procedure set forth in Section
3.01. Landlord shall have the right to periodically revise the annual estimates
based upon information available to Landlord which indicates a reasonable
likelihood of an increase in the amount of such costs. If Landlord shall fail to
deliver an annual estimate, until such time as Landlord does deliver such annual
estimate Tenant's obligation with respect to the payment of Additional Rent
shall be based upon the most recent annual estimate. Within three (3) months
after the end of each calendar year, Landlord shall deliver to Tenant a
reasonably detailed statement ("Statement") setting forth the actual cost of
items included in Additional Rent for such prior calendar year. If Tenant shall
have paid less than the amount set forth in the Statement, Tenant shall pay the
balance shown on the Statement to Landlord within thirty (30) days after the
date of the Statement. If Tenant shall have paid more than the amount set forth
in the Statement, Landlord shall credit such amount against future payments of
Rent; provided that if the Lease has expired, Landlord shall pay such amount to
Tenant at the time of delivery of the Statement. Landlord's and Tenant's rights
and obligations with respect to such payments shall survive the expiration or
earlier termination of this Lease.
(e) Tenant shall have the right to audit the Statement and shall
exercise such right by giving written notice to Landlord within thirty (30) days
of receipt of the Statement. All documentation and calculation for the audited
period upon which the Statement is based shall be made available to Tenant at
the offices where Landlord keeps such records during normal business hours
within ten (10) days after Landlord receives a written request from Tenant to
make such examination. Upon the completion of such audit, Tenant shall deliver a
copy of the audit to Landlord and the bill for the increased Operating Costs for
the audited period shall be adjusted accordingly. If Tenant shall have paid less
than such adjusted amount, Tenant shall promptly pay to Landlord the amount of
such underpayment. If Tenant shall have paid more than such adjusted amount,
Landlord shall credit such amount against future payments of Rents; provided
that if the Lease has expired, Landlord shall pay such amount to Tenant within
thirty (30) days of the completion of the audit. In the event that Tenant
disputes any amounts billed by Landlord pursuant to this Article 3, Tenant must
first pay such total amount billed within the time stipulated in this Lease
before Tenant may gain access to Landlord's records for review purposes.
(f) Additional Rent and Base Rent are collectively referred to in this
Lease as "Rent".
Section 3.04. A late fee of 5% of the overdue amount will be charged
for Rent received after the fifth day following written notice that such Rent is
due. It is understood and agreed by the parties that such untimely receipt of
rent will cause Landlord to incur costs not contemplated
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by this Lease, the exact amount of which being extremely difficult and
impracticable to determine. The parties hereby agree that this late fee
represents a fair and reasonable estimate of the costs that Landlord will incur
due to late payment of Rent by Tenant. In the event that Tenant does not pay
such Rent within ten (10) days following written notice that such Rent is due,
Tenant shall pay an interest charge ("Interest") for Rent (which shall be deemed
to include Additional Rent). The Interest shall be at a rate of Eighteen percent
(18%) per annum, or alternatively, the maximum amount allowable under the New
Jersey law, whichever is greater provided such amount does not exceed the
maximum amount allowable under state law.
Section 3.05. Upon execution of this Lease, Tenant shall deposit with
Landlord the sum of $126,792.00 (the "Deposit"), which shall be held as a
security for Tenant's performance as herein provided. At the time of execution
of this Lease Tenant may elect instead to furnish to Landlord and thereafter
keep in full force and effect for the term of the Lease, as it may be extended,
an irrevocable letter of credit ("Letter"), in a form and drawn upon a bank
satisfactory to Landlord, in the amount of $126,792.00 in favor of Landlord to
secure the satisfactory performance by Tenant of its obligations under this
Lease. (The Deposit and the Letter, collectively hereinafter "Security
Deposit"). Provided that Tenant shall not have been in default of its obligation
under this Lease at any time during the first year of the Initial Term, on May
1, 2000, the amount of the Security Deposit shall be reduced to $63,396.00 and
the amount, if held as a deposit, so released shall be promptly paid to Tenant.
In no event shall the Security Deposit be considered a measure of liquidated
damages. All or any part of the Security Deposit may be applied by Landlord in
full or partial satisfaction of any default by Tenant. If all or any part of the
Security Deposit is so applied, Tenant upon demand will restore the Security
Deposit to its full amount by the deposit of additional funds to be held as part
of the Deposit or renewal of the Letter so that it is restored to its amount
immediately prior to such application. At the expiration of the Lease and upon
the satisfaction by Tenant of its obligations hereunder the balance of the
Security Deposit, if any, and any accrued interest thereon, will be paid over to
Tenant.
Article 4 - Possession: Quiet Enjoyment
Section 4.01. Landlord shall, on or before the Commencement Date
deliver possession of the Premises to Tenant in their "as is" condition. It is
agreed that the Tenant has had sufficient opportunity to inspect the Premises
and that the Landlord has made no warranties or representations whatsoever with
respect to the physical condition of the Premises or the suitability of the
Premises for Tenant's intended use.
Section 4.02. Provided that Tenant is not in default of its obligations
under this Lease, Landlord covenants and agrees to keep Tenant in quiet
possession and enjoyment of the Premises against the claims of anyone lawfully
claiming by, through or under the Landlord during the Term, and warrants that it
has full power and authority to lease the Premises to Tenant for the Term.
Article 5 - Use of Premises
Section 5.01. Tenant shall continuously use the Premises for general
office purposes ("Permitted Use"), which shall be deemed to include the testing
of computer software written by Tenant, and for no other purpose without the
prior written consent of Landlord, which consent shall be in Landlord's sole
discretion.
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Section 5.02. Tenant, at its own cost and expense, shall comply with
all federal, state, county or local law, ordinance, rule or regulation
applicable to the use and occupancy of the Premises including the Americans With
Disabilities Act (42 U.S.C. sec. 1281-1283) and similar laws, rules and
regulations (collectively "ADA"); provided that Landlord shall comply, at
Landlord's cost, with the requirements of the ADA affecting the Premises and the
property where the Premises are located and Tenant shall comply, at Tenant's
cost, with the requirements of the ADA, compliance with which is necessitated by
Tenant's alterations made to the Premises or the use being made by Tenant of the
Premises.
Article 6 - Taxes
Section 6.01. Tenant shall pay before delinquency all taxes which are
levied or assessed upon Tenant's equipment, furniture, fixtures and Tenant's
other personal property installed or located in or on the Premises.
Section 6.02. Landlord shall pay before delinquency all real property
and/or rental taxes which are now or hereafter imposed upon the Property and/or
the Building by any governmental agency or authority having jurisdiction over
the Property, or any net income, franchise, estate, inheritance or transfer tax
imposed upon the Property.
Article 7 - Insurance
Section 7.01. At all times during the Term, at its own cost and
expense, Tenant shall keep or cause to be kept the following:
(a) commercial general liability and property damage insurance coverage
(sometimes known as broad form comprehensive general liability insurance), which
policy shall include coverage for claims arising from bodily injury, personal
injury and property damage occurring upon, in or about the Premises. The
coverage shall be on an occurrence basis and the combined single limits shall be
not less than $1,000,000;
(b) insurance covering all of Tenant's property and all equipment, fixtures,
motors, machinery, furnishings and furniture installed and owned by Tenant and
used in connection with the Premises insured against loss or damage on a
comprehensive all risk basis;
(c) Workers' Compensation Insurance covering all employees as required by law;
(d) During the course of any construction or renovation of any permitted
improvements on the Premises pursuant to Article 11, appropriate builder's risk
insurance and owner's contingent or protective liability insurance, naming
Landlord as additional insured, covering claims not covered by or under the
terms of the above-mentioned comprehensive general liability insurance, with
combined single limit coverage of $1,000,000, or such higher amount as Landlord
may from time to time reasonably require, and if Tenant shall contract with any
independent contractor for the furnishing of labor, materials or services to
Tenant, Tenant shall require such independent contractor to maintain Workers'
Compensation Insurance covering all persons working on the job site or in
connection with such construction. Tenant agrees to furnish
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Landlord with certificates evidencing all such insurance prior to the
commencement of any such construction or renovations. All such insurance shall
insure the interests of Landlord regardless of any breach or violation by such
independent contractor of warranties, declarations or conditions contained in
such policies or any action or inaction of such independent contractor or of any
other person.
As to all insurance required pursuant to subparagraphs (a) through (d)
above, (i) insurance shall be obtained from responsible companies qualified to
do business and in good standing in the state in which the Premises are located;
(ii) Landlord shall be named as an additional insured on all such policies; and
(iii) the interests of Landlord shall be insured regardless of any breach or
violation by Tenant of warranties, declarations or conditions contained in such
policies or any action or inaction of Tenant or of any other person. Tenant
agrees to furnish Landlord with certificates evidencing all such insurance prior
to the beginning of the term hereof, and annually thereafter, and evidencing
renewal thereof at least thirty (30) days prior to the expiration of any such
policy. Each such policy shall be non-cancelable with respect to the interest of
Landlord without at least twenty (20) days' prior written notice thereof.
Section 7.02. Landlord shall cause to be maintained, throughout the
Term (a) a policy of commercial general liability insurance with respect to the
Property, and (b) policies of insurance covering damage to the Building,
excluding Tenant's fixtures, or equipment, in the amount of the full replacement
value thereof, providing protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief and
"all risk". Landlord shall furnish Tenant, upon written demand therefor, a
certificate evidencing such insurance.
Section 7.03. Tenant and Landlord covenant that with respect to any
insurance coverage carried by either Tenant or Landlord in connection with the
Premises, whether or not such insurance is required by the terms of this Lease,
such insurance shall provide for the waiver by the insurance carrier of any
subrogation rights against Landlord, its agents, servants and employees under
Tenant's insurance policies or against Tenant, its agents, servants and
employees under Landlord's insurance policies. If a party to this Lease is
unable to obtain such a provision in any such insurance policy, then that party
shall cause the other party to be named an additional insured under such
insurance policy.
Article 8 - Indemnification
Section 8.01. Tenant shall hold Landlord harmless from and defend
Landlord against any and all claims or liability for any injury or damage
(including consequential damages and reasonable attorneys' fees) to any person
or property whatsoever (a) occurring in, on, or about the Premises; (b)
occurring in, on or about the Building, when such injury or damage shall be
caused in part or in whole by the act, neglect, fault, or omission of any duty
with respect to the same, by Tenant, its agents, employees, or invitees, or (c)
arising out of Tenant's breach of its obligations under this Lease. The
provisions of this Section 8.01 shall continue in effect and shall survive
(among other events) any termination or expiration of this Lease.
Section 8.02. Landlord shall hold Tenant harmless from and defend
Tenant against any
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and all claims or liability for any injury or damage (including reasonable
attorneys' fees) to any person or property whatsoever (a) occurring in, on, or
about the Premises caused by the act, neglect, fault, or omission of any duty
with respect to the same, by Landlord, its agents, employees, or invitees, and
(b) occurring in, on, or about the Building, unless such injury or damage shall
be caused in part or in whole by the act, neglect, fault, or omission of any
duty with respect to the same, by Tenant, its agents, employees, or invitees.
The provisions of this Section 8.02 shall continue in effect and shall survive
(among other events) any termination or expiration of this Lease.
Article 9 - Utilities and Services: Parking
Section 9.01. Landlord shall, at its sole cost, cause, for normal
office purposes, electricity, water and sewage service to be furnished to the
Premises for the use of Tenant. Tenant shall, at its sole cost and expense, pay
or cause to be paid all charges (including any deposits) for telephone or other
services or utilities furnished to the Premises or to Tenant.
Section 9.02. Tenant shall have the non-exclusive right to park not
more than 56 standard passenger motor vehicles ("Vehicles"), free of charge in
the parking facilities servicing the Building ("Parking Area"). Landlord may
from time to time establish reasonable rules and regulations for the Parking
Area, and Tenant agrees to observe the same upon being advised thereof. Any and
all parking of Vehicles in said Parking Area shall be at the risk of the owner
of the same. Landlord reserves the right to reconfigure and reassign the parking
spaces in the Parking Area.
Section 9.03. Tenant agrees to comply with (a) all applicable laws,
rules and regulations regarding the collection, sorting, separation and
recycling of waste products, garbage, refuse and trash (collectively "Trash")
and (b) any rules and regulations which Landlord in its sole discretion may
institute regarding Trash collection and recycling.
Article 10 - Repairs and Maintenance
Section 10.01. Except as provided in Section 10.02, Landlord shall do
the following:
(a) Maintain in good condition and repair during the Term all
structural components of the Property, including, without limitation, the
foundation, roof, exterior walls of the Building, and the plumbing, electrical,
heating, and air-conditioning systems which are a part of and/or service the
Premises, except for those owned by the Tenant; and
(b) Maintain and keep clean all Common Areas, including the
Parking Area, remove snow therefrom with reasonable dispatch when required,
provide adequate lighting and drainage for the Parking Area during normal
business hours, and maintain all landscaping in a neat and orderly condition;
and
(c) Cause trash and refuse to be removed daily or as often as
is reasonably necessary from the Building so as to avoid unreasonable
accumulations of the same; provided that Landlord shall not be obligated to
accept for disposal any Trash which has not been sorted and separated in
compliance with the provisions of Section 9.03, and in such case, Tenant shall
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be required to arrange for disposal of its Trash at its sole cost and expense,
using a contractor satisfactory to Landlord.
Section 10.02. Tenant, at its sole expense, shall maintain in good
condition and make all interior repairs to the Premises during the Term which
are necessary to keep the Premises in substantially as good condition as on the
Commencement Date, reasonable wear and tear and damage by fire or other casualty
excepted.
Article 11 - Alterations
Section 11.01. Tenant shall make no alterations, installations,
additions or improvements ("Alterations", which shall be deemed to include any
changes to Alterations previously approved by Landlord) of a structural nature
in or to the Premises. Tenant shall make non-structural changes only with the
prior written consent of Landlord; provided Landlord may disapprove any
Alterations or decorative changes which in the sole opinion of Landlord harm the
architectural integrity or appearance of the Building or conflict with the use
of the rest of the Building. Landlord will not unreasonably withhold, delay or
condition its consent to non-structural Alterations costing in the aggregate
less than $10,000.00. If such Alterations are consented to by Landlord, they
shall be made only by contractors or mechanics approved by Landlord at Tenant's
expense. Any such Alterations must comply with applicable laws, including but
not limited to, any and all regulations governing potential asbestos containing
materials. Tenant shall install and maintain the Alterations, interior
decoration and appearance in a first class manner. At the time of consenting to
Alterations, Landlord shall notify Tenant whether such Alterations shall be
required to be removed at the expiration or earlier termination of this Lease.
Any Alternations not removed shall become the property of Landlord. If Tenant is
required to remove such Alterations, Tenant shall restore the Premises to their
condition immediately prior to the making of such Alterations, reasonable wear
and tear excluded.
Section 11.02. If Landlord elects to require Tenant to remove such
Alterations, and such removal and restoration of the Premises are not effected
by Tenant by (i) the expiration or earlier termination of this Lease; or (ii)
within thirty (30) days from the date of notice by Landlord requiring the same,
whichever is later, Tenant shall be deemed to be holding over under Article 22,
Section 22.03 of this lease until such time as the Alterations are removed and
the Premises restored to its prior condition, and shall remain liable for any
and all consequential damages sustained by Landlord as a result.
Section 11.03. Tenant shall indemnify and hold Landlord harmless from
any loss, cost or expense (including reasonable attorneys' fees) incurred by
Landlord as a consequence of any defects in design, materials or workmanship
resulting from Tenant's Alterations.
Section 11.04. Tenant shall reimburse Landlord for Landlord's
reasonable costs for reviewing and approving or disapproving plans and
specifications for Alterations by Tenant, including but not limited to,
reasonable fees for engineers, architects and/or attorneys retained by Landlord
for these purposes. Such reimbursement shall be made by Tenant to Landlord
within thirty (30) days of Landlord's invoicing of Tenant.
Section 11.05. If any change ("Change") to any approved Alteration
increases the cost of
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any work to be performed by Landlord ("Landlord's Work") pursuant to this Lease,
Landlord shall provide Tenant with invoices documenting and evidencing such
increased costs and Tenant shall reimburse Landlord for such increased costs
within ten (10) days after receipt thereof. Such costs shall include the actual
costs incurred by Landlord, including but not limited to, reasonable fees for
engineers and architects retained by Landlord for these purposes, to revise
plans and specifications for Landlord's Work to indicate work resulting from an
approved Change, and to construct the Landlord's Work shown on such revised
plans to the extent that such costs exceed the costs that Landlord would have
had to pay to cause the Landlord's Work to be constructed (as reflected by
Landlord's original plans if such Change had not been made). If such Change
delays Landlord's completion of Landlord's Work, such delay period shall not be
considered when determining the Commencement Date defined in Section 2.01.
Section 11.06. Landlord and Tenant contemplate that at the commencement
of the Term of this Lease Tenant will undertake certain Alterations shown on
Exhibit B attached hereto and made a part hereof ("Initial Alterations"). By
execution of this Lease the Initial Alterations are deemed approved. The Initial
Alterations shall be subject to all of the provisions of this Article 11;
provided that Tenant shall not be required to remove them at the expiration or
earlier termination of the Term. Landlord shall have no financial obligation
with respect to the Initial Alterations except that Landlord shall reimburse
Tenant up to, but not more than, $281,760.00 ("Cash Allowance") of the cost of
the Initial Alterations. Such sum has been calculated at a rate of $20.00 per
square foot of area of the Premises. Provided that Tenant is not in default of
it's obligations under this Lease, such sum shall be paid to Tenant within 30
days of presentation to Landlord of (a) the certificate of occupancy, if
applicable, or such other evidence of completion of the work as is satisfactory
to Landlord and (b) third party invoices and mechanics lien waivers evidencing
completion of and payment for the work for which reimbursement is sought.
Article 12 - Trade Fixtures
All equipment (other than exhaust vents and fans and heating, air
conditioning and ventilating system), business and office machines, furniture
and other items of personal property (except Alterations including without
limitation walls, floors, ceilings, wiring, plumbing, sewerage, and water pipes
and lines) owned or installed by Tenant in the Premises at its expense shall
remain the property of Tenant, (and any taxes thereon and risk of loss shall be
borne by Tenant, and may be removed by Tenant at any time provided that Tenant
shall at its expense, repair any damage, holes or openings caused or occasioned
by such removal whether by Tenant or Landlord as hereafter provided and provided
that during the Term such removal does not adversely affect the appearance of
the Premises). Any such personal property of the Tenant left upon the Premises
at the end of the Term may, at the election of Landlord and after reasonable
notice to Tenant, (a) be removed, sold, stored or discarded at Tenant's expense;
or (b) be deemed to have been abandoned and to belong to the Landlord.
Article 13 - Mechanic's Liens
Tenant shall keep the Property free from and promptly remove any
mechanic's liens and indemnify, defend, and hold Landlord harmless from any and
all liability or expense of any kind and description which may arise out of or
be connected in any way with Tenant's
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Alterations. If any mechanic's or other lien shall at any time be filed against
the Premises by reason of labor, services or materials performed or furnished to
Tenant, Tenant shall cause the same to be discharged of record by payment or the
posting of a bond, to the satisfaction of Landlord within ten (10) days of the
filing of the lien. If Landlord shall incur any fees (including attorneys' fees)
by reason of the filing of any such lien, Tenant shall be obligated for the
payment of such fees. If Tenant shall fail to cause such lien to be so
discharged or bonded after being notified of the filing thereof, then, in
addition to any other right or remedy of Landlord, Landlord may bond or
discharge the same by paying the amount claimed to be due or posting a bond, and
the costs incurred by Landlord, including reasonable attorneys' fees, together
with interest thereon at the rate of 18% per annum, shall be due and payable by
Tenant to Landlord as Additional Rent. Landlord's consent to the construction of
Alterations shall not be deemed to be such consent of the Landlord or
acknowledgment that its estate is beholden for the payment for such Alterations
as would bind the interest of the Landlord under applicable mechanic's lien law.
Article 14 - Damage and Destruction
Section 14.01. Should a substantial portion of the Premises or of the
Building be damaged by fire or other casualty, Landlord may elect to terminate
this Lease by giving written notice to Tenant within sixty (60) days of such
fire or casualty, specifying a termination date, and this Lease shall terminate
as of the termination date specified. If Landlord does not elect to terminate
this Lease, then it shall give notice to Tenant within such sixty-day period of
the period required to complete the restoration and repair of the Premises. When
such fire or other casualty renders the Premises substantially unsuitable for
the' intended use, a just and proportionate abatement of Base Rent shall be
made, and Tenant may elect to terminate this Lease if:
(a) Landlord fails to give written notice within sixty (60) days of
such fire or casualty of its intention to restore the Premises, or
(b) Landlord advises Tenant in such notice that the period required for
restoration and repair exceeds 270 days, or
(c) Landlord fails to restore the Premises to a condition substantially
suitable for their intended use within the period set forth in its notice to
Tenant.
If Tenant elects to so terminate this Lease, Tenant shall give a written notice
of termination to Landlord within thirty (30) days following the lapsed time
period described in Section 14.01(a) or (b), as applicable, specifying a
termination date, and this Lease shall terminate as of the termination date.
Section 14.02. Landlord shall not be required to repair any injury or
damage by fire, or other casualty, or to make any repairs or replacements, of
any Alterations installed in the Premises by Tenant; and Tenant shall, at
Tenants sole cost and expense, repair and restore its portion of such
Alterations.
Section 14.03. In the event the Premises or the Building is totally
destroyed or rendered wholly unusable for Tenant's Permitted Use, this Lease
shall terminate and Tenant shall be liable for Rent only up to the date of such
total destruction.
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Article 15 - Condemnation
If a substantial portion of the Building is taken or condemned under
the power of eminent domain, or by purchase in lieu of such taking or
condemnation, Landlord may elect to terminate the Lease effective as of the date
of such taking, condemnation or purchase by giving written notice to Tenant. If
the Premises or Tenant's right of access thereto are taken or condemned under
the power of eminent domain, or by purchase in lieu of such taking or
condemnation, and as a result thereof the use and enjoyment of the Premises by
Tenant are materially impaired, Tenant may, at its sole option, but without
prejudice to any rights and claims which it may otherwise have on account of
such taking, condemnation or sale, terminate this Lease effective as of the date
of such taking, condemnation or purchase by giving written notice to Landlord at
any time prior to the effective date of such taking, condemnation or purchase.
If either Landlord or Tenant do not elect to terminate this Lease, the Rent
reserved for the remainder of the Term shall be reduced in proportion to the
portion of the Premises taken, condemned or sold, having due regard to the
nature and extent of the injury caused thereby to the Premises and to Tenant's
Permitted Use thereof, and such reduction in Rent shall be without prejudice to
any rights and claims which Tenant may otherwise have on account of such taking
or condemnation or sale. Landlord reserves to itself, and Tenant assigns to
Landlord, all rights to damages accruing on account of any taking under the
power of eminent domain or by reason of any act of any public or quasi-public
authority for which damages are payable. Tenant agrees to execute such
instruments of assignment as may be reasonably required by Landlord in any
proceeding, except it is agreed and understood, however, that Landlord does not
reserve to itself, and Tenant does not assign to Landlord, any damages
specifically payable for Tenant's trade, fixtures, furniture, moving expenses,
and/or Tenant's leasehold improvements.
Article 16 - Environmental Provisions
Section 16.01. Tenant shall not cause or permit any Hazardous Substance
(as defined below) to be brought upon, kept, disposed of or used in, on or about
the Premises by Tenant, its agents, employees, contractors, or invitees.
Section 16.02. As used in this Article 16, the term "Hazardous
Substance" means any substance which is toxic, ignitable, reactive, or corrosive
and which is regulated by any local government, the State of New Jersey, or the
United States government.
Section 16.03. Tenant represents, warrants and covenants that is has
obtained, is in compliance with, and will continue to comply with all federal,
state and local environmental law permits, licenses and other authorizations
which are required under all environmental laws and regulations, including laws
relating to emission, discharges releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, air, surface water,
groundwater, or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
Section 16.04. Tenant shall immediately notify the Landlord in the
event of any spill,
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pollution or contamination affecting the Premises from a Hazardous Substance,
and shall immediately forward to the Landlord any notices or correspondence
relating to such matters received or sent by Tenant.
Section 16.05. Tenant shall immediately contain and remove at its sole
cost and expense any Hazardous Substance found on the Premises if caused by
Tenant or anyone acting under Tenant; and such work must be done in compliance
with all applicable laws.
Section 16.06.Tenant will indemnify, defend, and hold Landlord harmless
from and against any claim, cost, damage (including without limitation
consequential damages), expense (including without limitation reasonable
attorneys' fees and expenses), loss, liability, or judgment now or hereafter
arising as a result of any claim for environmental cleanup costs, any resulting
damage to the environment and any other environmental claims against Tenant,
Landlord, the Premises, the Building or the Property relating to any act or
failure to act by Tenant or anyone claiming under Tenant. The provisions of this
Section 16.06 shall continue in effect and shall survive (among other events)
any termination or expiration of this Lease.
Section 16.07. Landlord will indemnify, defend and hold Tenant harmless
from and against any claim, cost, damage (including without limitation
consequential damages), expense (including without limitation reasonable
attorneys' fees and expenses), loss, liability, or judgment now or hereafter
arising as a result of any claim associated with any required clean-up or other
actions arising from the existence, release or threatened release of Hazardous
Material on, in or under the Premises unless such Hazardous Materials are
released by Tenant, its agents or contractors. Without limiting the foregoing,
in the event that any such Hazardous Materials are determined to be located on
the Property, Landlord shall, at Landlord's sole cost, promptly take all steps
necessary to comply with all applicable laws and regulations and the provisions
of this Lease. The provisions of this Section 15.03 shall survive any
termination or expiration of this Lease.
Article 17 - Signs and Advertising
Tenant shall not place any sign on or around the Premises without the
advance written consent of Landlord, which consent shall be in Landlord's sole
discretion. Notwithstanding the foregoing, and subject in each instance to the
advance written consent of Landlord, which shall not be unreasonably delayed,
conditioned or withhold, Tenant at its sole expense may (a) place its name on
its entry door, and (b) install a freestanding directional sign. Tenant's name
shall be placed in the building directory in the west lobby.
Article 18 - Entry by Landlord
Landlord and its agents shall have the right to enter into and upon the
Premises at all reasonable times for the purpose of examining and exhibiting the
same, for making any necessary repairs or alterations thereto, for the purpose
of supplying any service, or building maintenance to be provided by Landlord
hereunder, provided, however, that Landlord shall advise Tenant a reasonable
time in advance thereof, and, provided further, that the operations of Tenant
shall not be interfered with unreasonably thereby. Notwithstanding the
foregoing, in the
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event of an emergency and if despite its reasonable efforts the Landlord is
unable to give advance notice to Tenant, Landlord shall have the right to enter
into the Premises to make emergency repairs and shall thereafter notify Tenant
of such entry as soon as reasonably practicable thereafter.
Article 19 - Assignment and Subletting
Section 19.01. Tenant will not assign, sublet, permit another to
occupy, pledge, mortgage, or otherwise transfer this Lease or the whole or any
part of the Premises without in each instance having first received the express
written consent of Landlord which will not be unreasonably withheld or delayed
provided that the person(s) or entity to whom the Premises are assigned or
sublet is not a Financial Services Institution, otherwise, consent shall be in
Landlord's sole discretion. For purposes of this provision any entity engaged in
any of the following activities shall be deemed to be a Financial Services
Institution: (a) operation of a commercial bank, savings bank, savings and loan
association, credit union, a mutual or thrift association or any other
institution that accepts deposits of money, (b) operation of any sort of
automated teller machine or cash dispensing machine, (c) operation of a stock
brokerage firm, (d) operation of a mortgage broker, (e) operation of a finance
company, mortgage company or any other institution that lends money, (f)
investment banking, and (g) insurance brokerage. In any case where Landlord
shall consent to an assignment or subletting, Tenant shall remain primarily
liable for Tenant's obligations hereunder. In the event that the Premises are
sublet or this Lease is assigned or another is permitted to occupy the Premises,
Tenant shall pay to Landlord fifty percent (50%) of all net payments (gross rent
exclusive of brokerage commissions) in excess of the rental rates and other
amounts required to be paid by Tenant pursuant to this Lease. It shall be a
condition to the validity of any assignment or subletting that the terms of any
sublease or assignment shall not be more favorable than the terms of this Lease
and shall not be more favorable than the terms which Landlord is then offering
for new rental space in the Building or for existing rental space in the
Building which will be coming available. The transfer of a majority interest in
the capital stock of any corporate Tenant or a majority of the interest in any
partnership Tenant, however accomplished, and whether in a single transaction or
in a series of related or unrelated transactions, shall be deemed an assignment
of this Lease. Notwithstanding the foregoing, Tenant shall have the right to
sublease all or a portion of the Premises, to permit occupancy of all or a
portion of the Premises, and to assign its interest in this Lease to any
Affiliated Entity, as hereinafter defined, which is not a Financial Services
Institution, without obtaining prior Landlord's consent, and any such transfer
shall not be subject to the provisions of Section 19.02. "Affiliated Entity" for
purposes of this provision is defined as (a) any entity which controls, is
controlled by, or is under common control with, Tenant, or (b) any entity that
succeeds to Tenant's business by merger, consolidation, reorganization or other
form of corporate reorganization. Landlord acknowledges that the Premises will
be occupied by DLB Systems and that DLB Systems is an Affiliated Entity of
Tenant.
Section 19.02. Landlord, shall at its option have the right to
recapture the portion of the space made available by Tenant for sublease or
assignment. Tenant shall give notice to Landlord of each instance where it
intends to so transfer its interest and of the terms of the proposed
transaction, and Landlord shall have thirty (30) days to respond. In the event
Landlord elects to
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recapture such space, such recapture shall be effective as of the date upon
which the proposed sublease or assignment would have been effective and Tenant's
rent shall be proportionately abated as of that date without the execution of
any further instrument or document by Landlord and Tenant. In the event Landlord
elects against recapture, Tenant may proceed with the intended transfer subject
to Section 19.01 hereinabove. If such transfer fails to occur, Tenant shall
remain obligated to notify Landlord of any future proposed transfer.
Section 19.03. Tenant shall reimburse Landlord for Landlord's
reasonable costs for reviewing and approving or disapproving of any assignment,
sublet, occupancy, pledge, mortgage, or other transfer proposed by Tenant,
including but not limited to, reasonable fees for accountants and/or attorneys
retained by Landlord for these purposes. Such reimbursement shall be made by
Tenant to Landlord within thirty (30) days of Landlord's invoicing of Tenant.
Section 19.04. If Tenant (which term for the purposes of this Section
19.02 shall include the authorized representative of Tenant's estate in
Bankruptcy) assumes this Lease and proposes to assign the same pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C. ss. 101 et seq., or any future
statute in amendment or in substitution thereof (the "Bankruptcy Code") to any
person or entity who shall have made a bona fide offer to accept an assignment
of this Lease on terms acceptable to the Tenant, then notice of such proposed
assignment, setting forth (i) the name and address of such person or entity,
(ii) all of the terms and conditions of such offer, and (iii) adequate assurance
to be provided Landlord to assure such person's or entity's future. performance
under the Lease, including, without limitation, the assurance referred to in
Section 365 (b) (3) of the Bankruptcy Code, shall be given to Landlord by Tenant
no later than twenty (20) days after receipt by the Tenant, but in any event no
later than ten (10) days prior to the date that Tenant shall make application to
a court of competent jurisdiction for authority and approval to enter into such
assignment and assumption. Landlord shall thereupon have the prior right and
option, to be exercised by notice to Tenant at any. time prior to the effective
date of such proposed assignment, to accept an assignment of this Lease upon the
same terms and conditions and for the same consideration, if any, as the bona
fide offer made by such person or entity, less any brokerage commissions which
may be payable out of the consideration to be paid by such persons or entity for
the assignment of this lease.
In the event this Lease is assigned to any person or entity pursuant to
the provisions of the Bankruptcy Code, then any and all monies or other
consideration paid, payable or otherwise to be delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord and shall not constitute property of Tenant or of
the estate of Tenant within the meaning of the Bankruptcy Code. Any and all
monies or other considerations constituting Landlord's property under the
preceding sentence not paid or delivered to Landlord shall be held in trust for
the benefit of Landlord and shall be promptly paid to or turned over to
Landlord.
Any person or entity to which this Lease is assigned, pursuant to the
provisions of the Bankruptcy Code, shall be deemed, without further act or deed,
to have assumed all of the obligations arising under this Lease on and after the
date of such assignment. Any such assignee shall, upon demand, execute and
deliver to Landlord an instrument confirming such assumption.
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Article 20 - Subordination, Estoppel
Section 20.01. This Lease will be subject and subordinate to any
mortgage of the Property now existing or hereafter executed by Landlord or its
successors and assigns. Such subordination is automatic and is effective without
any further act of Tenant, but Tenant hereby agrees from time to time on request
from Landlord to execute and deliver any instruments that may be required by any
lender to confirm the subordination provided for herein. It is a condition of
the effectiveness of any subordination agreement as to all mortgages which now
or hereafter affect the Property, that the mortgagee of any such mortgage shall
execute a commercially reasonable non-disturbance agreement which provides that
in the event of foreclosure such mortgagee, its successors and assigns, will
recognize Tenant's rights under this Lease and shall not disturb Tenant's
possession hereunder. Any mortgagee may elect that this Lease shall have
priority over its mortgage, and upon notification of such election by such
mortgagee to Tenant, this Lease shall be deemed to have priority over such
mortgage whether this Lease is dated prior to or subsequent to the date of such
mortgage. Tenant hereby appoints Landlord, with full power of substitution, as
Tenant's attorney-in-fact (which appointment shall be irrevocable and shall be
deemed to be coupled with an interest) to execute and deliver any such
instrument for and in the name of Tenant.
Section 20.02. Tenant, within twenty (20) days after written request
from Landlord shall deliver to Landlord and any proposed purchaser or lender a
written certificate stating whether this Lease is in full force and effect, if
any amendments have been executed, if any defaults exist by Landlord or by
Tenant hereunder and the nature of any alleged default, if Tenant is then
claiming any offsets, counterclaims or defenses to this Lease, and any other
matter which may be reasonably requested.
Article 21 - Default
Section 21.01. If any of the following shall occur, Tenant shall be
deemed in default of this Lease: (a) Tenant shall fail to pay any Rent or other
sum when and as the same becomes due and payable and such failure shall continue
for more than ten (10) days following receipt of written notice that the same is
due; (b) if within the twelve month period immediately preceding, Tenant shall
have failed on two (2) occasions to pay any Rent or other sum when and as the
same became due and payable, and Tenant shall again fail to pay any Rent or
other sum when and as the same becomes due and payable; (c) Tenant shall fail to
perform any of the other duties required to be performed by Tenant under this
Lease or otherwise breaches this Lease and such failure or breach shall continue
for more than thirty (30) days after receipt of written notice thereof from
Landlord; provided, however, that if such cannot reasonably be cured within such
thirty (30) day period, Tenant shall have such additional time, but not more
than sixty (60) days, as is reasonably necessary to cure such breach; (d) Tenant
shall make a general assignment for the benefit of creditors, admit in writing
its inability to pay its debts as they become due, file a petition in
bankruptcy, have an order of relief entered against it, or file or have filed
against Tenant a petition seeking any reorganization, receivership, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation.
Section 21.02. In the event of default, to the extent not prohibited by
applicable law Landlord, upon written notice of termination to Tenant, and with
or without process of law (with
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force if necessary, provided Tenant has vacated the Premises) may enter into and
upon the Premises or any part thereof or mail a notice of termination addressed
to Tenant at the Premises, and repossess the same as of Landlord's former estate
and expel Tenant and those claiming through or under Tenant and remove its and
their effects (forcibly, if necessary) without being deemed guilty of any manner
of trespass and without prejudice to any remedies which might otherwise be used
for arrears of rent or prior breach of covenant, and upon such entry or mailing
as aforesaid this Lease shall terminate; Tenant hereby waiving all statutory
rights (including without limitation rights of redemption, if any, to the extent
such rights may be lawfully waived) and Landlord, without notice to Tenant, may
store Tenant's effects, and those of any person claiming through or under Tenant
at the expense and risk of Tenant, and, if Landlord so elects, may sell such
effects at public auction or private sale and apply the net proceeds to the
payment of all sums due to Landlord from Tenant if any, and pay over the
balance, if any, to Tenant.
Section 21.03. Upon the termination of this Lease, Tenant shall
nevertheless remain liable for all Rent then due and payable hereunder as of the
date of the termination of this Lease, together with all damages due or
sustained by Landlord prior to such termination or arising as a result of events
or conditions occurring or in existence during the Term hereof and prior to or
after such termination, and all reasonable costs, fees and expenses incurred by
Landlord in pursuit of, or in the collection of its remedies hereunder or under
any law, or in leasing or attempting to lease all or any portion of the Premises
to others from time to time (including, without limitation, all repossession
costs, brokerage commissions, reasonable attorney's fees in connection with the
foregoing matters, and all costs of such alterations, repairs, and decorations
as Landlord, in its reasonable judgment, considers necessary or advisable in
connection with such reletting) (all such rent, damages, costs, fees and
expenses being referred to herein as the "Termination Damages") and, in addition
thereto, additional damages (the "Liquidated Damages"), which, at the election
of Landlord, shall be either of the following:
(a) an amount or amounts equal to all Rent which, but for
termination, would have been payable to Landlord over the remainder of
the Term, reduced by the amount of Rent, if any, which the Landlord
shall actually receive from time to time during such period from others
to whom the Premises may be rented from time to time. The Landlord
shall not be obligated to attempt to collect any rental or other
payment obligation from any other person renting all or any portion of
the Premises by litigation or otherwise. Such Liquidated Damages shall
be computed and payable in monthly installments, with interest on any
amount in arrears at the rate of two percent (2%) per annum in excess
of the Fleet Prime Rate, in arrears, on the first day of each calendar
month following termination of the Lease and shall continue to become
due and payable in monthly installments until the date on which the
Term would have expired but for such termination; and any and all
amounts due and payable hereunder, including any amount in arrears,
shall be a continuing liability of Tenant thereafter, and interest
thereon shall accrue at the rate of two percent (2%) per annum in
excess of the Fleet Prime Rate, until Tenant shall discharge same by
payment to Landlord of the amount due, and any suit or action brought
from time to time to collect any such Liquidated Damages for any month
or months shall not in any manner prejudice the right of Landlord to
collect any Liquidated Damages for any subsequent month or months by a
similar proceeding; or
(b) an amount equal to the present value (as of the date of
such termination) of all Rent which, but for termination of this Lease,
would have become due during the
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remainder of the Term, reduced by an amount equal to the fair rental
value of the Premises over the remainder of the Term, as determined by
an independent real estate appraiser named by Landlord, in which case
such Liquidated Damages shall be payable to Landlord in one lump sum on
demand made by Landlord at any time and shall bear interest at the rate
of two percent (2%) per annum in excess of the Fleet Prime Rate from
the date of termination until paid. For purposes of this clause (ii),
present value shall be computed by the application of a discount rate
equal to the discount rate in effect at the Federal Reserve Bank
nearest to the location of the Premises as of the date of
determination.
Section 21.04. In addition, if this Lease is terminated, Landlord may,
but shall have no obligation to, relet the Premises or any part thereof, alone
or together with other premises, for such term or terms (which may be greater or
less than the period which otherwise would have constituted the balance of the
Term) and on such terms and conditions (which may include concessions or free
rent and alterations of the Premises) as Landlord, in its uncontrolled
discretion, may determine, but Landlord shall not be liable for, nor shall
Tenants obligations hereunder be diminished by reason of, failure by Landlord to
relet the Premises or any failure by Landlord to collect any rent due upon such
reletting, and Tenant, to the extent Tenant may lawfully do so, hereby waives
all right to require Landlord to relet the Premises.
Section 21.05. Nothing contained in this Lease shall however, limit or
prejudice the right of Landlord to prove for and obtain in proceedings under any
federal or state laws, including but not limited to laws relating to bankruptcy,
insolvency or reorganization by reason of the termination of this Lease, an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which the damages are to be
proved, whether or not the amount be greater than the amount of the loss or
damages referred to above.
Section 21.06. Any and all rights and remedies which Landlord may have
under this Lease, and at law and equity, shall be cumulative and shall not be
deemed inconsistent with each other, and any two or more of all such rights and
remedies may be exercised at the same time insofar as permitted by law.
Section 21.07. The waiver by either party of any default shall not be
deemed to be a waiver of any subsequent default under the same, or under any
other term, covenant or condition of this Lease. The subsequent acceptance of
any Rent by Landlord shall not be deemed to be a waiver of any preceding default
by Tenant under any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular Rent so accepted, regardless of
Landlord's knowledge of such preceding default at the time of acceptance of such
Rent. The acceptance of a partial payment of any Rent installment by Landlord
shall not be deemed to be a waiver of the default occasioned by the Tenant's
failure to pay such installment in its entirety.
Article 22 - Return of Premises: Holdover
Section 22.01. At the expiration or other termination of the Term,
Tenant will remove from the Premises its property and that of all claiming under
it, will repair any damage caused by such removal, and will peaceably yield up
to Landlord the Premises in as good condition in all
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respects as the same were at the commencement of this Lease, except for ordinary
wear and tear, damage by the elements, by any exercise of the right of eminent
domain or by any public or other authority, or damage not caused by Tenant and
with respect to which Tenant is not required to maintain insurance hereunder.
Section 22.02. If Tenant remains in possession of the Premises after
the expiration of the Term and continues to pay Rent without any express
agreement as to holding over, Landlord's acceptance of Rent will be deemed an
acknowledgment of Tenant's holding over upon a month- to-month tenancy, subject,
however, to all of the terms and conditions of this Lease except as to the Term
and any option to renew or extend the Lease and except that the monthly Rent
shall be 150% of the Rent paid for the last month of the Term.
Section 22.03. If Tenant remains in possession of the Premises after
the expiration of he Term, as such may be extended hereunder, whether as a
month-to-month tenant pursuant to Section 22.02 or otherwise, and Landlord at
any time declines to accept the Rent at the rate specified herein, Tenant's
holding over thereafter will be deemed to be as a tenant-at-sufferance. Tenant
will nevertheless be subject to all of the terms and conditions of this Lease
except as to the Term hereof and any option to renew and except that during the
first two months of so remaining in possession Tenant will pay a monthly fee in
an amount equal to 150% of the Rent paid for the last month of the Term and
thereafter an amount equal to 200% of the Rent paid for the last month of the
Term for Tenant's use and occupancy of the Premises and will pay all loss, cost
or damage (including attorneys' fees) sustained by Landlord on account of such
holding over. Landlord's acceptance of any payments pursuant to this Section
22.03 shall not be deemed to create a landlord-tenant relationship between the
parties.
Article 23 - Notices
All notices required to be given herein shall be given by (a) certified
mail, postage prepaid, return receipt requested, (b) by service in hand with
receipt, (c) by facsimile with an original copy to follow by recognized
overnight delivery service for which proof of delivery is available, or (d) by
recognized overnight delivery service for which proof of delivery is available,
to the following addresses:
Landlord: LEGAL Fleet Bank, N.A.
NOTICE: Corporate Properties
Transactions Group
MA OF 0803
Attn: Director of Real Estate
Transactions
if by U.S. Mail: P.O. Box 2197
Boston, MA 02106-2197
if by Fedex or other private courier: One Federal Street
Boston, MA 02110-2010
with a copy, which shall
not be deemed notice,
to Legal Counsel: Fleet Financial Group
Legal Department MA BO F10C
Attn: Real Estate Legal Counsel
if by U.S. Mail: P. O. Box 2197
Boston, MA 02106-2197
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if by Fedex or other private courier: 75 State Street
Boston, MA 02109
Tenant: Premier Research Worldwide Ltd.
with copy to: James H. Carll, Esquire
Archer & Greiner
One Centennial Square
Haddonfield, NJ 08033-0968
or to such other addresses and to such other persons as the parties may from
time to time designate in writing. The time of giving of any such notice shall
be deemed to be three (3) days after such notice is mailed.
Article 24 - Broker's Commissions
Pursuant to a separate agreement between Landlord and Insignia/ESG
("Broker"), Landlord shall pay a commission to Broker in connection with the
execution of this Lease. Each party hereto represents that it has not dealt with
any other real estate broker or agent in connection with the negotiation of this
Lease or the leasing of the Premises. Each party shall hold the other harmless
from all damages resulting from any claims that may be asserted against the
other party by any broker, finder, or other person or entity with whom the other
party has dealt.
Article 25 - Limitation of Landlord's Liability
Tenant shall neither assert nor seek to enforce any claim for breach of
this Lease against any of Landlord's assets other than Landlord's interest in
the Property and in the rents, issues and profits thereof. No partner, trustee,
stockholder, officer, director, employee or beneficiary of Landlord shall be
personally liable under the Lease, and Tenant shall look solely to Landlord's
interest as the landlord in the Property in pursuit of its remedies upon an
event of default hereunder so that the general assets of Landlord and of the
individual partners, trustees, stockholders, officers, employees or
beneficiaries of the Landlord shall not be subject to levy, execution or other
enforcement procedure for the satisfaction of the remedies of Tenant. In the
event Landlord sells or otherwise transfers its interest in the Property (or a
part thereof which includes the Premises), then from and after such sale or
other transfer Landlord shall be released from liability hereunder and Tenant
shall look solely to the interests in the Property of Landlord's transferee for
the performance of all of the obligations of Landlord hereunder.
Article 26 - Rules and Regulations
Tenant shall abide by the rules and regulations which may be
established from time to time by Landlord with respect to the Building and the
Property. In the event that there shall be conflict between such rules and
regulations and the provisions of this Lease, the provisions of
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this Lease shall control.
Article 27 - Recording of Lease
The parties hereto agree that this Lease shall not be recorded, but the
Landlord and Tenant hereby agree upon request of either party to enter into a
notice of lease in recordable form, setting forth the names of the parties,
describing the Premises, specifying the Term, and such other provisions, except
rental provisions, with respect to the Lease as will put on notice any third
party of the existence of this Lease. In such event, Tenant shall provide
Landlord with a release of notice of lease to be held by Landlord in escrow for
recording by Landlord in the event this Lease is terminated or expires.
Article 28 - Miscellaneous
Section 28.01. The words "Landlord" and "Tenant", as used herein shall
include the plural as well as the singular. Words used in the masculine gender
herein shall include feminine and neuter forms thereof.
Section 28.02. The covenants and conditions contained herein shall be
binding upon and inure to the benefit of the heirs, executors, administrators,
successors and assigns of the parties hereto.
Section 28.03. The article headings in this Lease are for convenience
only, and shall not limit or otherwise affect the meaning of any provisions
hereof.
Section 28.04. Time is of the essence in each and every provision of
this Lease.
Section 28.05. The invalidity or unenforceability of any provision of
this Lease shall not affect any other provision hereof.
Section 28.06. This Lease shall be construed and enforced in accordance
with the laws of the state in which the Premises are located.
Section 28.07. This Lease constitutes the entire agreement between the
parties hereto and may not be modified in any manner other than by written
agreement, executed by all of the parties hereto or their successors in
interest. No prior understanding or representation of any kind made before the
execution of this Lease shall be binding upon either party unless incorporated
herein.
Section 28.08. Submittal of a draft of this Lease does not constitute
an offer to lease the Premises upon the terms set forth herein. Neither party
shall be bound unless and until all necessary approvals are obtained and a
mutually satisfactory lease agreement has been executed and delivered by both
parties. Unless and until such agreement is fully executed and delivered by all
of the parties, any of the parties shall have the absolute right to enter into
discussions with other parties and, at any time and without notice, to terminate
negotiations regarding the proposed transaction without obligation.
26
<PAGE>
Section 28.09. Whenever Tenant shall claim under any provision of this
Lease that Landlord has unreasonably withheld or delayed its consent or approval
to some request of Tenant which consent Landlord has specifically agreed herein
not to unreasonably withhold or delay, Tenant shall have no claim for damages by
reason of such alleged withholding or delay, and Tenant's sole remedy therefore
shall be declaratory or injunctive relief, but in any event without the recovery
of damages. Unless Landlord has specifically agreed herein not to unreasonably
withhold or delay its consent in a given instance, all consents or approvals of
Landlord required herein may be granted or refused in Landlord's discretion.
Whenever Landlord agrees in this Lease that a required consent shall not be
unreasonably withheld or delayed, it is agreed that Landlord may withhold or
delay its consent if any master lessor or mortgagee shall have withheld or
delayed any consent which may be required of it.
Section 28.10. EXCEPT IN THE CASE OF GROSS NEGLIGENCE, WILLFUL
MALFEASANCE OR WILLFUL MISFEASANCE, LANDLORD SHALL NOT BE LIABLE TO TENANT FOR
ANY CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES, INCLUDING, BUT NOT LIMITED TO,
LOSS OF ANTICIPATED PROFITS, LOSS OF USE OR UTILIZATION OF FACILITIES, RESULTING
FROM ITS PERFORMANCE OR NONPERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT,
EVEN IF LANDLORD HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date
first set forth above:
LANDLORD: Fleet Bank, N.A.
By: /s/ Terence J. Farrell
------------------------------
Name: Terence J. Farrell
Title: Vice President
TENANT: Premier Research Worldwide Ltd.
By: /s/ Fred M. Powell
------------------------------
Name: Fred M. Powell
Title: Chief Financial Officer
In Boston, Massachusetts on the 14th day of May 1999, before me personally
appeared Terence J. Farrell, the Vice President of Fleet Bank, N.A., to me known
and known by me to be the person executing the foregoing instrument, and he
acknowledged said instrument by him executed to be his free act and deed in said
capacity and the free act and deed of Fleet Bank, N.A.
/s/ Mary C. Mann
------------------------------
Notary Public
My commission expires: 5/1/03
------
In _____________________________ on the ____________ day of __________________
1999, before me personally appeared the ___________________________, the
______________________________ of Premier Research Worldwide Ltd., to me known
and known by me to be the person executing the foregoing instrument, and he
acknowledged said instrument by him executed to be his free act and deed in said
capacity and the free act and deed of Premier Research Worldwide Ltd..
___________________________________
Notary Public
My commission expires:
28
<PAGE>
EXHIBIT A - Premises
i
<PAGE>
DATED 10th December 1999
--------------------------------------
CAEC HOWARD (ARKWRIGHT) LIMITED
and
PREMIER RESEARCH WORLDWIDE LIMITED
--------------------------------------
LEASE
relating to Suites 1-10 Olympus House
Werringon Centre Peterborough
in the County of Cambridgeshire
--------------------------------------
BIRCHAM & CO.
SOLICITORS
<PAGE>
LEASE dated 10th December 1999
1. PARTICULARS
1.1 The Landlord
CAEC HOWARD (ARKWRIGHT) LIMITED
1.2 The Tenant
RESEARCH DATA WORLDWIDE LIMITED whose registered office is at 400
Carability Green Luton Bedfordshire
1.3 The Property
Ground floor office accommodation together with ancillary toilet
accommodation shown for the purposes of identification only edged green
on the attached plan and known as Suites 1-10 forming part of the
Building
1.4 The Building
The building shown for the purposes of identification only edged red
on the attached plan and known as Olympus House Werrington Peterborough
1.5 The Term
A term of ten years commencing on 1st October 1999 and any statutory
continuation of the term of years
1.6 The Rent
From 1st October 1999 until 30th September 2004 the yearly rent of
(pound)70,720 exclusive and thereafter such rent as may from time to
time be agreed or determined in accordance with clause 6.7 by equal
monthly instalments in advance on the first day of each month the first
payment for the period from 1st October 1999 to 30th November 1999 to
be made on the completion of this lease
1.7 The Basic Service Charge
(pound)22,115.50 per annum exclusive payable by equal monthly
installments on the rent days (such charge being subject to adjustment
and review in accordance with the provisions of the schedule hereto)
the first payment for the period from 1st October 1999 to 30th November
1999 to be made on the signing of this lease
1.8 The Permitted Use
Office accommodation and ancillary medical testing laboratory
1.9 The Car Park
The car park forming part of the Building
-1-
<PAGE>
2. LEASE
2.1 Demise
The Landlord lets the Property to the Tenant together with the
rights specified in sub-clause 2.3 but excepting and reserving
the rights specified in sub-clause 2.3 for the term specified
in item 1.5 of the Particulars the tenant paying yearly and
proportionately for any fraction of a year the Rent and the
Basic Service Charge at the times and in the manner specified
in items 1.6 and 1.7 of the Particulars respectively
2.2 Rights for the Tenant
The following rights (which are common to the Landlord and occupiers of
other properties adjoining or neighbouring the Property) are included
in the letting:
2.2.1 the right (with or without vehicles on carriageways)
to go pass and re-pass to and from the Property over
and along any private highways and service yards
belonging to the Landlord giving access to the
Property until in respect of the said private
highways such time as the same shall become
maintainable at the public expense
2.2.2 the right to use the toilet accommodation within the
Building and which forms part of the Common Parts
2.2.3 the right of way on foot over the passageways within
the Building and which form part of the Common Parts
thereof to gain access to the Property
2.2.4 the right to free and uninterrupted use (subject to
minimum temporary interruption for repair alteration
or replacement) for the purpose of necessary supplies
to the Property of all Service Installations which
are not part of the Property
2.2.5 the right for the Property to be supported and
protected by the remainder of the Building
2.2.6 The right to park cars within the Car Park subject at
all times to the directions given from time to time
by the Landlord's Surveyor concerning the use of the
Car Park and the allocation of parking spaces therein
by means of regulations given under the provisions
-2-
<PAGE>
of clause 4.32(a) and (b) hereof or otherwise BUT at
no time shall the Tenant be allocated less than ten
car parking spaces in the Car Park except when works
of repair or maintenance to the Building make this
impossible
2.3 Exceptions
There is excepted and reserved to the Landlord the free and
uninterrupted use of all Service Installations which are in the
Property and serve other properties or which shall come into existence
within 80 years of the date of this lease
3. INTERPRETATION
In this Lease (including any schedule) where the context admits:
3.1 the Particulars means the Particulars set out in clause 1 of
this lease and references to numbered items of the Particulars
are references to the numbered sub-clauses of that clause
3.2 the Landlord means the person named as Landlord in item 1.1 of
the Particulars and includes any other person for the time
being entitled to the immediate reversion on this lease
3.3 the Tenant means the person named as the Tenant in item 1.2 of
the Particulars and includes the successor in Title of the
Tenant to the term created by this Lease
3.4 the Guarantor means the person (if any) named as the Guarantor
in item 1.3 of the Particulars
3.5 the Property means the property described in item 1.4 of the
Particulars and includes:
3.5.1 any service installations exclusively serving the
Property notwithstanding they might extend beyond the
boundaries of the Property
3.5.2 all fixtures and fittings (except tenant's trade
fixtures and fittings) in or forming part of the
Property
3.5.3 And it is agreed and declared that:
3.5.3.1 the walls where these are common to other
parts of the building of which the Property
is part shall be treated as party walls and
maintained as such
-3-
<PAGE>
3.5.3.2 the structural part of any ceiling is not
part of the Property but any decorative
finish or false ceiling applied or fixed
thereto is part of the Property
3.5.3.3 the decorative finishes (including plaster)
within the Property applied to the
structural parts of the Building form part
of the Property
3.5.3.4 The structural part of any floor is not part
of the Property but any finish applied or
fixed thereto is part of the Property
3.6 the Building means the building known as Olympus House and
external areas shown for the purposes of identification only
edged red on the attached plan of which the Property forms
part
3.7 the Centre includes the Building and means the land and
buildings known as the Werrington Centre Staniland Way
Peterborough the approximate boundaries of which are shown by
the thick broken black line on the plan attached hereto and
where the context admits any additional buildings in which
after (but not more than 80 years after) the date of this
lease Landlord shall have acquired a freehold or leasehold
interest and which shall have been so constructed as to form
an integral part of the Centre
3.8 the Common Parts mean any pedestrian ways concourses and
circulation areas toilet accommodation staircases escalators
and lifts service roads and servicing areas forecourts car
parks landscaped areas signs walls and any other structures
and any other ways or areas which areas are designated from
time to time by the Landlord for common use by or for the
benefit of those occupying the Centre and those visiting it
except the Building Common Parts
3.9 the Building Common Parts mean the items listed under this
definition of the Common Parts but in this case they are
limited to those within the Building for the common use of
those occupying the Building and not the Centre as a whole
3.10 the Retained Parts mean the Common Parts and any storage or
plant rooms used in connection with the provision of services
by the Landlord and all
-4-
<PAGE>
Service Installations which serve the Building except the
Building Retained Parts
3.11 the Building Retained Parts means the Building Common Parts
and any storage boiler and plant rooms used in connection with
the provision of the services by the Landlord to the occupiers
of the Building and not the Centre as a whole and all Service
Installations within the Building and those outside it which
exclusively serve it
3.12 the Service Installations means sewers pipes wires flues ducts
channels drains gutters gullies and similar conduits and
apparatus for the supply of water electricity gas telephone
television or radio signals or for the disposal of fumes or
foul or surface water
3.13 the Rent means the sum specified as Rent in item 1.6 of the
Particulars or such other sum as shall for the time being be
Rent under the provisions of clause 6.7
3.14 the Landlord's Surveyor means the Head of Property Service for
the time being of the Landlord or such other person appointed
by the Landlord to act as its Surveyor for the purpose of this
lease who may or may not be a person in the full-time
employment of the Landlord
3.15 Person includes a company corporation or other body legally
capable of holding land
3.16 Masculine includes the feminine and the singular the plural
and vice versa
3.17 Obligations undertaken by more than one person are joint and
several obligations
3.18 any covenant by the Tenant not to do any act or thing shall be
construed as if it were a covenant not to do or permit or
other such act or thing
3.19 rights excepted and reserved or granted to the Landlord shall
be construed as excepted and reserved or granted to the
Landlord and all persons authorised by the Landlord
4. TENANT'S COVENANTS
The Tenant covenants with the Landlord as follows:
4.1 To pay Rent
To pay the Rent and the Basic Service Charge at the times and in the
manner
-5-
<PAGE>
described in items 1.6 and 1.7 of the Particulars respectively
4.2 Outgoings
To pay all existing and future rates taxes assessments
impositions and outgoings assessed or imposed on or in respect of the
Property (whether assessed or imposed on the Landlord or the Tenant)
except:
4.2.1 any tax in respect of the rents under this Lease (other than any
amounts payable under clause 4.36)
4.2.2 any tax in respect of the Grant of this Lease
4.2.3 any tax in respect of any dealing by the Landlord with the
reversion immediately expectant on the determination of the term
4.3 Interest on arrears
If any rent or other sums payable by the Tenant to the Landlord under
this Lease shall be due but unpaid for 21 days to pay on demand to
the Landlord (if the Landlord shall so require) interest at 3% above
the current Barclays Bank plc base lending rate from time to time
(which interest rate shall still apply after and notwithstanding any
judgment of the Court) on such money from the due date until payment
provided that this sub-clause shall not prejudice any other right
remedy in respect of such money
4.4 Repair and Decoration
4.4.1 To repair maintain and renew the interior of the
Property and keep the Property (other than the
structure of the Building which may form part of it
but including in particular the carpets and other
decorative finishes applied thereto) clean and in
good repair
4.4.2 As often as shall in the reasonable opinion of the
Landlord's Surveyor be necessary in order to maintain
a high standard of decorative finish and
attractiveness as well as to preserve the Property
(and at least once in any period of five years of the
term and in the last six months of the Tenant's
occupation of the property) to clean prepare and
paint or polish or otherwise treat in the appropriate
manner approved by the Landlord's Surveyor all
internal materials surfaces and finishes of the
Property and to wash all surfaces requiring washing
-6-
<PAGE>
4.4.3 At the end of the tenancy created by this Lease to
give up the Property duly repaired and decorated in
accordance with the provisions of this sub-clause
PROVIDED THAT.
4.4.4.1 All work referred to in this clause
shall be done in a good and workmanlike
manner and to the reasonable
satisfaction of the Landlord's Surveyor
4.4.4.2 Papering and painting carried out in the
last six months of the Tenant's
occupation of the Property shall be
carried out in colours first approved in
writing by the Landlord's Surveyor
4.4.4.3 Damage by fire or any other peril
covered by the Landlord's insurance is
excepted from the Tenant's liability
under this sub-clause unless the whole
or part of the insurance money is
irrecoverable by reason of any act or
default of the Tenant
4.4.4.4 The Tenant shall pay the Landlord's
Surveyor's reasonable and proper fees
incurred as a result of any breach of
this sub-clause
4.4.4.5 The Tenant shall pay a sum equivalent to
the loss of rent incurred by the
Landlord during such period as is
reasonably required for the carrying out
of works after the end of the tenancy by
reason of any breach of this sub-clause
without prejudice to any other right of
the Landlord
4.5 Maintenance
4.5.1 To keep the service installations which solely serve
the Property clear unobstructed and in good and fair
condition and not to do anything which causes an
obstruction or damage to any service installation in
the Centre
4.5.2 To take all necessary precautions against frost
damage to any pipes or water apparatus in the
Property
-7-
<PAGE>
4.5.3 To take all necessary care and precautions to avoid
water damage to any other part of the Centre by
reason of bursting or overflowing of any pipe tank or
water apparatus in the Property and to indemnify the
Landlord against liability for any such damage
4.5.4 To clean the inner surface of the windows and other
lights and any glass in the doors and the skylights
of the Property as often as reasonably necessary
4.6 To repair on notice
4.6.1 To make good with all practicable speed (commencing
work within two months or sooner if necessary and
then proceeding diligently) any defect in repair or
decoration of the Property for which the Tenant is
liable in accordance with the Tenant's covenants and
of which the Landlord has given notice in writing
4.6.2 If the Tenant shall not comply with paragraph 4.6.1
to allow the Landlord to enter the Property and make
good such defects and to repay to the Landlord on
demand the expense of doing so (including surveyor's
fees)
4.7 Statutory requirements
4.7.1 To execute works and do all things on or in respect
of the Property which are required by the Offices
Shops and Railway Premises Act 1963 or any other
present or future Act of Parliament or by any order
byelaw or regulation
4.7.2 To comply with all requirements of any present or
future Act of Parliament order byelaw or regulation
as to the use of or otherwise concerning the Property
4.8 To permit entry
4.8.1 To permit the Landlord and the Landlord's agents and
workmen and all others authorized by it on reasonable
notice during normal working hours (except in
emergency) to enter the Premises for the purposes of:
4.8.1.1 viewing and recording the condition of the
Property
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<PAGE>
4.8.1.2 repairing maintaining altering or
cleaning any part of the Building (other
than the Property) or premises adjoining
the Building
4.8.1.3 repairing maintaining cleaning altering
replacing or adding to any of the
Service Installations which serve other
parts of the Centre or nearby premises
and for any other reasonable purpose
connected with the management of the
Landlord's adjoining or nearby property
PROVIDED that the Landlord shall make good all damage to the Property
caused by such entry
4.9 Letting Board
During the last six months of the tenancy created by this
Lease to allow a letting board or notice to be displayed on
the Property and during the whole of the term to allow a sale
board or notice to be displayed on the Property (but not so
that any board or notice unnecessarily obstructs the light of
the Property) and to allow prospective tenants or purchasers
to view the Property at all reasonable times on reasonable
notice
4.10 Alienation
4.10.1 Unless otherwise permitted under this Clause the
Tenant shall not:
4.10.1.1 hold the Property expressly or impliedly
on trust for another person
4.10.1.2 part with possession of the Property
4.10.1.3 share possession of the Property with
another person
4.10.1.4 allow anyone other than the Tenant or
its employees to occupy the Property
4.10.2 The Tenant shall not assign a part (as distinct from
the whole) of the Property
4.10.3 The Tenant shall not assign the whole of the Property
without:
4.10.3.1 procuring that any intended assignee
("the Assignee") of the Demised Premises
enters into direct covenants
-9-
<PAGE>
with the Landlord to pay the rents
reserved by this Lease and observe and
perform all the Tenant's covenants in
this Lease from the date of the
assignment or transfer of the Tenant's
interest hereunder to the Assignee for
the residue of the Term or until such
interest is further assigned (other than
by an excluded assignment within the
meaning of Section 11 of the Landlord
and Tenant (Covenants) Act 1995)
whichever is the shorter period
4.10.3.2 obtaining the consent of the Landlord
(such consent not to be unreasonably
withheld)
4.10.3.3 first entering into an Authorised
Guarantee Agreement within the meaning
of Section 16 of the Landlord and Tenant
(Covenants) Act 1995 in a form
reasonably required by the Landlord
4.10.4 The Landlord may refuse the consent referred to at
4.10.3 above where there is at the time of the
Tenant's request for such consent any subsisting
breach of the Tenant's covenants hereunder
4.10.5 The Landlord shall be entitled to require as a
condition precedent to the grant of the consent
referred to at 4.10.3.2 above
4.10.5.1 (where the proposed assignee is a
corporate body) the provision of a deed
of covenant duly executed by one or more
guarantors reasonably acceptable to the
Landlord by which he or they enter into
covenants with the Landlord in the form
of the covenants set out in the Clause 8
hereto, and/or
4.10.5.2 the deposit with the Landlord of a sum
equal to at least one half of the yearly
rent payable hereunder for the time
being in such form as the Landlord may
reasonably require
4.10.5.3 The power of the Landlord to decide upon
any of the matters requiring its
decision under sub-clause or
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<PAGE>
4.10.5.4 shall be exercised reasonably
4.10.6 The Tenant shall not charge a part (as distinct from
the whole) of the Property
4.10.7 The Tenant shall not charge the whole of the Property
except to a bank or similar financial institution for
the purpose only of borrowing money on the security
of this Lease
4.10.8 The Tenant shall not underlet the whole or any part
of the Property:
4.10.8.1 unless the proposed undertenant has
first covenanted by deed with the
Landlord in such form as the Landlord
may reasonably require that with effect
from the date of the underlease and
during the term thereof
the undertenant will observe and perform
all the provisions of the underlease to
be observed and performed by the
undertenant; nor
4.10.8.2 (where the proposed undertenant is a
corporate body and the Landlord
reasonably so requires) without first
procuring a covenant by deed with the
Landlord from two individuals who are or
a company which is acceptable to the
Landlord as surety for the undertenant;
nor
4.10.8.3 except by way of a "permitted
underlease"; nor
4.10.8.4 (in the case of an underletting of part)
in a unit or units first approved by the
Landlord (such consent not to be
unreasonably withheld or delayed); nor
4.10.8.5 without the prior written consent of the
Landlord (which will not be unreasonably
withheld or delayed)
4.10.9 A "permitted underlease" is an underlease which
4.10.9.1 is granted without any fine or premium
4.10.9.2 reserves a rent not less than the
greater of the best rent which the
Tenant ought reasonably to obtain in the
open market upon the grant of such
underlease and the
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<PAGE>
Rent then payable or that reasonably
attributable to the permitted part being
that part of the Property approved by
the Landlord in accordance with Clause
4.10.6.4
4.10.9.3 incorporates provisions for the review
of rent at the same times and on the
same basis as in this Lease; and
4.10.9.4 is (so far as is consistent with an
underlease) in a form substantially the
same as this Lease except that further
subletting shall be prohibited
4.10.9.5 is excluded from the operation of
sections 24-28 of the Landlord and
Tenant Act 1954; and
4.10.9.6 would not if granted produce more than
two exclusively occupied units of
accommodation in the Property
4.10.10 The Tenant shall enforce and shall not waive or vary
the provisions of an underlease and shall operate at
the relevant dates of review the rent review
provisions contained in an underlease but shall not
agree the rent upon such a review without the prior
approval of the Landlord
4.10.11 The Tenant may share occupation of the Property with
a company that is a member of the same group (as
defined by Section 42 of the Landlord and Tenant Act
1954):
4.10.11.1 for so long as both the Tenant and that
company remain members of the same
group; and
4.10.11.2 provided that no tenancy is created, and
4.10.11.3 provided that within 21 days of such
sharing the Landlord receives notice of
the company sharing occupation and the
address of its registered office
Notification
4.11.1 The Tenant shall upon request from time to time
provide within one month all information which the
Landlord may request under section 40(1)(a) and (b)
of the Landlord and Tenant Act 1954
4.11.2 The Tenant shall within 28 days of any assignment
charge or
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<PAGE>
underlease of or of any other devolution of this
Lease or of any interest deriving from this Lease
give notice thereof to the Landlord's solicitor
produce for registration the original or a certified
copy of the document effecting or evidencing such
devolution and pay such reasonable registration fee
as the Landlord's solicitor may require being not
less than (pound)20 (plus VAT)
4.12 Heating Equipment
4.12.1 Not to provide within the Property equipment for the
dissipation of heat unless it is of a quality
character and design previously approved of in
writing by the Landlord's Surveyor and to install
such equipment in accordance with the reasonable
requirements of the Landlord's Surveyor
Heating
4.12.2 Not at anytime during the Term to install or use
heating equipment in the Property for space heating
or heating the main water supply therein save with
the prior consent of the Landlord's Surveyor
equipment using for these purposes a supply of heat
from the Landlord's Heating Plant for the Building
Provided that the Tenant may use other forms of
heating at times when the supply of heat for the
said Heating Plant may fail or be reduced below that
sufficient to keep the Property and any hot water
supply at a reasonable temperature
4.13 Alterations
4.13.1 Not to make any alterations or additions affecting
the structure of the Property or its external
appearance
4.13.2 Not without the Landlord's written consent (which
shall not be unreasonably withheld) to make any
other alterations or additions to the Property
4.13.3 Not to install or erect any exterior lighting shade
or awning or place leave or install any merchandise
or other things or structure in front of or
elsewhere outside the Property
-13-
<PAGE>
4.13.4 At the end of the tenancy created by this Lease if
so required by the Landlord substantially to
reinstate the Property to the same condition as it
was in at the date of grant of this Lease such
reinstatement to be carried out under the
supervision and to the reasonable satisfaction of
the Landlord's Surveyor
4.13.5 To procure that any alterations or additions to the
Property which shall be permitted by the Landlord
under paragraph (b) shall be carried out only by
contractors first approved in writing by the
Landlord (which approval shall not be unreasonably
withheld)
4.14 Signs
4.14.1 Not to place on the exterior of the Property any
name writing notice sign placard sticker or
advertisement
4.14.2 To remove if so required by the Landlord's Surveyor
any signs placards stickers or advertisements on or
inside the windows of the Property which shall in
his reasonable opinion detract from the appearance
of the Property or the Centre as a whole
4.15 Deliveries etc
4.15.1 Not to load or unload vehicles except in the service
roads or servicing areas or yards and in the course
of such loading or unloading
4.15.1.1 to comply with all reasonable
requirements and regulations of the
Landlord and
4.15.1.2 not to cause any unnecessary obstruction
4.15.1.3 Not to permit any motor vehicle or
trailer to be parked in the service
roads or servicing areas or yards except
for such period of time as may be
reasonable for loading or unloading or
as may be otherwise permitted by the
Landlord
4.16 Noisy machinery
Not to install or use in or upon the Property any machinery or
apparatus which causes noise or vibration which can be heard or felt in
adjoining premises or which may cause structural damage
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<PAGE>
4.17 As to supply services
4.17.1 To comply with the requirements and regulations of
the statutory authorities or other supply companies
with regard to any Service Installation in the
Property
4.17.2 Not without the Landlord's written consent (which
shall not be unreasonably withheld) to carry out the
work to any service installation as is referred to
in paragraph (a) or make any alteration or extension
to it
4.18 Nuisance
Not to do anything upon the Property which is or may become a nuisance
damage or annoyance to the Landlord or to the tenant or occupier of
other parts of the Centre
4.19 Use
4.19.1 Not to use the whole or any part of the Property
4.19.1.1 for any illegal or immoral purpose
4.19.1.2 for any offensive noisy or dangerous
trade business or manufacture
4.19.1.3 otherwise than as an office
4.19.1.4 Not to use the whole or any part of the
Property for any business other than the
business specified in item 8 of the
Particulars or for any class of business
other than the class of business so
specified without the previous written
consent of the Landlord Provided that:
4.19.2 the Landlord shall be entitled to withhold its
consent referred to in the above clause at its
absolute discretion if it is of the opinion that the
proposed change would or might adversely affect the
tenant-mix of the Centre (that is to say the balance
between different businesses and classes of business
carried on) whether by causing excessive competition
or otherwise
4.19.3 subject to clause 4.19.2 the Landlord's consent shall
not be unreasonably withheld
4.19.3.1 Not to allow any person to reside or
sleep on the
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Property
4.19.3.2 Not to hold any sale by auction on the
Property
4.19.3.3 Not to install any automatic vending
machine on any part of the exterior of
the Property
4.20 Use of Common Parts
To comply with the Landlord's reasonable regulations as to hours and
times during which any part of the Common Parts and the Building Common
Parts shall be closed for servicing cleaning or redecorating or some
other reasonable purpose
4.21 Not to invalidate insurance
4.21.1 Not (by act or omission) to do anything which may
invalidate any insurance policy effected by the
Landlord in respect of the Centre including the
Property or increase the premium for it
4.21.2 To repay to the Landlord all sums paid by way of
increased premiums by reason of any breach by the
Tenant of paragraph (a)
4.21.3 To notify the Landlord in writing within 24 hours of
any outbreak of fire in the Property or other event
likely to lead to a claim on the Landlord's insurance
relating to the Property
4.22 Tenant's Insurances
4.22.1 To maintain in force throughout the term insurance in
respect of the Property against liability to third
parties for injury to or deaths of any person or
damage to any property and to maintain such insurance
for the benefit of the Landlord as well as the Tenant
and to produce to the Landlord on request the policy
relating to any insurance specified in paragraph (a)
and the last premium receipt
4.22.2 To indemnify the Landlord in respect of any loss or
damage which the Tenant is obliged to insure against
under this sub- clause
4.23 Obstruction to access
4.23.1 Not to place or leave anything in the Common Parts
and the Building Common Parts or otherwise obstruct
them
4.23.2 To indemnify the Landlord against any damage which
may arise by reason of the Landlord (in order to
clear fire escape routes or
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otherwise) removing goods placed or left in breach of
the covenant in paragraph (a)
4.23.3 To make good immediately any damage caused to the
Retained Parts and the Building Retained Parts by the
Tenant or any employee or licensee of the Tenant
4.24 Floor loadings
4.24.1 Not to overload floors or any other structure of the
Property
4.24.2 Forthwith to make good to the reasonable satisfaction
of the Landlord's Surveyor any damage caused to the
Property or the Building by any breach of paragraph
(a) hereof
4.25 Music etc
Not to play or use any musical instrument or apparatus which reproduces
sound in the Property so that it can be heard in adjoining premises or
in the Building if the Landlord shall in its absolute discretion
consider such sound is undesirable and give written notice to the
Tenant to that effect
4.26 Animals
Not to keep any animal fish reptile or bird in the Property
4.27 Pests
To take all practical steps to keep the Property clear of rats mice and
other pests
4.28 To pass on Notices
To supply The Landlord with a copy of any notice affecting the Property
served on the Tenant by any competent authority (or received by the
Tenant from any other person) immediately it is received by the Tenant
4.29 As to Planning Acts
4.29.1 To comply with all the requirements under the Acts
relating to Town and Country Planning which affect
the Property
4.29.2 Not without the Landlord's written consent to make
any application for planning permission affecting the
Property nor to implement any such permission
4.30 To preserve easements
4.30.1 To preserve so far as the Tenant is able all rights
of light and
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other easements enjoyed by the Property and at all
times to afford to the Landlord such facilities and
assistance as may enable the Landlord to prevent
anyone acquiring any right of light or other easement
over the Property
4.31 Expenses of the Landlord
To pay to the Landlord on an indemnity basis all costs fees
charges disbursements and expenses (including without
prejudice to the generality of the foregoing those payable to
counsel solicitors surveyors and bailiffs) incurred by the
Landlord in relation or incidental to:
4.31.1 every application made by the Tenant for a consent or
approval required or made necessary by the provisions
of this Lease whether or not such consent or approval
shall be granted or given
4.31.2 the preparation and service of a notice under Section
146 of the Law of Property Act 1925 or incurred by or
in contemplation of proceedings under Sections 146 or
147 of that Act notwithstanding that forfeiture is
avoided otherwise than by relief granted by the Court
4.31.3 the effecting of any forfeiture not requiring such
notice
4.31.4 the recovery or attempted recovery of arrears of rent
or other sums due from the Tenant
4.31.5 any steps taken in contemplation of or in connection
with the preparation and service of all notices and
schedules (whether statutory or otherwise) relating
to wants of repair to the Demised Premises or other
breaches of the Tenant's covenants in this Lease
whether served during or after the expiration of the
Term and the inspection and supervision of any works
required to be done
4.32 Regulations and Refuse
4.32.1 To comply with all such regulations (consistent with
the terms of this Lease) for the proper management of
the Centre or the comfort or convenience of its
occupiers or the control or security
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of the Common Parts and the Building Common Parts and
other Retained Parts as the Landlord shall make from
time to time and communicate in writing to the Tenant
4.32.2 In particular to comply with such regulations as are
referred to in clause 4.32.1 with regard to car
parking and the disposal of refuse and also to comply
with all requirements of any interested authority as
to refuse disposal
4.33 Discharge private sewers
4.33.1 Not to discharge any trade effluent as defined by the
Public Health (Drainage of Trade Premises) Act 1937
as amended (or any re-enactment of the same) from the
Property into any private sewers for the time being
serving the same without the consent of the Landlord
and any competent authority and then subject to such
conditions as may be imposed including the charges
for treatment
4.33.2 Not to allow anything but water to be discharged into
any surface water sewer serving the Property
4.34 Security and fire alarms
4.34.1 To permit the duly authorised employees and agents of
the Landlord and any security company which is
responsible for maintaining any fire alarm systems in
the Centre to enter the Property upon reasonable
notice during the usual business hours for the
purpose of servicing and maintaining such systems
Provided that the Landlord or security company
respectively shall make good any damage to the
Property
4.34.2 To maintain repair and when necessary renew any fire
alarms and ancillary equipment installed in the
Property by the Landlord
4.34.3 Not to make any connections to any alarm systems
provided by the Landlord without the prior written
consent of the Landlord's Surveyor and then not to
install in the Property any equipment or apparatus
which is intended to be an extension of any such fire
alarm system other than such apparatus or equipment
as is
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compatible with the Landlord's equipment comprising
that system
4.35 Keys and Signs
At the end of the tenancy created by this Lease to give up all keys of
the Property to the Landlord and remove all lettering and signs put up
by the Tenant in the Property and forthwith to make good an y damage
caused by such removal
4.36 VAT
In addition to the rents fees and other
sums payable by the Tenant under this Lease to pay any Value Added Tax
(or any substituted or similar tax) which is now or may become payable
in respect of any such rents fees and other sums
5. LANDLORD'S COVENANTS
The Landlord covenants with the Tenant as follows:
5.1 Quiet Enjoyment
That as long as the Tenant pays the rent and complies with the terms of
the Lease the Tenant may enjoy the Property peaceably during the term
without any interruption by the Landlord or any person lawfully
claiming under or in trust for the Landlord
5.2 To insure
5.2.1 To keep the Building (including the Building Retained
Parts) and a sum to cover two years' rents insured
against fire and such other perils as the Landlord
may from time to time reasonably insure against such
insurance to be effected with a substantial and
reputable insurance office for the full reinstatement
value (including the cost of demolition and all
necessary professional fees in connection with
reinstatement)
5.2.2 In case of damage to the Building or any part of it
to apply any insurance money received by the Landlord
under the insurance referred to in paragraph (a) in
reinstating such damage as quickly as reasonably
practicable
5.3 To provide services
Within the Centre
5.3.1 To keep the Common Parts and Service Installations
serving the
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Centre which are not the liability for repair of any
tenant or other occupier of Property therein
adequately repaired maintained cleaned and lighted
until these may be declared maintainable at the
public expense
Within the Building
5.3.2 To keep those parts of the Building including the
Building Common Parts which are not the liability for
repair of any tenant or other occupier thereof and in
particular the exterior and main structure and roof
of the Building and the Service Installation serving
it adequately repaired maintained decorated and
cleaned and to clean light and heat the Building
Common Parts and to provide heating to the areas of
the Building intended for letting to at least the
standard required under any statutory provisions for
office premises and to maintain an adequate supply of
hot water to the wash hand basins in the toilets of
the Building and other equipment and supplies in such
toilets as may be reasonable
6. PROVISOS
The Parties agree that the lease is subject to the following
provisions:
6.1 Landlord's right of re-entry
In any of the following events:
6.1.1 If any rent or other sum due under this Lease is
unpaid for 28 days after becoming due (whether
formally demanded or not)
6.1.2 If there is a breach of any of the Tenant's covenants
contained in this Lease
6.1.3 If the Tenant (being an individual) becomes bankrupt
or makes any composition with his creditors or (being
a company) enters into liquidation (except voluntary
liquidation for the purpose of reconstruction or
amalgamation) or has a receiver appointed
6.1.4 if execution is levied on goods in the Property Then
the Landlord may re-enter the Property and the tenancy
created by this Lease shall immediately come to an end
and the re-entry shall not prejudice any of the
Landlord's other rights and remedies
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6.2 Suspension of rent
6.2.1 If the whole or any part of the Property or its
essential accesses or services are destroyed or
damaged by fire or any other risk covered by the
Landlord's insurance so as to render the Property
unfit for use then (unless the insurance money or
any part thereof is irrecoverable by reason of any
act or default of the Tenant) the rent or a fair
proportion of it according to the nature and extent
of the damage shall be suspended until the date that
the Property with the essential accesses and
services is again fit for occupation
6.2.2 Any dispute concerning this sub-clause shall be
referred to arbitration in the manner specified in
clause 7
6.2.3 Clause 6.2.1 above shall not apply if the Property
with its essential accesses and services are repaired
or reinstated within two weeks after the occurrence
of the damage in question
6.3 Landlord's right to alter the premises
6.3.1 The Landlord shall be entitled to alter add to and
execute works on other parts of the Centre or
adjoining or nearby premises of the Landlord
(including if necessary work on the part of the
building above the Property and the erection of
scaffolding in front of the Property) notwithstanding
that the access of light and air to the Property may
be interfered with
6.3.2 The Landlord shall be entitled to alter the Common
Parts and the Building Common Parts but not so as to
render the access to or amenities of the Property
substantially less convenient for the Tenant
6.4 Accidents
6.4.1 The Landlord shall not be responsible to the Tenant
or the Tenant's licensees nor to any other person in
the Property:
6.4.1.1 for any accident happening or injury
suffered in the Property
6.4.1.2 for any damage or loss of any goods or
property sustained in the Property
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<PAGE>
6.4.2 The Landlord shall not be responsible to the Tenant
or the Tenant's licensees nor to any other person in
the Centre:
6.4.2.1 for any accident happening or injury
suffered in the Centre
6.4.2.2 for any damage or loss of any goods or
property sustained in the Centre
Except where due to the negligence of any employee of the Landlord
6.5 As to goods left on the Property
If at the end of the tenancy any furniture or effects belonging to the
Tenant are left in the Property for more than 14 days the Landlord
shall have the power to remove them and to sell the same as agent for
and on behalf of the Tenant and the Landlord shall pay or account to
the Tenant on demand for the proceeds of sale (but not any interest
thereon) less any costs of storage and sale reasonably incurred by the
Landlord
6.6 Without prejudice to the
generality of the covenants by the Tenant
hereinbefore contained it is agreed that (a) in the event of
the service of a notice under any statutory provision
requiring by reason of anything done or permitted on the
Property during the term the execution of works therein or (b)
in the event of the need for structural repairs to the
Property in common with other adjoining or neighboring
Property belonging to the Landlord the Landlord may if it
shall so desire elect to execute such works and the Tenant
will on demand refund to the Landlord the proper and
reasonable costs of such works as shall be certified by the
Landlord's Surveyor. If the Landlord shall elect to execute
the aforesaid works then the Tenant shall afford to the
Landlord all necessary access to the Property and other
facilities for the purpose of carrying out the said works
6.7.1 Where in this sub-clause the following emboldened words
commence with capital letters they have the following meanings
unless the context otherwise requires:
Review Dates
1st October 2004 and each subsequent fifth
anniversary of that date
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Review Date
Any One of the Review Dates
Relevant Review Date
The Review Date by reference to which Rent is being
reviewed
Restrictions
Restrictions imposed by an Authority which operate to
impose any limitation in relation to the review of
rent or the collection of any increase in rent
Open Market Rent
As defined in Clause 6.7.4.
6.7.2 Time is not of the essence except where specified
6.7.3 With effect from each Review Date the Rent shall be
the amount payable (but for any abatement of Rent)
immediately prior to that Review Date or (if greater)
the Open Market Rent as agreed or determined under
this clause 6.7
6.7.4 "Open Market Rent" means the best yearly rent at
which the Property might reasonably be expected to be
let at the Relevant Review Date by a willing landlord
assuming that:
6.7.4.1 the Property is available to let as a
whole to a willing tenant with vacant
possession on the open market without a
fine or premium under a lease for a term
of fifteen years but commencing on the
Relevant Review Date including
provisions for review of rent on the
Review Dates and otherwise on the same
terms as this Lease (except as to the
amount of the Rent)
6.7.4.2 the willing tenant has had the benefit
of a rent free period of occupation of
such length as would be granted in the
open market and that this period has
expired immediately before the Relevant
Review Date
6.7.4.3 the covenants and provisions of this
Lease on the part of the Landlord and
the Tenant have been fully performed
and observed
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6.7.4.4 the Property may be used for any purpose
(in addition to the Permitted Use) which
is at the Relevant Review Date permitted
under the Town and Country Planning Act
1990 or any Act in re-enactment thereof
or in substitution therefor
6.7.4.5 if the Property has been destroyed or
damaged it has been fully restored
6.7.4.6 the Property is fully fitted out and
equipped to the requirements of a
willing tenant and is available for
immediate beneficial occupation and use
6.7.4.7 no work has been carried out to the
Property (unless by the Landlord or a
superior landlord) which has diminished
its rental value
6.7.4.8 every prospective willing landlord and
willing tenant is able to recover VAT
in full
6.7.5 but disregarding:
6.7.5.1 any effect on rent of the fact that the
Tenant any undertenant or any of their
respective predecessors in title have
been in occupation of the Property
6.7.5.2 any goodwill attached to the Property by
reason of the carrying on of the
business of the Tenant any undertenant
or any of their predecessors in title
6.7.5.3 any effect on rent of the Restrictions
6.7.5.4 any adverse effect upon rent of any
temporary works operations or other
activities on any adjoining or
neighbouring property
6.7.5.5 any effect on rent attributable to any
improvement to the Property carried out
not more than ten years before the
Relevant Review Date with consent where
required and otherwise than in pursuance
of an obligation to the Landlord or its
predecessors in title to the extent only
that such improvement has been carried
out without
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cost to the Landlord or its predecessors
in title and that such improvement was
completed either during the Term or
during any period of occupation prior to
the commencement of the Term arising out
of an agreement to grant this Lease
6.7.6.1 The Landlord may serve upon the Tenant
notice during the period of nine months
before or at any time after a Review
Date requiring the Rent to be increased
with effect from that Review Date or
stating that the Rent is not to be
increased
6.7.6.2 If the Landlord serves notice requiring
the Rent to be increased ("Review
Notice") the Landlord and the Tenant
shall endeavour to agree the Open Market
Rent as at the Relevant Review Date
6.7.6.3 If the Landlord and the Tenant do not
agree the Open Market Rent within three
months after service of a Review Notice
or by the date three months before the
Relevant Review Date (whichever is the
later) either may by notice to the other
require the Open Market Rent as at the
Relevant Review Date to be determined
by a Chartered Surveyor having at least
ten years' experience in assessing the
rental value of premises similar to the
Property and acting as a single
arbitrator
6.7.6.4 If the Landlord and the Tenant do not
agree on the joint appointment of an
arbitrator the arbitrator shall be
nominated on the joint application of
the Landlord and the Tenant (or if
either of them neglects to concur in
such application then on the sole
application of the other) by the
President or other chief officer or
acting chief officer for the time being
of the Royal Institution of Chartered
Surveyors
6.7.6.5 The arbitrator shall act as an
arbitrator in accordance
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with the Arbitration Acts 1950-1979
6.7.6.6 The arbitrator shall within three months
of his appointment or within such
extended period as the Landlord may
agree give the Landlord and the Tenant
written notice of the amount of the
Open Market Rent as determined by him
but if he does not or if for any reason
it becomes apparent that he will not be
able to complete his duties in
accordance with his appointment the
Landlord and the Tenant may agree upon
or either of them may apply for the
appointment of another arbitrator (which
procedure may be repeated as often as
necessary) pursuant to the provisions of
this Clause 6.7
6.7.6.7 The costs of the arbitrator including
those incidental to his appointment
shall be borne by the Landlord and the
Tenant in such manner as the arbitrator
determines
6.7.7 Where the Rent payable with effect from a Review Date
is not ascertained prior to that Review Date the
Tenant shall:
6.7.7.1 with effect from the Relevant Review
Date pay an "Interim Rent" at the rate
at which Rent was payable (ignoring any
abatement) immediately prior to that
Review Date; and
6.7.7.2 if the Rent when ascertained exceeds the
Interim Rent then within seven days of
the Rent being ascertained ("the
Payment Date") pay to the Landlord an
amount equal to the aggregate of the
sums by which each quarterly installment
of Rent would have exceeded each
instalment of Interim Rent had the Rent
been ascertained by the Relevant Review
Date together with interest on each of
those sums from the date it would have
been due to the Payment Date at a rate
2% above the current Barclays Bank plc
base lending rate from
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time to time
6.7.8 Where Restrictions are in force at a Review Date the
Landlord may (whether or not Rent has been agreed or
determined with effect from that Review Date) give
notice to the Tenant at any time but not later than
28 days (in respect of which time is of the essence)
after such Review Date postponing that Review Date
until such later date (being not later than the next
following Review Date) as the Landlord may
subsequently by not less than three months' prior
notice specify and in that event the Rent payable
immediately prior to the Review Date that is
postponed shall (notwithstanding any review that may
have taken place as at that Review Date) continue to
be the Rent payable until increased upon review at
the postponed or (as the case may be) a subsequent
Review Date
6.7.9 Where Rent is increased with effect from a Review
Date the Landlord and Tenant shall (at their own
cost) sign memoranda thereof in such form as the
Landlord may reasonably require for annexation to
both the original and counterpart of this Lease
6.8 In this clause 6.8 "Determination Date" means 30th September
2004
6.8.1 If the Tenant wishes to determine this Lease on the
Determination Date it must:
6.8.1.1 serve notice upon the Landlord not
earlier than twelve months and not later
than six months before the Determination
Date (time being of the essence) of its
intention to determine this Lease;
6.8.1.2 pay the Rent and perform and observe the
covenants on the part of the Tenant
contained in this Lease up to the
Determination Date; and
6.8.1.3 yield up the Property on the
Determination Date with vacant
possession and otherwise in accordance
with the provisions of this Lease
6.8.2 Subject to compliance with clause 6.8.1 of this Lease
shall
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determine upon the Determination Date but without
prejudice to the rights of any party against another
in respect of any antecedent breach of covenant
6.8.3 Upon the Determination Date the Tenant shall hand
over to the Landlord the original Lease any land
certificate and all other title deeds and documents
relating to the Property and shall execute such
document as the Landlord shall reasonably require in
order to cancel any entry or title at H M Land
Registry
6.9 The marginal notes shall not affect the construction of this
Lease
7. ARBITRATION
Wherever in this Lease there is provision for reference to arbitration
then in the absence of any express contrary provision such reference
shall be made in accordance with the Arbitration Acts 1950 to 1979 or
any statute amending or replacing it to the determination of a single
arbitrator (who shall so far as reasonably possible be a person
experienced in the letting of premises similar to that the subject of
this Lease to be agreed upon by the parties or failing agreement
appointed by the President of the Royal Institution of Chartered
Surveyors (or if the President is not available or is unable to make
such appointment then by the Vice-President or next senior official of
the Institution then available and able to make such appointment or if
no such officer shall be available and able then by such officer of
such professional body of surveyors as the Landlord shall reasonably
designate)
8. GUARANTEE
The Guarantor covenants with and guarantees to the Landlord:
8.1 That the Tenant shall duly pay the rents in manner prescribed
in this Lease and will comply with all the terms of this Lease
and that the Guarantor will make good to the Landlord on
demand all losses costs damages and expenses occasioned to the
Landlord by any default of the Tenant in paying the rents or
complying with the terms Provided that any neglect or
forbearance by the Landlord in enforcing or giving time to the
Tenant for payment of the rents or compliance with the terms
of this Lease shall not affect the liability of the Guarantor
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8.2 That in the event of the Tenant becoming bankrupt or entering
into liquidation and the trustee in bankruptcy or liquidator
disclaiming this Lease and the Landlord within two months
after the disclaimer serving upon the Guarantor a notice to do
so the Guarantor will accept from the Landlord a Lease of the
Property for a term equal to the residue then remaining
unexpired of the term granted by this Lease but otherwise on
the same terms as this Lease
9. Certificate
It is hereby certified by the parties that there is no agreement for
lease to which this Lease gives effect
IN WITNESS whereof the parties to these presents have caused their respective
Common Seals to be affixed to this Deed the day and year first before written
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THE SCHEDULE
1. The Service Charge to be paid by the Tenant under the terms of this
Lease is to be calculated in two parts. First the Tenant shall
contribute (together with other occupiers of the property within the
Centre) to the maintenance of the Centre and the services provided
therein by the Landlord for the benefit of the Centre those that occupy
property therein and those that visit it and Secondly the Tenant shall
contribute (together with the other occupiers of the Building) to the
maintenance of the Building and the provision of services therein by
the Landlord pursuant to clause 5.3 of this Lease and for the benefit
of those that occupy the Building and those that visit it the Tenant's
contributions as aforesaid to be calculated as appears herein
1.1 "the Expenditure" means the Expenditure described in
paragraph 1.4 and may (at the discretion of the Landlord) include a
reasonable sum by way of provision for future Expenditure on such
items in paragraph 1.4 as call for Expenditure of a periodically
recurring but short term nature whether such expenditure is likely to
be incurred during or after the end of the tenancy and shall be
expressed in two parts the first being the expenditure attributable to
the Centre excluding the Building (the Centre Exhibition) and the
second the Expenditure limited to the Building and incurred for the
benefit of solely those who occupy it (or parts of it) or visit it
(the Building Expenditure)
1.2 "Chargeable Unit" means a separate unit in the Centre
which is let or intended for letting so that all the Chargeable units
in the Centre (which include those within the Building) together
comprise all the services in the Centre except the Retained Parts and
the Building Retained Parts
1.3 "Floor Area" means in relation to any Chargeable Unit the
total internal floor area measured inside the boundary walls except in
the case of a shop front where the measurement shall be taken from the
boundary of the Property
1.4 "The Tenant's Proportion" means the proportion of the Centre
Expenditure and the Building Expenditure attributable to the Property
as determined
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from time to time by the Landlord's Surveyor in accordance
with paragraph 1.5
1.5 "The Landlord's "Account year"" means a year ending on the
31st March or such annual period as the Landlord may at its
discretion determine from time to time and notify in writing
to the Tenant
2. Basic Charge
The Basic Service Charge shall be the yearly sum specified in item 1.7
of the Particulars or such other yearly sum as the Landlord's Surveyor
may from time to time determine as being fair and reasonable and notify
in writing to the Tenant and shall comprise the two elements of the
service charge as set out before
3. Adjustments
As soon as practicable after the end of each Landlord's Account Year
the Landlord shall deliver to the Tenant a statement showing in
reasonable detail the Centre Expenditure and the Building Expenditure
for such year and showing the Tenant's Proportion of such Expenditure
shown by such statement shall exceed the Basic Service Charge paid in
respect of such Landlord's Account Year the Tenant shall immediately
pay to the Landlord the amount of such excess. If the Tenant's
Proportion of such total Expenditure shall be less than the Basic
Service Charge paid in respect of such Landlord's Account Year then the
Landlord shall allow to the Tenant off the next payment of rent (or if
the tenancy has come to an end shall immediately pay to the Tenant) the
amount of such difference. These Provisions shall continue to apply
notwithstanding the tenancy has come to an end but only in respect of
the period down to the end of the tenancy
4. Expenditure
The Expenditure comprises the cost properly incurred by the Landlord in
respect of the Centre and the Building in discharging its obligations
under clauses 5.2 and 5.3 of this Lease and providing other services
and in particular (but is not limited to) the following items or such
of them as may from time to time be applicable
(a) repairing renewing and maintaining (including cleaning painting and
decorative treatment and periodic washing) the Retained Parts and the
Building Retained Parts
(b) insurance against third party employer's and public liability in
respect of
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the Retained Parts
(c) such further insurances as the Landlord may reasonably effect in
respect of the Building and the Centre and any lifts boilers or other
apparatus therein
(d) maintaining operating and replacing any signs loudspeakers or
public address systems in the Retained Parts and the
Building Retained Parts
(e) maintaining repairing and replacing fire prevention and fire
warning equipment in the Retained Parts and the Building Retained Parts
and such security systems in the Building and the Centre as a whole and
the cost of answering any false alarm calls where these cannot be
recharged against the Tenant or other tenants of premises in the Centre
(f) Providing staff for servicing and managing the Centre such cost to
include insurance pensions and welfare contributions benefits in kind
and provision of clothing
(g) all charges assessments impositions and other outgoings (other than
rent) payable by the Landlord in respect of the Centre as a whole or
any part of the Retained Parts or Building Retained Parts
(h) the cost of
providing and maintaining any plants shrubs trees grassed areas flowers
furniture or furnishings or feature in the Centre
(i) the cost of collecting storing and disposing of refuse
(j) the cost of and incidental to compliance by the Landlord with:
(i) any notice regulations or order of any competent authority
and
(ii) any requirement of any present or future Act of
Parliament Order Byelaw or Regulations in respect of the
Centre as a whole or of the Retained Parts
(k) the reasonable and proper fees and expenses of the Landlord's
Surveyor and any other person or firm employed by the Landlord for the
general management of the Centre (or if any such person is an employee
of the Landlord then a reasonable fee to the Landlord for such work)
(1) all fees and expenses payable to any surveyor accountant or other
agent in connection with the preparation and audit of any service
account (or if such work is undertaken by an employee of the Landlord
then a reasonable fee to the Landlord for such work)
-33-
<PAGE>
5. Tenant's Proportioned Expenditure
In determining the Tenant's Proportion the Landlord's Surveyor shall
calculate
5.1 (as to the Centre) the floor area of the Chargeable Units
within the Centre at the end of the Landlord's Account Year
and the proportion of the floor area of the Property to this
total shall be the proportion of the Centre Expenditure to be
met by the Tenant and
5.2 (as to the Building) the total floor area of the Chargeable
Units within the Building at the end of the Landlord's Account
Year and the proportion of the floor area of the Property to
this total shall be the proportion of the Building Expenditure
to be met by the Tenant
AND the total of the Tenant' proportion of the Expenditure in respect
of the Centre and the Building calculated under the provisions of parts
.1 and .2 above is the Service Charge to be paid by the Tenant for the
respective Landlord's Account Year
6. Certificate
Each annual statement of Expenditure shall be certified by the
Landlord's Surveyor and a duly certified copy of such statement shall
be evidence for the purposes of this Lease of the matters covered by
such statement but the Landlord shall upon request permit the Tenant to
inspect at any time up to two months of the delivery of a statement the
vouchers and receipts for items included in it
7. No implied obligations
The inclusion of a service in the list contained in paragraph 4 shall
not imply an obligation on the part of the Landlord to provide such
service
Seal (THE COMMON SEAL of PREMIER
(RESEARCH WORLDWIDE LIMITED
(was hereunto affixed in the presence of:
Director
/s/ signature illegible
Director/Secretary
/s/ signature illegible
-34-
<PAGE>
MARKETING SERVICE AGREEMENT
THIS MARKETING SERVICE AGREEMENT (the "Marketing Agreement"), is made
this ____ day of March, 1999 (the "Effective Date"), by and between PREMIER
RESEARCH WORLDWIDE, LTD., a Delaware corporation with its principal place of
business located at 30 South 17th Street, Philadelphia, PA 19103 (referred to
herein as "PRWW") and AMERICA'S DOCTOR, INC., a Delaware corporation with its
principal place of business located at 11403 Cronridge Drive, Suite 200, Owings
Mills, MD 21117 (referred to herein as "AD").
WHEREAS, PRWW and AD entered into a Stock Purchase Agreement, dated July
2, 1998, and a Support and Service Agreement on July 2, 1998, as amended from
time to time (the "Support and Service Agreement");
WHEREAS, AD desires to market AD's services regarding obtaining subjects
for clinical trials for third parties, including contract research organizations
("CRO's") and pharmaceutical companies;
WHEREAS, PRWW has specialized expertise in obtaining and marketing
subjects in clinical trials; and
WHEREAS, AD acknowledges that PRWW's specialized expertise is not
readily available in the marketplace and will add great value to AD;
WHEREAS, PRWW desires to assist AD in the marketing of AD's services to
such third parties by, among other things, providing AD with education and
training on how to obtain and market subjects for clinical trials;
NOW THEREFORE, intending to be legally bound, the parties hereto agree
as follows:
1. Recitals. The abovementioned recitals are incorporated as if fully set
forth herein.
2. Term. The term of this Marketing Agreement shall be deemed to have
commenced on January l, 1999 (the "Effective Date") and expire on December 31,
2000.
3. PRWW Marketing Services. Whereas, AD desires to determine the commercial
feasibility of recruiting candidates for clinical trials and marketing said
candidates to pharmaceutical, biotechnology and medical device companies and
clinical/contract research organizations (CRO).
In consideration of AD's use of potential clinical trial candidate data supplied
to PRWW and for PRWW's services, as defined below, supplied in support of AD's
test of commercial feasibility, AD agrees to pay PRWW in accordance with the
amounts set forth in paragraph 4.
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<PAGE>
Within ninety days of expiration of this agreement, AD can elect to purchase
PRWW's exclusive right to patient data, as set forth in the Support and Service
Agreement, section 4, for an additional sum of $200,000 as specified in
paragraph 4.
3.1 Scope of Service. PRWW and specifically, the CEO of PRWW (or other
officer(s) of PRWW mutually agreed upon by AD and PRWW), shall consult
with and provide marketing services to the Board of Directors and the
officers of AD, at reasonable times, concerning matters pertaining to the
marketing of AD's services to CRO's and other third parties interested in
recruitment, quantification and qualification of volunteers for
clinical/medical studies (the "PRWW Marketing Services"). PRWW's
Marketing Services to AD shall include, but not be limited to the
following duties and functions: (i) educate and train AD officers,
employees and representatives about volunteer and patient recruitment and
marketing techniques for volunteer and patient recruitment; (ii) impart
personal expertise and knowledge as to the workings of CRO and
pharmaceutical organizations with regard to the recruitment,
quantification and qualification of volunteers for clinical/medical
studies; (iii) reasonably make available the resources of PRWW to AD's
marketing efforts to other CRO's and pharmaceutical companies; (iv)
accompany representatives of AD on marketing and sales presentations; (v)
use its best efforts to introduce AD to CRO's and pharmaceutical
companies; (vi) assist in determining appropriate pricing levels for AD's
products and services; and (vii) any other marketing/sales related
activities reasonably requested by AD or its Directors. PRWW's Marketing
Services shall not be required to exceed two hundred (200) hours for each
three (3) month calendar period under this Marketing Agreement. In
addition, AD shall use its best efforts to provide PRWW with timely
notification of when the PRWW Marketing Services will be required. PRWW
and its representatives shall not represent AD, AD's Board of Directors,
AD's officers or any other member of AD in any transaction or
communication nor shall PRWW and its representatives make claim to do so,
unless authorized by AD, its officers or its Directors.
During the term of this agreement, Sections 4.1, 4.2, and 4.3 of the
Support and Service Agreement shall be deleted in their entirety and
replaced with the following:
"4.1 AD may provide similar solicitation, quantification, recruitment or
other services as those provided to PRWW pursuant to this Agreement to
any other person or entity at AD's sole discretion.
2
<PAGE>
4.2 AD may contract with other CRO's (or any other person or entity
with an interest in volunteer recruitment, solicitation or qualification)
in any manner whatsoever, at AD's sole discretion, provided that AD does
not materially interfere with the Services granted to PRWW. PRWW agrees
that there is no material interference provided that PRWW has the right
to solicit, quantify, qualify and recruit volunteers for its studies
pursuant to Section 3.2 of the Support and Service Agreement as amended.
Specifically, AD may provide the Services to PRWW while simultaneously
providing the same or similar recruitment, quantification or
qualification services to a third party, regardless of whether such same
or similar services conflict in whole or in part with the provision of
the Services to PRWW. For example, if AD has contracted with a CRO to
provide recruits for a study that conflicts with either: (a) a study
ongoing by PRWW; or (b) a study to be commenced by PRWW, in either case,
AD shall provide both PRWW and the other CRO with the right to solicit,
quantify and recruit patients simultaneously.
4.3 All materials, documents, volunteer data, and other information
provided to PRWW by AD during the course of this Agreement shall be
deemed to be, between AD and PRWW, confidential information
("Information") which shall be owned by AD. Upon termination of this
Agreement, PRWW may retain all Information provided to PRWW by AD
pursuant to Section 3.1 hereunder provided that PRWW may only use such
Information for the express purpose of recruitment of volunteers for
studies in which PRWW participates and for which PRWW properly notified
AD pursuant to Section 3.2 of the Agreement. During the Term of this
Agreement PRWW may only use the Information for the express purpose of
recruitment of volunteers for studies in which PRWW participates and for
which PRWW properly notified AD pursuant to Section 3.2 of the Agreement.
PRWW shall be liable for any unauthorized use or disclosure of the
Information by PRWW's employees which could have reasonably been
prevented by PRWW."
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<PAGE>
4. Fee. AD shall pay PRWW a total fee of Four Million Six Hundred Thousand
Dollars ($4,600,000) in installments of Five Hundred Seventy Five Thousand
Dollars ($575,000) per three (3) month calendar period (the "Fee") with an
additional $200,000 due upon AD's decision to purchase PRWW's exclusive right to
patient data. The payment schedule shall be as follows and there shall be a five
(5) day grace period for all payments:
a. $575,000 due on March 15, 1999 (for the three month period
commencing January 1, 1999);
b. $575,000 due on June 15, 1999 (for the three month period
commencing April 1, 1999);
c. $575,000 due on September 15, 1999 (for the three month period
commencing July 1, 1999);
d. $575,000 due on December 15, 1999 (for the three month period
commencing October 1, 1999);
e. $575,000 due on March 15, 2000 (for the three month period
commencing January 1, 2000);
f. $575,000 due on June 15, 2000 (for the three month period
commencing April 1, 2000);
g. $575,000 due on September 15, 2000 (for the three month period
commencing July 1, 2000);
h. $575,000 due on December 15, 2000 (for the three month period
commencing October 1, 2000).
i. $200,000 due on or before the expiration of this agreement,
contingent upon AD decision to purchase PRWW's exclusive right to patient data.
5. Relationship of the parties. The parties are independent contractors.
Nothing in this Marketing Agreement or in the activities contemplated by the
parties pursuant to this Marketing Agreement shall be deemed to create an
agency, partnership, employment or joint venture relationship between the
parties. Each party shall be deemed to be acting solely on its own behalf and,
except as expressly stated, has no authority to pledge the credit of, or incur
obligations or perform any acts or make any statements on behalf of, the other
party. Neither party shall represent to any person or permit any person to act
upon the belief that it has any such authority from the other party. Neither
party's officers or employees, agents or contractors shall be deemed officers,
employees, agents or contractors of the other party for any purpose.
4
<PAGE>
6. Information. In connection with this Marketing Agreement, AD and its
Directors, officers and representatives will furnish PRWW and its
representatives with data, material and information concerning AD (the
"Information") which PRWW reasonably requests or is necessary for the
performance by PRWW hereunder. PRWW agrees that any Information received by PRWW
or its representatives during any furtherance of PRWW's obligations hereunder
will be treated by PRWW in full confidence and will not be revealed to any other
person, firm, organizations or entity except to PRWW's agents, employees, and
representatives in connection with the PRWW Marketing Services to be performed
on behalf of AD: (i) who will be informed of the confidential nature of the
Information; and (ii) who will treat such Information in full confidence and
shall not reveal any Information to any other person, firm, organization or
entity. PRWW shall be responsible for any breach of this provision by any of its
agents, employees or representatives.
7. Termination. AD may terminate this agreement by giving one hundred eighty
(180) days written notice to PRWW. Upon AD's termination of this agreement, the
exclusive patient data revert back to PRWW pursuant to the Support and Service
Agreement between PRWW and AD, dated July 2, 1998,
8. Termination for Cause/Liquidated Damages. In the event that AD fails to
make any or all payments due under Section 4 above within forty-five (45) days
of when such payment(s) is due, then PRWW may terminate this Marketing Agreement
for cause by notifying AD of such termination in writing. In the event this
Marketing Agreement is terminated by PRWW for cause as provided in this Section
8, AD shall pay liquidated damages to PRWW in an amount equal to the actual
amount due at the time of termination by PRWW plus and amount equal to the fees
which would have been earned over the next two calendar quarters.
9. Trademarks. Nothing herein confers or shall confer upon PRWW any right,
title or interest in any goodwill, trademark, trade name, service mark, brand
name, knowledge or credibility of AD. PRWW acknowledges that all such interests
are the exclusive property of AD. PRWW shall not utilize any goodwill,
trademark, service mark, trade name, brand name, knowledge or credibility of AD
without prior written consent of AD and shall not assert any claim of ownership
or right to same.
5
<PAGE>
10. Indemnification. Each party hereto shall indemnify and hold the other
party and its directors, officers, employees, agents, subsidiaries, parents,
affiliates, consultants and subcontractors (all "Associates") harmless from any
claim, liability, loss, damages or expense, together with all reasonable costs
and expenses relating thereto, including reasonable attorneys' fees, resulting
from the negligent, reckless or willful acts or omissions of such party or its
Associates in connection with the providing of the PRWW Marketing Services
hereunder. Each party hereto shall indemnify and hold the other party and its
directors, officers, employees, agents, subsidiaries, parents, affiliates,
consultants and subcontractors (all "Associates") harmless from any claim,
liability, loss, damages or expense, together with all reasonable costs and
expenses relating thereto, including reasonable attorneys' fees, arising out of
or resulting from any breach of any representation, warranty, covenant or
obligation of such party contained in this Marketing Agreement herein.
11. Survival. The parties respective rights and obligations under Sections 4
("Fee"), 6 ("Information'), 8 ("Trademarks') and 9 ("Indemnification") shall
survive any expiration or termination of this Marketing Agreement.
12. Representations by PRWW. PRWW represents, warrants, covenants and agrees
that the PRWW Marketing Services shall be furnished and in all respects provided
in conformance and compliance with applicable laws. PRWW represents and warrants
that it has the authority to enter into this Marketing Agreement and the right
to provide the PRWW Marketing Services to AD hereunder without breach of any
obligation to any other third party, and that its performance under this
Marketing Agreement will not breach any contract, agreement, rule, law or
regulation of whatever nature.
13. Representations by AD. AD represents and warrants that it has the
authority to enter into this Marketing Agreement without breach of any
obligation to any other third party, and that its performance under this
Marketing Agreement will not breach any contract, agreement, rule, law or
regulation of whatever nature.
14. Entire Agreement/Amendments. This Marketing Agreement constitutes the
entire agreement between the parties and supersedes and takes precedence over
all prior agreement or understandings, whether oral or written, between the
parties. This Marketing Agreement shall not be construed to govern any other
transactions between AD and PRWW. No changes, amendments or modifications of any
of the terms or conditions of this Agreement shall be valid unless made by an
instrument in writing signed by both parties.
15. Assignment. Neither party shall assign any of its rights nor delegate
any of its obligations under this Agreement without the prior written consent of
the other party; however, PRWW may assign its rights under this Agreement to any
successor to PRWW by merger or consolidation or any person or entity which
acquires substantially all of the assets and business of PRWW, which assignee
shall assume PRWW's duties and obligations hereunder.
6
<PAGE>
16. Arbitration. Any controversy or claim arising out of or relating to this
Marketing Agreement, or the breach thereof, shall be settled by arbitration in
accordance of the rules of the American Arbitration Association, and judgment
upon the award rendered by the arbitrator(s) shall be entered in any court
having jurisdiction thereof. For that purpose, the parties hereto consent to the
jurisdiction and venue of an appropriate court located in the State of Maryland.
The parties acknowledge that in no event shall the aggregate contribution of the
other party, its agents, members, employees, and affiliates of each,
collectively exceed the amount of the Fee provided in Section 4 of this
Marketing Agreement.
17. Miscellaneous.
17.1 This Marketing Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland without regard to conflict of
law principles.
17.2 Section heading are included for convenience only and are not to
be used to construe or interpret this Agreement.
17.3 Whenever this Marketing Agreement requires either party's
approval, consent or satisfaction, the response shall not be unreasonably or
arbitrarily withheld or delayed.
17.4 The failure of either party to object to, or to take affirmative
action with respect to, any conduct of the other party that violates any term or
condition of this Marketing Agreement shall be limited to that particular
instance, and shall not be construed as a waiver of that party's right for such
breach or as a waiver of such remedies for future breaches by the other party.
17.5 If any provision of this Marketing Agreement becomes unlawful or
unenforceable in any jurisdiction, such provision shall be ineffective only to
the extent of such invalidity or enforceability without invalidating the
remaining provisions of this Marketing Agreement, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate such provision or
render it unenforceable in any other jurisdiction.
17.6 This Marketing Agreement may be executed by the parties in one or
more counterparts; each of which when so executed shall be an original, but all
such counterparts shall constitute one and the same instrument.
17.7 All pronouns and words shall be read in appropriate number and
gender; the masculine, feminine and neuter shall be interpreted interchangeably;
and the singular shall include the plural and vice versa, as the circumstances
may require.
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<PAGE>
17.8 The parties hereto represent that they have carefully read the
foregoing Marketing Agreement, understood its terms, had the opportunity to
consult with an attorney of their choice, and voluntarily signed the same as
their own free act with the intent to be legally bound thereby. The parties
acknowledge that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments hereto. The terms of
this Marketing Agreement are contractual and not a mere recital.
17.9 Notices and other communications shall be transmitted in writing
by certified U.S. Mail, postage prepaid, return receipt requested or by
overnight courier, addressed to the parties at the address first set forth
above. Such notices and communications shall be deemed effective four (4) days
after the date of mailing or upon receipt as evidenced by the U.S. Postal
Service return receipt cards, whichever is earlier, or upon receipt if sent by
overnight courier.
(CONTINUED NEXT PAGE)
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Marketing
Agreement to be duly executed as of the date first above-written, such parties
acting by their representatives being thereunto duly authorized.
PREMIER RESEARCH WORLDWIDE, LTD.
/s/ Joel Morganroth
- ---------------------------------
By: Joel Morganroth, CEO
AMERICA'S DOCTOR, INC.
/s/ Scott M. Rifkin
- - ---------------------------------
By: Scott M. Rifkin, CEO
<PAGE>
DLB SYSTEMS
MASTER SOFTWARE LICENSE AGREEMENT
Agreement Date: July 31, 1999
-------------
FOR AND IN CONSIDERATION of the mutual benefits accruing and expected
to accrue hereunder, DLB Systems, (a business unit of Premier Research
Worldwide, Ltd., a Delaware corporation) with principal offices at 1200 Route 22
East, Bridgewater, New Jersey 08807 (hereinafter referred to as "DLB"), and
Breast Cancer International Research Group, with principal offices in Edmonton,
Alberta Cancer (hereinafter referred to as "Licensee"), intending to be legally
bound, hereby enter into this License Agreement (the "Agreement"):
1. PREAMBLE
1.1 This agreement sets forth the terms and conditions under which
Licensee is licensed to use DLB Software (hereinafter referred
to as this "Agreement"). This Agreement grants to Licensee the
non-exclusive, non-transferable, non-assignable right to use
the specified Software in object code form, only on the
designated computer at the specified installation location, as
more fully set forth in the applicable Rider.
1.2 DLB hereby provides and Licensee hereby accepts: (i) grant of
license for use; and (ii) delivery in object code form of the
DLB Software product(s) listed herein, subject to the
following terms and conditions.
2. TERM OF AGREEMENT
2.1 This Agreement shall commence on the date it has been executed
by DLB, and shall continue until terminated in accordance with
Paragraph 5, "Term of License", or Paragraph 13, "Default and
Termination."
2.2 A Rider annexed to this Agreement shall identify the Software
being licensed.
2.3 Effective on the execution by both parties of any Rider
referencing this Agreement, it and this Agreement shall
replace and supersede any prior licenses or agreements between
the parties relating to the licensing of the Software
specified therein. The provisions of the Rider and this
Agreement thereafter shall govern and control.
3. DEFINITIONS
3.1 "Annual Maintenance Fee" means the fee paid by Licensee which
entitles Licensee to receive maintenance.
3.2 "Computer" means the actual computer on which the Software is
to be installed, as set forth in the applicable Rider. (The
Computer may also be referred to as CPU or Server.)
3.3 "Delivery Date" means the date by which the Software shall be
delivered to the Installation Location.
3.4 "Installation Location" means the physical location of the
Computer upon which the Software is to be installed, as set
forth in this Agreement.
3.5 "License" means the non-exclusive, non-transferable,
non-assignable right to use the Software hereby granted by DLB
to Licensee in accordance with this Agreement.
3.6 "Price List" means one or more lists published by DLB from
time to time which specify license fees, maintenance fees and
other charges made by DLB.
3.7 "Rider" means a document executed by both parties, which
refers to and incorporates the general terms and conditions of
this Agreement and any additional terms contained therein.
3.8 "Software" means the specific software items being licensed
and associated written documentation. (The Software may
sometimes be referred to as "Product").
3.9 "User(s)" means a specific designated user of the Software.
4. LICENSE AND PERMITTED USE
4.1 Licensee hereby is granted a License to use the Software, in
object code form only, pursuant to the terms and conditions
set forth in this Agreement. The Software shall be used solely
for Licensee's internal business purposes by its authorized
personnel, subject to CPU and User restrictions, only on the
Computer and only at the Installation Location described in
the applicable Rider. Use of the Software on other additional
computers of Licensee requires additional fees as specified
below.
4.1.1 SINGLE USER LICENSE of RECORDER Remote: If Licensee
elects a Single User License of RECORDER Remote, use
of the Software is limited to a single site and a
single user working with the software on a single
study for its own internal data processing only.
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<PAGE>
4.1.2 SINGLE SITE LICENSE: If Licensee elects a Single Site
License, use of the Software is limited to object
code form on a single designated CPU and to the
maximum number of users actually licensed by the
Licensee for its own internal data processing only.
4.1.3 ENTERPRISE LICENSE: If Licensee elects an Enterprise
License, use of the Software is limited to a single
legal entity and its directly related divisions or
wholly owned subsidiaries for its own internal data
processing only.
4.2 Licensee shall not copy or otherwise reproduce, or permit any
third party to use, copy or otherwise reproduce, all or any
part of the Software (including, without limitation, any user
and education manuals) except as expressly authorized by
Paragraph 4.4. Licensee further agrees not to use all or any
part of the Software as part of a service bureau, network or
time sharing facility, whether or not for monetary or other
compensation.
4.3 Licensee agrees not to make alterations to or modify the
Software; combine or merge any part of the Software with any
other program; grant sub-licenses, leases or other rights in
or to the Software; use the Software on other than the
Computer at the Installation Location and in accordance with
the CPU and User restrictions as specified in the applicable
Rider; or make any use of the Software, user manuals or other
documentation except as expressly authorized by this
Agreement.
4.4 Licensee is authorized to make and retain one copy of the
Software in non-printed, machine-readable form, for back-up
and disaster recovery purposes. All proprietary notices,
logos, copyright notices and similar markings shall be
retained on such copies.
4.5 Nothing in this Agreement shall be construed to prohibit
Licensee from maintaining a reasonable number of archival
copies of the data generated by Licensee's use of the
Software. All proprietary notices, logos, copyright notices
and similar markings shall be retained on such copies.
4.6 Except for those rights specifically granted herein, Licensee
is granted no other rights in and to the Software. The
Software delivered pursuant to each Rider (and all related
written materials), together with all copyrights, patents,
trademarks, trade secrets and other rights therein, are and
shall remain the sole property of DLB. All rights therein (and
in and to all related manuals, and educational and training
materials) including, but not limited to, intellectual
property rights, trade secrets, patents, trademarks and
copyrights, remain solely and exclusively with DLB.
4.7 If a replacement Installation Location is in a different
country, Licensee may be required to sign a new Rider or
separate License Agreement with DLB (or its foreign
representative) applicable to the country where the Software
is installed. Such new Rider or License Agreement may be
subject to different terms, fees and discount rates.
4.8 Licensee agrees not to disassemble, decompile, decode, or
otherwise reverse engineer or attempt to reconstruct or
discover any source code or underlying algorithms of the
Software.
5. TERM OF LICENSE
The License for each Product shall be effective from the date of DLB's
acceptance of the applicable Rider to this Agreement and shall remain
in force for a period of ninety-nine (99) years; or until Licensee
discontinues use of the Software; or this Agreement or any License
under it is terminated by either party; or Licensee fails to pay the
relevant License fees when due and payable and Licensee has not cured
such non-payment as set forth in Section 13.
<PAGE>
6. LICENSE FEES
6.1 Upon signing this Agreement, Licensee shall pay DLB for the
License, Service, Network Support Services(NSS) and
Maintenance Fees as set forth in the attached payment schedule
agreement rider. When the Software is delivered, Licensee
shall pay DLB the remaining ten percent of the License,
Service and Maintenance Fees set forth on a specific Rider.
6.2 Additional services will be invoiced as incurred with payment
due net 10 days from date of invoice.
6.3 All license fees are exclusive of shipping charges which are
FOB 1200 Route 22 East, Bridgewater, New Jersey and will be
invoiced separately.
6.4 All license fees are payable without offset or deduction of
any kind.
6.5 After ten (10) days from the date of the invoice, unpaid
invoices are subject to a late payment charge of one and one
half percent (1.5%) per month, or the highest legal rate, if
less.
6.6 All amounts mentioned in this Agreement, including but not
limited to License Fee, Service Fees and Annual Maintenance
Fees, are payable in U.S. dollars. All License Fees, Annual
Maintenance Fees and other taxable charges referred to in this
Agreement and payable under any Rider are net of any
applicable sales, use, property and other taxes and import or
other duties, however designated or levied. Payment of all
such taxes and duties (excluding taxes assessed upon the
profit or gain of DLB) shall be the sole responsibility of
Licensee.
7. MAINTENANCE SERVICE
7.1 DLB hereby agrees to provide, and Licensee hereby agrees to
purchase, Maintenance Service as described below for a period
of one (1) year following execution of this Agreement.
7.2 After the first year, Maintenance Services will be renewed
each year automatically for subsequent three (3) one year
periods at the contract price of $875,000 per year, unless the
Customer is no longer using the products and notifies DLB in
writing 90 days prior to the renewal. Payment is due and
payable for the three subsequent years of maintenance on the
anniversary date of August 30, commencing on August 30, 2000.
After the three year period, maintenance will
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<PAGE>
automatically renew at contract prices plus an increase not to
exceed the cpi unless terminated in accordance with the
provisions contained herein. If payment has not been received
by the date due, then DLB reserves the right to suspend
Maintenance Services until such payment is received.
7.3 Maintenance Service means: (1) off-site telephone support at
DLB's New Jersey headquarters, Monday through Friday, 8:00 am
to 8:00 pm EST, and off-site telephone support at DLB's UK
office, Monday through Friday, 9:00 am to 5:30 pm current
British time, excluding statutory holidays, which will be
initiated upon execution of this Agreement; (2) improvements
and application enhancements and updates (Software and
Documentation) to the licensed Software, which are designated
as such by DLB in support of operating system changes to keep
the licensed Software competitive in the marketplace. New
features, Software items or Software separately licensed by
DLB are not included. DLB will maintain the Software in
accordance with DLB's then current specifications.
7.4 In order to be eligible for RECORDER Remote support, the site
must maintain a standard PC and network (hardware & software)
configuration as defined during the Site Implementation Phase
and DLB must be provided on-line access to the site for
trouble shooting purposes. In addition, the site must only
have personnel who have been certified in the utilization of
RECORDER Remote contacting DLB for support purposes.
7.5 The support service for the RECORDER Remote sites will
include: (1) RECORDER Remote trouble shooting; (2) RECORDER
Remote software corrections; (3) RECORDER Remote software
enhancements; (4) Network connection trouble shooting; (5)
PC/Workstation configuration trouble shooting;
(6)Upload/Download assistance.
7.6 Reasonable travel, living and out of pocket expenses incurred
by DLB for on-site Maintenance Services will be reimbursed to
DLB by Licensee.
7.7 Maintenance Service does not include installation, education,
training, consulting, programming or other special services.
Such services may be obtained pursuant to Paragraph 15 hereof.
7.8 Should Licensee discontinue Maintenance Service and at a later
date decide to reinstate Maintenance Service, Licensee will
pay all back maintenance due, in addition to paying the
current year's maintenance in advance.
8. REPLACEMENT COMPUTERS AND ALTERNATIVE LOCATIONS
8.1 Installation of the Software on a replacement computer within
the same operation system is permitted so long as the Software
continues to be used in accordance with the CPU and User
restrictions set forth in the specific Rider. If use of the
replacement Computer causes a change in the CPU and/or User
restrictions which causes the License fee to be at a higher
price, Licensee shall pay to DLB an additional fee based upon
the difference between the then current License fee for the
original computer and that of the replacement Computer at the
time of the upgrade, and any conversion charges as are stated
in the then current Price List.
8.2 Licensee shall notify DLB, in writing, of the use of the
Software on a replacement computer no later than thirty (30)
days before such replacement computer comes into operation.
8.3 DLB shall be entitled to require Licensee to confirm, in
writing, on each anniversary of the Delivery Date, the make,
model, number of users, serial number and location of the
computer on which the Software is currently installed and that
no replacement computer is or has been in operation. Licensee
shall permit representatives of DLB to inspect, on an annual
basis, any location at which the Software is being used at
reasonable times and on reasonable notice for the purpose of
verifying that Licensee is not in default of this Agreement.
8.4 Installation of the Software on a different operation system
is not permitted.
8.5 If Licensee fails to comply with its aforesaid reporting
obligations, and the Software is installed on a replacement
computer entailing a higher fee than that charged for the
original computer installation, then Licensee shall pay to
DLB, retroactive to date of such installation, the difference
between the two fees. In addition, the parties shall
immediately enter into a Rider designating the replacement
computer as the Computer authorized by this Agreement.
<PAGE>
9. ADDITIONAL INSTALLATIONS
9.1 Additional Users, Software or Computers on which the Software
may operate, may be licensed hereunder by execution of a
separate Rider and payment of the applicable amount specified
in the then current Price List.
9.2 All additional License fees shall be based on the then current
Price List for the country of installation.
10. WARRANTIES; LIMITATION OF LIABILITY
10.1 DLB represents to Licensee that the Software and related
documentation have tangible value; and that DLB has the right
to license, market and distribute, maintain and support the
Software.
10.2 The Warranty Period shall commence on the Delivery Date and
shall continue for a period of ninety (90) days ("Warranty
Period").
10.3 During the Warranty Period, DLB warrants that the Software
provided shall function substantially as described in the DLB
then current published Software specifications, as modified
from time to time.
10.4 DLB's sole obligation under the above warranty shall be to
remedy or repair, as soon as reasonably practicable, all
substantial and demonstrable errors and malfunctions in the
Software at no charge to Licensee. DLB may, at its sole
discretion, provide either an up-date of the affected item or
an alternative method which has
Page 3
<PAGE>
substantially the same functionality. DLB's aforementioned
warranty obligation is conditional upon: (1) Licensee giving
DLB written notice of any substantial malfunction promptly and
in any event within the Warranty Period; (2) the said
malfunction being repeatedly demonstrable; and (3) no
unauthorized addition to or modification of the Software
having been undertaken by Licensee or a third party, whether
or not said third party is acting on behalf of Licensee.
10.5 EXCEPT AS SPECIFIED HEREIN, NO OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, ARE MADE BY DLB.
10.6 DLB'S SOLE RESPONSIBILITY FOR BREACH OF WARRANTY, ERROR, OR
OMISSIONS SHALL BE AS SET FORTH IN THIS PARAGRAPH 10. IN NO
EVENT WILL DLB BE LIABLE TO LICENSEE OR ANY OTHER PARTY FOR
ANY REASON WHATSOEVER, WHETHER IN CONTRACT OR TORT, FOR ANY
LOSS RESULTING FROM THE USE OF THE SOFTWARE, WHETHER INTENDED
OR FORESEEABLE, OR FOR ANY FORM OF INDIRECT, SPECIAL,
PUNITIVE, CONSEQUENTIAL, OR INCIDENTAL LOSS, DAMAGE OR EXPENSE
(INCLUDING, BUT NOT LIMITED TO, LOSS DUE TO INABILITY TO
OBTAIN DATA, LOSS OF BUSINESS, OR LOSS OF ANTICIPATED PROFITS)
IN CONNECTION WITH OR ARISING OUT OF THE FURNISHING,
FUNCTIONING OR USE OF ANY SOFTWARE OR PRODUCT PROVIDED UNDER
THIS AGREEMENT OR ANY RIDER ENTERED INTO PURSUANT TO IT, EVEN
IF ADVISED OF THE POSSIBILITY THEREOF.
10.7 DLB INDEMNIFIES LICENSEE FROM LIABILITY FOR PERSONAL INJURY OR
PROPERTY DAMAGE CAUSED SOLELY BY DLB'S NEGLIGENCE OR WILLFUL
MISCONDUCT WHILE PERFORMING ITS OBLIGATIONS PURSUANT TO THIS
AGREEMENT ON LICENSEES PREMISES.
10.8 EXCLUDING ANY LIABILITY FOR PATENT OR COPYRIGHT INFRINGEMENT,
DLB'S LIABILITY HEREUNDER SHALL NOT IN ANY EVENT EXCEED THE
PRICE PAID BY LICENSEE FOR THE PARTICULAR DLB SOFTWARE PRODUCT
INVOLVED.
11. DLB PROPRIETARY RIGHTS
11.1 Without DLB's prior written consent, Licensee shall not
transfer, in whole or in apart, in any manner, the Software,
Software documentation or any copy of the Software or Software
documentation. Licensee recognizes that, in developing the
Software, DLB has invested irreplaceable trade secrets and
methods as well as an amount of money which is difficult or
impossible to ascertain. Consequently, in addition to any
other remedy available at law or equity, Licensee consents to
the entry of any injunction or restraining order necessary to
protect the Software in case of a claimed breach of this
Agreement.
11.2 Licensee acquires no right in and/or to any DLB trademarks,
copyrights, patents, trade secrets or any other intellectual
property rights belonging to DLB by virtue of entering into
this Agreement or any Rider. Licensee shall not make the
Software available for use by or for the benefit of any other
party, whether or not for consideration. Licensee shall take
all reasonable precautions to maintain the confidentiality of
the Software, which precautions shall be at least equivalent
to those precautions Licensee takes to protect its own
confidential information. Without limiting the generality of
the foregoing, Licensee shall acquire no rights in and/or to
any source code and shall not reverse engineer, disassemble or
take any other steps to discover such source code.
<PAGE>
12. ASSIGNMENT
Neither this Agreement nor any Rider shall be transferred or assigned,
in whole or in part, by Licensee without the prior written consent of
DLB. A spin-off, sale of assets, merger, acquisition or other
transaction which involves a change of control of Licensee, or any part
of Licensee, shall be deemed to be an assignment hereunder. Licensee
shall notify DLB of any such transaction within five (5) business days
after its occurrence at which time the new entity must immediately
execute a Master Software License Agreement with DLB or cease using the
Software.
13. DEFAULT AND TERMINATION
13.1 DLB may terminate this Agreement and any License or Rider
under it, if one or more of the following occur: (1) effective
immediately and without prior notice, if Licensee breaches the
provisions of Section 11; (2) upon thirty (30) days written
notice, if Licensee shall fail to pay any License fee when
due, but such termination shall not take effect, and the
respective License shall remain in full force and effect, if
Licensee makes such payment prior to the expiration of the
thirty (30) day period; (3) upon thirty (30) days written
notice, if Licensee is in default of any other provision of
this License, but such termination shall not take effect, and
the respective License shall remain in full force and effect,
if Licensee shall cure such default prior to the expiration of
the thirty (30) day period; or (4) Licensee enters into
liquidation, whether voluntary or compulsory, or has a
receiver appointed, or commits an act of bankruptcy, or
becomes insolvent, or enters into any arrangement with its
creditors, or takes or suffers any similar action in
consequence of debt, or ceases or threatens to cease to carry
on business.
13.2 Termination shall be without prejudice to the right of DLB to
retain any fees paid before termination; to demand payment of
any fees or charges that are due and unpaid or not yet
invoiced at the effective date of termination; or to seek
equitable relief, damages, or both, for breach of any
provision hereof.
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<PAGE>
13.3 If Licensee's right to use any Software is terminated for any
reason, whether with or without cause or due to the expiration
or non-renewal thereof, Licensee shall immediately cease using
such Software and delete same and all associated items from
its library. Further, Licensee shall return to DLB all copies
of materials provided by DLB in connection with the License.
Upon written demand from DLB, Licensee shall confirm in
writing to DLB that such deletion of the Software and return
of all materials has occurred.
14. INDEMNIFICATION
14.1 DLB represents that it has the right to market, distribute,
maintain and support the Software licensed to Licensee and,
subject to the remainder of this Article 14, agrees to defend
or settle, at its option, any action brought against Licensee
arising from any claim that Licensee's use of the Software
under the terms of this Agreement or any License or Rider
under the terms of this Agreement, infringes any patent,
copyright, trademark, trade secret or other proprietary right
belonging to a third party ("Third Party Claim") and to hold
Licensee harmless from any and all liabilities, losses, costs,
damages, expenses and reasonable attorney's fees that result
from any such Third Party Claim.
14.2 DLB 's obligations under this Section 14 are conditioned upon:
(1) DLB being promptly notified in writing by Licensee of any
Third Party Claim; (2) Licensee giving DLB express sole
authority to conduct the defense of any Third Party Claim and
all negotiations of a settlement or compromise; (3) Licensee
allowing its name to be used in proceedings, as necessary; (4)
Licensee providing DLB with all reasonable assistance in
defending any Third Party Claim; and (5) the Third Party Claim
shall not have arisen due to unauthorized acts or misconduct
of Licensee or a third party, whether or not said third party
is acting on behalf of Licensee, including use or combination
of the Software with software or hardware not supplied or
approved by DLB.
14.3 If the Software is the subject of a Third Party Claim, DLB may
at its option and expense either: (1) obtain an appropriate
license for Licensee to continue using the Software from the
party asserting the Third Party Claim; or (2) replace or
modify the Software (or parts thereof) that is the subject of
the Third Party Claim so that it is functionally equivalent
and no longer infringing as alleged. Except for its
indemnification obligations set forth above, DLB shall have no
further liability to Licensee.
15. PROFESSIONAL SERVICES
15.1 At Licensee's request and direction, DLB will assist Licensee
with the installation, consulting and training ("Services")
pursuant to one or more Professional Service work orders
(hereinafter "Work Order"), signed by both parties, specifying
the services to be rendered, charges and other relevant
matters. All services performed pursuant to a Work Order shall
be subject to the express terms and conditions as set forth in
this Agreement and more specifically in this Article 15 and
the subject Work Order. Work Orders are considered to be time
and materials contracts.
15.2 DLB will expend reasonable efforts to assist Licensee in the
performance of the Services specified in each Work Order and
warrants that its services hereunder will be of professional
quality conforming to generally accepted industry standards.
In order to receive warranty remedies, deficiencies in the
Services must be reported to DLB in writing within thirty (30)
days of completion of the applicable Services.
15.3 Ownership of a product produced under a Work Order will be the
property of DLB, not a "Work Made for Hire", and shall be
protected by Licensee in accordance with Section 11.
15.4 Licensee shall provide DLB's employees with adequate work
areas, access to computer terminals, data, Software and
personnel, and all other facilities, as may be reasonably
required for performance of the Services set forth in the Work
Order.
15.5 DLB shall be paid semi-monthly for Services rendered under the
Work Orders. Charges will be based upon the fees agreed to in
the Work Order and any amendments or additions, thereto which
have been agreed to by both parties. DLB will be reimbursed
for all reasonable out of pocket expenses incurred and travel
time, whether or not these are specifically stated on the Work
Order. Invoices are payable within ten (10) days of the date
of the invoice.
15.6 DLB and Licensee are independent contractors and no
employment, agency, association, partnership, joint venture or
relationship inconsistent with that of an independent
contractor shall be created by performance of the Services
specified in a Work Order.
15.7 Either party may terminate any Work Order (whether or not
complete) upon ten (10) days written notice, without further
liability. DLB shall be paid for all services rendered to the
date of termination.
<PAGE>
16. NON-SOLICITATION AND HIRING OF DLB
EMPLOYEES
Licensee shall not directly or indirectly solicit for employment, hire
or utilize the services of any employee, agent, representative or
consultant of DLB during the term of this Agreement and/or any Work
Order under it and for one year thereafter or assist any third party in
so doing. In the event of breach of this provision, Licensee shall pay
to DLB a sum equal to one hundred fifty percent (150%) of the annual
compensation agreed to be paid by Licensee to such person. The
aforementioned remedy is in addition to any other remedies available to
DLB at law or in equity.
17. SUB-LICENSING PROVISIONS REGARDING
THIRD PARTY SOFTWARE
DLB may be a Value Added Reseller (VAR) or perform similar services for
certain Third Party providers of software, incorporating their software
(the "Third Party Software") into DLB's Software. As such, this
Agreement provides as follows:
17.1 SINGLE USER LICENSE: If Licensee elects a Single User License,
use of the Third Party Software is
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<PAGE>
limited to a single site and a single user for its own
internal data processing only.
17.2 SINGLE SITE LICENSE: If Licensee elects a Single Site License,
use of the Third Party Software is limited to object code form
on a single designated CPU to the maximum number of users
actually licensed by the Licensee for its own internal data
processing only.
17.3 ENTERPRISE LICENSE: If Licensee elects an Enterprise License,
use of the Third Party Software is limited to a single legal
entity and its directly related divisions or wholly owned
subsidiaries for its own internal data processing only.
17.4 SCOPE OF USE: The Third Party Software is licensed for use
with DLB's Software only and not for any other purpose; no
title is intended to pass to the Licensee, and no right is
granted to rent, time-share, or reproduce the Third Party
Software, except for temporary transfer in the event of
malfunction.
17.5 NO REVERSE ENGINEERING: The Licensee agrees not to
disassemble, decompile, decode, or otherwise reverse engineer
or attempt to reconstruct or discover any source code or
underlying algorithms of the Third Party Software. Duplication
is permitted only for a single backup or archival copy.
17.6 NO EXPORT OR RE-EXPORT: The Licensee agrees not to export or
re-export outside of the United States except in accordance
with the U.S. Export Control Act and regulations.
17.7 NO WARRANTIES: DLB DOES NOT MAKE ANY WARRANTIES, EXPRESS OR
IMPLIED, ON BEHALF OF ANY THIRD PARTY PROVIDER OF SOFTWARE AND
DLB DISCLAIMS ALL WARRANTIES AND LIABILITIES ON BEHALF OF ANY
THIRD PARTY PROVIDER OF SOFTWARE INCLUDING WITHOUT LIMITATION
THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
17.8 LIMITATION OF LIABILITY: IN NO EVENT WILL DLB HAVE ANY
LIABILITY, BASED ON CONTRACT, TORT OR OTHERWISE, FOR DIRECT,
INDIRECT, CONSEQUENTIAL, OR ANY DAMAGES ARISING FROM ANY THIRD
PARTY SOFTWARE WITHIN THE LICENSED APPLICATION.
17.9 NO USE OF THIRD PARTY NAME OR TRADEMARKS: The Licensee may not
use the Third Party name or trademarks of any Third Party
provider of software without the written permission of such
Third Party.
17.10 THIRD PARTY BENEFICIARY; ASSIGNMENT OF RIGHTS: The Third Party
provider of software shall be an intended third party
beneficiary of the foregoing provisions; DLB shall assign to
such Third Party whatever rights are necessary to assure that
the Third Party obtains the benefit of the foregoing
provisions of this Addendum.
17.11 RETURN OF SOFTWARE, ETC: At the termination of the License the
Licensee will discontinue use of, and destroy or return to
DLB, the Software and all archival or other copies of the
Software.
17.12 NO PUBLICATION: The Licensee will not publish any results of
benchmark tests run on the Software application programs.
17.13 INHERENTLY DANGEROUS APPLICATION: The Software is not
specifically developed or licensed for use in any inherently
dangerous applications. The Licensee hereby agrees that the
Third Party shall not be liable for any claims or damages
arising from such use.
<PAGE>
18. GENERAL
18.1 Law to be Applied - This Agreement and all Riders under it
shall be governed by and interpreted under the laws of the
State of New Jersey.
18.2 Licensee acknowledges and accepts that the role of DLB is
solely that of a supplier of Software and related items and
that it is Licensee's responsibility to determine its own data
processing requirements and to satisfy itself that the
Software meets such requirements. Furthermore, Licensee
recognizes it is responsible for the selection, use of and
results obtained from any Software or equipment used in
conjunction therewith.
18.3 DLB shall use its reasonable best efforts to provide prompt,
correct responses to telephone inquires from Licensee. DLB,
however, shall have no liability for delays, errors or
omissions.
18.4 DLB will use reasonable efforts to protect all Software (and
the tapes or other media in which they are embedded) from
computer viruses or other contaminants. DLB represents that,
to the best of its knowledge, the Software (and tapes or other
media in which they are embedded) provided by it do not
contain any viruses or programming codes or instructions that
are constructed to damage, interfere with or otherwise
adversely affect the Software.
18.5 Publicity - The parties may collaborate on publicity,
advertising, brochures, literature and the like as regards
this Agreement and their business relationship. Prior to any
distribution, all such material will be approved in writing by
both parties.
18.6 Notices - Notices under this Agreement, any Rider or Amendment
shall be deemed given one (1) day after being presented to
Federal Express or the equivalent for delivery to a party at
the addresses specified below or such new address as either
party shall communicate to the other party:
To: Breast Cancer International Research Group
Edmonton, Alberta, Canada
ATTN:
To: DLB System
1200 Route 22 East,
Bridgewater, New Jersey, 08807
ATTN: Manager - Contracts
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<PAGE>
18.7 Force Majeure - No party to this Agreement or any Rider under
it shall be liable for delay or failure in the performance of
its contractual obligations arising from any one or more
events which are beyond its reasonable control. Upon such
delay or failure affecting one party, that party shall notify
the other party and use all reasonable endeavors to cure or
alleviate the cause of such delay or failure with a view to
resuming performance of its contractual obligations as soon as
practicable.
18.8 Waiver - The failure of any party to enforce or exercise, at
any time or for any period of time, any term of or any right
arising pursuant to this Agreement or any Rider under it does
not constitute, and shall not be construed as, a waiver of
such term or right and shall in no way affect that party's
right to later enforce or exercise it. The waiver by either
party of the breach of any provision of this Agreement shall
not constitute a waiver of the breach of any other provision
or of the subsequent breach of the same or any other
provision.
18.9 Severability - The invalidity or unenforceability of any term
of or any right arising pursuant to this Agreement or any
Rider shall in no way affect the remaining terms or rights.
18.10 Binding Effect - This Agreement shall be binding upon and
inure to the benefit of the parties, and their heirs and
successors.
18.11 Amendment - This Agreement may not be amended, waived,
terminated or superseded except by a written instrument signed
by the parties.
18.12 Inconsistencies between the Agreement and the Rider- Unless a
Rider expressly provides otherwise, in the event of any
inconsistency between the Rider and the Agreement, the terms
of the Rider shall govern and control. This Agreement and the
Rider shall govern and control in the case of any
inconsistency between them and any purchase order,
confirmation or other document issued by either party.
18.13 Plural and Singular Usage- As used herein, the singular of any
term includes the plural and the plural means the singular,
whenever the context so requires.
18.14 Headings - The section headings in this Agreement are inserted
for convenience only and are not intended to affect the
meaning or interpretation of this Agreement.
18.15 Notwithstanding the general rules of construction, both DLB
and Licensee acknowledge that both parties were given an equal
opportunity to negociate the terms and conditions contained in
this Agreement and agree that the identity of the drafter of
this Agreement is not relevant to any interpretation of the
terms and conditions of this Agreement.
18.16 Entire Agreement - The entire understanding between the
parties is contained in this Agreement and all Riders under
it. This Agreement supersedes all prior statements,
representations, agreements, understandings and negotiations,
whether written or oral, and in all cases takes precedence.
DLB SYSTEMS /s/ John Bauer Customer /s/ T. Saxton H.Rhouri
------------------------- -------------------------------
Signature Signature
CFO VP Finance President
------------------------- -------------------------------
Name/Title Name/Title
Sept. 25, 1999 Aug 23/99 23 Aug 99
------------------------- -------------------------------
Date Date
Page 7
<PAGE>
MASTER SOFTWARE LICENSE
AGREEMENT RIDER
Rider Date: July 31, 1999
This is a Rider to the Master Software License Agreement entered into by and
between Breast Cancer International Research Group and DLB Systems, a business
unit of Premier Research Worldwide, Ltd., dated July 31, 1999 (hereinafter the
"Agreement"). DLB hereby grants to the Licensee a non-exclusive,
non-transferable, non-assignable license to use the software listed below, as
provided by DLB and accepted by Licensee at the location listed below, in
accordance with the terms and conditions of the Agreement. In the event a
discrepancy should arise between the provisions of this Rider and those of the
Agreement, the provisions of this Rider shall apply.
TOTAL OF SOFTWARE AND FIRST YEAR MAINTENANCE, for the
Period 9/1/99 through 8/31/00 $3,100,000
==========
Enterprise Licenses for RECORDER, MONITOR, ALERT
100 Single User Licenses of RECORDER Remote
First Year Maintenance, for the period 9/1/99 through 8/31/00 -
Enterprise licenses for RECORDER, MONITOR, ALERT First Year
Maintenance, for the period 9/1/99 through 8/31/00 - 100 Single User
Licenses of RECORDER Remote
3. The System shall be installed on the following equipment:
MANUFACTURER MODEL MEMORY MB SYSTEM LOCATION
- --------------------------------------------------------------------------------
TBD
4. SPECIAL TERMS AND CONDITIONS (These Special terms and conditions apply to
this Rider only)
The terms of the Agreement not modified by this Rider shall remain in full force
and effect. This Rider together with the above referenced Agreement constitutes
the entire agreement of the parties and supersedes all prior understanding and
agreements, whether written or oral.
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<PAGE>
By signature below, the parties agree to the foregoing:
<TABLE>
<S> <C>
Accepted by: Accepted by Licensee:
DLB Systems Breast Cancer International Research Group
Signature: /s/ John Bauer Signature: /s/ T. Saxton /s/ H.Rhouri
----------------------------- -----------------------------------------
Name: John Bauer Name: T. Saxton H.Rhouri
---------------------------------- ---------------------------------------------
Title: CFO Title: VP Finance President
--------------------------------------- ---------------------------------------------
</TABLE>
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<PAGE>
PAYMENT SCHEDULE
Rider Date: July 31, 1999
-------------
Payment Schedule
- ----------------
Due August 30, 1999 $2,250,000
Due September 30, 1999 $ 850,000
TOTAL OF SOFTWARE & FIRST YEAR
MAINTENANCE, for the period 9/1/99 through 8/31/00 $3,100,000
==========
- --------------------------------------------------------------------------------
Page 11
<PAGE>
-------------------------------------------------------------------------------
ADDENDUM-1
The following Addendum shall apply to the Software License Agreement dated July
31, 1999 between DLB Systems and Breast Cancer International Research Group and
will take effect from the date of this Agreement.
APPENDIX I
PRODUCT AND SERVICES PROVIDED
100 Single User Licenses of RECORDER Remote and First Year Maintenance, for
the period 9/1/99 through 8/31/00 $750,000
APPENDIX II
PAYMENT SCHEDULE
All charges are subject to the addition of applicable taxes in accordance with
prevailing laws and rates.
<TABLE>
<S> <C>
100 Single User Licenses of RECORDER Remote and First Year Maintenance, for $750,000 no later than 30 days after
the period 9/1/99 through 8/31/00 delivery date (see delivery schedule below)
</TABLE>
APPENDIX III
DELIVERY SCHEDULE
Customer will notify DLB, in writing, 30 days in advance of the required
delivery date.
For DLB Systems For Customer
Signature: ______________________ Signature: ________________________
Printed: ______________________ Printed: ______________________
Title: ______________________ Title: ___________________
Date: ______________________ Date: ____________________
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<PAGE>
-END-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDENDUM-2
The following Addendum shall apply to the Software License Agreement dated July
31, 1999 between DLB Systems and Breast Cancer International Research Group and
will take effect from the date of this Agreement.
APPENDIX I
PRODUCT AND SERVICES PROVIDED
100 Single User Licenses of RECORDER Remote and First Year Maintenance, for
the period 9/1/99 through 8/31/00 $750,000
APPENDIX II
PAYMENT SCHEDULE
All charges are subject to the addition of applicable taxes in accordance with
prevailing laws and rates.
<TABLE>
<S> <C>
100 Single User Licenses of RECORDER Remote and First Year Maintenance, for $750,000 no later than 30 days after
the period 9/1/99 through 8/31/00 delivery date (see delivery schedule below)
</TABLE>
APPENDIX III
DELIVERY SCHEDULE
Customer will notify DLB, in writing, 30 days in advance of the required
delivery date.
For DLB Systems For Customer
Signature: ______________________ Signature: ________________________
Printed: ______________________ Printed: ______________________
Title: ______________________ Title: ___________________
Date: ______________________ Date: ____________________
Page 13
<PAGE>
-END-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDENDUM-3
The following Addendum shall apply to the Software License Agreement dated July
31, 1999 between DLB Systems and Breast Cancer International Research Group and
will take effect from the date of this Agreement.
APPENDIX I
PRODUCT AND SERVICES PROVIDED
100 Single User Licenses of RECORDER Remote and First Year Maintenance, for
the period 9/1/99 through 8/31/00 $750,000
APPENDIX II
PAYMENT SCHEDULE
All charges are subject to the addition of applicable taxes in accordance with
prevailing laws and rates.
<TABLE>
<S> <C>
100 Single User Licenses of RECORDER Remote and First Year Maintenance, for $750,000 no later than 30 days after
the period 9/1/99 through 8/31/00 delivery date (see delivery schedule below)
</TABLE>
APPENDIX III
DELIVERY SCHEDULE
Customer will notify DLB, in writing, 30 days in advance of the required
delivery date.
.
For DLB Systems For Customer
Signature: ______________________ Signature: ________________________
Printed: ______________________ Printed: ________________________
Title: ______________________ Title: ________________________
Date: ______________________ Date: ________________________
-END-
- --------------------------------------------------------------------------------
Page 14
<PAGE>
ADDENDUM
This Addendum will serve to modify the Master Software License Agreement dated
July 31, 1999 between DLB Systems and Breast Cancer International Research
Group, ltd. as follows:
ADDENDUM-1 is changed as follows:
APPENDIX II
PAYMENT SCHEDULE
All charges are subject to the addition of applicable taxes in accordance with
prevailing laws and rates.
100 Single User Licenses of RECORDER Remote and First Year Maintenance,
for $750,000 due January 25, 1999 the period 9/1/99 through 8//31/00
APPENDIX III
DELIVERY SCHEDULE
Delivery required to Customer by November 30, 1999.
ADDENDUM-2 is changed as follows:
APPENDIX II
PAYMENT SCHEDULE
All charges are subject to the addition of applicable taxes in accordance with
prevailing laws and rates.
100 Single User Licenses of RECORDER Remote and First Year Maintenance,
for $750,000 due March 15, 2000 the period 9/1/99 through 8//31/00
APPENDIX III
DELIVER SCHEDULE
Delivery required to Customer by November 30, 1999.
Confidential
Page 2 11/04/00
<PAGE>
For DLB Systems For BCIRG
Signature: /s/ Vincent W. Renz, Jr. Signature: /s/ T.W. Saxton
Printed: Vincent W. Renz, Jr. Printed: T.W. Saxton
Title: Sr. Vice President & General Manager Title: V. P. Finance
Date: Date: Nov. 4, 99
Confidential
Page 3 11/04/00
<PAGE>
DLB SYSTEMS
PROFESSIONAL SERVICES AGREEMENT
Agreement Date:_July 31,1999
FOR AND IN CONSIDERATION of the mutual benefits accruing and expected
to accrue hereunder, DLB Systems, (a business unit of Premier Research
Worldwide, Ltd., a Delaware corporation) with principal offices at 1200 Route 22
East, Bridgewater, New Jersey 08807 (hereinafter referred to as "DLB"), and
Breast Cancer International Research Group, with principal offices in Edmonton,
Alberta, Canada (hereinafter referred to as "Customer"), intending to be legally
bound, hereby enter into this Professional Services Agreement (the "Agreement"):
WHEREAS, DLB employs personnel ("Employees") who possess the skills to provide
professional services and deliverables (collectively "Services") commonly
defined in the computer industry to include, without limitation, consulting,
education, installation, data entry and conversion, training, error correction
and software modifications to address the general needs and requirements
expressed by DLB's clients; and
WHEREAS, DLB often contracts to provide its clients with theses Services; and
WHEREAS, Client wishes to secure Services from DLB from time to time for one or
more engagements, each of which be set forth in a separate Work Order or
Engagement Letter the form for which is attached as Schedule A; and
WHEREAS, DLB desires to provide the Services as required by Client from time to
time in accordance with the terms and conditions set forth hereinafter.
NOW, THEREFORE, DLB and Client, intending to be legally bound, hereby agree as
follows:
1. SERVICES
Client authorizes DLB to provide Services from time to time in accordance
with the specific provisions designated in a Work Order or Engagement Letter
signed by authorized officers of DLB and Client. Each Work Order or
Engagement Letter shall incorporate the terms of this Agreement and will
constitute a separate agreement binding upon the parties. However, in the
event of any conflict between this Agreement and the Work Order or Engagement
Confidential Page 1
<PAGE>
Letter, the provisions of the Work Order or Engagement Letter shall prevail.
2. TERM OF AGREEMENT
2.1 This Agreement shall commence on the date it has been executed by both
parties and shall continue until terminated in accordance with Paragraph
6, "Default and Termination".
3. PROFESSIONAL SERVICES
3.1 If the Work Order or Engagement Letter provides for a fixed amount of
time, once the number of days or hours allocated to a particular Work
Order or Engagement Letter has been used, Customer must sign a new Work
Order or Engagement Letter within ten (10) business days or DLB reserves
the right to discontinue working on the project. If no new Work Order or
Engagement Letter is signed, the Customer is responsible for the ten-
(10) additional day's work.
3.2 DLB will expend reasonable efforts in the performance of the
Professional Services specified in each Work Order or Engagement Letter
and represents that its Professional Services hereunder will be of
professional quality conforming to generally accepted industry
standards. If necessary, DLB will engage subcontractors to assist in
performing the Professional Services.
3.3 Customer must promptly notify DLB if there is a justifiable problem with
a person assigned by DLB to the Customer's project, or the work being
performed is not justifiably satisfactory.
3.4 Ownership of work produced under a Work Order or Engagement Letter shall
be set forth in the specified Work Order or Engagement Letter. If no
such designation is made, ownership of the work produced under a Work
Order or Engagement Letter shall remain with DLB.
<PAGE>
3.5 Customer shall provide DLB's employees with adequate work areas, access
to computer terminals, data, software and personnel. And all other
reasonable facilities as may be required for performance of the
Professional Services set forth in the Work Order or Engagement Letter.
3.6 DLB shall be paid monthly for Professional Services rendered under a
Work Order or Engagement Letter. Charges will be based upon the fees
agreed to in the Work Order or Engagement Letter and any amendments or
additions thereto, which have been agreed to by both parties.
3.7 If no Work Order or Engagement Letter is in place and the Services are
verbally requested by Customer, then Services will be at a rate verbally
agreed to by the parties, or if no rate has been verbally agreed to
between the parties, DLB's standard rates for such Professional
Services. Payment of invoices produced for Professional Services work
performed under a verbal agreement shall be considered agreement on the
part of Customer as to the existence of the verbal agreement.
3.8 DLB will be reimbursed for all reasonable out of pocket expenses
incurred and travel time, whether or not these are specifically stated
on a Work Order or Engagement Letter.
3.9 DLB and Customer are independent contractors and no employment, agency,
association, partnership, joint venture or relationship,
Confidential Page 2
<PAGE>
inconsistent with that of an independent contractor shall be created by
performance of the Professional Services specified in a Work Order or
Engagement Letter.
3.10 Upon termination of a Work Order or Engagement Letter by either party,
DLB shall be paid for all undisputed Professional Services rendered to
the date of termination.
4. FEES
4.1 Payment shall be made in accordance with the payment schedule attached
to a Work Order or Engagement Letter. Invoices are payable within thirty
(30) days of invoice.
4.2 After thirty (30) days from the date of invoice, unpaid invoices are
subject to a late payment charge of one and one half percent (1.5%) per
month, or the highest legal rate, if less.
4.3 All amounts mentioned in this Agreement are payable in US dollars. All
taxable charges, if any, referred to in this Agreement and payable under
any Work Order or Engagement Letter are net of any applicable sales,
use, property and other taxes and import or other duties, however
designated or levied. Payment of all such taxes and duties (excluding
taxes assessed upon the profit or gain of DLB) shall be the sole
responsibility of Customer.
5. CONFIDENTIALITY;
DLB PROPRIETARY RIGHTS
5.1 Each party agrees to keep confidential all technical, product, business,
financial and other information regarding the business of the other
party ("Confidential Information").
<PAGE>
5.2 Each party shall at times protect and safeguard the Confidential
Information of the other and shall not disclose, give, transmit or
otherwise convey any Confidential Information, in whole or in part, to
any third party.
5.3 Confidential Information will not include information that (1) is or
becomes generally known or available through no fault of the recipient;
(2) is known to the recipient at the time of its receipt from the
disclosing party; (3) the disclosing party provides to a third party
without restriction on disclosure; (4) is subsequently rightfully
provided to the recipient by a third party without restriction on
disclosure; (5) is independently developed by the recipient, without
reference to the disclosing party's Confidential Information; (6) is
required to be disclosed pursuant to a governmental agency or court
subpoena, provided the recipient promptly notifies the disclosing party
of such subpoena to allow it reasonable time to seek a protective order
or other appropriate relief; or (7) is approved for release by written
authorization of the disclosing party.
5.4 Because of the unique nature of the Confidential Information, each party
agrees that the disclosing party may suffer irreparable harm in the
event the recipient fails to comply with its obligations under this
Section, and that monetary damages will be inadequate to compensate the
disclosing party for such breach. Accordingly, the recipient agrees that
the disclosing party will, in addition to any other remedies available
to it at law or in equity, be
Confidential Page 3
<PAGE>
entitled to seek injunctive relief to enforce the terms if this Section.
6. DEFAULT AND TERMINATION
6.1 DLB may terminate this Agreement and any Work Order or Engagement Letter
under it, if one or more of the following occur; 1) upon fifteen (15)
days prior written notice, if Customer breaches the provisions of
Section 5; 2) upon thirty (30) days written notice, if Customer shall
fail to pay any fee for the work set forth under this Agreement or any
current or future Work Order or Engagement Letter to it, when due, but
such termination shall not take effect if Customer makes such payment
prior to the expiration of the notice period; 3) upon thirty (30) days
written notice, if Customer is in material default of any other
provision of this Agreement, but such termination shall not take effect
if Customer shall cure such default prior to the expiration of the
notice period; or 4) immediately, if Customer enters into liquidation,
whether voluntarily or compulsory, or compounds with its creditors, or
has a receiver appointed, or commits an act of bankruptcy, or becomes
insolvent, or enters into any arrangement with its creditors, or takes
or suffers any similar action in consequence of debt, or ceases or
threatens to cease to carry on business.
6.2 Customer may terminate this Agreement and any Work Order or engagement
Letter under it, if one or more of the following occur; 1) upon thirty
(30) days written notice, if DLB is in material default of any provision
of this Agreement, but such termination shall not take effect if DLB
shall cure such default prior to the expiration of the notice period; or
2) immediately following written notice, if DLB enters into liquidation,
whether voluntarily or compulsory, or compounds with its creditors, or
has a receiver appointed, or commits an act of bankruptcy, or becomes
insolvent, or enters into any arrangement with its creditors, or takes
or suffers any similar action in consequence of debt, or ceases or
threatens to cease to carry on business.
<PAGE>
6.3 Termination shall be without prejudice to the right of DLB to retain any
fees paid before termination; to be paid any fees or charges that were
due and unpaid or not yet invoiced at the effective date of termination;
or seek equitable relief, damages, or both, for breach of any provision
hereof.
7. LIMITATION OF LIABILITY
7.1 IN NO EVENT WILL DLB BE LIABLE TO CUSTOMER OR ANY OTHER PARTY FOR ANY
REASON WHATSOEVER, WHETHER IN CONTRACT OR TORT, FOR ANY FORM OF
INDIRECT, SPECIAL, CONSEQUENTIAL, OR INCIDENTAL LOSS, DAMAGE OR EXPENSE
(INCLUDING, BUT NOT LIMITED TO, LOSS DUE TO INABILITY TO OBTAIN DATA,
LOSS OF BUSINESS, OR LOSS OF ANTICIPATED PROFITS) IN CONNECTION WITH OR
ARISING OUT OF THE FURNISHING OF THE PROFESSIONAL SERVICES OR THE
FUNCTIONING OR USE OF ANY SOFTWARE OR WORK PRODUCED UNDER THIS AGREEMENT
OR ANY WORK ORDER OR ENGAGEMENT LETTER ENTERED INTO
Confidential Page 4
<PAGE>
PURSUANT TO IT, EVEN IF ADVISED OF THE POSSIBILITY THEREOF.
7.2 DLB INDEMNIFIES CUSTOMER FROM LIABILITY FOR PERSONAL INJURY OR PROPERTY
DAMAGE CAUSED SOLELY BY DLB'S NEGLIGENCE OR WILLFUL MISCONDUCT WHILE
PERFORMING OBLIGATIONS PURSUANT TO THIS AGREEMENT.
7.3 IN ANY EVENT, DLB'S LIABILITY FOR DAMAGES SHALL NOT EXCEED THE PRICE
PAID BY CUSTOMER FOR THE PARTICULAR WORK ORDER OR ENGAGEMENT LETTER
UNDER WHICH DLB'S LIABILITY ARISES.
8. ASSIGNMENT
Neither this agreement nor any Work Order or Engagement Letter issued under
it shall be transferred or assigned, in whole or in part, by Customer without
the prior written consent of DLB. In the event of a sale of all or
substantially all of the assets of Customer, a merger, acquisition,
reorganization or other transaction which involves a change in control of
Customer or any part of Customer, this Agreement may be assigned to the party
acquiring control of Customer's assets as long as the new party is not a
direct competitor of DLB (in which case Customer must obtain DLB's written
consent) and the new party agrees in writing to be bound by the terms and
conditions of this Agreement and any Work Order or Engagement Letter under
it;provided, no such consent shall be required if the new party is an
affiliate or subsidiary who's stock is at least fifty-one (51%) owned by
Customer. Customer shall notify DLB of any such transaction within five (5)
business days after its occurrence.
<PAGE>
9. NON-SOLICITATION AND HIRING OF EMPLOYEES
Neither party shall knowingly solicit for employment, hire or utilize the
services of any employee, agent, representative or consultation of the other
party during the term of this Agreement or of any Work Order or Engagement
Letter under it, or for one year after the completion of the performance of
services hereunder, or assist any third party in so doing.
10. GENERAL
10.1 Law to be Applied - This Agreement and all Work Orders and Engagement
Letters under it shall be governed by and interpreted under the laws
of the State of Delaware.
10.2 Customer acknowledges and accepts that the role of DLB is solely that
of a supplier of the Professional Services to be provided under this
Agreement and any Work Orders or Engagement Letters to it.
10.3 Publicity - The parties may collaborate on publicity, advertising,
brochures, literature and the like as regards this Agreement and their
business relationship. Prior to any distribution, both parties will
approve all such material in writing.
10.4 Notices - Notices under this Agreement, any Work Order, Engagement
Letter or Amendment shall be deemed given when sent one (1) day after
being presented to Federal Express or the equivalent for delivery to a
party at the addresses specified below or such new address as either
party shall communicate to the other in writing from time to time.
Confidential Page 5
<PAGE>
To Customer:
Breast Cancer International
Research Group
Edmonton, Alberta, Canada
ATTN:
To DLB Systems:
DLB Systems
1200 Route 22 East
Bridgewater, New Jersey 08807
ATTN:
10.5 Force Majeure - No party to this Agreement or any Work Order or
Engagement Letter under it shall be liable for delay or failure in the
performance of its contractual obligations arising from any one or
more events which are beyond its reasonable control. Upon such delay
or failure affecting one party, that party shall notify the other
party and use all reasonable endeavors to cure or alleviate the cause
of such delay or failure with a view to resuming performance of its
contractual obligations as soon as practicable.
10.6 Waiver - The failure of any party to enforce or exercise, at any time
or for any period of time, any term of or any right arising pursuant
to this Agreement or any Work Order or Engagement Letter under it,
does not constitute and shall not be construed as, a waiver of such
term or right and shall in no way affect that party's right to later
enforce or exercise it. The waiver by either party of the breach of
any provision of this Agreement shall not constitute a waiver of the
breach of any other provision or of the subsequent breach of the same
or any other provision.
<PAGE>
10.7 Severability - The invalidity or unenforceability of any term of or
any right arising pursuant to this Agreement or any Work Order or
Engagement Letter shall in no way affect the remaining terms or
rights.
10.8 Binding Effect - This Agreement shall be binding upon and ensure to
the benefit of the parties, and their heirs, successors and assigns.
10.9 Inconsistencies Between Agreement, Work Order or Engagement Letter and
other Documents - Unless a Work Order or Engagement Letter expressly
provides otherwise, in the event of any inconsistency between the
terms of this Agreement and any Work Order or Engagement Letter, the
terms of the most recent Work Order or Engagement Letter shall govern
and control for the work specified under that specific Work Order or
Engagement Letter. This Agreement and any Work Order or Engagement
Letter shall govern and control in the case of any inconsistency
between it and any purchase order, confirmation or other document
issued by either party.
10.10 Plural and Singular Usage - As used herein, the singular of any term
includes the plural and the plural means the singular, whenever the
context so requires.
10.11 Headings - The section headings in this Agreement are inserted for
convenience only and are not intended to affect the meaning or
interpretation of this Agreement.
Confidential Page 6
<PAGE>
10.12 Notwithstanding the general rules of construction, both DLB and
Customer acknowledge that both parties were given an equal opportunity
to negotiate the terms and conditions contained in this Agreement and
agree that the identity of the drafter of this Agreement is not
relevant to any interpretation of the terms and conditions of this
Agreement.
10.13 Amendment - This Agreement and its terms may not be modified, amended,
waived, or superceded except by a written instrument signed by an
authorized representative for DLB and an authorized representative of
the Customer.
10.14 The entire understanding between the parties is contained in this
Agreement and all Work Orders and Engagement Letters under it. This
Agreement and all Work Orders and Engagement Letters under it
supersede all prior agreements, statements, representations,
understandings and negotiations, whether written or oral, and in all
cases takes precedence.
DLB SYSTEMS:
Breast Cancer International Research Group:
/s/ John Bauer /s/ T. Saxton /s/H.Rhouri
- ------------------------------ ---------------------------------------------
Signature Signature
John Bauer, CFO T. Saxton VP Finance H.Rhouri/President
- ------------------------------ ---------------------------------------------
Name/Title Name/Title
September 1, 1999 Aug 23, 99 23 Aug 99
- ------------------------------ ---------------------------------------------
Date Date
Confidential Page 7
<PAGE>
PROFESSIONAL SERVICES
AGREEMENT RIDER-1
Rider Date: July 31, 1999
This is a Rider to the Professional Services Agreement entered into by and
between Breast Cancer International Research Group and DLB SYSTEMS, a business
unit of Premier Research Worldwide, Ltd., dated July 31,1999 (hereinafter the
"Agreement"). DLB hereby grants to the Licensee a non-exclusive,
non-transferable, and non-assignable by either party without the consent of the
other party, which consent shall not be unreasonably withheld, except for an
assignment to an affiliate or to a purchaser of all or substantially all, of the
assets of the business to which this agreement pertains and to use the software
listed below, as provided by DLB and accepted by Licensee at the location listed
below, in accordance with the terms and conditions of the Agreement. In the
event a discrepancy should arise between the provisions of this Rider and those
of the Agreement, the provisions of this Rider shall apply.
1. IMPLEMENTATION SERVICES
RECORDER Study Implementation $150,000
This estimate is based on our prior experience in implementing the RECORDER
application for a CRO initiating a study for a sponsor. The estimate does not
reflect any understanding, on the part of DLB, of the requirements for the study
to be conducted for RPR. In order to develop a more accurate project estimate,
to include goals, objectives, scope, resources, milestones, deliverables and
cost, DLB must conduct a Pre-Implementation Review of the study requirements.
Upon completion of the Pre-Implementation Review, DLB will prepare a detail
project plan for review and approval by BCRIG prior to commencing work.
2. Payment in full on or before January 31, 2000.
The terms of the Agreement not modified by this Rider shall remain in full force
and effect. This Rider, together with the above referenced Agreement,
constitutes the entire agreement of the parties and supersedes all prior
understanding and agreements, whether written or oral.
By signature below, the parties agree to the foregoing:
Accepted By:
DLB SYSTEMS BCIRG
Signature: /s/ John Bauer Signature: /s/ T. Saxton /s/ H. Rhouri
Name: John Bauer Name: T. Saxton H. Rhouri
Title: CFO Title: VP Finance President
Confidential Page 8
<PAGE>
PROFESSIONAL SERVICES
AGREEMENT RIDER-2
Rider Date: July 31, 1999
This is a Rider to the Professional Services Agreement entered into by and
between Breast Cancer International Research Group and DLB SYSTEMS, a business
unit of Premier Research Worldwide, Ltd., dated July 31, 1999(hereinafter the
"Agreement"). DLB hereby grants to the Licensee a non-exclusive,
non-transferable, and non-assignable by either party without the consent of the
other party, which consent shall not be unreasonably withheld, except for an
assignment to an affiliate or to a purchaser of all or substantially all, of the
assets of the business to which this agreement pertains and to use the software
listed below, as provided by DLB and accepted by Licensee at the location listed
below, in accordance with the terms and conditions of the Agreement. In the
event a discrepancy should arise between the provisions of this Rider and those
of the Agreement, the provisions of this Rider shall apply.
1. IMPLEMENTATION SERVICES
MONITOR Study Implementation $50,000
This estimate is based on our prior experience in implementing the MONITOR
application for a CRO initiating a study for a sponsor. The estimate does not
reflect any understanding, on the part of DLB, of the requirements for the study
to be conducted for RPR. In order to develop a more accurate project estimate,
to include goals, objectives, scope, resources, milestones, deliverables and
cost, DLB must conduct a Pre-Implementation Review of the study requirements.
Upon completion of the Pre-Implementation Review, DLB will prepare a detail
project plan for review and approval by BCRIG prior to commencing work.
2. Payment in full on or before January 31, 2000.
The terms of the Agreement not modified by this Rider shall remain in full force
and effect. This Rider, together with the above referenced Agreement,
constitutes the entire agreement of the parties and supersedes all prior
understanding and agreements, whether written or oral.
By signature below, the parties agree to the foregoing:
Accepted By:
DLB SYSTEMS BCIRG
Signature: /s/ John Bauer Signature: /s/ T. Saxton /s/ H. Rhouri
Name: John Bauer Name: T. Saxton H. Rhouri
Title: CFO Title: VP Finance President
Confidential Page 9
<PAGE>
PROFESSIONAL SERVICES
AGREEMENT RIDER-3
Rider Date: July 31, 1999
This is a Rider to the Professional Services Agreement entered into by and
between Breast Cancer International Research Group and DLB SYSTEMS, a business
unit of Premier Research Worldwide, Ltd., dated July 31, 1999(hereinafter the
"Agreement"). DLB hereby grants to the Licensee a non-exclusive,
non-transferable, and non-assignable by either party without the consent of the
other party, which consent shall not be unreasonably withheld, except for an
assignment to an affiliate or to a purchaser of all or substantially all, of the
assets of the business to which this agreement pertains and to use the software
listed below, as provided by DLB and accepted by Licensee at the location listed
below, in accordance with the terms and conditions of the Agreement. In the
event a discrepancy should arise between the provisions of this Rider and those
of the Agreement, the provisions of this Rider shall apply.
1. IMPLEMENTATION SERVICES
ALERT Study Implementation $50,000
This estimate is based on our prior experience in implementing the ALERT
application for a CRO initiating a study for a sponsor. The estimate does not
reflect any understanding, on the part of DLB, of the requirements for the study
to be conducted for RPR. In order to develop a more accurate project estimate,
to include goals, objectives, scope, resources, milestones, deliverables and
cost, DLB must conduct a Pre-Implementation Review of the study requirements.
Upon completion of the Pre-Implementation Review, DLB will prepare a detail
project plan for review and approval by BCRIG prior to commencing work.
2. Payment in full on or before January 31, 2000.
The terms of the Agreement not modified by this Rider shall remain in full force
and effect. This Rider, together with the above referenced Agreement,
constitutes the entire agreement of the parties and supersedes all prior
understanding and agreements, whether written or oral.
By signature below, the parties agree to the foregoing:
Accepted By:
DLB SYSTEMS BCIRG
Signature: /s/ John Bauer Signature: /s/ T. Saxton /s/ H. Rhouri
Name: John Bauer Name: T. Saxton H. Rhouri
Title: CFO Title: VP Finance President
Confidential Page 10
<PAGE>
PROFESSIONAL SERVICES
AGREEMENT RIDER-4
Rider Date: July 31, 1999
This is a Rider to the Professional Services Agreement entered into by and
between Breast Cancer International Research Group and DLB SYSTEMS, a business
unit of Premier Research Worldwide, Ltd., dated July 31, 1999(hereinafter the
"Agreement"). DLB hereby grants to the Licensee a non-exclusive,
non-transferable, and non-assignable by either party without the consent of the
other party, which consent shall not be unreasonably withheld, except for an
assignment to an affiliate or to a purchaser of all or substantially all, of the
assets of the business to which this agreement pertains and to use the software
listed below, as provided by DLB and accepted by Licensee at the location listed
below, in accordance with the terms and conditions of the Agreement. In the
event a discrepancy should arise between the provisions of this Rider and those
of the Agreement, the provisions of this Rider shall apply.
1. IMPLEMENTATION SERVICES
Implementation and Education for 400 Single $100,000 for every 100 single
User Licenses of RECORDER Remote user license increment or
fraction thereof
Services to Include:
Technical Architecture Definition
- Network
- Communications
- PC
Technical Architecture Validation
Software Installation and Distribution Plan
Backup and Recovery Plan
End User Education
Scope of Services assumes standard/identical PC and/or network configurations
at all sites.
2. Payment in full on or before March 31, 2000.
The terms of the Agreement not modified by this Rider shall remain in full force
and effect. This Rider, together with the above referenced Agreement,
constitutes the entire agreement of the parties and supersedes all prior
understanding and agreements, whether written or oral.
By signature below, the parties agree to the foregoing:
Accepted By:
DLB SYSTEMS BCIRG
Signature: /s/ John Bauer Signature: /s/ T. Saxton /s/ H. Rhouri
Name: John Bauer Name: T. Saxton H. Rhouri
Title: CFO Title: VP Finance President
Confidential Page 11 3/22/00
<PAGE>
eResearch Technology, Inc.
SERIES A PREFERRED
STOCK PURCHASE AGREEMENT
March 24, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Purchase and Sale of Stock...................................................................................1
1.1 Authorization of the Shares.........................................................................1
1.2 Sale and Issuance of Series A Preferred Stock.......................................................1
1.3 Filing of Certificate of Designation................................................................1
1.4 Closing Date........................................................................................1
2. Representations and Warranties of the Company................................................................1
2.1 Organization, Good Standing and Qualification.......................................................1
2.2 Capitalization and Voting Rights....................................................................2
2.3 Subsidiaries; Investments...........................................................................2
2.4 Authorization.......................................................................................3
2.5 Governmental Consents...............................................................................3
2.6 Litigation..........................................................................................3
2.7 Proprietary Information and Inventions Agreements...................................................3
2.8 Title to Property and Assets........................................................................4
2.9 Financial Statements; Liabilities...................................................................4
2.10 Material Contracts and Other Commitments............................................................4
2.11 Proprietary Rights..................................................................................4
2.12 Compliance with Other Instruments...................................................................5
2.13 Related Party Transactions..........................................................................5
2.14 Licenses; Permits...................................................................................5
2.15 Registration Rights.................................................................................6
2.16 Corporate Documents.................................................................................6
2.17 Changes.............................................................................................6
2.18 Tax Returns, Payments and Elections.................................................................7
2.19 Insurance...........................................................................................7
2.20 Minute Books........................................................................................7
2.21 Employee Matters....................................................................................7
2.22 Millennium Compliance...............................................................................7
2.23 Disclosure..........................................................................................7
3. Representations and Warranties of Parent.....................................................................7
3.1 Organization, Good Standing and Qualification.......................................................8
3.2 Authorization.......................................................................................8
3.3 Governmental Consents...............................................................................8
4. Investment Representations, Warranties and Covenants of Purchaser............................................8
4.1 Authorization.......................................................................................8
4.2 Purchase Entirely for Own Account...................................................................8
4.3 Disclosure of Information...........................................................................9
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.4 Investment Experience...............................................................................9
4.5 Accredited Investor.................................................................................9
4.6 Restricted Securities...............................................................................9
4.7 Further Limitations on Disposition..................................................................9
4.8 Legends.............................................................................................9
4.9 Tax Advisors.......................................................................................10
5. Conditions of Purchaser's Obligations at Closing............................................................10
5.1 Representations and Warranties.....................................................................10
5.2 Performance........................................................................................10
5.3 Qualifications.....................................................................................10
5.4 Proceedings and Documents..........................................................................10
5.5 Transaction Documents..............................................................................11
5.6 Certificate of Designation.........................................................................11
5.7 Legal Opinion......................................................................................11
5.8 No Legal Proceedings...............................................................................11
5.9 Compliance Certificate.............................................................................11
5.10 Due Diligence; Schedule of Exceptions..............................................................12
5.11 Board of Directors.................................................................................12
6. Conditions of the Company's Obligations at Closing..........................................................12
6.1 Representations and Warranties.....................................................................12
6.2 Qualifications.....................................................................................12
6.3 Transaction Documents..............................................................................12
6.4 Certificate of Designation.........................................................................12
7. Covenants of the Company....................................................................................12
7.1 Prompt Payment of Taxes............................................................................12
7.2 Maintenance of Insurance...........................................................................13
7.3 Compliance with Laws...............................................................................13
7.4 Keeping of Records and Books of Account............................................................13
7.5 Maintenance of Properties..........................................................................13
7.6 Obligations........................................................................................13
7.7 Public Disclosures.................................................................................13
7.8 Warrant Agreement..................................................................................13
8. Miscellaneous...............................................................................................14
8.1 Successors and Assigns.............................................................................14
8.2 Governing Law......................................................................................14
8.3 Counterparts.......................................................................................14
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
8.4 Titles and Subtitles...............................................................................14
8.5 Notices............................................................................................14
8.6 Finder's Fee.......................................................................................14
8.7 Expenses...........................................................................................14
8.8 Amendment and Waivers..............................................................................14
8.9 Severability.......................................................................................15
8.10 Aggregation of Stock...............................................................................15
8.11 GAAP...............................................................................................15
8.12 Entire Agreement...................................................................................15
</TABLE>
-iii-
<PAGE>
EXHIBITS
A. Certificate of Designation
B. Schedule of Exceptions
C. Investor Rights Agreement
D. Warrant Agreement
E. Option Agreement
F. Legal Opinion of Company Counsel
G. Legal Opinion of Parent Counsel
-iv-
<PAGE>
eResearchTechnology, Inc.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
entered into as of March 24, 2000, by and among eResearchTechnology, Inc., a
Delaware corporation (the "Company"), Premier Research Worldwide, Ltd., a
Delaware corporation ("Parent"), and Communicade Inc., a Delaware corporation
("Purchaser").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Authorization of the Shares. The Company has, or before the
Closing (as hereinafter defined) will have, authorized the sale and issuance of
95,000 shares of its Series A Preferred Stock (the "Series A Preferred Stock"),
having the rights, restrictions, privileges and preferences as set forth in the
Company's Series A Preferred Stock in the form attached hereto as Exhibit A (the
"Certificate of Designation").
1.2 Sale and Issuance of Series A Preferred Stock. Subject to the
terms and conditions of this Agreement, Purchaser agrees to purchase at the
Closing, and the Company agrees to sell and issue to Purchaser at the Closing,
95,000 shares of the Company's Series A Preferred Stock (the "Shares"), at a
purchase price of $100 per share, or an aggregate purchase price of $9,500,000
(the "Purchase Price").
1.3 Filing of Certificate of Designation. The Company shall adopt
and file with the Secretary of State of Delaware on or before the Closing (as
defined below) the Certificate of Designation.
1.4 Closing Date. The closing of the purchase and sale of the Shares
hereunder shall be held at the offices of Jones, Day, Reavis & Pogue, 599
Lexington Avenue, New York, New York at 10:00 a.m., local time, on March 24,
2000 (the "Closing") or at such other time and place as shall be mutually agreed
upon by the Company and Purchaser. At the Closing, Purchaser shall tender to the
Company, by check or wire transfer, the Purchase Price for the Shares. At the
Closing, the Company shall issue to Purchaser a certificate or certificates
representing the Shares purchased by Purchaser.
2. Representations and Warranties of the Company. Except as set forth
on the Schedule of Exceptions attached as Exhibit B hereto (the "Schedule of
Exceptions"), the Company hereby represents and warrants to Purchaser as
follows, as of the date hereof and as of the Closing:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is qualified to do business in every jurisdiction
in which its ownership of property or conduct of business requires it to be so
qualified, except where the failure to obtain such qualification could not
reasonably be expected to have a material adverse effect on the business,
operating results, assets or financial condition of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect"). The Company
possesses all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to carry
on its business as now conducted and as proposed to be conducted and to carry
out the
<PAGE>
transactions contemplated by this Agreement. The copies of the Company's
charter documents and bylaws which have been furnished to Purchaser reflect all
amendments made thereto at any time prior to the date of this Agreement and are
complete and correct.
2.2 Capitalization and Voting Rights.
(a) The authorized capital of the Company consists, or will
consist of:
(i) Preferred Stock. 10,000,000 shares, without par value
(the "Preferred Stock"), of which 95,000 shares have been designated Series A
Preferred Stock, none of which are issued and outstanding prior to the Closing
and all of which will be sold pursuant to this Agreement at the Closing. The
rights, privileges and preferences of the Series A Preferred Stock are as set
forth in the Certificate of Designation.
(ii) Common Stock. 50,000,000 shares of Common Stock, par
value $.01 per share (the "Common Stock"), of which 1,000 shares are issued and
outstanding as of the date hereof.
(iii) Warrant. In accordance with Section 7.8, upon the
consummation of an Initial Public Offering (as defined in Section 7.8), the
Company will issue a warrant to Purchaser to purchase 2.5% of the then
outstanding shares of its Common Stock pursuant to the terms of the Warrant
Agreement (as defined in Section 2.4).
(b) Except for (i) the conversion privileges of the Series A
Preferred Stock to be issued under this Agreement and (ii) the warrant described
in Section 2.2(a) above, there are not outstanding any stock, options, warrants
or other securities convertible or exchangeable for any shares of the Company's
capital stock or containing any profits participation features, or any
outstanding rights or options to subscribe for or purchase the Company's capital
stock or any stock or securities convertible into or exchangeable for the
Company's capital stock or any stock appreciation rights or phantom stock plans,
or obligations for the purchase or acquisition from the Company of any shares of
its capital stock. The Company is not a party or subject to any agreement or
understanding and there is no agreement or understanding between any other
persons or entities which affects or relates to the voting or giving of written
consents with respect to any security or by a director of the Company.
(c) As of the Closing, the Company shall not be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any warrants, options or other rights
to acquire its capital stock.
2.3 Subsidiaries; Investments. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity. The Company is not a participant in any
joint venture, partnership or similar arrangement. Each such subsidiary is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, possesses all requisite corporate power and
authority and all material licenses, permits and authorizations necessary to own
its properties and to carry on its business as now being conducted and as
presently proposed to be conducted and is qualified to do business in every
jurisdiction in which its ownership of property or the conduct of business
requires to be so qualified, except where the failure to obtain such
qualification would not have a Material Adverse Effect. All of the outstanding
shares of capital stock of each such subsidiary are validly issued, fully paid
and nonassessable, and all such shares are owned by the Company, free and clear
of any lien, and are not subject to any option or right to purchase any such
shares. Neither the Company nor any
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such subsidiary owns or holds the right to acquire any shares of stock or any
other security or interest in any other person or entity.
2.4 Authorization. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Investor Rights Agreement among
the Company, Parent and Purchaser, substantially in the form attached hereto as
Exhibit C (the "Investor Rights Agreement"), the Warrant Agreement among the
Company and Purchaser, substantially in the form attached hereto as Exhibit D
(the "Warrant Agreement"), the Put Option Agreement among the Company, Parent
and Purchaser, substantially in the form attached hereto as Exhibit E (the
"Option Agreement", and together with this Agreement, the Investor Rights
Agreement and the Warrant Agreement, the "Transaction Documents"), the
performance of all obligations of the Company under the Transaction Documents,
and the authorization, issuance (or reservation for issuance), sale and delivery
of the Series A Preferred Stock being sold hereunder constitute valid and
legally binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investor Rights Agreement may be limited by applicable federal or state
securities laws. The Series A Preferred Stock being purchased by Purchaser
hereunder, when issued, sold and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable.
2.5 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for the filing of the Certificate of
Designation with the Delaware Secretary of State.
2.6 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of any of the Transaction Documents, or the right of the Company to
enter into any such agreement or to consummate the transactions contemplated
thereunder, or that might result, either individually or in the aggregate, in a
Material Adverse Effect, financially or otherwise, or any change in the current
equity ownership of the Company. The Company is not subject to any arbitration
proceedings under collective bargaining agreements or otherwise or, to the
Company's knowledge, any governmental investigation or inquiry and, to the
Company's knowledge, there is no reasonable basis for any of the foregoing. The
foregoing includes, without limitation, actions, suits, proceedings or
investigations pending or threatened involving (a) the prior employment of any
of the Company's employees, or their use in connection with the Company's
business of any information allegedly proprietary to any of their former
employers, or (b) negotiations by the Company with potential investors in the
Company. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
2.7 Proprietary Information and Inventions Agreements. Each
employee, officer and consultant of the Company has executed a Proprietary
Information and Inventions Assignment Agreement. The Company is not aware that
any of its employees, officers or
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consultants are in violation thereof, and the Company will use its best efforts
to prevent any such violation. The Company is not aware that any officer or key
employee intends to terminate employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Subject to general principles relating to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company.
2.8 Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens that arise in the ordinary course of business and do
not materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in compliance
with such leases and holds a valid leasehold interest free of any liens, claims
or encumbrances.
2.9 Financial Statements; Liabilities. The Company commenced
operations on January 1, 2000. The Company's audited financial statements
(balance sheet, statement of operations, and statements of stockholders' equity
and cash flows) at and for the period ended December 31, 1999, (the "Financial
Statements") present the historical operating revenues, expenses, assets and
liabilities of Parent, are complete and correct in all material respects, are
consistent with the books and records of the Company, and have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis ("GAAP") throughout the periods indicated. The Financial
Statements fairly present the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein.
Except as set forth in the Financial Statements, the Company has no
material obligations or liabilities, other than (i) liabilities incurred in the
ordinary course of business subsequent to the December 31, 1999 balance sheet
(the "December Balance Sheet"), none of which is a liability resulting from a
breach of contract or breach of warranty or claim of infringement of an
Intellectual Property Right (as defined below) of a third party, and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business, and not required under GAAP to be reflected in the Financial
Statements, which, individually or in the aggregate, are not material to the
financial condition of the Company, exclusive of obligations for salaries
accrued since December 31, 1999 but not yet due, and recurring trade payables
not greater than $100,000 in the aggregate incurred in the ordinary course of
business.
2.10 Material Contracts and Other Commitments. Except for the
Transaction Documents there are no agreements, instruments or contracts to which
the Company is a party or by which it is bound, other than the following
(collectively, the "Contracts"): (i) contracts for the purchase of supplies and
services that were entered into in the ordinary course of business, do not
involve the payment of more than $50,000 in cash, goods, or services, and do not
extend for more than one date hereof, (ii) contracts entered into in the
ordinary course of business that do not involve amounts in excess of 5% of the
Company's 1999 revenues, and (iii) contracts terminable at will by the Company
on no more than 30 days notice without cost or liability to the Company and are
not material to the conduct of the Company's business. All of the Contracts are
valid, binding and in full force and effect in all material respects and
enforceable by the Company in accordance with their respective terms in all
material respects, subject to the effect of applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium, usury or other laws of
general application relating to or affecting enforcement of creditors' rights
and rules or laws concerning equitable remedies. The Company is not in material
default under any of such Contracts. To the knowledge of the Company, no other
party to any of the Contracts is in material default thereunder.
2.11 Proprietary Rights.
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(a) At the time of the Closing the Company owns, or has valid
license rights with respect to, all patents, patent applications, if any,
trademarks, service marks, trade names, inventions, processes, formulae, trade
secrets, franchises, copyrights and other proprietary rights (collectively,
"Intellectual Property Rights") employed in or necessary for the operation of
its business as now conducted with no known infringement of or conflict with the
rights of others. Such ownership and title are exclusive and not subject to
termination without the Company's consent. To the Company's knowledge, the
conduct of its business does not infringe or conflict with any intellectual
property rights of any third party. There are no outstanding options, licenses,
or agreements of any kind relating to the foregoing Intellectual Property
Rights, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the Intellectual Property Rights of any
other person or entity. The Company is not aware of any third party that has
misappropriated or is infringing or violating any of its Intellectual Property
Rights. The Company has not received any communications alleging that the
Company has violated or, by conducting its business as proposed, would violate
any of the Intellectual Property Rights of any other person or entity, and there
have been no claims made against the Company asserting the invalidity or
unenforceability or any of the Company's Intellectual Property Rights. The
Company does not believe it is or will be necessary to use any inventions of any
of its employees (or persons it currently intends to hire) made prior to their
employment by the Company.
(b) The transactions contemplated by this Agreement shall have
no Material Adverse Effect on the Company's right, title and interest in and to
the Company's Intellectual Property Rights.
2.12 Compliance with Other Instruments. The Company is not in
violation of, or default on (i) any term of its Restated Certificate or Bylaws,
or (ii) any statute, rule or regulation applicable to the Company, or any term
of any material contract, mortgage, indenture, judgment, writ, decree, order or
instrument to which the Company is subject and a violation of which would have a
Material Adverse Effect. The execution, delivery and performance of this
Agreement and the Investors Rights Agreement, and the consummation of the
transactions contemplated hereby and thereby will not result in any such
violation or be in conflict with or constitute either a default under any such
instrument, judgment, order, writ, decree or contract or an event that gives any
third party the right to modify, terminate or accelerate any obligation under
any such instrument, judgment, order, writ, decree or contract or that results
in the creation of any lien, charge or encumbrance upon any assets of the
Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of
any material permit, license, authorization, or approval applicable to the
Company, the effect which would in any such case constitute a Material Adverse
Effect.
2.13 Related Party Transactions. No employee, officer, stockholder
or director of the Company or member of his or her immediate family is indebted
to the Company, nor is the Company indebted (or committed to make loans or
extend or guarantee credit) to any of them, other than (i) for payment of salary
for services rendered, (ii) reimbursement for reasonable expenses incurred on
behalf of the Company, and (iii) for other standard employee benefits made
generally available to all employees including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company, nor does any such person have any interest in any material asset or
right of the Company. To the Company's knowledge, no officer, director, or
stockholder or any member of their immediate families is, directly or
indirectly, interested in any contract with the Company (other than such
contracts as relate to any such person's ownership of capital stock or other
securities of the Company).
2.14 Licenses; Permits. The Company has all franchises, permits,
licenses, and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which
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<PAGE>
could have a Material Adverse Effect, and believes it can obtain, without undue
burden or expense, any similar authority for the conduct of its business as
presently planned to be conducted. The Company is not in default in any material
respect under any of such franchises, permits, licenses or other similar
authority.
2.15 Registration Rights. Except as provided in the Investor Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.16 Corporate Documents. Except for amendments necessary to satisfy
representations and warranties or conditions contained herein (the form of which
amendments has been approved by Purchaser), the Certificate of Designation and
bylaws of the Company are in the form provided to Purchaser.
2.17 Changes. Since December 31, 1999, there has not been:
(i) any material adverse change in the assets, liabilities,
financial condition, operations, business prospects, employee relations,
customer or supplier relations or operating results of the Company from that
reflected in the Financial Statements;
(ii) any action by the Company that would have required the
consent of the holders of a majority of the Series A Preferred Stock pursuant to
the Certificate of Designation or the Investor Rights Agreement;
(iii) any investment in or steps taken by the Company to
incorporate any subsidiary;
(iv) any damage, destruction or loss, whether or not covered
by insurance, that would constitute a Material Adverse Effect;
(v) any waiver by the Company of a valuable right or of a
material debt owed to it;
(vi) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(vii) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;
(viii) any loans or guarantees made by the Company to or for
the benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(ix) any change in any compensation arrangement or agreement
with any key employee;
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<PAGE>
(x) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets, other intangible assets or other
Intellectual Property Rights; or
(xi) any resignation or termination of employment of any key
officer of the Company.
(b) The Company has not at any time made payments for political
contributions or made any bribes, kickback payments or other illegal payments.
2.18 Tax Returns, Payments and Elections. The Company has filed all
tax returns and reports (including information returns and reports) as required
by law. The Company has paid all taxes and other assessments due, except those
contested by it in good faith that are listed on Exhibit B. The provision for
taxes of the Company as shown in the Financial Statements is adequate for taxes
due or accrued as of the date thereof. The Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended (the "Code"), to be treated as a
Subchapter S corporation or a collapsible corporation pursuant to Section
1362(a) or Section 341(f) of the Code, nor has it made any other elections
pursuant to the Code (other than elections that relate solely to methods of
accounting, depreciation or amortization) that would have a Material Adverse
Effect.
2.19 Insurance. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, in customary amounts
(subject to reasonable deductibles) and that the Company believes is sufficient
for its business as conducted and as proposed to be conducted.
2.20 Minute Books. The minute books of the Company made available to
Purchaser contain minutes of all meetings of directors and stockholders since
the time of incorporation and reflect all transactions referred to in such
minutes accurately in all material respects.
2.21 Employee Matters. The Company is not aware that any officer or
key employee, or that any group of key employees, currently intends to terminate
their employment with the Company. The employment of each officer and employee
of the Company is terminable at the will of the Company.
2.22 Millennium Compliance. The failure by the Company's computer
systems to be capable of the following during and/or after January 1, 2000, will
not have a Material Adverse Effect on the Company: (a) handling date information
involving all and any dates, including accepting input, providing output and
performing date calculations in whole or in part; (b) operating accurately
without interruption on and in respect of any and all dates and without change
in performance; (c) responding to and processing two digit year input without
creating any ambiguity as to the century; and (d) storing and providing date
input information without creating any ambiguity as to the century.
2.23 Disclosure. Neither this Agreement nor any of the Exhibits,
Schedules, or closing certificates hereto contain any untrue statement of a
material fact or omit a material fact necessary to make each statement contained
herein or therein, in light of the circumstances under which it is made, not
misleading.
3. Representations and Warranties of Parent. Parent hereby represents
and warrants to Purchaser as follows, as of the date hereof and as of the
Closing:
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3.1 Organization, Good Standing and Qualification. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is qualified to do business in every jurisdiction
in which its ownership of property or conduct of business requires it to be so
qualified, except where the failure to obtain such qualification could not
reasonably be expected to have a material adverse effect on the business,
operating results, assets or financial condition of Parent and its subsidiaries
taken as a whole. Parent possesses all requisite corporate power and authority
and all material licenses, permits and authorizations necessary to own and
operate its properties, to carry on its business as now conducted and as
proposed to be conducted and to carry out the transactions contemplated by this
Agreement. The copies of Parent's charter documents and bylaws which have been
furnished to Purchaser reflect all amendments made thereto at any time prior to
the date of this Agreement and are complete and correct.
3.2 Authorization. All corporate action on the part of Parent, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement and the Option Agreement, the performance of all
obligations of Parent under this Agreement and the Option Agreement, and the
authorization, issuance (or reservation for issuance), sale and delivery of the
shares of common stock of Parent issuable pursuant to the Option Agreement (the
"Parent Common Stock") constitute valid and legally binding obligations of
Parent, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies. The Parent Common
Stock, when issued, sold and delivered in accordance with the terms of the
Option Agreement, will be duly and validly issued, fully paid and nonassessable.
3.3 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for the filing of the Certificate of
Designation with the Delaware Secretary of State.
4. Investment Representations, Warranties and Covenants of Purchaser.
Purchaser hereby represents and warrants that:
4.1 Authorization. Purchaser has full power and authority to enter
into this Agreement and the other Transaction Documents, and each such
agreement, when executed and delivered, will constitute a valid and legally
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent that the indemnification provisions contained
in the Investor Rights Agreement may be limited by applicable laws.
4.2 Purchase Entirely for Own Account. This Agreement is made with
Purchaser in reliance upon Purchaser's representation to the Company, which by
Purchaser's execution of this Agreement Purchaser hereby confirms, that the
Series A Preferred Stock to be received by Purchaser and the Common Stock
issuable upon conversion thereof (collectively, the "Securities") will be
acquired for investment for Purchaser's own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and that
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, Purchaser further
represents that Purchaser does not
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have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to such person or to any third person,
with respect to any of the Securities.
4.3 Disclosure of Information. Purchaser believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Series A Preferred Stock. Purchaser further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series A Preferred
Stock and the business, properties, prospects and financial condition of the
Company. The foregoing, however, does not limit or modify the representations
and warranties of the Company in Section 2 of this Agreement or the right of
Purchaser to rely thereon.
4.4 Investment Experience. Purchaser is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Series A Preferred Stock. Purchaser
also represents it has not been organized solely for the purpose of acquiring
the Series A Preferred Stock.
4.5 Accredited Investor. Purchaser is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
4.6 Restricted Securities. Purchaser understands that the Securities
it is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In addition, Purchaser represents that it is familiar with SEC
Rule 144, as presently in effect, and understands the resale limitations imposed
thereby and by the Act. Purchaser understands that no public market presently
exists for the Series A Preferred Stock or Common Stock of the Company, and that
there are no assurances that any such market will be created.
4.7 Further Limitations on Disposition. Without in any way limiting
the above, Purchaser further agrees not to make any disposition of all or any
portion of the Securities unless and until the transferee has agreed in writing
for the benefit of the Company to be bound by this Section 4 and Section 8 of
this Agreement and Sections 1.9, 1.12 and 2 of the Investor Rights Agreement,
and:
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, Purchaser shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Act.
4.8 Legends. It is understood that the certificate(s) evidencing the
Shares shall bear the following legends:
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE AGREEMENTS COVERING
THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD
OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RIGHTS OF FIRST REFUSAL AND MARKET STAND-OFF PROVISIONS
CONTAINED IN THE COMPANY'S INVESTOR RIGHTS AGREEMENT DATED MARCH 24,
2000. A COPY OF SUCH AGREEMENT MAY BE OBTAINED WITHOUT CHARGE UPON
WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.
4.9 Tax Advisors. Purchaser has reviewed with its own tax advisors
the federal, state and local tax consequences of its purchase of Shares, where
applicable, and the transactions contemplated by this Agreement. Purchaser is
relying solely on its own tax advisors and understands that Purchaser (and not
the Company) shall be responsible for Purchaser's own tax liability that may
arise as a result of its purchase of Shares or the transactions contemplated by
this Agreement.
5. Conditions of Purchaser's Obligations at Closing. The obligations of
Purchaser to purchase Shares at the Closing are subject to the fulfillment of
each of the following conditions:
5.1 Representations and Warranties. The representations and
warranties of each of the Company and Parent contained in Section 2 and Section
3, respectively, shall be true in all respects (or, if any such representation
is not expressly qualified by "materiality," "Material Adverse Effect" or words
of similar import, then in all material respects) on and as of the date hereof
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
5.2 Performance. Each of the Company and Parent shall have performed
and complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
5.3 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Shares will have been obtained by each of the Company and Parent as of the
Closing.
5.4 Proceedings and Documents.
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<PAGE>
(a) All corporate and other proceedings in connection with the
transactions contemplated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and substance to Purchaser, and
Purchaser shall have received all such counterparts and certified or other
copies of such documents as Purchaser may reasonably request.
(b) The Company shall have delivered to Purchaser certified
copies of the resolutions duly adopted by the Company's Board of Directors
authorizing the execution, delivery and performance of this Agreement, the other
Transaction Documents, the filing of the Certificate of Designation, the
issuance and sale of the Series A Preferred Stock, the reservation for issuance
of Common Stock upon conversion of the Series A Preferred Stock, and the
consummation of all other transactions contemplated by this Agreement.
(c) Parent shall have delivered to Purchaser certified copies of
the resolutions duly adopted by Parent's Board of Directors authorizing the
execution, delivery and performance of this Agreement and the Option Agreement
and the reservation of Parent Common Stock for issuance upon exercise of
Purchaser's rights under the Option Agreement.
(d) The Company shall have delivered to Purchaser certified
copies of the Certificate of Designation and the Company's bylaws, each as in
effect at the Closing. (e) As of the Closing, the Company shall have delivered
to Purchaser a good standing certificate for the Company from the Secretary of
State of Delaware, dated as of a date within 30 days prior to the Closing.
5.5 Transaction Documents. The Company, Parent, Purchaser and all
other parties thereto shall have entered into the Transaction Documents (other
than the Warrant Agreement).
5.6 Certificate of Designation. The Certificate of Designation shall
have been filed with the Delaware Secretary of State.
5.7 Legal Opinion. Duane, Morris & Heckscher LLP, counsel to the
Company, shall have rendered to Purchaser a legal opinion in substantially the
form attached hereto as Exhibit F, and Archer & Greiner, counsel to Parent,
shall have rendered to Purchaser a legal opinion in substantially the form
attached hereto as Exhibit G.
5.8 No Legal Proceedings. No proceeding challenging this Agreement
or the transactions contemplated hereby or seeking to prohibit, alter, prevent
or materially delay the Closing or seeking damages in connection therewith shall
have been instituted or threatened by any person or entity.
5.9 Compliance Certificate. (a) The Chairman of the Company shall
deliver to Purchaser at the Closing a certificate stating that the conditions
specified in Sections 5.1 through 5.8 with respect to the Company have been
fulfilled.
(b) The President of Parent shall deliver to Purchaser at
the Closing a certificate stating that the conditions specified in Sections 5.1
through 5.8 with respect to Parent have been fulfilled.
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<PAGE>
5.10 Due Diligence; Schedule of Exceptions. Purchaser shall have
completed its financial and legal due diligence review of the Company with the
results thereof satisfactory to Purchaser in its sole discretion, and the
Schedule of Exceptions shall be satisfactory in form and substance to Purchaser
in its sole discretion.
5.11 Board of Directors. The Company shall have a board of directors
consisting of six directors. As of the Closing, the Board of Directors shall
consist of Sheldon M. Bonovitz, Joseph A. Esposito, Joel Morganroth, Howard D.
Ross, John M. Ryan and one person designated by Purchaser who shall initially be
Thomas L. Harrison.
6. Conditions of the Company's Obligations at Closing. The obligations
of the Company to sell and issue the Shares at the Closing are subject to the
fulfillment of each of the following conditions:
6.1 Representations and Warranties. The representations and
warranties of Purchaser contained in Section 4 shall be true in all respects
(or, if any such representation is not expressly qualified by "materiality,"
"Material Adverse Effect" or words similar import, then in all material
respects) on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
6.2 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
6.3 Transaction Documents. The Company, Purchaser and all other
parties thereto shall have entered into the Transaction Documents (other than
the Warrant Agreement).
6.4 Certificate of Designation. The Certificate of Designation shall
have been filed with the Delaware Secretary of State.
7. Covenants of the Company. Without limiting any other covenants and
provisions hereof, each of the Company and Parent (where applicable) covenants
and agrees that until the consummation of an underwritten public offering
pursuant to an effective registration under the Act covering the offer and sale
by the Company of its Common Stock in which the aggregate net proceeds to the
Company equal or exceed $25,000,000 (a "Qualified Public Offering"), it will
perform and observe the following covenants and provisions, and will cause each
subsidiary and any other corporation of which it directly or indirectly owns at
least fifty percent (50%) of such corporation's outstanding shares (a
"Subsidiary"), if and when such Subsidiary exists, to perform and observe such
of the following covenants and provisions as are applicable to such Subsidiary.
7.1 Prompt Payment of Taxes. The Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any Subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books
-12-
<PAGE>
adequate reserves with respect thereto, and provided, further, that the Company
will pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefor.
7.2 Maintenance of Insurance. The Company will maintain insurance
with responsible and reputable insurance companies or associations in such
amounts and covering such risks as is customarily carried by companies engaged
in similar businesses and owning similar properties as the Company.
7.3 Compliance with Laws. The Company will comply, and cause each
Subsidiary to comply, with the requirements of all applicable foreign and
domestic laws, rules, regulations and orders of any governmental authority,
where noncompliance would have a Material Adverse Effect upon the business or
operations of the Company.
7.4 Keeping of Records and Books of Account. The Company will keep
adequate records and books of account in which complete entries will be made in
accordance with GAAP, reflecting all financial transactions of the Company.
7.5 Maintenance of Properties. The Company will maintain and
preserve all of its properties and assets, necessary for the proper conduct of
its business, in good repair, working order and condition, ordinary wear and
tear excepted.
7.6 Obligations. The Company will comply with all other material
obligations which it incurs pursuant to any contract or agreement, as such
obligations become due, unless and to the extent that (i) the same are being
contested in good faith and by appropriate proceedings and, if necessary,
adequate reserves (as determined in accordance with GAAP) have been established
on its books with respect thereto or (ii) the breach thereof would not have a
Material Adverse Effect.
7.7 Public Disclosures. The Company shall not disclose Purchaser's
name or identity as an investor in the Company in any press release or other
public announcement or in any document or material filed with any governmental
entity, without the prior written consent of Purchaser (which consent shall not
be unreasonably withheld), unless such disclosure is required by applicable law
or governmental regulations or by order of a court of competent jurisdiction, in
which case prior to making such disclosure, the Company shall give written
notice to Purchaser describing in reasonable detail the proposed content of such
disclosure and shall permit Purchaser to review and comment upon the form and
substance of such disclosure.
7.8 Warrant Agreement. If the Company consummates an underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of securities to
the general public for the account of the Company (an "Initial Public
Offering"), then simultaneously therewith the Company shall execute and deliver
to Purchaser the Warrant Agreement, and the Warrant Agreement will specify that
Purchaser is entitled to purchase a number of shares of the Company's Common
Stock equal to 2.5% of the then-outstanding common stock of Company (after
giving effect to the issuance of the shares of Common Stock sold by the Company
in the Initial Public Offering and the conversion of the Series A Preferred
Stock, if applicable) at an exercise price per share equal to 200% of the per
share offering price in the Initial Public Offering less the underwriters'
commission per share.
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<PAGE>
8. Miscellaneous.
8.1 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any securities of the Company). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
8.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware, without reference to conflicts of law
rules.
8.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.5 Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and shall
be addressed (i) if to Purchaser, at its address set forth on the signature page
to this Agreement, and (ii) if to the Company, at the address of its principal
corporate offices (attention: Chairman), or at such other address as a party may
designate by 10 days' advance written notice to the other party pursuant to the
provisions above.
8.6 Finder's Fee. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Purchaser agrees to indemnify and hold harmless the Company from
any liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which Purchaser or any of its officers, partners, employees, or
representative is responsible. The Company agrees to indemnify and hold harmless
Purchaser from any liability for any commission or compensation in the nature of
a finders' fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Company or any of its officers, employees
or representatives is responsible.
8.7 Expenses. Purchaser shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement, provided, however, that the Company will reimburse Purchaser for
the reasonable fees and expenses of its counsel in connection with the
transactions contemplated by this Agreement up to a maximum amount of $15,000.
8.8 Amendment and Waivers. Any term of this Agreement may be amended
and the performance of any term of this Agreement may be waived (either
generally or in a particular instance and
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<PAGE>
either retroactively or prospectively) only with the written consent of the
Company and Purchaser. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities and the
Company.
8.9 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.10 Aggregation of Stock. All shares of the Series A Preferred
Stock held or acquired (or Common Stock issued upon conversion thereof) by
affiliated entities or persons (including partners or constituent members and
former partners and former constituent members) shall be aggregated for the
purpose of determining the availability of or discharge of any rights under this
Agreement. For purposes of this Section 8.10, the Company may rely on such
person whom a group of related persons shall designate from time to time for
information relating to the affiliations of entities or persons.
8.11 GAAP. Where any accounting determination or calculation is
required to be made under this Agreement or the exhibits hereto, such
determination or calculation (unless otherwise provided) shall be made in
accordance with GAAP.
8.12 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and thereof, and no party shall be liable
or bound to any other party in any manner by any warranties, representations, or
covenants except as specifically set forth herein or therein.
[Remainder of page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Series B Preferred
Stock Purchase Agreement as of the date first above written.
eResearchTechnology, Inc.
By: /s/ Joel Morganroth
----------------------------------------
Joel Morganroth, M.D.
Chairman
Address: 30 South 17th Street
Philadelphia, PA 19103
PURCHASER:
Communicade Inc.
By: /s/ Gerard A. Neumann
----------------------------------------
Name: Gerard A. Neumann
Title:
Address: 437 Madison Avenue
New York, NY 10022
PARENT:
Premier Research Worldwide, Ltd.
By: /s/ Joel Morganroth
----------------------------------------
Joel Morganroth, M.D.
Chairman and Chief Executive Officer
Address: 30 South 17th Street
Philadelphia, PA 19103
[Signature Page to Series A Preferred Stock Purchase Agreement]
<PAGE>
Exhibit A
CERTIFICATE OF DESIGNATION
<PAGE>
Exhibit B
eResearchTechnology, Inc.
SCHEDULE OF EXCEPTIONS
<PAGE>
Exhibit C
INVESTOR RIGHTS AGREEMENT
<PAGE>
EXHIBIT D
WARRANT AGREEMENT
<PAGE>
EXHIBIT E
OPTION AGREEMENT
<PAGE>
EXHIBIT F
OPINION OF DUANE, MORRIS & HECKSCHER LLP
<PAGE>
eReserachTechnology, Inc.
INVESTOR RIGHTS AGREEMENT
March 24, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
1. Registration Rights......................................................1
1.1 Definitions.....................................................1
1.2 Piggyback Registration Rights...................................2
1.3 Required Registration...........................................3
1.4 Registration on Form S-3........................................4
1.5 Registration Procedures.........................................5
1.6 Furnish Information.............................................6
1.7 Expenses of Registration........................................6
1.8 No Delay of Registration........................................6
1.9 Indemnification.................................................6
1.10 Reports under Securities Exchange Act of 1934...................8
1.11 Assignment of Registration Rights...............................8
1.12 "Market Stand-Off" Agreement....................................9
1.13 Termination of Registration Rights..............................9
2. Company Right of First Refusal on Sales of Shares........................9
2.1 General.........................................................9
2.2 Exceptions.....................................................10
2.3 No Assignment of Rights of First Refusal.......................10
2.4 Termination....................................................10
2.5 Other Restrictions on Transfer.................................10
3. Right of First Refusal on Company Issuance..............................10
3.1 Right of First Refusal.........................................10
3.2 Pro Rata Share.................................................10
3.3 New Securities.................................................11
3.4 Procedure......................................................11
3.5 Termination and Assignment.....................................12
3.6 Company Right to Terminate Issuance of New Securities..........12
4. Covenants of the Company................................................12
4.1 Delivery of Financial Statements...............................12
4.2 Inspection.....................................................13
4.3 Board of Directors.............................................13
4.4 Termination of Covenants.......................................13
5. Miscellaneous...........................................................13
5.1 Successors and Assigns.........................................13
5.2 Governing Law..................................................14
5.3 Counterparts...................................................14
5.4 Titles and Subtitles...........................................14
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<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
5.5 Notices........................................................14
5.6 Expenses.......................................................14
5.7 Amendments and Waivers.........................................14
5.8 Aggregation of Stock...........................................14
5.9 Severability...................................................14
5.10 Entire Agreement; Amendment; Waiver............................14
5.11 Dispute Resolution.............................................15
5.12 Remedies.......................................................15
5.13 No Inconsistent Agreements.....................................15
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<PAGE>
eResearchTechnology, Inc.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (this "Agreement") is made as of March
24, 2000, by and among eResearchTechnology, Inc., a Delaware corporation (the
"Company"), Premier Research Worldwide, Ltd., a Delaware corporation (the "Prior
Holder"), and Communicade Inc., a Delaware corporation ("Investor").
RECITALS
A. The Company and Investor are entering into a Series A Preferred
Stock Purchase Agreement (the "Purchase Agreement") of even date herewith;
B. In order to induce Investor to purchase shares of Series A Preferred
Stock pursuant to the Purchase Agreement, the Company and the Prior Holder
desire that the Company grant to Investor the registration and other rights set
forth herein; and
C. Investor desires that this Agreement shall govern the registration
and other rights of Investor.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "1934 Act" shall mean the Securities Exchange Act
of 1934, as amended.
(b) The term "Act" means the Securities Act of 1933, as amended.
(c) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any permitted assignee thereof
pursuant to the terms of Section 1.11.
(d) The term "Ownership Percentage" means and includes, with
respect to each Holder of Registrable Securities requesting inclusion of
Registrable Securities in an offering pursuant to this Agreement, the number of
Registrable Securities held by such Holder divided by the aggregate of all
Registrable Securities held by all Holders requesting registration in such
offering.
(e) The term "Public Offering" means and includes the closing of
a firm commitment underwritten public offering pursuant to an effective
registration statement under the Act, covering the offer and sale of securities
to the general public for the account of the Company.
(f) The terms "register", "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
<PAGE>
(g) The term "Registrable Securities" means (i) Common Stock
issuable or issued upon conversion of the Company's Series A Preferred Stock
acquired by Investor pursuant to the Purchase Agreement; and (iii) any Common
Stock of the Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
foregoing, excluding in all cases, however, any shares sold or transferred by a
person in a transaction in which the rights under this Section 1 are not
assigned.
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 Piggyback Registration Rights.
(a) Registration Rights. If at any time the Company shall
determine to register under the Act (including pursuant to a demand of any
stockholder of the Company exercising registration rights other than pursuant to
Section 1.3 hereof) any of its common stock (other than a registration relating
solely to the sale of securities to participants in a Company employee benefits
plan, a registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities or a registration in which the only
common stock being registered is common stock issuable upon conversion of debt
securities which are also being registered), it shall send to each Holder
written notice of such determination and, if within 15 days after receipt of
such notice, such Holder shall so request in writing, the Company shall use its
commercially reasonable efforts to include in such registration statement all or
any part of the Registrable Securities that such Holder requests to be
registered.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the written notice given pursuant
to Section 1.2(a). In such event, the right of any Holder to registration
pursuant to this Section 1.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 1.2, if the managing
underwriter determines in its sole discretion that marketing factors require a
limitation of the number of shares to be underwritten, the managing underwriter
may limit the Registrable Securities to be included in such registration. The
Company shall so advise all Holders distributing their securities through such
underwriting, and the number of shares of Registrable Securities and other
securities that may be included in the registration and underwriting shall be
allocated in the following order of priority (A) first, to the holders of the
Company's equity securities who initiated such registration pursuant to such
holders' registration rights or to the Company if the Company initiated such
registration, (B) second, to the Holders requesting to sell common stock
according to each Holder's Ownership Percentage, (C) third, to the Company, and
(D) fourth, to the extent additional securities may be included therein, pro
rata among the other selling stockholders according to the total amount of
securities owned by each such stockholder.
If any of the Holders disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter.
2
<PAGE>
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 1.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
1.3 Required Registration.
(a) On as many as, but not more than, two occasions, not earlier
than the earlier of either (i) six months after the completion by the Company of
its initial Public Offering or (ii) the third anniversary of the date hereof,
one or more Holders of Registrable Securities then outstanding may require the
Company, at the Company's expense, to register some or all of such Holders'
Registrable Securities, provided that each such registration covers an offering
with an aggregate offering price that is not less than $10,000,000; and
provided, further, that such Holder(s) may not require such registration more
than once in any 12-month period. Such Holder(s) shall notify the Company in
writing that it or they intend to offer or cause to be offered for public sale
of all or any portion of the Registrable Securities, and within 10 days after
the receipt of such notice, the Company will so notify all holders of
Registrable Securities.
(b) Upon written request of any Holder given within 30 days
after the receipt by such Holder from the Company of such notification, the
Company will use its commercially reasonable efforts to cause all or any part of
the Registrable Securities that may be requested by any Holder thereof
(including the Holder or Holders giving the initial notice of intent to offer
(each an "Initiating Holder" and collectively the "Initiating Holders")) to be
registered under the Securities Act as expeditiously as possible. The Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practical, but in any event within 90 days
after receipt by the Company of the request of the Initiating Holder.
(c) Notwithstanding anything contained in this Section 1.3 or
Section 1.4 to the contrary, if the Company furnishes to the Holders requesting
any registration pursuant to such sections a certificate signed by the President
of the Company stating that, in the good faith judgment of the Board of
Directors of the Company, such registration would be seriously detrimental to
the Company and that it is in the best interests of the Company to defer the
filing of a registration statement, then the Company shall have the right to
defer the filing of a registration statement with respect to such offering for a
period of not more than 90 days; provided, however, that the Company may not
exercise such right more than once in any 12-month period.
(d) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as part of their request and the Company shall
include such information in the written notice referred to above.
(e) If the registration to be effected pursuant to this Section
1.3 is a registration in connection with the Company's initial Public Offering,
the underwriter shall be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Holders of Registrable Securities
included in such registration. In all subsequent registrations effected pursuant
to this Section 1.3, the underwriter, if any, shall be selected by a majority in
interest of the Holders of Registrable Securities included in such registration
and shall be reasonably acceptable to the Company. In any event, the right of
any Holder to include his, her or its Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall enter into an underwriting
agreement in customary form with the underwriters selected for such
underwriting.
3
<PAGE>
(f) Notwithstanding the foregoing, if the managing underwriter
advises the Holders of Registrable Securities included in such registration in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among the Holders according to each such
Holder's Ownership Percentage.
(g) Notwithstanding the foregoing, the Company shall not be
obligated to effect, or to take any action to effect, any registration pursuant
to this Section 1.3: (i) after the Company has effected two registrations
pursuant to this Section 1.3 and such registrations have been declared or
ordered effective and kept effective for the period set forth in Section 1.5(a)
and the Company has registered at least 80% of the total number of Registrable
Securities requested to be included therein, (ii) during the period starting
with the date 60 days prior to the Company's good faith estimate of filing of,
and ending on a date 120 days after the effective date of, a registration
statement filed under the Act (other than a registration of securities in a Rule
145 transaction or relating solely to the sale of securities to participants in
a Company stock plan), provided that the Company is actively employing in good
faith its commercially reasonable efforts to cause such registration statement
to become effective, and provided further that the Holders were given the
opportunity to fully participate in such registration pursuant to, and the
Company otherwise complied with its obligations under Section 1.2 above, (iii)
if the Initiating Holders propose to dispose of shares of Registrable Securities
that may be immediately registered on Form S-3 pursuant to a request made
pursuant to Section 1.4 below or (iv) if the Registrable Securities requested to
be registered by the Initiating Holders may be sold by such Initiating Holders
in a 90-day period pursuant to Rule 144 of the Act.
1.4 Registration on Form S-3. In case the Company shall receive from
a Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 (or any similar form promulgated by the SEC) and any
related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company will, not
more than twice in any year:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, use its commercially reasonable
efforts to effect such registration and all such qualifications and compliances
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holder's or Holders' Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within 20 days after receipt
of such written notice from the Company; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 1.4: (1) if Form S-3 is not available for
such offering by the Holders; (2) if the Company shall furnish to the Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not more
than 180 days after receipt of the request of the Holder or Holders under this
Section 1.4; provided, however, that the Company shall not utilize this right
more than once in any 12-month period; or (3) with respect to any Holder, if the
number of Registrable Securities requested to be registered on Form S-3 by such
Holder may be sold by such Holder in a 90-day period pursuant to Rule 144 of the
Act.
4
<PAGE>
(c) Subject to the foregoing, the Company shall use its
commercially reasonable efforts to file a registration statement covering the
Registrable Securities and other securities so requested to be registered as
soon as practicable after receipt of the request or requests of the Holders.
Registrations effected pursuant to this Section 1.4 shall not be counted as
demands for registration effected pursuant to Section 1.3. If the Holders giving
the initial notice propose to offer the Registrable Securities by means of an
underwriting, the terms of Sections 1.3(d) and (e) shall apply.
1.5 Registration Procedures. Whenever required under this Section 1
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use commercially reasonable efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for a period of up to 120
days or, if earlier, until the distribution contemplated in the Registration
Statement has been completed;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act;
(c) Furnish to the Holders participating in such registration
such numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents as they
may reasonably request in order to facilitate the public offering of Registrable
Securities owned by them;
(d) Use commercially reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such state or jurisdictions;
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering (and each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement);
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed; and
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(h) Provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration.
1.6 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
1.7 Expenses of Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Sections
1.2, 1.3 and 1.4 for each Holder (which right may be assigned as provided in
Section 1.11), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of counsel for the Company and no more
than one counsel for all the selling Holders, but excluding underwriting
discounts and commissions relating to Registrable Securities.
1.8 No Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action, as such expenses are incurred; provided, however, that the
indemnity agreement contained in this subsection 1.9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld or delayed), nor shall the Company be liable
in any case for any such loss, claim, damage, liability, or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished by any such Holder,
underwriter or controlling person for use in such registration.
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(b) To the extent permitted by law, each Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, severally but not jointly, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder; and
each such Holder will pay any legal or other expenses reasonably incurred by any
person intended for use in such registration to be indemnified pursuant to this
subsection 1.9(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity by
any Holder under this subsection 1.9(b) exceed the net proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with one counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
indemnified party under this Section 1.9 unless and to the extent that the
failure to deliver notice is materially prejudicial to its ability to defend
such action. Any omission to so deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.9.
(d) If the indemnification provided for in this Section 1.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
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(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.10 Reports under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after 90 days after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after 90 days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.11 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds with a
value of at least $2,000,000 in the aggregate, provided: (a) the Company is,
within a reasonable time before such transfer, furnished with written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; (b) such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement, including without limitation the provisions of
Section 1.12 below; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act. For the purposes of
determining the number of shares of Registrable Securities held by a transferee
or assignee of a holder of Registrable Securities, (i) the holdings of
affiliated partnerships, limited liability companies and other entities and
their constituent or retired partners or members or limited partners
(collectively, "Affiliated Persons"), and (ii) the holdings of spouses,
ancestors, lineal descendants and siblings who acquire Registrable Securities by
gift, will or intestate succession (collectively, "Family Members"), shall in
each case be aggregated together, provided that all assignees and transferees
who would not qualify individually for assignment of registration rights shall
designate in writing to the Company from time to time a single attorney-in-fact
on behalf of the entire group of Affiliated Persons or Family Members,
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as the case may be, for the purpose of exercising any rights, receiving notices
or taking any action under this Section 1.
1.12 "Market Stand-Off" Agreement. Each Holder hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees or affiliated entities who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
common stock included in such registration; provided, however, that:
(a) all officers and directors of the Company enter into similar
agreements; and
(b) such market stand-off time period shall not exceed 180 days
except as may be agreed by holders of a majority of the then outstanding
Registrable Securities.
Each Holder agrees to provide to the other underwriters of any
public offering such further agreement as such underwriter may require in
connection with this market stand-off agreement. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to the Registrable Securities of each Holder (and the shares or
securities of every other person subject to the foregoing restriction) until the
end of such period.
1.13 Termination of Registration Rights. The right of any Holder to
inclusion in any registration pursuant to Section 1.2 or to request registration
pursuant to Section 1.3 shall terminate upon the earlier of (i) five years after
the date of the Company's initial Public Offering, or (ii) such date as a public
trading market shall exist for the Company's Common Stock and all shares of
Registrable Securities beneficially owned or subject to Rule 144 aggregation by
such Holder may immediately be sold under Rule 144 (without regard to Rule
144(k)) during any 90-day period.
2. Company Right of First Refusal on Sales of Shares.
2.1 General. In the event that, at any time prior to the effective
date of the Company's initial Public Offering, a Holder proposes to make any
sale or transfer of Series A Preferred Stock, or Common Stock issued upon
conversion of Series A Preferred Stock, otherwise permitted pursuant to this
Agreement, then prior to effecting such sale or transfer the Holder shall give
the Company the opportunity to purchase such shares in the following manner:
(a) Such Holder shall give notice (the "Transfer Notice") to the
Company in writing of such intention, specifying the securities proposed to be
sold or transferred, the proposed price per share therefor (the "Transfer
Price"), the name of the proposed transferee or transferees and the other
material terms upon which such disposition is proposed to be made, including
such other terms and information as the Company may reasonably request in order
to confirm the bona fide nature of the proposed transaction.
(b) The Company shall have the right, exercisable by written
notice given by the Company to such Holder within 20 days after receipt of such
Transfer Notice to purchase all (but not less than all) of the securities
specified in such Transfer Notice.
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(c) If the Company exercises its right of first refusal
hereunder, the closing of the purchase of the securities with respect to which
such right has been exercised shall take place within 30 days after the Company
gives notice of such exercise, which period of time shall be extended if
necessary to comply with applicable securities laws and regulations. Upon
exercise of its right of first refusal, the Company and such Holder shall be
legally obligated to consummate the purchase contemplated thereby and shall use
their best efforts to secure any approvals required in connection therewith.
(d) If the Company does not exercise its right of first refusal
hereunder within the 20 day period specified for such exercise, such Holder
shall be free, during the period of 60 days following the expiration of such
time for exercise to enter into an agreement to sell the securities specified in
such Transfer Notice, to the specified proposed transferee or another investor
which is solely a financial investor acquiring for investment purposes, on terms
no less favorable to such Holder than the terms specified in such Transfer
Notice, provided that the closing of the purchase and sale of such securities
shall take place within 30 days after such Holder enters into such agreement.
2.2 Exceptions. The right of first refusal herein shall not apply to
any transfer of securities by a Holder without receipt of consideration by the
Holder (a) to any Family Member (as defined in Section 1.10) of any Holder who
is an individual, or to a trust for the benefit of the Holder or the Holder's
Family Members or (ii) to any Affiliated Person (as defined in Section 1.11) of
a Holder that is an entity, provided in any such case that the transferee agrees
to be bound by the provisions of this right of first refusal with respect to any
further transfers.
2.3 No Assignment of Rights of First Refusal. The Company may not
assign its rights of first refusal under this Section 2.
2.4 Termination. The Company's right of first refusal set forth
herein shall terminate upon the first to occur of (i) the closing of an initial
Public Offering of the Common Stock of the Company to the general public which
is effected pursuant to a registration statement filed with, and declared
effective by, the SEC under the Act, and (ii) such date as the Company shall be
subject to the reporting requirements of Section 13(a) or 15(d) of the 1934 Act.
2.5 Other Restrictions on Transfer. Notwithstanding anything to the
contrary contained herein, (a) until the six-month anniversary of the date
hereof, no Holder shall transfer any shares of Series A Preferred Stock without
the prior written consent of the Company; and (b) until the effective date of
the Company's initial Public Offering, no Holder shall transfer any shares of
Series A Preferred Stock to any person or entity engaged in conducting or
providing products or services for use in conducting clinical research trials.
3. Right of First Refusal on Company Issuance.
3.1 Right of First Refusal. The Company hereby grants to Investor a
right of first refusal ("Right of First Refusal") to purchase Investor's Pro
Rata Share (as defined in Section 3.2 below) of any New Securities (as defined
in Section 3.3 below) which the Company may, from time to time, propose to issue
and sell.
3.2 Pro Rata Share. Investor's "Pro Rata Share," for purposes of
this Section 3, is equal to the product obtained by dividing (a) the aggregate
Stated Value (as defined in the Company's Certificate of Designation of Series A
Convertible Preferred Stock) of the Series A Preferred Stock then held by the
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Investor by (b) the difference between the valuation of the Company upon
consummation of the sale of such New Securities, as determined in good faith by
the Board of Directors (including the Investor Nominee (as defined in Section
4.4) then serving as a director) and the proposed purchaser of such New
Securities, and the aggregate consideration to be paid by such proposed
purchaser for such New Securities.
3.3 New Securities. Except as set forth below, "New Securities"
shall mean any shares of capital stock of the Company, including Common Stock
and Preferred Stock, whether or not now authorized, and rights, options,
warrants or any similar instrument to purchase such shares of Common Stock or
Preferred Stock and securities of any type whatsoever that are, or may by their
terms become, convertible into such shares of Common Stock or Preferred Stock.
Notwithstanding the foregoing, "New Securities" do not include the following:
(i) shares of Common Stock issued upon the conversion of the Series A Preferred
Stock; (ii) shares of Common Stock, or options or other rights to purchase
Common Stock, issued or granted to employees, officers, directors and
consultants of the Company pursuant to any one or more employee stock incentive
plans or agreements either approved, or within an aggregate amount approved, by
the Company's Board of Directors; (iii) securities issued or issuable pursuant
to financing transactions approved by the Company's Board of Directors
including, but not limited to, equipment leases or bank lines of credit,
provided that the specific issuance is approved by the Board; (iv) shares of
Common Stock or other securities issued as a dividend or distribution on, or in
connection with a split of or recapitalization of, any of the capital stock of
the Company; (v) shares of capital stock of the Company issued pursuant to
warrants outstanding as of the date hereof; (vi) securities issued by the
Company pursuant to the acquisition of another corporation or other entity by
the Company by merger, purchase of all or substantially all of the capital stock
or assets, or other reorganization as a result of which the stockholders of the
Company will continue to hold more than fifty percent (50%) of the voting
securities of the Company; or (vii) securities issued in a firm commitment
underwritten Public Offering covering the offer and sale of securities of the
Company.
3.4 Procedure.
(a) In the event the Company proposes to undertake an issuance
of New Securities with respect to which the Investor has a right of first
refusal hereunder, it shall give Investor written notice (the "Company Notice")
of its intention, describing the amount and type of New Securities to be issued,
and the price and terms upon which the Company proposes to issue the same.
Investor shall have 20 days from the date of receipt of the Company Notice to
exercise its Right of First Refusal to purchase up to its Pro Rata Share of such
New Securities for the price and upon the terms specified in the Company Notice
by delivering written notice (the "Right of First Refusal Election Notice") to
the Company and stating therein the quantity of New Securities to be purchased.
(b) Settlement for the New Securities to be purchased by
Investor pursuant to this Section 3.4 shall be made in cash within 20 days from
Investor's date of receipt of the Company Notice; provided, however, that if the
terms of payment for the New Securities specified in the Company Notice were for
other than cash against delivery, Investor shall pay in cash to the Company the
fair market value of such consideration as mutually agreed upon by the Company
and Investor or, if no such agreement is reached, as determined by an investment
banking firm mutually acceptable to the Company and Investor, which appraisal
shall be final, within five days of such determination if such determination is
made after 15 days following receipt of the Company Notice.
(c) In the event that Investor has not elected or does not have
the right to purchase all of the New Securities within 20 days of the receipt of
Company Notice pursuant to clause (a) above, the Company shall have 90 days
thereafter to sell the New Securities not elected or entitled to be
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purchased by Investor at a price and upon terms no more favorable to the
proposed purchasers of such New Securities than specified in the Company Notice.
In the event the Company has not sold some or all of the New Securities within
such 90 day period, the Company shall not thereafter issue or sell any unsold
New Securities without first offering such securities to Investor in the manner
provided above.
(d) If Investor shall have failed to deliver to the Company its
Right of First Refusal Election Notice within the time periods described in this
Section 3.4, Investor shall be deemed to have waived its Right of First Refusal
as to such financing to which such notice pertains.
3.5 Termination and Assignment. The Right of First Refusal granted
in this Section 3 shall expire upon the effective date of the Company's first
Public Offering of securities registered under the Securities Act at an
aggregate offering price of at least $25,000,000. The Right of First Refusal is
non-assignable except to any transferee to whom registration rights may be
transferred pursuant to Section 6 of this Agreement.
3.6 Company Right to Terminate Issuance of New Securities.
Notwithstanding the foregoing, the Company may in its sole discretion terminate
any proposed issuance of New Securities in respect of which the Company has
given Company Notice, at any time prior to the consummation thereof. The
foregoing provision shall apply even in the event Investor shall have exercised
its Right of First Refusal hereunder; provided, however, that no New Securities
shall then have been issued.
4. Covenants of the Company.
4.1 Delivery of Financial Statements. The Company shall deliver to
Investor, so long as Investor shall be a Holder of at least ten percent (20%) of
the Series A Preferred Stock issued pursuant to the Purchase Agreement (subject
to appropriate adjustment for stock splits, dividends, combinations and other
recapitalizations):
(a) as soon as practicable, but in any event within 120 days
after the end of each fiscal year of the Company, an income statement for such
fiscal year, a balance sheet of the Company and statement of stockholders'
equity as of the end of such year, and a statement of cash flows for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with U.S. generally accepted accounting principles, consistently
applied ("GAAP"), and, to the extent available, audited and certified by
independent public accountants of nationally recognized standing selected by the
Company;
(b) as soon as practicable, but in any event within 60 days
after the end of each of the first three quarters of each fiscal year of the
Company, an unaudited profit or loss statement, a statement of cash flows for
such fiscal quarter and an unaudited balance sheet as of the end of such fiscal
quarter in reasonable detail;
(c) as soon as practicable, but in any event prior to the end of
each fiscal year, a budget and business plan for the next fiscal year, including
balance sheets, income statements and statements of cash flows, and, as soon as
prepared, any other budgets or revised budgets prepared by the Company; and
(d) a statement of the authorized, issued and then outstanding
capital stock of the Company and all outstanding options, warrants and other
rights to acquire capital stock of the Company, including the following
information with respect to such outstanding stock, options, warrants and
rights: the
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holder; the number of shares covered; and the exercise price and expiration
date, if applicable; in each case as Investor may from time to time request.
4.2 Inspection. So long as Investor holds at least 20% of the Series
A Preferred Stock issued pursuant to the Purchase Agreement (as adjusted for
subsequent stock splits, combinations or reclassifications), the Company shall
permit Investor, at its own expense, to visit and inspect the Company's
properties, and to discuss the Company's affairs, finances and accounts with the
Company's officers, employees and outside accountants, all at such reasonable
times as may be requested by Investor.
4.3 Board of Directors. Investor shall be entitled to nominate one
member (the "Investor Nominee") to the Company's Board of Directors at each
meeting or pursuant to each written consent of the Company's stockholders for
the election of directors, and to remove from office the Investor Nominee and to
fill any vacancy caused by the resignation, death or removal of the Investor
Nominee. Each of Investor and the Prior Holder hereby agrees to vote all of its
respective shares of Common Stock and Series A Preferred Stock and any other
voting securities of the Company now owned or hereafter acquired in favor of the
election of the Investor Nominee to the Board.
(a) The Company shall call, promptly following receipt of a
request by Investor, a special meeting of the stockholders of the Company to
elect an Investor Nominee to the Board and to cause the removal of the Investor
Nominee if Investor shall request the removal of the Investor Nominee in writing
for any reason. Investor shall have the right to designate a new nominee in the
event the existing Investor Nominee shall be removed pursuant to this Section
4.3(a) or shall vacate his directorship for any reason.
(b) The Company shall use reasonable efforts to prevent any
action from being taken by the Board during the pendency of any vacancy due to
death, resignation or removal of an Investor Nominee, unless Investor shall have
failed to act to nominate and elect a replacement in a timely manner.
(c) The Company shall enter into indemnity agreements with the
Investor Nominee on the same terms as the Company may have with any other
director of the Company, and cause the Investor Nominee (and any former Investor
Nominee) to be covered on any insurance policy maintained from time to time by
the Company or any other person covering acts and omissions of the directors and
officers of the Company in their capacity as such.
4.4 Termination of Covenants. The covenants set forth in this
Section 4 shall terminate and be of no further force or effect (i) upon the
consummation of a Public Offering or when the Company first becomes subject to
the periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act,
whichever event shall first occur or (ii) with respect to the covenants set
forth in Section 4.2, as to any Holder, or transferee or assignee of such
Holder, who is deemed by the Board of Directors of the Company acting in good
faith to be a competitor or potential competitor of the Company.
5. Miscellaneous.
5.1 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
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5.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware without reference to conflicts of law
rules.
5.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
5.5 Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and shall
be addressed (i) if to Investor or to the Prior Holder, at its respective
address set forth on the signature page hereto and (ii) if to the Company, at
the address of its principal corporate offices (attention: Chairman), or in any
such case at such other address as a party may designate by 10 days' advance
written notice to the other party pursuant to the provisions above.
5.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
5.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding; provided, however,
that in the event that such amendment or waiver adversely affects the
obligations and/or rights of any Holder in a different manner than the other
Holders, such amendment or waiver shall also require the written consent of such
Holder. Any amendment or waiver effected in accordance with this paragraph shall
be binding upon each holder of any Registrable Securities then outstanding, each
future holder of all such Registrable Securities, and the Company.
5.8 Aggregation of Stock. All shares of the Series A Preferred Stock
of the Company held or acquired (or Common Stock issuable upon conversion
thereof) by affiliated entities or persons (including partners or constituent
members and former partners and former constituent members) shall be aggregated
together for the purpose of determining the availability or discharge of any
rights under this Agreement. For purposes of this Section 5.8, the Company may
rely on such person whom a group of related persons shall designate from time to
time for information relating to the affiliations of entities or persons.
5.9 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
5.10 Entire Agreement; Amendment; Waiver. This Agreement (including
the Exhibits hereto, if any) constitutes the full and entire understanding and
agreement between the parties with regard to
14
<PAGE>
the subjects hereof and thereof, and supersedes all prior agreements and
understandings, whether written or oral, with respect to the subject matter
hereof.
5.11 Dispute Resolution. If there arises a dispute between any party
to this Agreement, and any other party to this Agreement regarding this
Agreement, those parties agree to negotiate in good faith to resolve the dispute
between them regarding this Agreement. If the negotiations do not resolve the
dispute to the reasonable satisfaction of both parties, then each party shall
nominate one partner, member or senior officer of the rank of Vice President or
higher as its representative. These representatives shall, within 30 days of a
written request by either party to call such a meeting, meet in person and alone
(except for one assistant for each party) and shall attempt in good faith to
resolve the dispute. If the dispute cannot be resolved by such senior managers
in such meeting, the parties agree that they shall, if requested in writing by
either party, meet within 30 days after such written notification for one day
with an impartial mediator mutually agreed upon by the parties and consider
dispute resolution alternatives other than litigation. If any alternative method
of dispute resolution is not agreed upon within 30 days after the one day
mediation, either party may begin litigation proceedings. This procedure shall
be a prerequisite before taking any additional action hereunder.
5.12 Remedies. Subject to Section 5.11, in the event of a breach by
the Company of its obligations under this Agreement, each Holder, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it will waive the
defense that a remedy at law would be adequate.
5.13 No Inconsistent Agreements. The Company has not, as of the date
hereof, and will not, on or after the date hereof, enter into any agreement with
respect to its securities which is inconsistent with or more favorable to any
stockholder on the date hereof than the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The Company shall
not, directly or indirectly, enter into any merger, consolidation or
reorganization in which the Company is not the surviving corporation unless the
proposed surviving corporation, prior to the merger, consolidation or
reorganization, agrees in writing to assume the obligations of the Company under
this Agreement, and for that purpose references herein to "Registrable
Securities" shall be deemed to be references to the securities to which holders
of Registrable Securities would be entitled to receive in exchange for
Registrable Securities in any such merger, consolidation or reorganization
unless such securities were registered under the Act in connection with the
merger, consolidation or reorganization.
[Remainder of page intentionally left blank.]
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Investor Rights
Agreement as of the date first above written.
eResearchTechnology, Inc.
By: /s/ Joel Morganroth
-------------------------------------
Joel Morganroth, M.D.
Title: Chairman
Address: 30 South 17th Street
Philadelphia, PA 19103
INVESTOR:
Communicade Inc.
By: /s/ Gerard A. Neumann
-------------------------------------
Name: Gerard A. Neumann
Title: Chief Financial Officer
Address: 437 Madison Avenue
New York, NY 10022
PRIOR HOLDER:
Premier Research Worldwide, Ltd.
By: /s/ Joel Morganroth
-------------------------------------
Joel Morganroth, M.D.
Chairman and Chief Executive Officer
Address: 30 South 17th Street
Philadelphia, PA 19103
[Signature Page to Investor Rights Agreement]
<PAGE>
EXHIBIT D
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT
WITH A VIEW TO THE DISTRIBUTION THEREOF AND, EXCEPT AS STATED IN AN AGREEMENT
BETWEEN THE HOLDER OF THIS CERTIFICATE AND THE ISSUER CORPORATION, SUCH
SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES OR THE ISSUER
CORPORATION RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE ISSUER
CORPORATION) STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
VOID AFTER 5:00 P.M., PHILADELPHIA TIME, ON _________________, 2002 OR IF NOT A
BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., PHILADELPHIA TIME, ON THE NEXT
FOLLOWING BUSINESS DAY.
NO. 1
WARRANT TO PURCHASE
_______ SHARES OF
COMMON STOCK
OF
ERESEARCHTECHNOLOGY, INC.
TRANSFER RESTRICTED -- SEE SECTION 5.01
This certifies that, for good and valuable consideration, Communicade,
Inc. or its permitted successors and assignees (the "Warrantholder"), is
entitled to purchase from eResearchTechnology, Inc., a Delaware corporation (the
"Company"), subject to the terms and conditions hereof, at any time on or after
the date hereof, and before 5:00 p.m., Philadelphia time, on __________, 2002
(or, if such day is not a Business Day, at or before 5:00 p.m., Philadelphia
time, on the next following Business Day), the number of fully paid and non-
assessable shares of Common Stock stated above at the Exercise Price. The
Exercise Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Article III hereof.
ARTICLE I
<PAGE>
Section 1.01 Definition of Terms. As used in this Warrant, the
following capitalized terms shall have the following respective meanings:
(a) Business Day: A day other than a Saturday, Sunday or other
day on which banks in the Commonwealth of Pennsylvania are authorized by law to
remain closed.
(b) Common Stock: Common Stock, $.01 par value per share, of
the Company.
(c) Exercise Price: $ per Warrant Share, as such price may
be adjusted from time to time pursuant to Article III hereof.
(d) Expiration Date: 5:00 p.m., Philadelphia time, on ,
2002 or if such day is not a Business Day, the next succeeding day which is a
Business Day.
(e) Holder: A holder of outstanding Warrants.
(f) Person: An individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or any department
or agency thereof.
(g) Public Offering: A public offering of any of the Company's
equity or debt securities pursuant to a registration statement under the
Securities Act.
(h) Securities Act: The Securities Act of 1933, as amended.
(i) Transfer: See Section 5.01.
(j) Warrant: This Warrant and all other warrants that may be
issued in its place.
(k) Warrantholder: The person or entity to whom this Warrant
is originally issued, or any successor in interest thereto, or any assignee or
transferee thereof, in whose name this Warrant is registered upon the books to
be maintained by the Company for that purpose.
(l) Warrant Shares: The shares of Common Stock purchasable
upon exercise of the Warrants.
ARTICLE II
DURATION AND EXERCISE OF WARRANT
Section 2.01 Duration of Warrant. The Warrantholder may exercise this
Warrant at any time and from time to time after the date hereof and before 5:00
p.m., Philadelphia time, on
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<PAGE>
the Expiration Date. If this Warrant is not exercised on or before the
Expiration Date, it shall become void, and all rights hereunder shall thereupon
cease.
(a) Exercise of Warrant.
(i) The Warrantholder may exercise this Warrant, in whole
or in part, by presentation and surrender of this Warrant to the Company at its
corporate office at 30 South 17th Street, Philadelphia, PA 19103, or at the
office of its stock transfer agent, if any, with the Subscription Form annexed
hereto duly executed and accompanied by payment of the full Exercise Price for
each Warrant Share to be purchased.
(ii) Upon receipt of this Warrant with the Subscription
Form duly executed and accompanied by payment of the aggregate Exercise Price
for the Warrant Shares for which this Warrant is then being exercised, the
Company shall cause to be issued certificates for the total number of whole
shares of Common Stock for which this Warrant is being exercised (adjusted to
reflect the effect of the provisions contained in Article III hereof, if any) in
such denominations as are requested for delivery to the Warrantholder, and the
Company shall thereupon deliver such certificates to the Warrantholder. The
Warrantholder shall be deemed to be the holder of record of the Shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of the Company shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the
Warrantholder. If at the time this Warrant is exercised, a registration
statement is not in effect to register under the Securities Act the Warrant
Shares issuable upon exercise of this Warrant, the Company may require the
Warrantholder to make such investment intent representations, and to provide the
Company with an opinion of counsel (which may be counsel for the Company) and
may place such legends on certificates representing the Warrant Shares, as may
be reasonably required in the opinion of counsel to the Company to permit the
Warrant Shares to be issued without such registration.
(iii) Notwithstanding anything to the contrary set forth
herein, upon exercise of this Warrant, the Warrantholder may, at its election,
either (i) exercise this Warrant by paying to the Company an amount equal to the
aggregate Exercise Price of the shares being purchased or (ii) receive shares of
Common Stock equal to the value (as determined below) of this Warrant, in which
event the Company shall issue to the Warrantholder a number of shares of Common
Stock computed using the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares to be issued to the Warrantholder.
Y = the number of shares purchasable under this Warrant with
respect to which the Exercise Price is to be paid.
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<PAGE>
A = the current fair market value of one share of the
Company's Common Stock.
B = the Exercise Price then in effect.
As used herein, current fair market value of the Company's Common Stock shall
mean with respect to each share of Common Stock the average of the closing
prices of the Company's Common Stock sold on all securities exchanges on which
the Common Stock may at the time be listed, or, if there have been no sales on
any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day the
Common Stock is not so listed, the average of the representative bid and asked
prices quoted in the Nasdaq Stock Market as of 4:00 p.m., New York City time,
or, if on any day the Common Stock is not quoted in the Nasdaq Stock Market, the
average of the highest bid and lowest asked price on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over the 20 consecutive business days prior to the day as of which the current
fair market value of Common Stock is being determined. If at any time the Common
Stock is not listed on any securities exchange or quoted in the Nasdaq Stock
Market or the over-the-counter market, the current fair market value shall be
the highest price per share that the Company could obtain from a willing buyer
(not a current employee or director) for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in good faith by the
Board of Directors of the Company, unless the Warrantholder shall purchase such
shares in conjunction with an underwritten public offering of the Company's
Common Stock pursuant to a registration statement filed under the Securities Act
of 1933, in which case the fair market value shall be the price per share at
which the Common Stock is sold to the public in such offering.
(iv) In case the Warrantholder shall exercise this Warrant
with respect to less than all of the Warrant Shares that may be purchased under
this Warrant, the Company shall execute a new warrant in the form of this
Warrant for the balance of such Warrant Shares and deliver such new warrant to
the Warrantholder.
Section 2.02 Reservation of Shares. The Company hereby agrees that at
all times there shall be reserved for issuance and delivery upon exercise of
this Warrant such number of shares of Common Stock or other shares of capital
stock of the Company from time to time issuable upon exercise of this Warrant.
All such shares shall be duly authorized, and when issued upon such exercise,
shall be validly issued, fully paid and nonassessable, free and clear of all
liens, security interests, charges and other encumbrances or restrictions on
sale and free and clear of all preemptive rights.
Section 2.03 Fractional Shares. The Company shall not be required to
issue any fraction of a share of its capital stock in connection with the
exercise of this Warrant, and in any case where the Warrantholder would, except
for the provisions of this Section 2.04, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall, upon the exercise of this Warrant and receipt of the Exercise
Price, issue only
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<PAGE>
the largest number of whole shares purchasable upon exercise of this Warrant.
The Company shall not be required to make any cash or other adjustment in
respect of such fraction of a share to which the Warrantholder would otherwise
be entitled, but shall return to the Warrantholder that portion of the Exercise
Price that represents such fraction of a share.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK PURCHASABLE
AND OF EXERCISE PRICE
The Exercise Price and the number and kind of Warrant Shares shall be
subject to adjustment from time to time upon the happening of certain events as
provided in this Article III.
Section 3.01 Mechanical Adjustment.
(a) If at any time prior to the exercise of this Warrant in
full, the Company shall (i) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (ii) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (iii)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares; or (iv) issue any shares of its capital stock by
reclassification of its Common Stock (including any such reclassification in
connection with a consolidation or a merger in which the Company is the
continuing corporation), the Exercise Price in effect at the time of the record
date of such dividend, distribution, subdivision, combination, reclassification
or recapitalization shall be adjusted so that the Warrantholder shall be
entitled to receive the aggregate number and kind of shares which, if this
Warrant had been exercised in full immediately prior to such event, it would
have owned by virtue of such exercise and been entitled to receive by virtue of
such dividend, distribution, subdivision, combination, reclassification or
recapitalization. Any adjustment required by this paragraph 3.01(a) shall be
made successively immediately after the record date, in the case of a dividend
or distribution, or the effective date, in the case of a subdivision,
combination, recapitalization or reclassification, to allow the purchase of such
aggregate number and kind of shares.
(b) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to paragraph (a) of this Section 3.01, the Warrant
Shares shall simultaneously be adjusted by multiplying the number of Warrant
Shares initially issuable upon exercise of each Warrant by the Exercise Price in
effect on the date thereof and dividing the product so obtained by the Exercise
Price, as adjusted.
(c) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least one
cent in such price; provided, however, that any adjustments which by reason of
this paragraph (c) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 3.01 shall be made to the nearest cent or to the nearest one-hundredth
of a
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<PAGE>
share, as the case may be. Notwithstanding anything in this Section 3.01 to
the contrary, the Exercise Price shall not be reduced to less than the then
existing par value of the Common Stock as a result of any adjustment made
hereunder.
Section 3.02 Notice of Adjustment. Whenever the number of Warrant
Shares or the Exercise Price is adjusted as herein provided, the Company shall
prepare and deliver to the Warrantholder a certificate signed by its President,
setting forth the adjusted number of shares purchasable upon the exercise of
this Warrant and the Exercise Price of such shares after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which adjustment was made.
Section 3.03 No Adjustment for Cash Dividends. No adjustment in respect
of any cash dividends shall be made during the term of this Warrant.
Section 3.04 Preservation of Purchase Rights in Certain Transactions.
In case of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock (other than subdivision or combination of the
outstanding Common Stock and other than a change in the par value of the Common
Stock) or in case of any consolidation or merger of the Company with or into
another corporation (other than a merger with a subsidiary in which the Company
is the continuing corporation and that does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the class issuable upon exercise of this Warrant) or in the case of any sale,
lease, transfer or conveyance to another corporation of the property and assets
of the Company as an entirety or substantially as an entirety, the Company
shall, as a condition precedent to such transaction, cause such successor or
purchasing corporation, as the case may be, to execute with the Warrantholder an
agreement granting the Warrantholder the right thereafter, upon payment of the
Exercise Price in effect immediately prior to such action, to receive upon
exercise of this Warrant the kind and amount of shares and other securities and
property that it would have owned or have been entitled to receive after the
happening of such reclassification, change, consolidation, merger, sale or
conveyance had this Warrant been exercised immediately prior to such action.
Such agreement shall provide for adjustments in respect of such shares of stock
and other securities and property, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article III. In the event
that in connection with any such reclassification, capital reorganization,
change, consolidation, merger, sale or conveyance, additional shares of Common
Stock shall be issued in exchange, conversion, substitution or payment, in whole
or in part, for, or of, a security of the Company other than Common Stock, any
such issue shall be treated as an issue of Common Stock covered by the
provisions of this Article III. The provisions of this Section 3.04 shall
similarly apply to successive reclassifications, capital reorganizations,
consolidations, mergers, sales or conveyances.
Section 3.05 Dissolution or Liquidation. In the event of any proposed
distribution of the assets of the Company in dissolution or liquidation (except
under circumstances when Section 3.04 shall be applicable), the Company shall
mail notice thereof to the Warrantholder and shall make no distribution to
stockholders until the expiration of 30 days from the date of mailing
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<PAGE>
of the aforesaid notice and, in any such case, the Warrantholder may exercise
the purchase rights with respect to this Warrant within 30 days from the date of
mailing such notice and all rights herein granted not so exercised within such
30-day period shall thereafter become null and void.
Section 3.06 Form of Warrant After Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Exercise Price or
the number or kind of the Warrant Shares, and Warrants theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in this Warrant, as initially issued.
Section 3.07 Treatment of Warrantholder. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrantholder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for all purposes and shall not be
affected by any notice to the contrary.
ARTICLE IV
OTHER PROVISIONS RELATING TO
RIGHTS OF WARRANTHOLDER
Section 4.01 No Rights as Stockholders; Notice to Warrantholders.
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or its transferees the right to vote or to receive dividends or to
consent or to receive notice as a stockholder in respect of any meeting of
stockholders for the election of directors of the Company or of any other
matter, or any rights whatsoever as stockholders of the Company. The Company
shall give notice to the Warrantholder by certified mail if at any time prior to
the expiration or exercise in full of the Warrants, any of the following events
shall occur:
(a) the Company shall authorize the payment of any dividend
payable in any securities upon shares of Common Stock or authorize the making of
any non-cash distribution to the holders of shares of Common Stock;
(b) the Company shall authorize the issuance to all holders of
Common Stock of any additional shares of Common Stock or of rights, options or
warrants to subscribe for or purchase Common Stock or of any other subscription
rights, options or warrants;
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, or sale or conveyance of
the property of the Company as an entirety or substantially as an entirety); or
(d) a capital reorganization or reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common Stock
and other than a change in the par value of the Common Stock) or any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or change of Common
Stock
- 7 -
<PAGE>
outstanding) or in the case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially an entirety. Such
giving of notice shall be initiated (i) at least ten Business Days prior to the
date fixed as a record date or effective date or the date of closing of the
Company's stock transfer books for the determination of the stockholders
entitled to such dividend, distribution, or subscription rights, or for the
determination of the stockholders entitled to vote on such proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of the closing of the stock
transfer books, as the case may be. Failure to provide such notice shall not
affect the validity of any action taken in connection with such dividend,
distribution or subscription rights, or proposed merger, consolidation, sale,
conveyance, dissolution, liquidation or winding up.
Section 4.02 Lost, Stolen, Mutilated or Destroyed Warrants. If this
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms
as to indemnity or otherwise as it may in its discretion impose (which shall, in
the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as, and in substitution for, this
Warrant.
Section 4.03 Payment of Taxes. The Company shall pay all stamp taxes
attributable to the initial issuance of Warrant Shares issuable upon any
exercise of the Warrant or issuable pursuant to Section 3, excluding any tax or
taxes which may be payable because of the transfer involved in the issuance or
delivery of any certificates for Warrant Shares in a name other than that of the
exercising Warrantholder in respect of which such Warrant Shares are issued.
ARTICLE V
RESTRICTIONS ON TRANSFER OF WARRANTS
Section 5.01 Restrictions on Transfer.
(a) The Warrantholder understands and agrees that neither this
Warrant nor the Warrant Shares have been registered under the Securities Act,
and that accordingly they will not be transferable except as permitted under
various exemptions contained in the Securities Act, or upon satisfaction of the
registration and prospectus delivery requirements of the Securities Act.
(b) Neither this Warrant nor the Warrant Shares may be
disposed of or encumbered (any such action, a "Transfer"), except (i) to any
underwriter in connection with a Public Offering of the Common Stock, provided
that this Warrant is exercised immediately upon such Transfer and the shares of
Common Stock issued upon such exercise are sold by such underwriter as part of
such Public Offering and only in accordance with and subject to the provisions
of the Securities Act and the rules and regulations promulgated thereunder, or
(ii) to the extent that, in connection with any such transfer, the Warrantholder
first provides the Company with an opinion of counsel (which may be counsel for
the Company) to the effect that
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<PAGE>
such Transfer will be exempt from the registration and the prospectus delivery
requirements of the Securities Act and the registration or qualification
requirements of any applicable state securities laws, except that no such
opinion will be required with respect to a sale effected in accordance with Rule
144(k) or Rule 144A under the Securities Act or pursuant to an effective
registration statement under the Act.
(c) The Warrantholder understands that the Company shall not
be required to register any transfer of this Warrant or the Warrant Shares not
made in accordance with the restrictions contained herein and that the Company
may make a notation on its records or give instructions to any transfer agent of
this Warrant or the Warrant Shares in order to implement the restrictions on
transfer of this Warrant and the Warrant Shares as provided in paragraph
5.01(b).
ARTICLE VI
OTHER MATTERS
Section 6.01 Amendments and Waivers. The provisions of this Warrant,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waiver or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Holders of at least a majority-in-interest of the outstanding Warrants (based
upon the respective number of shares purchasable upon the exercise of the
Warrants). Whenever such consent is required hereunder, such consent may be
effected by any available legal means, including without limitation at a special
or regular meeting, by written consent or otherwise. Holders shall be bound by
any consent agreed to by a majority-in-interest of the Holders, whether or not
certificates representing such Warrants have been marked to indicate such
consent.
Section 6.02 Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware, notwithstanding
principles of conflicts of laws.
Section 6.03 Notice. Any notices or certificates by the Company to the
Holder and by the Holder to the Company shall be deemed delivered if in writing
and delivered in person or by certified mail (return receipt requested) to the
Holder addressed to it at the address which Holder has designated in writing to
the Company, and if to the Company, addressed to it at:
eResearchTechnology, Inc.
30 South 17th Street
Philadelphia, PA 19103
Attention: President and Chief Executive Officer
The Company may change its address by written notice to the Holder, and
the Holder may change its address by written notice to the Company.
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<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, _____________________________________________
hereby sells, assigns and transfers unto __________________________ the within
Warrant, together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint ________________________________ attorney, to
transfer said Warrant on the books of the within-named Company with respect to
the number of Warrant Shares set forth below, with full power of substitution in
the premises:
Name(s) of Number of
Assignee(s) Address Warrant Shares
----------- ------- --------------
And if said number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, a new Warrant is to be issued in the
name of said undersigned for the balance remaining of the Warrant Shares
represented by said Warrant.
Date:__________________
___________________________________
The above signature should
correspond exactly with the name on
the first page of this Warrant or
with the name of the assignee
appearing in the assignment form.
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
eResearch Technology, Inc.:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
_________________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $____________________.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay cash for any fractional share to:
(Please print Name, Address and Taxpayer I.D. No.)
Name____________________________________
Address_________________________________
________________________________________
Taxpayer I.D. No._______________________
And if said number of shares shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.
Signature_____________________________________
The above signature should
correspond exactly with the name on
the first page of this Warrant or
with the name of the assignee
appearing in the assignment form.
<PAGE>
EXHIBIT 10.18
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT
WITH A VIEW TO THE DISTRIBUTION THEREOF AND, EXCEPT AS STATED IN AN AGREEMENT
BETWEEN THE HOLDER OF THIS CERTIFICATE AND THE ISSUER CORPORATION, SUCH
SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES OR THE ISSUER
CORPORATION RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE ISSUER
CORPORATION) STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
VOID AFTER 5:00 P.M., PHILADELPHIA TIME, ON THE SECOND ANNIVERSARY OF THE DATE
ON WHICH ERESEARCHTECHNOLOGY, INC. CONSUMMATES ITS INITIAL PUBLIC OFFERING OR IF
NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., PHILADELPHIA TIME, ON THE
NEXT FOLLOWING BUSINESS DAY.
NO. 2
WARRANT TO PURCHASE
SHARES OF
COMMON STOCK
OF
ERESEARCHTECHNOLOGY, INC.
TRANSFER RESTRICTED -- SEE SECTION 5.01
This certifies that, for good and valuable consideration, Scirex
Corporation or its permitted successors and assignees (the "Warrantholder"), is
entitled to purchase from eResearchTechnology, Inc., a Delaware corporation (the
"Company"), subject to the terms and conditions hereof, at any time on or after
the date on which the Company consummates its initial Public Offering, and
before 5:00 p.m., Philadelphia time, on the second anniversary thereof (or, if
such day is not a Business Day, at or before 5:00 p.m., Philadelphia time, on
the next following Business Day), the Warrant Shares for an aggregate Exercise
Price of $1,000,000. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment as provided in Article III hereof.
<PAGE>
ARTICLE I
Section 1.01 Definition of Terms. As used in this Warrant, the
following capitalized terms shall have the following respective meanings:
(a) Business Day: A day other than a Saturday, Sunday or other
day on which banks in the Commonwealth of Pennsylvania are authorized by law to
remain closed.
(b) Common Stock: Common Stock, $.01 par value per share, of
the Company.
(c) Exercise Price: The price at which the Company's Common
Stock is sold to the public in the Company's initial Public Offering per Warrant
Share, as such price may be adjusted from time to time pursuant to Article III
hereof.
(d) Expiration Date: 5:00 p.m., Philadelphia time, on the
second anniversary of the date on which the Company consummates its initial
Public Offering or if such day is not a Business Day, the next succeeding day
which is a Business Day.
(e) Holder: A holder of outstanding Warrants.
(f) Person: An individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or any department
or agency thereof.
(g) Public Offering: A public offering of any of the Company's
Common Stock pursuant to a registration statement under the Securities Act.
(h) Securities Act: The Securities Act of 1933, as amended.
(i) Transfer: See Section 5.01.
(j) Warrant: This Warrant and all other warrants that may be
issued in its place.
(k) Warrantholder: The person or entity to whom this Warrant
is originally issued, or any successor in interest thereto, or any assignee or
transferee thereof, in whose name this Warrant is registered upon the books to
be maintained by the Company for that purpose.
(l) Warrant Shares: The shares of Common Stock purchasable
upon exercise of the Warrants, which shall initially equal $1,000,000 divided by
the Exercise Price, subject to adjustment as provided in Article III hereof.
- 2 -
<PAGE>
ARTICLE II
DURATION AND EXERCISE OF WARRANT
Section 2.01 Duration of Warrant. The Warrantholder may exercise this
Warrant at any time and from time to time after the date on which the Company
consummates its initial Public Offering and before 5:00 p.m., Philadelphia time,
on the Expiration Date. If this Warrant is not exercised on or before the
Expiration Date, it shall become void, and all rights hereunder shall thereupon
cease.
(a) Exercise of Warrant.
(i) The Warrantholder may exercise this Warrant, in
whole or in part, by presentation and surrender of this Warrant to the Company
at its corporate office at 30 South 17th Street, Philadelphia, PA 19103, or at
the office of its stock transfer agent, if any, with the Subscription Form
annexed hereto duly executed and accompanied by payment of the full Exercise
Price for each Warrant Share to be purchased.
(ii) Upon receipt of this Warrant with the
Subscription Form duly executed and accompanied by payment of the aggregate
Exercise Price for the Warrant Shares for which this Warrant is then being
exercised, the Company shall cause to be issued certificates for the total
number of whole shares of Common Stock for which this Warrant is being exercised
(adjusted to reflect the effect of the provisions contained in Article III
hereof, if any) in such denominations as are requested for delivery to the
Warrantholder, and the Company shall thereupon deliver such certificates to the
Warrantholder. The Warrantholder shall be deemed to be the holder of record of
the Warrant Shares issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Warrantholder. If at the time this Warrant is exercised, a registration
statement is not in effect to register under the Securities Act the Warrant
Shares issuable upon exercise of this Warrant, the Company may require the
Warrantholder to make such investment intent representations, and to provide the
Company with an opinion of counsel (which may be counsel for the Company) and
may place such legends on certificates representing the Warrant Shares, as may
be reasonably required in the opinion of counsel to the Company to permit the
Warrant Shares to be issued without such registration.
(iii) Notwithstanding anything to the contrary set
forth herein, upon exercise of this Warrant, the Warrantholder may, at its
election, either (i) exercise this Warrant by paying to the Company an amount
equal to the aggregate Exercise Price of the shares being purchased or (ii)
receive shares of Common Stock equal to the value (as determined below) of this
Warrant, in which event the Company shall issue to the Warrantholder a number of
shares of Common Stock computed using the following formula:
- 3 -
<PAGE>
X = Y(A-B)
------
A
Where: X = the number of shares to be issued to the Warrantholder.
Y = the number of shares purchasable under this Warrant
with respect to which the Exercise Price is to be
paid.
A = the current fair market value (as of the exercise
date) of one share of the Company's Common Stock.
B = the Exercise Price then in effect.
As used herein, current fair market value of the Company's Common Stock shall
mean with respect to each share of Common Stock the average of the closing
prices of the Company's Common Stock sold on all securities exchanges on which
the Common Stock may at the time be listed, or, if there have been no sales on
any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day the
Common Stock is not so listed, the average of the representative bid and asked
prices quoted in the Nasdaq Stock Market as of 4:00 p.m., New York City time,
or, if on any day the Common Stock is not quoted in the Nasdaq Stock Market, the
average of the highest bid and lowest asked price on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over the 20 consecutive business days prior to the day as of which the current
fair market value of Common Stock is being determined. If at any time the Common
Stock is not listed on any securities exchange or quoted in the Nasdaq Stock
Market or the over-the-counter market, the current fair market value shall be
the highest price per share that the Company could obtain from a willing buyer
(not a current employee or director) for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in good faith by the
Board of Directors of the Company, unless the Warrantholder shall purchase such
shares in conjunction with an underwritten public offering of the Company's
Common Stock pursuant to a registration statement filed under the Securities Act
of 1933, in which case the fair market value shall be the price per share at
which the Common Stock is sold to the public in such offering.
(iv) In case the Warrantholder shall exercise this Warrant
with respect to less than all of the Warrant Shares that may be purchased under
this Warrant, the Company shall execute a new warrant in the form of this
Warrant for the balance of such Warrant Shares and deliver such new warrant to
the Warrantholder.
Section 2.02 Reservation of Shares. The Company hereby agrees that at
all times there shall be reserved for issuance and delivery upon exercise of
this Warrant such number of shares of Common Stock or other shares of capital
stock of the Company from time to time issuable upon exercise of this Warrant.
All such shares shall be duly authorized, and when issued upon such exercise,
shall be validly issued, fully paid and nonassessable, free and clear of all
liens, security
- 4 -
<PAGE>
interests, charges and other encumbrances or restrictions on sale and free and
clear of all preemptive rights.
Section 2.03 Fractional Shares. The Company shall not be required to
issue any fraction of a share of its capital stock in connection with the
exercise of this Warrant, and in any case where the Warrantholder would, except
for the provisions of this Section 2.04, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall, upon the exercise of this Warrant and receipt of the Exercise
Price, issue only the largest number of whole shares purchasable upon exercise
of this Warrant. The Company shall not be required to make any cash or other
adjustment in respect of such fraction of a share to which the Warrantholder
would otherwise be entitled, but shall return to the Warrantholder that portion
of the Exercise Price that represents such fraction of a share.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK PURCHASABLE
AND OF EXERCISE PRICE
The Exercise Price and the number and kind of Warrant Shares shall be
subject to adjustment from time to time upon the happening of certain events as
provided in this Article III.
Section 3.01 Mechanical Adjustment.
(a) If at any time prior to the exercise of this Warrant in
full, the Company shall (i) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (ii) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (iii)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares; or (iv) issue any shares of its capital stock by
reclassification of its Common Stock (including any such reclassification in
connection with a consolidation or a merger in which the Company is the
continuing corporation), the Exercise Price in effect at the time of the record
date of such dividend, distribution, subdivision, combination, reclassification
or recapitalization shall be adjusted so that the Warrantholder shall be
entitled to receive the aggregate number and kind of shares which, if this
Warrant had been exercised in full immediately prior to such event, it would
have owned by virtue of such exercise and been entitled to receive by virtue of
such dividend, distribution, subdivision, combination, reclassification or
recapitalization. Any adjustment required by this paragraph 3.01(a) shall be
made successively immediately after the record date, in the case of a dividend
or distribution, or the effective date, in the case of a subdivision,
combination, recapitalization or reclassification, to allow the purchase of such
aggregate number and kind of shares.
(b) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to paragraph (a) of this Section 3.01, the Warrant
Shares shall simultaneously be adjusted by multiplying the number of Warrant
Shares initially issuable upon exercise of each
- 5 -
<PAGE>
Warrant by the Exercise Price in effect on the date thereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(c) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least one
cent in such price; provided, however, that any adjustments which by reason of
this paragraph (c) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 3.01 shall be made to the nearest cent or to the nearest one-hundredth
of a share, as the case may be. Notwithstanding anything in this Section 3.01 to
the contrary, the Exercise Price shall not be reduced to less than the then
existing par value of the Common Stock as a result of any adjustment made
hereunder.
Section 3.02 Notice of Adjustment. Whenever the number of Warrant
Shares or the Exercise Price is adjusted as herein provided, the Company shall
prepare and deliver to the Warrantholder a certificate signed by its President,
setting forth the adjusted number of shares purchasable upon the exercise of
this Warrant and the Exercise Price of such shares after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which adjustment was made.
Section 3.03 No Adjustment for Cash Dividends. No adjustment in respect
of any cash dividends shall be made during the term of this Warrant.
Section 3.04 Preservation of Purchase Rights in Certain Transactions.
In case of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock (other than subdivision or combination of the
outstanding Common Stock and other than a change in the par value of the Common
Stock) or in case of any consolidation or merger of the Company with or into
another corporation (other than a merger with a subsidiary in which the Company
is the continuing corporation and that does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the class issuable upon exercise of this Warrant) or in the case of any sale,
lease, transfer or conveyance to another corporation of the property and assets
of the Company as an entirety or substantially as an entirety, the Company
shall, as a condition precedent to such transaction, cause such successor or
purchasing corporation, as the case may be, to execute with the Warrantholder an
agreement granting the Warrantholder the right thereafter, upon payment of the
Exercise Price in effect immediately prior to such action, to receive upon
exercise of this Warrant the kind and amount of shares and other securities and
property that it would have owned or have been entitled to receive after the
happening of such reclassification, change, consolidation, merger, sale or
conveyance had this Warrant been exercised immediately prior to such action.
Such agreement shall provide for adjustments in respect of such shares of stock
and other securities and property, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article III. In the event
that in connection with any such reclassification, capital reorganization,
change, consolidation, merger, sale or conveyance, additional shares of Common
Stock shall be issued in exchange, conversion, substitution or payment, in whole
or in part, for, or of, a security of the Company other than Common Stock, any
such issue shall be treated as an issue of Common Stock covered by the
provisions of this Article III. The provisions
- 6 -
<PAGE>
of this Section 3.04 shall similarly apply to successive reclassifications,
capital reorganizations, consolidations, mergers, sales or conveyances.
Section 3.05 Dissolution or Liquidation. In the event of any proposed
distribution of the assets of the Company in dissolution or liquidation (except
under circumstances when Section 3.04 shall be applicable), the Company shall
mail notice thereof to the Warrantholder and shall make no distribution to
stockholders until the expiration of 30 days from the date of mailing of the
aforesaid notice and, in any such case, the Warrantholder may exercise the
purchase rights with respect to this Warrant within 30 days from the date of
mailing such notice and all rights herein granted not so exercised within such
30-day period shall thereafter become null and void.
Section 3.06 Form of Warrant After Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Exercise Price or
the number or kind of the Warrant Shares, and Warrants theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in this Warrant, as initially issued.
Section 3.07 Treatment of Warrantholder. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrantholder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for all purposes and shall not be
affected by any notice to the contrary.
ARTICLE IV
OTHER PROVISIONS RELATING TO
RIGHTS OF WARRANTHOLDER
Section 4.01 No Rights as Stockholders; Notice to Warrantholders.
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or its transferees the right to vote or to receive dividends or to
consent or to receive notice as a stockholder in respect of any meeting of
stockholders for the election of directors of the Company or of any other
matter, or any rights whatsoever as stockholders of the Company. The Company
shall give notice to the Warrantholder by certified mail if at any time prior to
the expiration or exercise in full of the Warrants, any of the following events
shall occur:
(a) the Company shall authorize the payment of any dividend
payable in any securities upon shares of Common Stock or authorize the making of
any non-cash distribution to the holders of shares of Common Stock;
(b) the Company shall authorize the issuance to all holders of
Common Stock of any additional shares of Common Stock or of rights, options or
warrants to subscribe for or purchase Common Stock or of any other subscription
rights, options or warrants;
- 7 -
<PAGE>
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, or sale or conveyance of
the property of the Company as an entirety or substantially as an entirety); or
(d) a capital reorganization or reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common Stock
and other than a change in the par value of the Common Stock) or any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or change of Common
Stock outstanding) or in the case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially an
entirety.
Such giving of notice shall be initiated (i) at least ten Business Days prior to
the date fixed as a record date or effective date or the date of closing of the
Company's stock transfer books for the determination of the stockholders
entitled to such dividend, distribution, or subscription rights, or for the
determination of the stockholders entitled to vote on such proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of the closing of the stock
transfer books, as the case may be. Failure to provide such notice shall not
affect the validity of any action taken in connection with such dividend,
distribution or subscription rights, or proposed merger, consolidation, sale,
conveyance, dissolution, liquidation or winding up.
Section 4.02 Lost, Stolen, Mutilated or Destroyed Warrants. If this
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms
as to indemnity or otherwise as it may in its discretion impose (which shall, in
the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as, and in substitution for, this
Warrant.
Section 4.03 Payment of Taxes. The Company shall pay all stamp taxes
attributable to the initial issuance of Warrant Shares issuable upon any
exercise of the Warrant or issuable pursuant to Section 3, excluding any tax or
taxes which may be payable because of the transfer involved in the issuance or
delivery of any certificates for Warrant Shares in a name other than that of the
exercising Warrantholder in respect of which such Warrant Shares are issued.
ARTICLE V
RESTRICTIONS ON TRANSFER OF WARRANTS
Section 5.01 Restrictions on Transfer.
(a) The Warrantholder understands and agrees that neither this
Warrant nor the Warrant Shares have been registered under the Securities Act,
and that accordingly they will not be transferable except as permitted under
various exemptions contained in the Securities Act, or upon satisfaction of the
registration and prospectus delivery requirements of the Securities Act.
- 8 -
<PAGE>
(b) Neither this Warrant nor the Warrant Shares may be
disposed of or encumbered (any such action, a "Transfer"), except (i) to any
underwriter in connection with a Public Offering of the Common Stock, provided
that this Warrant is exercised immediately upon such Transfer and the shares of
Common Stock issued upon such exercise are sold by such underwriter as part of
such Public Offering and only in accordance with and subject to the provisions
of the Securities Act and the rules and regulations promulgated thereunder, or
(ii) to the extent that, in connection with any such transfer, the Warrantholder
first provides the Company with an opinion of counsel (which may be counsel for
the Company) to the effect that such Transfer will be exempt from the
registration and the prospectus delivery requirements of the Securities Act and
the registration or qualification requirements of any applicable state
securities laws, except that no such opinion will be required with respect to a
sale effected in accordance with Rule 144(k) or Rule 144A under the Securities
Act or pursuant to an effective registration statement under the Act.
(c) The Warrantholder understands that the Company shall not
be required to register any transfer of this Warrant or the Warrant Shares not
made in accordance with the restrictions contained herein and that the Company
may make a notation on its records or give instructions to any transfer agent of
this Warrant or the Warrant Shares in order to implement the restrictions on
transfer of this Warrant and the Warrant Shares as provided in paragraph
5.01(b).
ARTICLE VI
OTHER MATTERS
Section 6.01 Amendments and Waivers. The provisions of this Warrant,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waiver or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Holders of at least a majority-in-interest of the outstanding Warrants (based
upon the respective number of shares purchasable upon the exercise of the
Warrants). Whenever such consent is required hereunder, such consent may be
effected by any available legal means, including without limitation at a special
or regular meeting, by written consent or otherwise. Holders shall be bound by
any consent agreed to by a majority-in-interest of the Holders, whether or not
certificates representing such Warrants have been marked to indicate such
consent.
Section 6.02 Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware, notwithstanding
principles of conflicts of laws.
Section 6.03 Notice. Any notices or certificates by the Company to the
Holder and by the Holder to the Company shall be deemed delivered if in writing
and delivered in person or by certified mail (return receipt requested) to the
Holder addressed to it at the address which Holder has designated in writing to
the Company, and if to the Company, addressed to it at:
- 9 -
<PAGE>
eResearchTechnology, Inc.
30 South 17th Street
Philadelphia, PA 19103
Attention: President and Chief Executive Officer
The Company may change its address by written notice to the Holder, and
the Holder may change its address by written notice to the Company.
Section 6.04 Reports under the Securities Exchange Act of 1934. With a
view to making available to the Holder the benefits of Rule 144 promulgated
under the Securities Act and any other rule or regulation of the Securities and
Exchange Commission (the "SEC") that may at any time permit a Holder to sel
securities of the Company to the public without registration, the Company agrees
to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after 90 days after the
effective date of the first registration statement filed by the Company for the
offering of its Common Stock to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Securities
Exchange Act of 1934; and
(c) furnish to any Holder, so long as the Holder owns any
Warrant Shares, forthwith upon request (i) a written statement by the Company
that it has complied with the reporting requirements of SEC Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company for the offering of its Common Stock to the general
public), the Securities Act and the Securities Exchange Act of 1934 (at any time
after it has become subject to such reporting requirements), (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company and (iii) such other information as may be
reasonably requested in availing any Holder of any rule or regulation of the SEC
which permits the selling of any such Warrant Shares without registration.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
as of the 27th day of March, 2000.
eResearchTechnology, Inc.
By: /s/ Bruce Johnson
-----------------------
Bruce Johnson,
Vice President and
Chief Financial Officer
- 10 -
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, _____________________________________________
hereby sells, assigns and transfers unto __________________________ the within
Warrant, together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint ________________________________ attorney, to
transfer said Warrant on the books of the within-named Company with respect to
the number of Warrant Shares set forth below, with full power of substitution in
the premises:
Name(s) of Number of
Assignee(s) Address Warrant Shares
----------- ------- --------------
And if said number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, a new Warrant is to be issued in the
name of said undersigned for the balance remaining of the Warrant Shares
represented by said Warrant.
Date:__________________
-----------------------------
The above signature should
correspond exactly with the
name on the first page of this
Warrant or with the name of
the assignee appearing in the
assignment form.
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
eResearchTechnology, Inc.:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
_________________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the purchase price in full in the form of (i) cash or a
certified or official bank check in the amount of $____________________ and/or
(ii) shares of Common Stock with a current fair market value, calculated in
accordance with Section 2.01(a)(iii) of the within Warrant, of $ ..
Please issue a certificate or certificates for such Common Stock in the
name of, and pay cash for any fractional share to:
(Please print Name, Address and Taxpayer I.D. No.)
Name
---------------------------------------
Address
-----------------------------------
Taxpayer I.D. No.
--------------------------
And if said number of shares shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.
Signature
-----------------------------
The above signature should
correspond exactly with the
name on the first page of this
Warrant or with the name of
the assignee appearing in the
assignment form.
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
------------------------------
<TABLE>
<CAPTION>
State or
Jurisidiction of
Incorporation Names Under Which
Name of Subsidiary or Organization Subsidiary Does Business
- ------------------ ---------------- ------------------------
<S> <C> <C>
eResearch Technology Limited United Kingdom eResearch Technology Limited
eResearch Technology Ltd.
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Philadelphia, PA
March 27,2000
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001108888
<NAME> eResearch Technology, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<EXCHANGE-RATE> 1 1 1
<CASH> 0 0 0
<SECURITIES> 0 0 0
<RECEIVABLES> 0 10,666 4,962
<ALLOWANCES> 0 243 425
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0 12,629 5,864
<PP&E> 0 11,710 10,864
<DEPRECIATION> 0 7,600 8,159
<TOTAL-ASSETS> 0 22,553 13,325
<CURRENT-LIABILITIES> 0 9,231 8,063
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 0 13,322 5,262
<TOTAL-LIABILITY-AND-EQUITY> 0 22,553 13,325
<SALES> 0 0 0
<TOTAL-REVENUES> 14,163 31,807 42,785
<CGS> 0 0 0
<TOTAL-COSTS> 25,681 31,618 39,570
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> (11,518) 189 3,215
<INCOME-TAX> (4,530) 64 1,286
<INCOME-CONTINUING> (6,988) 125 1,929
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (6,988) 125 1,929
<EPS-BASIC> (6.988) .125 1.929
<EPS-DILUTED> (6.988) .125 1.929
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001108888
<NAME> DLB Systems, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 4,705
<CGS> 0
<TOTAL-COSTS> 6,494
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 290
<INCOME-PRETAX> (2,079)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,079)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,079)
<EPS-BASIC> .01165
<EPS-DILUTED> .01165
</TABLE>
