FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 30, 1996
EDITEK, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-11394 95-3863205
(Commission File Number) (IRS Employer Identification No.)
1238 Anthony Road
Burlington, North Carolina 27215
(Address of principal executive offices) (Zip Code)
(910) 226-6311
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
The Registrant entered into an agreement (the "Asset Purchase
Agreement") dated as of July 1, 1995, as amended by Amendment Agreements dated
as of January 2, 1996 and January 30, 1996 (the "Amendment Agreements")
(collectively, the "Purchase Agreement") with MedTox Laboratories, Inc.
("MedTox"), a Minnesota corporation involved in the performance of toxicological
testing services, including forensic, medical, biological and pharmacological
toxicology, to acquire substantially all of the assets of MedTox. By agreement
dated as of January 10, 1996, the Registrant assigned its rights to purchase the
assets to Psychiatric Diagnostic Laboratories of America, Inc. ("Psychiatric"),
a Delaware corporation and a wholly-owned subsidiary of Princeton Diagnostic
Laboratories of America, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Registrant. On January 30, 1996 (the "Closing Date") the
Registrant closed the MedTox acquisition.
The Registrant intends to use the assets acquired from MedTox to
continue the toxicological testing business formerly conducted by MedTox. The
Registrant believes that the acquisition of the MedTox assets will enable the
Registrant to expand substantially its toxicological testing presence in the
United States and Canada and to obtain cost savings from the Registrant's
current laboratory operations. The Registrant has hired 247 former employees
of MedTox, which brings to 362 the number of employees of the Registrant.
The terms of the MedTox Transaction and the related Preferred Stock
financing were negotiated at arms' length, and no material relationship exists
between MedTox and the Registrant or between MedTox and Psychiatric.
Set forth below is a summary of some of the material terms of the
Purchase Agreement and other transactions related thereto (collectively, the
"MedTox Transaction"), which summary should be read in conjunction with the full
terms of the Purchase Agreement and other related agreements, copies of which
are included as exhibits hereto and are incorporated herein in their entirety.
Upon closing, the Registrant's assignee, Psychiatric, acquired
substantially all of the assets of MedTox, including all the tangible and
intangible assets (other than cash in bank accounts) owned by MedTox as of the
closing, including, without limitation, all accounts receivable, all inventory,
equipment, contracts, leases, subleases, licenses, customer and supplier lists,
certain business records, trade secrets, tradenames and marks and other
intellectual property. Certain of the liabilities of MedTox were also assumed by
the Registrant and Psychiatric in connection with the acquisition, as more fully
described in the Agreement.
The Purchase Agreement provides for a purchase price for the MedTox
assets of $24,000,000, of which (i) $19,000,000 was paid in cash and (ii)
$5,000,000 was paid in the form of 2,517,306 shares ("MedTox Shares") of the
Common Stock of the Registrant, par value $.15 per share (the "Common Stock"),
which number of shares is subject to upward adjustment as described below in
"Additional Shares For MedTox Shareholders." The cash portion of the purchase
price was financed by the Registrant through sale of 380 shares of Series A
Convertible
<PAGE>
Preferred Stock ("Series A Preferred Stock") and debt financing
from Heller Financial, Inc. ("Heller") (the "Debt Financing.") In
addition, the Registrant sold an additional 235,295 shares of common
stock to Dr. Harry McCoy, a Medtox shareholder, (the "McCoy Shares"), and
27 shares of Series A Convertible Preferred Stock for working capital
purposes bringing the total number of Series A Preferred Shares sold to
407. The material terms of the Series A Preferred Stock and the Debt
Financing are described below.
Additional Shares For MedTox Shareholders
The Purchase Agreement provides that, if after the Closing Date the
market value of the Common Stock of the Registrant declines below $1.986 per
share, the Registrant will issue additional shares of Common Stock ("Additional
Shares") to shareholders of MedTox who retain their shares of Common Stock
through four specified dates (the "Repricing Dates") to compensate the MedTox
shareholders for decreases after the closing of the MedTox Transaction in the
market price of the Common Stock of the Registrant below $1.986 per share. The
Repricing Dates are the fifth trading day following the date the Registrant
issues press releases announcing its financial performance for the fiscal
quarters ending on March 31, 1996, September 30, 1996 and September 30, 1997 and
the fiscal year ending on December 31, 1996. Because the number of Additional
Shares that may become issuable is tied to decreases in the market price of the
Common Stock, the number of Additional Shares issuable in the future in
connection with the MedTox Transaction cannot be determined at this time and
will depend upon changes in the market price of the Common Stock, as well as the
extent to which MedTox shareholders retain the MedTox shares on each of the
Repricing Dates. Substantial sales of shares of Common Stock by the MedTox
shareholders or purchasers of Series A Preferred Stock may have a material
adverse effect on the market price of the Common Stock of the Registrant, which
would increase the number of Additional Shares issuable to MedTox shareholders
on the Repricing Dates.
Debt Financing
To obtain funds necessary to complete the MedTox Transaction and to
provide for the Registrant's working capital needs, the Registrant and its
affiliated entities, Psychiatric and diAGnostix, Inc., a Delaware corporation
and a wholly-owned subsidiary of the Registrant, entered into a credit facility
consisting of two term loans in the amount of $2,000,000 each, one with an
eighteen-month term and the other with a three-year term, and a revolving line
of credit of up to $7,000,000 (the "Credit Facility") with the amount available
under the Credit Facility dependent upon the amount of assets available to
secure borrowings under the Credit Facility. As of January 30, 1996
approximately $2,900,000 million was available under the Credit Facility, of
which approximately $1,000,000 has been drawn down by the Registrant. The
closing for the term loans and the Credit Facility occurred on January 30, 1996.
In connection with the Debt Financing, the Registrant and its
subsidiaries have granted Heller a security interest in substantially all their
assets and have agreed to comply with many financial and other covenants which
restrict operations of the Registrant and its subsidiaries, including the
ability to pay dividends. These security interests and covenants are contained
in agreements attached as exhibits hereto.
<PAGE>
Series A Preferred Stock
The 407 shares of Series A Preferred Stock were sold for $50,000 per
share with the initial sales occurring on January 30, 1996 (the "Initial
Issuance Date"). Each share of Series A Preferred Stock is convertible into
shares of Common Stock, at any time on or after March 30, 1996 (60 days after
the Initial Issuance Date). On the second anniversary of the Initial Issuance
Date conversion rights terminate and any remaining shares of Series A Preferred
Stock will be automatically converted, unless the holder provides the Registrant
with prior written notice that conversion is not desired.
The number of shares of Common Stock issuable upon conversion of a
share of Series A Preferred Stock will equal the number derived by dividing (i)
the purchase price of the Series A Preferred Stock ($50,000 per share) by (ii)
the lower of (x) $2.775 or (y) 75% of the Market Price of the Common Stock on
the day the shares of Preferred Stock are converted into Common Stock. "Market
Price" is defined for this purpose as the daily average of the closing bid
prices quoted on the American Stock Exchange or other exchange on which the
Common Stock is traded for the five trading days immediately preceding the date
the shares are converted. Accordingly, a minimum of 7,333,333 shares of Common
Stock are issuable upon conversion of the 407 outstanding shares of Series A
Preferred Stock. However, the actual number of shares of Common Stock issuable
upon conversion of the Series A Preferred Stock will not be known until the
time of issuance of such Common Stock. Substantial sales of Common Stock
by the MedTox shareholders and purchasers of Series A Preferred Stock may
have a material adverse effect on the market price of the Registrant's Common
Stock, which would increase the number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock.
The Series A Preferred Stock has a liquidation preference and a 9%
annual dividend (cumulative until December 31, 1997) and very limited voting
rights, as described in the Amended Certificate of Designations of Preferred
Stock, a copy of which is attached as an Exhibit hereto.
Resales of Securities
The Registrant has issued the 2,517,306 MedTox Shares, 235,295 McCoy
Shares and 104 shares of Series A Preferred Stock pursuant to an exemption
from the registration requirements of the Securities Act of 1933, as amended
(the 1933 Act"), afforded by Regulation D of the Securities and Exchange
Commission (the "Commission").
The Registrant has agreed to use its best efforts to register for
resale with the Commission the Common Stock issuable upon conversion of such
shares of Series A Preferred Stock (the "Conversion Shares"), the MedTox
Shares, the Additional Shares (as defined above), the McCoy Shares and 586,667
shares of Common Stock issuable pursuant to warrants issued as compensation to
Shoreline Pacific for investment banking services in connection with sales of
Series A Preferred Stock.
In addition, 303 shares of Series A Preferred Stock were sold by the
Registrant pursuant to Regulation S of the Commission (the "Offshore Offering").
The Registrant does not expect to file a registration statement with respect to
these shares of Series A Preferred Stock.
<PAGE>
Regulation S generally provides that offers or sales that occur outside
the United States and in compliance with the requirements thereof are not
subject to the registration requirements of the Act. Subject to certain
restrictions and conditions set forth therein, Regulation S is available for
offers and sales to investors that are not in the U.S. Such offshore investors
who purchase the shares of Series A Preferred Stock in the Offshore Offering
pursuant to Regulation S are not permitted to transfer such shares or Conversion
Shares to a U.S. Person (defined generally as a resident of the U.S. or an
entity organized under the laws of the U.S.) for a period of at least 40 days
after February 2, 1996, the closing of the Offshore Offering (the "Restricted
Period"). Resales to buyers who are not U.S Persons are permitted at any time.
After the expiration of the Restricted Period, investors who purchased
shares of Series A Preferred Stock in the Offshore Offering may sell such shares
or Conversion Shares in the U.S., but only if such shares are registered or an
exemption from registration is available. Accordingly, beginning on March 30,
1996 (the first day any investor will be able to convert shares of Series A
Preferred Stock into shares of Common Stock), to the extent that any offshore
investors have converted their shares of Series A Preferred Stock into Common
Stock, such offshore investors will also be able to sell such Common Stock in
the U.S. if the shares are registered or an exemption is available.
The investors participating in the Offshore Offering who can resell in
accordance with Regulation S do not have registration rights to require the
Registrant to register for resale the Conversion Shares issuable upon conversion
of shares of Series A Preferred Stock. Therefore, sales of Conversion Shares for
such offshore investors must be made in compliance with an exemption from
registration. The stock certificates for the Conversion Shares will not contain
restrictive securities legends. Consequently, the Registrant will not be able to
prevent resales of Series A Preferred Stock or Conversion Shares by offshore
investors and each offshore investor will make its own determination whether
such sales qualify for exemptions from registration.
If substantial sales of the Registrant's Common Stock occur, whether by
the investors in the Offshore Offering or by U.S. investors pursuant to the
registration statement or otherwise, such sales could have a material adverse
affect on the market price of the Registrant's Common Stock.
Item 5. Other Events.
Effective January 31, 1996, the Board of Directors of the Registrant
elected two additional members to the Board of Directors of the Registrant,
bringing the total number of Directors to six. Dr. Harry McCoy was the President
and Co-Founder of MedTox. Dr. McCoy received his Bachelors Degree in Biology
from the University of California, San Diego and a Doctorate in Pharmacy from
the University of California, San Francisco. He conducted his clinical
internship at the Stanford Medical Center, University of California and
pursued his Post-Doctoral Fellowship in Pharmacokinetics with the
University of Minnesota where he held joint faculty appointments at the
University of Minnesota College of Pharmacy and the Section of Clinical
Pharmacology at the St. Paul-Ramsey Medical Center.
<PAGE>
Mr. George Masters is Vice Chairman, President and Chief Executive
Officer of Seragen, Inc. Mr. Masters has spent his entire business career in the
healthcare industry, including 20 years with Warner-Lambert. He left
Warner-Lambert in 1983 as a Group President, and for the past 12 years has held
senior management positions with a number of biotechnology companies. Mr.
Masters has been a board member of approximately fifteen medically oriented
companies and currently serves as a member of the Board of Directors of: CME
Telemetrix, Hemosol, Inc., ImmuCell Corporation, Intelligent Medical Imaging,
and Seragen. Mr. Masters is on the Board of Directors of the Biotechnology
Industry Organization in Washington, DC and serves on its Executive Committee.
He is on the Board of Visitors of Boston University School of Medicine and the
Board of Associates of the Whitehead Institute for Biomedical Research at MIT.
He also acts as an investment advisor to three venture capital funds.
Item 7. Financial Statements and Exhibits.
(a) Financial statements.
Audited Consolidated Balance Sheets, Statements of Operations
and Cash Flows for MedTox Laboratories, Inc. for fiscal years
ended December 31, 1993 and December 31, 1994. (Incorporated
by reference to the Registrant's Proxy Statement dated
September 25, 1995.)
Interim Consolidated Balance Sheets, Statements of Operations
and Cash Flows for MedTox Laboratories, Inc. for the nine
months ended September 30, 1995.
(b) Pro Forma Financial Information.
EDITEK, Inc. and MedTox Laboratories, Inc. Pro Forma Condensed
Balance Sheet as of September 30, 1995 and Statements of
operations for fiscal year ended December 31, 1994 and Nine
Months ended September 30, 1995.
(c) Exhibits.
3.1 Amended Certificate of Designations of Series A
Convertible Preferred Stock.
10.1 Asset Purchase Agreement dated as of July 1, 1995
between EDITEK, Inc. and MedTox Laboratories, Inc.
10.2 Amendment Agreement dated as of January 2, 1996
between EDITEK, Inc. and MedTox Laboratories, Inc.
<PAGE>
10.3 Amendment Agreement dated as of January 30, 1996
among the Registrant, MedTox Laboratories, Inc. and
Psychiatric Diagnostic Laboratories of America, Inc.
10.4 Loan and Security Agreement (together with the
Exhibits and Schedules thereto) by and between the
Registrant, Psychiatric Diagnostic Laboratories of
America, Inc., diAGnostix, Inc. and Heller Financial,
Inc., dated January 30, 1996.
10.5 Term Note A executed by the Registrant, Psychiatric
Diagnostic Laboratories of America, Inc. and
diAGnostix in favor of Heller Financial, Inc., dated
January 30, 1996.
10.6 Term Note B executed by the Registrant, Psychiatric
Diagnostic Laboratories of America, Inc. and
diAGnostix in favor of Heller Financial, Inc., dated
January 30, 1996.
10.7 Assignment for Security (Patents) executed by the
Registrant in favor of Heller Financial, Inc., dated
January 30, 1996.
10.8 Assignment for Security - EDITEK (Trademarks)
executed by the Registrant in favor of Heller
Financial, Inc., dated January 30, 1996; and
10.9 Assignment for Security - Princeton (Trademarks)
executed by Princeton Diagnostic Laboratories of
America, Inc. in favor of Heller Financial, Inc.,
dated January 30, 1996.
10.10 Lease Agreement between MedTox Laboratories, Inc.
and Phoenix Home Life Mutual Insurance Company, dated
April 1, 1992, and amendments to such lease.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EDITEK, INC.
Date: February 7, 1996 By: /s/ Peter J. Heath
Name: Peter J. Heath
Title: Vice President of Finance
and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
(a) Interim Consolidated Balance Sheets, Statements of Operations and Cash Flows for MedTox
Laboratories, Inc. for the nine months ended September 30, 1995.
(b) EDITEK, Inc. and MedTox Laboratories, Inc. Pro Forma Condensed Balance Sheet as of
September 30, 1995 and Statements of Income for fiscal year ended December 31, 1994
and Nine Months ended September 30, 1995.
3.1 Amended Certificate of Designations of Series A Convertible Preferred Stock.
10.1 Asset Purchase Agreement dated as of July 1, 1995 between EDITEK, Inc. and MedTox
Laboratories, Inc.
10.2 Amendment Agreement dated as of January 2, 1996 between EDITEK, Inc. and MedTox
Laboratories, Inc.
10.3 Assignment Agreement dated as of January 10, 1996 among the Registrant, MedTox
Laboratories, Inc. and Psychiatric Diagnostic Laboratories of America, Inc.
10.4 Loan and Security Agreement (together with the Exhibits and Schedules thereto) by and
between the Registrant, Psychiatric Diagnostic Laboratories of America, Inc., diAGnostix,
Inc. and Heller Financial, Inc., dated January 30, 1996.
10.5 Term Note A executed by the Registrant, Psychiatric Diagnostic Laboratories of America,
Inc. and diAGnostix in favor of Heller Financial, Inc., dated January 30, 1996.
10.6 Term Note B executed by the Registrant, Psychiatric Diagnostic Laboratories of America,
Inc. and diAGnostix in favor of Heller Financial, Inc., dated January 30, 1996.
10.7 Assignment for Security (Patents) executed by the Registrant in favor of
Heller Financial, Inc., dated January 30, 1996.
10.8 Assignment for Security - EDITEK (Trademarks) executed by the Registrant in favor of
Heller Financial, Inc., dated January 30, 1996.
10.9 Assignment for Security - Princeton (Trademarks) executed by Princeton Diagnostic
Laboratories of America, Inc. in favor of Heller Financial, Inc., dated January 30, 1996.
10.10 Lease Agreement between MedTox Laboratories, Inc. and Phoenix Home Life Mutual Insurance
Company, dated April 1, 1992, and amendments to such lease.
</TABLE>
<PAGE>
Exhibit (a)
MEDTOX LABORATORIES, INC.
AND SUBSIDIARY
Consolidated Balance Sheet
<TABLE>
<CAPTION>
9/30/95 12/31/94
--------------------------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,034,921 $ 526,512
Accounts receivable, less allowance for
doubtful accounts 3,438,523 2,966,466
Laboratory supplies 310,395 413,301
Prepaid expenses and other current assets 179,386 107,622
--------------------------------
Total current assets 5,963,225 4,013,901
Property and equipment:
Laboratory equipment 4,736,097 4,108,629
Office furniture and fixtures 372,764 370,685
Leasehold improvements 543,277 426,017
Transportation equipment 315,819 304,891
--------------------------------
Total property and equipment 5,967,957 5,210,222
Less accumulated depreciation (4,169,368) (3,700,312)
--------------------------------
Net property and equipment 1,798,589 1,509,910
Other assets, net of related amortization:
Software 66,505 84,242
Goodwill 5,331 9,022
Deposits and other 18,629 19,596
--------------------------------
Total other assets 90,465 112,860
--------------------------------
Total assets $ 7,852,279 $ 5,636,671
================================
Current Liabilities
Accounts payable $ 639,451 $ 98,218
Accrued salary and wages 287,724 335,120
Accrued expenses 1,114,215 761,700
Restructuring accrual, current portion 258,070 258,070
Current portion of long-term debt 501,710 437,755
--------------------------------
Total current liabilities 2,801,170 1,890,863
Restructuring accrual, long-term portion 514,173 659,795
Long-term debt (net of current portion) 591,525 518,563
Minority interest in subsidiary
210 210
--------------------------------
Total liabilities 3,907,078 3,069,431
Stockholder's equity:
Common stock, $1 par value per share, 50,000 shares
authorized; 29,658 issued and outstanding 29,658 29,658
Additional paid-in capital 600,033 600,032
Retained earnings 3,315,510 1,937,550
--------------------------------
Total stockholders' equity 3,945,201 2,567,240
Total liabilities and stockholders' equity $ 7,852,279 $ 5,636,671
================================
</TABLE>
<PAGE>
MEDTOX LABORATORIES, INC.
AND SUBSIDIARY
Unaudited Consolidated Statement of Operations
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
9/30/95 9/30/94
---------------------------------
<S> <C> <C>
Revenues $17,019,777 $16,575,770
Pass through costs (1,669,418) (1,664,776)
---------------------------------
Net revenues 15,350,359 14,910,994
Cost of revenues:
Supplies 3,013,015 3,233,910
Direct labor 2,652,051 2,201,928
Laboratory overhead 1,259,848
-
---------------------------------
Total cost of sales 6,924,914 5,435,838
Gross profit 8,425,445 9,475,156
Operating expenses:
Distribution expenses 1,839,941 -
Sales and marketing expenses 707,987 638,483
Client support expenses 1,413,822 2,557,649
MIS expenses 144,980 103,800
General and administrative expenses 1,616,389 3,709,373
---------------------------------
Total operating costs 5,723,119 7,009,305
Other income (expense)
Other Income 1,112 4,000
Interest expense (139,156) (109,410)
---------------------------------
Total other income (expense) (138,044) (105,410)
---------------------------------
Net income $ 2,564,282 $ 2,360,441
=================================
Pro forma income data:
Net income as reported $ 2,564,282 $ 1,613,686
Pro forma adjustment to record
provision for income taxes 971,863 611,587
---------------------------------
Pro forma net income $ 1,592,419 $ 1,002,099
=================================
Pro forma net income per share $ 53.71 $ 33.95
=================================
</TABLE>
<PAGE>
MEDTOX LABORATORIES, INC.
AND SUBSIDIARY
Unaudited Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
9/30/95 9/30/94
-----------------------------------
<S> <C> <C>
Reconciliation of net income to net cash provided by operating activities:
Net income $ 2,564,282 $ 2,360,441
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 536,659 468,000
(Gain) loss on sale of assets (1,112) (4,000)
Changes in operating assets and liabilities:
Accounts receivable (472,057) (311,655)
Laboratory supplies 102,906 167,056
Prepaid and other current assets (71,764) 168,965
Accounts payable 517,707 (848,245)
Accrued expenses, salaries and wages 183,020 558,706
-----------------------------------
Net cash provided by operating activities $ 3,359,641 $ 2,559,268
Cash flows from investing activities:
Purchases of property and equipment $ (670,928) $ (462,248)
Purchases of intangible assets and software (132,982) (33,335)
Proceeds from sale of equipment 1,112 4,000
Decrease in deposits and other assets 967 19,157
-----------------------------------
Net cash used in investing activities $ (801,831) $ (472,426)
Cash flows from financing activities:
Proceeds from long-term debt $ 478,000 $ 124,619
Net decrease in line of credit - (500,000)
Payments on long-term debt (341,083) (724,890)
Proceeds from the issuance of common stock - 31,200
Distributions to stockholders (1,186,318) -
-----------------------------------
Net cash used in financing activities $ (1,049,401) $ (1,069,071)
Net increase in cash and cash equivalents $ 1,508,409 $ 1,017,771
Cash and cash equivalents, beginning of year $ 526,512 $ 27,977
-----------------------------------
Cash and cash equivalents, end of year $ 2,034,921 $ 1,045,748
===================================
</TABLE>
EXHIBIT (b)
The following unaudited pro forma consolidated balance sheet as of September 30,
1995, and the unaudited pro forma consolidated statements of operations for the
nine months ended September 30, 1995 and the year ended December 31, 1994, give
effect to the acquisition of MEDTOX by EDITEK using the purchase method. The
unaudited pro forma consolidated financial information is based on the
historical financial information of EDITEK and MEDTOX as of September 30, 1995
and the pro forma adjustments described in the notes thereto. There are no pro
forma adjustments to other amounts reflected in the historical financial
statements of MEDTOX as management believes that the historical costs assigned
to MEDTOX assets and liabilities approximate fair value.
Information was prepared as if the acquisition was effected as of
September 30, 1995 in the case of the unaudited pro forma consolidated balance
sheet; as of January 1, 1994 in the case of the September 30, 1995 and December
31, 1994 unaudited pro forma statements of operations. The unaudited pro forma
financial statements may not be indicative of the results that actually would
have occurred if the acquisition had been in effect on the dates indicated or
which may be obtained in the future. The unaudited pro forma financial
information should be read in conjunction with the financial statements and
other financial data of EDITEK and MEDTOX.
<PAGE>
EDITEK AND MEDTOX
UNAUDITED CONSOLIDATED BALANCE SHEETS
September 30, 1995
(In Thousands except per share amounts)
<TABLE>
<CAPTION>
Historical Proforma
------------------------------- ------------------------------------
EDITEK MEDTOX Adjustments Consolidated
------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and Cash Equivalents $ 416 $ 2,035 $ 934 (a) $ 3,385
Accounts Receivable, net 1,308 3,439 - 4,747
Inventory and Supplies 868 310 - 1,178
Other Current Assets 741 179 (500)(a) 420
------------------------------- ---------------- -----------------
Total Current Assets 3,333 5,963 434 9,730
Property and Equipment 7,512 5,968 - 13,480
Accumulated Depreciation (6,704) (4,169) - (10,873)
------------------------------- ---------------- -----------------
Property & Equipment, net 808 1,799 - 2,607
Other Assets - 85 - 85
Goodwill, net 3,241 5 22,202 (c) 25,448
------------------------------- ---------------- -----------------
Total Non-Current Assets 4,049 1,889 22,202 28,140
------------------------------- ---------------- -----------------
Total Assets $ 7,382 $ 7,852 $ 22,636 $ 37,870
============= ============== ================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Revolving line of credit $ - $ - $ 990 (a) $ 990
Accounts Payable 1,139 639 - 1,778
Accrued Expenses 333 1,402 112 (h) 1,847
Current Maturities of Long Term Debt 82 502 831 (b) 1,415
Restructuring Accrual, Current Portion - 258 - 258
Other Current Liabilities 13 - - 13
------------- -------------- ---------------- -----------------
Total Current Liabilities 1,567 2,801 1,933 6,301
Long Term Debt Obligations - 592 2,075 (b) 2,667
Restructuring Accrual, Long Term Portion - 514 - 514
-
Other Long Term Liabilities - - - -
------------- -------------- ---------------- -----------------
Total Liabilities 1,567 3,907 4,008 9,482
Common Stock 1,532 30 348 (e) 1,910
Addt. Paid-in Capital 33,631 600 2,595 (e) 36,826
Preferred Stock - - 19,000 (e) 19,000
Retained Earnings (Deficit) (29,172) 3,315 (3,315) (e) (29,172)
------------- -------------- ---------------- -----------------
5,991 3,945 18,628 28,564
Less: Treasury Stock and Other Contra Equity (176) - - (176)
------------- -------------- ---------------- -----------------
Total Stockholders' Equity 5,815 3,945 18,628 28,388
------------- -------------- ---------------- -----------------
Total Liabilities and Shareholders' Equity $ 7,382 $ 7,852 $ 22,636 $ 37,870
============= ============== ================ =================
</TABLE>
See notes to unaudited pro forma consolidated financial statements
<PAGE>
EDITEK AND MEDTOX
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 1995
(In Thousands except per share amounts)
<TABLE>
<CAPTION>
Historical Proforma
--------------------------------- ----------------------------------------
EDITEK MEDTOX Adjustments Consolidated
--------------------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Revenues $ 5,663 $ 15,351 $ - 21,014
Cost of sales 4,800 6,925 1,985 (g) 13,710
--------------------------------- ----------------- ------------------
Gross margin 863 8,426 (1,985) 7,304
Operating expenses
Research and development 669 - - 669
Selling, general and administrative 2,852 5,723 (1,985) (g) 6,590
Amortization 111 - 833 (d) 944
--------------------------------- ----------------- ------------------
Total operating expenses (1,152)
3,632 5,723 8,203
Income (loss) before interest
and other income (2,769) 2,703 (833) (899)
Other income - 1 - 1
Interest expense (21) (139) (206) (b) (366)
--------------------------------- ----------------- ------------------
Net income (loss) (2,790) 2,565 (1,039) (1,264)
Preferred stock dividend - - 1,283 (f) 1,283
--------------------------------- ----------------- ------------------
Net income (loss) applicable to common
shareholders $ (2,790) $ 2,565 $ (2,321) $ (2,546)
================================= ================= ==================
Income (Loss) per common share $ (0.28) $ 86.51 $ (0.20)
================================= ==================
Weighted average number of common
shares outstanding 9,915,427 29,650 12,432,733
================================= ==================
</TABLE>
See notes to unaudited pro forma consolidated financial statements
<PAGE>
EDITEK AND MEDTOX
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 1994
(In Thousands except per share amounts)
<TABLE>
<CAPTION>
Historical Proforma
---------------------------- ---------------------------------------
EDITEK MEDTOX Adjustments Consolidated
---------------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Revenues $ 6,593 $ 19,651 $ 37 (g) $ 26,281
Cost of sales 6,044 8,714 2,635 (g) 17,393
---------------------------- ---------------- -----------------
Gross margin 549 10,937 (2,598) 8,888
Operating expenses
Research and development 729 - - 729
Selling, general and administrative 3,194 7,576 (2,617) (g) 8,153
Amortization 147 - 1,110 (d) 1,257
Restructuring costs - 568 - 568
---------------------------- ---------------- -----------------
Total operating expenses 4,070 8,144 (1,507) 10,707
Income (loss) before interest
and other income (3,521) 2,793 (1,091) (1,819)
Other income - 19 (19) (g) -
Interest income(expense) (25) (218) (368) (a) (611)
---------------------------- ---------------- -----------------
Net income (loss) (3,546) 2,594 (1,478) (2,430)
Preferred stock dividend - - 1,710 (f) 1,710
---------------------------- ---------------- -----------------
Net income (loss) applicable to common
shareholders $ (3,546) $ 2,594 $ (3,188) $ (4,140)
============================ ================ =================
Income (Loss) per common share $ (0.49) $ 87.87 $ (0.43)
============================ =================
Weighted average number of common
shares outstanding 7,204,244 29,520 9,595,685
============================ =================
</TABLE>
See notes to unaudited pro forma consolidated financial statements
<PAGE>
EDITEK AND MEDTOX
NOTES TO UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
a) EDITEK was able to close the $24 million acquisition of MEDTOX by raising
$19 million from the issuance of 380 shares of Preferred Stock, borrowing
approximately $5 million in the form of two term loans and a revolving line
of credit and issuing $5 million of Common Stock of the Company to the
shareholders of MEDTOX in the form of 2,517,306 shares of Common Stock. The
Company did not acquire the cash on hand at MEDTOX at September 30, 1995
and was required to pay off the existing loans of MEDTOX and approximately
$1.2 million in financing costs.
Cash and Cash Equivalents
(dollar amounts in thousands)
Proceeds from issuance of
Series A Preferred Stock $19,000
Proceeds from debt:
Term Loans 4,000
Credit Facility 990
Compensation to Investment
Bankers ( 1,262)
Compensation for Placement
of Debt ( 165)
Payment of MedTox Notes:
Current Portion ( 502)
Long Term Portion ( 592)
Payment to MedTox
Shareholders (18,500)
MedTox distribution of cash
on hand at Medtox ( 2,035)
--------------
$ 934
Reduction of $500 in other Current Assets represents deposit previously
paid to Medtox.
(b) Pro Forma adjustment to long term debt accounts are summarized as follows:
Current Long Term
Portion Portion
Elimination of Medtox's
long term debt $ (502) $ (592)
Issuance of term loans 1,333 2,667
-----------------------
$ 831 $ 2,075
The interest rates on the loans are as follows:
Term Loan A 2.0% above Prime Rate
Term Loan B 2.5% above Prime Rate
Credit Facility 1.5% above Prime Rate
<PAGE>
c) Goodwill representing the excess of the purchase price of $24 million over
the fair value of the identifiable net assets of MedTox has been reflected
and is comprised of the following:
(dollar amounts in thousands)
Purchase price ............................................ $ 24,000
Costs related to acquisition .............................. 400
Net assets acquired @ 9/30/95 ............................. (2,198)
--------
$ 22,202
The allocation of the total amount of excess purchase price over the fair
value of the assets is a preliminary allocation absent an appraisal of
certain intangible assets.
d) Amortization is based on an effective date of the acquisition of MEDTOX of
January 1, 1994 amortized over a twenty year period.
e) Pro Forma adjustment to stockholder's equity accounts are summarized as
follows:
<TABLE>
<CAPTION>
(dollar amounts in thousands)
Additional
Common Preferred Paid In Retained
Stock Stock Capital Earnings
<S> <C> <C> <C> <C>
Elimination of MEDTOX'S equity accounts $ (30) $ - $ (600) $ (3,315)
Issuance of Preferred Stock - 19,000 (1,427) -
Issuance of Common Stock 378 - 4,622 -
----------- --------- ---------------- ----------
$ 348 $ 19,000 $ 2,595 $ ( 3,315)
</TABLE>
f) Dividend of 9% declared for $19 million of Preferred Stock issued and
outstanding.
g) Adjustments to reclassify certain expenses of MEDTOX, including
distribution expenses to conform with the historical presentation of the
financial statements of EDITEK. These reclassifications have no impact on
the operating income of MEDTOX.
h) Adjustment to reflect Acquisition costs are expected to approximate
$400,000.
<PAGE>
<PAGE>
AMENDED CERTIFICATE OF DESIGNATIONS OF PREFERRED STOCK
OF
EDITEK, INC.
Pursuant to Section 151 of the Delaware Corporation Law, EDITEK, Inc., a
Delaware corporation (the "Corporation"), does hereby submit this Amended
Certificate of Designations of Preferred Stock for the purpose of amending the
powers, preferences, limitations and rights of the Series A Convertible
Preferred Stock of the Corporation, as determined by the Board of Directors of
the Corporation pursuant to the authority vested in it by the provisions of the
Certificate of Incorporation of the Corporation and as originally set forth in
the Certificate of Designations of Preferred Stock filed with the Delaware
Secretary of State on January 10, 1996. There have been no shares of the Series
A Convertible Preferred Stock issued.
The Board of Directors of the Corporation unanimously adopted the following
resolutions, effective as of January 25, 1996, with respect to up to Four
Hundred Eighty (480) shares of Series A Convertible Preferred Stock, par value
$1.00 per share, of the Corporation:
RESOLVED:
The Series A Convertible Preferred Stock of the Corporation shall
consist of Four Hundred Eighty (480) shares of Series A Convertible
Preferred Stock, par value $1.00 per share ("Series A Stock"), the powers,
preferences, privileges, rights, qualifications, limitations and
restrictions of which are as follows:
Section 1.Dividends.
On December 31st of each year commencing on December 31, 1996, a
dividend equal to Four Thousand Five Hundred Dollars ($4,500.00) per share
shall accrue on each share of Series A Stock issued and outstanding on such
date. Such dividend shall be payable out of funds legally available
therefor, when and as declared by the Board of Directors of the
Corporation. Such dividends are hereinafter referred to as "Preferred
Dividends." Preferred Dividends which accrue on or before December 31, 1997
shall be cumulative, but Preferred Dividends accruing after December 31,
1997 shall not be cumulative. No dividends shall be payable on the shares
of Common Stock of the Corporation (the "Common Stock") until all accrued
cumulative Preferred Dividends have been fully paid. The Corporation shall
have no obligation to pay any dividend until the dividend is declared by
the Board of Directors of the Corporation.
Section 2.Liquidation, Dissolution or Winding Up.
(a) (i) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of
outstanding shares of Series A Stock, subject to the provisions of Section
2(b) hereof, shall be entitled to be
<PAGE>
paid out of the assets of the Corporation available for distribution to
stockholders, whether such assets are capital, surplus, or earnings, and
before any additional payment shall be made to the holders of any class of
Common Stock or of any other class or series of stock ranking on
liquidation junior to the Series A Stock, a liquidation preference in an
amount, for each share of Series A Stock held, equal to Fifty Thousand
Dollars ($50,000.00), plus all accrued but unpaid cumulative Preferred
Dividends and all accrued noncumulative Preferred Dividends that have been
declared but which remain unpaid (the "Series A Liquidation Preference").
(ii) If, upon any liquidation, dissolution or winding up of the
Corporation, the assets to be distributed pursuant to the Series A
Liquidation Preference set forth above shall be insufficient to permit
payment in full of such Series A Liquidation Preference and the Parity
Preferred Liquidation Preference which may be payable to holders of Parity
Preferred Stock (both as defined in subsection (b) below), then the Series
A Liquidation Preference shall entitle the holders of Series A Stock to be
distributed that portion of the assets available for distribution as (x)
the Series A Liquidation Preference bears to (y) the sum of the Series A
Liquidation Preference plus the Parity Preferred Liquidation Preference
(which amount shall be distributed pro rata to each owner of Series A Stock
based on the number of shares owned by each).
(iii)After payment in full of the Series A Liquidation Preference
and the Parity Preferred Liquidation Preference payable to holders of
Parity Preferred Stock (as defined in subsection (b) below) (or after funds
necessary for such payment shall have been set aside by the Corporation in
trust for the account of such holders so as to be available for such
payment), any assets remaining available for distribution shall be
distributed to the holders of the Common Stock and/or other series or
classes of stock, and no further distribution shall be made to the holders
of Series A Stock.
(b) The Corporation shall have the right to create a series or class
(or series or classes) of Preferred Stock of the Corporation with
liquidation rights and preferences which are equal, but not senior, to
those of the Series A Stock, and the Series A Stock shall rank in
liquidation on a parity with any such series or class of preferred stock of
the Corporation ("Parity Preferred Stock") to the extent of the Parity
Preferred Liquidation Preference if the rights of such Parity Preferred
Stock indicate that it is equal to the Series A Stock. The term "Parity
Preferred Liquidation Preference" shall mean the sum of (i) the lowest
purchase price paid to the Corporation upon issuance of the Parity
Preferred Stock, plus (ii) all accrued cumulative dividends (up to a
maximum annual dividend per share of nine percent (9%) of the purchase
price per share of the Parity Preferred Stock) payable to the holders of
the Parity Preferred Stock ("Parity Dividends") which remain unpaid, and
all accrued noncumulative Parity Dividends that have been declared but
which remain unpaid.
(c) A consolidation or merger of the Corporation (other than a
subdivision, combination, reclassification or exchange of shares provided
for elsewhere in Section 4 hereof) or a sale of all or substantially all of
the assets of the Corporation (other than a
<PAGE>
transaction to which the provisions of Section 4(e) hereof apply) shall be
regarded as a liquidation, dissolution or winding up of the affairs of the
Corporation within the meaning of this Section 2; provided, however, that,
except in the case of a sale of substantially all the assets of the
Corporation, each holder of Series A Stock shall have the right to elect
the benefits of the provisions of Section 4(e) hereof in lieu of receiving
payment in liquidation, dissolution or winding up of the Corporation
pursuant to this Section 2. For purposes of this Section 2, a sale of
substantially all of the assets of the Corporation shall include, without
limitation, the sale or other disposition of more than 50% of such assets,
as determined by reference to either (i) the book value, or (ii) the fair
market value, of such assets.
(d) In the event of a liquidation, dissolution or winding up of the
Corporation resulting in the availability of assets other than cash for
distribution to the holders of Series A Stock, the holders of Series A
Stock shall be entitled to a distribution of cash and/or assets equal in
value to the Series A Liquidation Preference, subject to the provisions of
Section 2(a). In the event that such distribution to the holders of Series
A Stock shall include any assets other than cash, the Board of Directors of
the Corporation shall determine the value of such assets to be distributed
for such purpose and shall notify all holders of Series A Stock of such
determination. The value of such assets for purposes of the distribution
under this Section 2(d) shall be the value as determined by the Board of
Directors of the Corporation in good faith. The determination of the Board
of Directors shall be final and binding.
Section 3.Voting Power. Except as otherwise expressly provided herein
or as required by law, the holders of Series A Stock shall have no voting
power, and the holders of the Common Stock shall exclusively possess all
voting power for the election of directors and for all other purposes.
Section 4.Conversion.The holders of Series A Stock shall have the
following conversion rights:
(a) Subject to and in compliance with the provisions of this Section
4, during the Conversion Period (as defined in Section 4(c) hereof), a
share of Series A Stock may be converted into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a
holder of Series A Stock shall be entitled upon conversion shall be
obtained by multiplying the Applicable Conversion Rate (determined as
provided in Section 4(b) hereof) by the number of shares of Series A Stock
being converted.
(b) The number of shares of Common Stock issuable upon conversion of
each share of the Series A Stock (the "Applicable Conversion Rate") shall
equal the quotient obtained by dividing (i) Fifty Thousand Dollars
($50,000.00) by (ii) 75% of the Market Price per share of the Common Stock
on the Conversion Date (as defined in Section 4(f) below). Notwithstanding
the foregoing, in no event shall the Applicable Conversion Rate be less
than the number of shares of Common Stock equal to the quotient obtained by
<PAGE>
dividing (i) Fifty Thousand Dollars ($50,000.00) by (ii) $2.775. "Market
Price" shall mean for this purpose the daily average for the five trading
days immediately prior to the First Issuance Date or the Conversion Date,
as the case may be, of the closing bid prices quoted on the American Stock
Exchange, Nasdaq National Market System or other securities exchange on
which the Common Stock is traded.
(c) A holder of Series A Stock shall have no right to convert Series A
Stock into Common Stock (A) from the date the first share of Series A Stock
is issued by the Corporation (the "First Issuance Date") until the
beginning of the Conversion Period (as defined below), and (B) all
conversion rights terminate and the Series A Stock ceases to be convertible
on the second anniversary of the First Issuance Date (the "Conversion
Termination Date"). The period commencing on the sixtieth (60th) day
following the First Issuance Date and ending on the Conversion Termination
Date shall be referred to herein as the "Conversion Period." All shares of
Series A Stock not theretofore converted shall automatically be converted
into shares of Common Stock on the last day of the Conversion Period,
unless prior to 5:00 P. M. on the last day of the Conversion Period the
holder of such shares of Series A Stock delivers to the principal offices
of the Corporation written notice executed by such holder instructing the
Corporation not to convert the Series A Stock of such holder. The
Corporation shall not be required to deliver stock certificates
representing shares of Common Stock until the holder of the converted
Series A Stock surrenders the stock certificates evidencing the Series A
Stock as required by Section 4 (f) hereof. In determining the commencement
of a holder's right to convert shares of Series A Stock, the day
immediately following the First Issuance Date shall be counted as the first
day.
(d) If, during the Conversion Period, the Common Stock issuable upon
the conversion of the Series A Stock shall be changed into the same or
different number of shares of any class or classes of stock, whether by
reclassification or otherwise (other than a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 4),
then and in each such event the holder of each share of Series A Stock
shall have the right thereafter to convert such share into the kind and
amount of shares of stock and other securities and property receivable upon
such reorganization, reclassification or other change, by holders of the
number of shares of Common Stock into which such Series A Stock might have
been converted immediately prior to such reorganization, reclassification
or change.
(e) If at any time or from time to time during the Conversion Period
there shall be a capital reorganization of the Common Stock (other than a
reclassification or exchange of shares provided for elsewhere in this
Section 4) or a merger or consolidation of the Corporation with or into
another Corporation, then, as a part of and as a condition to the
effectiveness of such reorganization, merger or consolidation, lawful and
adequate provision shall be made so that if the Corporation is not the
surviving corporation, any shares of Series A Stock shall be converted into
preferred stock of the surviving corporation ("New Corporation Preferred
Stock") having equivalent preferences, rights and privileges to the Series
A Stock, except that in lieu of being able to convert into
<PAGE>
shares of Common Stock, the holders of the New Corporation Preferred Stock
shall thereafter be entitled to receive upon conversion of the New
Corporation Preferred Stock the number of shares of stock or other
securities or property of the Corporation or of the successor corporation
resulting from such merger or consolidation, to which a holder of the
number of shares of Common Stock deliverable upon conversion of the Series
A Stock immediately prior to the capital reorganization, merger,
consolidation or sale would have been entitled on such capital
reorganization, merger or consolidation.
Each holder of Series A Stock upon the occurrence of a capital
reorganization, merger or consolidation of the Corporation as such events
are more fully set forth in the first paragraph of this Section 4(e), shall
have the option of electing treatment of the shares of Series A Stock held
by such holder under either this Section 4(e) or Section 2(c) hereof,
except as otherwise provided in said Section 2(c), notice of which election
shall be submitted in writing to the Corporation at its principal offices
no later than ten (10) days before the effective date of such event,
provided that any such notice shall be effective if given not later than
fifteen (15) days after the date of the Corporation's notice, pursuant to
Section 6, with respect to such event.
(f) To exercise the conversion privilege, a holder of Series A Stock
shall surrender the certificate or certificates representing the shares
being converted to the Corporation at its principal office, and shall give
written notice (which notice may be made by fax, telecopy or other
electronic transmission) to the Corporation at that office that such holder
elects to convert such shares. Such notice shall also state the name or
names (with address or addresses) in which the certificate or certificates
for shares of Common Stock issuable upon such conversion shall be issued.
The certificate or certificates for shares of Series A Stock surrendered
for conversion shall be accompanied by proper assignment thereof to the
Corporation or in blank. The date when such written notice is received by
the Corporation shall be the "Conversion Date" with respect to such shares.
Within three (3) trading days after the Conversion Date, the Corporation
shall issue and shall deliver to the holder of the shares of Series A Stock
being converted, or on written order from such holder, a certificate or
certificates as such holder may request for the number of full shares of
Common Stock issuable upon the conversion of such shares of Series A Stock
in accordance with the provisions of this Section 4 and cash as provided in
Section 4(g), in respect of any fraction of a share of Common Stock
issuable upon such conversion; provided, however, that the Corporation
shall not be required to deliver stock certificates representing shares of
Common Stock until its receipt of the surrendered stock certificates for
the Series A Stock from the holder of the converted Series A Stock. Such
conversion shall be deemed to have been effected immediately prior to the
close of business on the Conversion Date, and at such time the rights of
the holder as holder of the converted shares of Series A Stock shall cease
and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record
of shares of Common Stock represented thereby.
(g) No fractional shares of Common Stock or scrip representing
fractional
<PAGE>
shares shall be issued upon conversion of Series A Stock. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon
conversion of Series A Stock, the Corporation shall pay to the holder of
the shares of Series A Stock which were converted a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the
Market Price (as defined in Section 4(b)) per share of the Common Stock on
the Conversion Date.
(h) In the event some but not all of the shares of Series A Stock
represented by a certificate or certificates surrendered by a holder are
converted, the Corporation shall execute and deliver to or on the order of
the holder, at the expense of the Corporation, a new certificate
representing the number of shares of Series A Stock which were not
converted.
(i) The Corporation shall at all times during the Conversion Period
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 Series A Stock, 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 Series A Stock, 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 Series A Stock, the
Corporation shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such
purpose.
Section 5.No Reissuance of Series A Stock.No share or shares of Series
A Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled, retired, and eliminated from the shares which the Corporation
shall be authorized to issue. The Corporation may from time to time take
such appropriate corporate action as may be necessary to reduce the
authorized number of shares of Series A Stock accordingly.
Section 6.Notices of Record Date.In the event (a) the Corporation
establishes a record date to determine the holders of any class of
securities who are entitled to receive any dividend or other distribution,
or (b) there occurs any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the
Corporation, any merger or consolidation of the Corporation, and any
transfer of all or substantially all of the assets of the Corporation to
any other corporation, or any other entity or person, or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, the
Corporation shall mail to each holder of Series A Stock at least twenty
(20) days prior to the record date specified therein, a notice specifying
(i) the date of such record date for the purpose of such dividend or
distribution and a description of such dividend or distribution, (ii) the
date on which any such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected
to become effective, and (iii) the time, if any, that is to be fixed, as to
when the holders of record of Common Stock (or other securities)
<PAGE>
shall be entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding up.
Section 7.No Preemptive Rights.The holders of Series A Stock shall
have no preemptive rights or other right to purchase additional shares of
capital stock or other securities of the Corporation by reason of their
ownership of shares of Series A Stock, except as may from time to time be
specified in a written contract between such holder(s) of Series A Stock
and the Corporation.
Section 8.Other Rights.Except as otherwise provided herein or in the
Certificate of Incorporation, each share of Series A Stock and each share
of Common Stock shall be identical in all respects, shall have the same
powers, preferences and rights, without preference of any such class or
share over any other such class or share, and shall be treated as a single
class of stock for all purposes.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be executed on its behalf by James D. Skinner, its President,
and Peter J. Heath, its Secretary, as of this 25th day of January, 1996, hereby
declaring and certifying that this is the act and deed of the Corporation and
that the facts stated herein are true.
EDITEK, INC.
[CORPORATE SEAL]
By: /s/ James D. Skinner
James D. Skinner
ATTEST:
/s/ Peter J. Heath
Peter J. Heath, Secretary
<PAGE>
ASSET PURCHASE AGREEMENT
Between
EDITEK, INC.
and
MEDTOX LABORATORIES, INC.
Dated Effective July 1, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE I ASSET SALE. . . . . . . . . . . . . . . . . . . 1
Section 1.1 Asset Sale . . . . . . . . . . . . . . . . 1
Section 1.2 Affiliates . . . . . . . . . . . . . . . . 1
ARTICLE II LIABILITIES . . . . . . . . . . . . . . . . . . 1
Section 2.1 Assumed Liabilities. . . . . . . . . . . . 1
Section 2.2 Retained Liabilities . . . . . . . . . . . 2
Section 2.3 Litigation Administration. . . . . . . . . 2
ARTICLE III CONSIDERATION PAYABLE BY PURCHASER. . . . . . . 3
Section 3.1 Purchase Price . . . . . . . . . . . . . . 3
ARTICLE IV CLOSING . . . . . . . . . . . . . . . . . . . . 3
Section 4.1 Closing. . . . . . . . . . . . . . . . . . 3
Section 4.2 Conditions to Each Party's Obligation to
Close. . . . . . . . . . . . . . . . . . . 4
Section 4.3 Conditions to Obligation of Seller to
Close. . . . . . . . . . . . . . . . . . . 4
Section 4.4 Conditions to Obligation of Purchaser to
Close. . . . . . . . . . . . . . . . . . . 5
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER . . 6
Section 5.1 Corporate Organization and Good
Standing . . . . . . . . . . . . . . . . . 6
Section 5.2 Authorization; Binding Agreement . . . . . 6
Section 5.3 Certain Fees . . . . . . . . . . . . . . . 7
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLER. . . . 7
Section 6.1 Corporate Organization and Good
Standing . . . . . . . . . . . . . . . . . 7
Section 6.2 Authorization; Binding Agreement . . . . . 8
Section 6.3 Capitalization of Seller . . . . . . . . . 8
Section 6.4 Subsidiaries; Investments. . . . . . . . . 8
Section 6.5 Financial Statements . . . . . . . . . . . 8
Section 6.6 Absence of Certain Changes . . . . . . . . 9
Section 6.7 Certain Fees . . . . . . . . . . . . . . . 9
Section 6.8 Consents and Approvals; No Violations. . . 9
Section 6.9 Litigation . . . . . . . . . . . . . . . . 10
Section 6.10 Certain Employment Matters . . . . . . . . 10
Section 6.11 Employee Benefit Plans . . . . . . . . . . 11
Section 6.12 Tax Matters. . . . . . . . . . . . . . . . 14
Section 6.13 Assets.. . . . . . . . . . . . . . . . . . 14
Section 6.14 Intellectual Property. . . . . . . . . . . 15
Section 6.15 Contracts, Minutes and Other Instruments
and Information. . . . . . . . . . . . . . 15
Section 6.16 Permits and Licenses . . . . . . . . . . . 15
<PAGE>
Section 6.17 Real Property; Environmental Matters . . . 16
Section 6.18 Related Party Transactions . . . . . . . . 17
Section 6.19 Customers. . . . . . . . . . . . . . . . . 17
Section 6.20 Insurance. . . . . . . . . . . . . . . . . 17
Section 6.21 Material Statements or Omissions . . . . . 17
ARTICLE VII CONDUCT OF BUSINESS PENDING THE CLOSING . . . . 18
Section 7.1 Conduct of Business by Seller Pending the
Closing. . . . . . . . . . . . . . . . . . 18
Section 7.2 Enforcement. . . . . . . . . . . . . . . . 20
ARTICLE VIII ADDITIONAL AGREEMENTS . . . . . . . . . . . . . 20
Section 8.1 Access to Information. . . . . . . . . . . 20
Section 8.2 Shareholders' Approval . . . . . . . . . . 20
Section 8.3 Employees. . . . . . . . . . . . . . . . . 21
Section 8.4 Expenses . . . . . . . . . . . . . . . . . 21
Section 8.5 Agreement to Cooperate . . . . . . . . . . 21
Section 8.6 Public Statements. . . . . . . . . . . . . 21
Section 8.7 Allocation of Purchase Price . . . . . . . 22
ARTICLE IX POST CLOSING COVENANTS. . . . . . . . . . . . . 22
Section 9.1 Names and Marks. . . . . . . . . . . . . . 22
Section 9.2 Trade Secrets. . . . . . . . . . . . . . . 22
Section 9.3 Good Will and Customers. . . . . . . . . . 22
Section 9.4 Noncompetition . . . . . . . . . . . . . . 23
Section 9.5 Contract Rights. . . . . . . . . . . . . . 23
Section 9.6 Title; Liens; Assignments. . . . . . . . . 23
ARTICLE X TERMINATION, AMENDMENT AND WAIVER . . . . . . . 23
Section 10.1 Termination. . . . . . . . . . . . . . . . 23
Section 10.2 Effect of Termination. . . . . . . . . . . 24
Section 10.3 Amendment. . . . . . . . . . . . . . . . . 24
Section 10.4 Waiver . . . . . . . . . . . . . . . . . . 24
ARTICLE XI CONFIDENTIALITY . . . . . . . . . . . . . . . . 24
Section 11.1 Confidential Information . . . . . . . . . 24
ARTICLE XII INDEMNIFICATION . . . . . . . . . . . . . . . . 25
Section 12.1 Indemnification. . . . . . . . . . . . . . 25
Section 12.2 Indemnification of Seller. . . . . . . . . 26
Section 12.3 Other Remedies . . . . . . . . . . . . . . 27
Section 12.4 Setoff . . . . . . . . . . . . . . . . . . 27
Section 12.5 Knowledge of Breach. . . . . . . . . . . . 27
ii
<PAGE>
ARTICLE XIII GENERAL PROVISIONS. . . . . . . . . . . . . . . 28
Section 13.1 Survival of Representations, Warranties
and Agreements . . . . . . . . . . . . . . 28
Section 13.2 Notices. . . . . . . . . . . . . . . . . . 28
Section 13.3 Miscellaneous. . . . . . . . . . . . . . . 29
Section 13.4 Dispute Resolution . . . . . . . . . . . . 29
Section 13.5 Counterparts . . . . . . . . . . . . . . . 30
Section 13.6 Parties in Interest. . . . . . . . . . . . 30
Disclosure Schedules
Exhibit A - Escrow Agreement with Henson & Efron, P.A. as
Escrow Agent (3.1 (a))
Exhibit B - Escrow Agreement with Petree Stockton, L.L.P as
Escrow Agent (3.1 (b))
Exhibit C - Form of Opinion of Petree Stockton, L.L.P. (4.3
(b))
Exhibit D - Form of Opinion of Henson & Efron, P. A. (4.4 (b))
Exhibit E - Form of Noncompetition Agreements (4.4 (f))
Exhibit F- Financial Statements of Seller (6.5)
Exhibit G - Form of Opinion of Henson & Efron, P. A. (8.2)
iii
<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT, dated effective July 1, 1995 (the "Agreement"),
between EDITEK, Inc., a Delaware corporation ("Purchaser") and
MedTox Laboratories, Inc., a Minnesota corporation ("Seller").
WHEREAS, Seller desires to sell to Purchaser all the assets of
Seller, and Purchaser desires to purchase all the assets of Seller,
pursuant to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby,
agree as follows:
ARTICLE I
ASSET SALE
Section 1.1 Asset Sale. Seller agrees to sell, and
Purchaser agrees to purchase, all the tangible and intangible
assets (other than cash in bank accounts) owned by Seller as of the
Closing Date (as hereinafter defined), including, without
limitation, all accounts receivable, all inventory, equipment,
contracts, leases, subleases, licenses, customer and supplier
lists, business records (other than Seller's minute books and stock
ledger), trade secrets, tradenames and marks and other intellectual
property (collectively, the "Assets"). Schedule 1.1 hereto
contains a list of all Assets of Seller on May 31, 1995. Until the
Closing Date Seller shall not incur any liabilities or transfer any
Assets without the prior consent of Purchaser, which shall not
unreasonably be withheld, except that Seller may sell inventory and
incur trade payables in the ordinary course of business consistent
with its prior practices as explained to Purchaser. All assets to
be sold by Seller hereunder, whether or not listed on Schedule 1.1
hereto, are hereinafter referred to as the "Assets."
Section 1.2 Affiliates. The term "Affiliates" shall mean
all of the current officers and directors of Seller.
ARTICLE II
LIABILITIES
Section 2.1 Assumed Liabilities. In addition to payment of
the purchase price payable pursuant to Section 3.1, Purchaser shall
undertake and assume on the Closing Date (as hereinafter defined)
to satisfy, perform or discharge, to the extent not satisfied,
performed, paid or discharged prior to the Closing Date, the
following liabilities and obligations of Seller (the "Assumed
Liabilities") to the extent such liabilities are not retained
liabilities covered by Section 2.2 hereof:
<PAGE>
(a) All contractual liabilities and obligations of
Seller set forth on, reflected on or reserved against the unaudited
balance sheet of Seller furnished pursuant to Section 6.5 below,
including without limitation all trade payables, bank debt and
other long term liabilities;
(b) All contractual liabilities and obligations of
Seller accruing on or after the Closing Date or the performance of
which arises on or after the Closing Date under agreements, leases,
contracts and commitments (i) which are disclosed to Purchaser
pursuant to Section 6.15, or (ii) which are (A) entered into in the
ordinary course of Seller's business (or are consented to by
Purchaser) after the date hereof and prior to the Closing Date and
(B) if it is "material" (as defined in Section 6.15 hereof), it is
disclosed in writing to Purchaser at or prior to the Closing Date;
and
(c) All obligations of Seller under the Change in
Control and Employment Agreements set forth in Disclosure Schedule
2.1(c) ("Employee Agreements") for employees who are terminated by
Seller immediately prior to the Closing, provided that no
obligation of Seller is assumed by Purchaser under this Section 2.1
with respect any claim by any employee of Seller that the
termination of employment with Seller constitutes a termination of
employment for purposes of Section 3 of any such Employee
Agreement, unless Purchaser shall fail to offer to employ such
employee on terms that would not constitute a "Good Reason" as
defined in the Employee Agreements.
Section 2.2 Retained Liabilities. Except as provided in
Section 2.1 hereof, Purchaser assumes no liabilities of Seller and
Seller retains all its liabilities, including, without limitation:
(a) all federal, state and other income, withholding,
social security, workman's compensation and similar tax liabilities
of Seller and any associated interest or penalties;
(b) all liability for any lawsuits and claims asserted
against Seller, disclosed pursuant to Sections 6.9 and 6.10; and
(c) all liability for any law suits, claims or
administrative actions arising out of, or related to, acts or
omissions of Seller prior to the Closing, whether or not asserted
prior to the Closing and whether or not disclosed to Purchaser,
whether based on breach of contract, tort, fiduciary duty, strict
liability or any other theory, except suits to collect contractual
obligations assumed by Purchaser pursuant to Section 2.2 hereof.
Section 2.3 Litigation Administration. The parties agree
that defending suits, claims and actions may be difficult for
Seller after the Closing due to the Seller ceasing to conduct an
active business. Solely to facilitate defense by Seller of any
2
<PAGE>
minor suits, claims or actions for which Seller has retained
liability hereunder, until the first anniversary of the Closing,
Purchaser will, upon written request by Seller, assist Seller to
defend any suit, claim or action with potential liability of less
than Twenty Five Thousand ($25,000) for any single suit, claim or
action, provided that all such suits, claims and actions in the
aggregate do not exceed Fifty Thousand ($50,000) Dollars. Seller
shall pay to Purchaser all reasonable amounts incurred by Purchaser
in defense or settlement of any matter on which Seller requests
assistance as provided herein. At the option of Purchaser,
Purchaser may have such amounts paid to it from the Escrowed
Purchase Price.
ARTICLE III
CONSIDERATION PAYABLE BY PURCHASER
Section 3.1 Purchase Price. In addition to assumption of
the Assumed Liabilities, Purchaser shall pay Seller an aggregate
purchase price of Twenty-Four Million ($24,000,000) Dollars for the
Assets, as follows:
(a) Upon execution hereof, $500,000 earnest money,
deposited into escrow with legal counsel to Seller, as escrow
agent, to be held pursuant to the terms of the Escrow Agreement
attached hereto as Exhibit A, and delivered to Seller, together
with any interest or other income therefrom, upon the closing of
the transactions contemplated herein;
(b) At Closing, the sum of $500,000 to be deposited in
escrow (the "Escrowed Purchase Price") with legal counsel to
Purchaser to be held and delivered pursuant to the terms of the
Escrow Agreement attached hereto as Exhibit B; and
(c) At Closing, the remainder of the Purchase Price
shall be paid by wire transfer to Seller's bank account in
Minneapolis, Minnesota.
ARTICLE IV
CLOSING
Section 4.1 Closing. The Closing for the transactions
contemplated hereby shall be held on a date designated by Purchaser
within twenty (20) business days following approval of the
transactions contemplated hereby by the stockholders of the
Purchaser (but no later than the Seller Termination Date if Seller
exercises its termination rights under Section 10.1 hereof) or on
another mutually agreeable date (the "Closing Date") at a location
and time mutually agreeable to the parties.
3
<PAGE>
At the Closing, Seller shall deliver to Purchaser such bills
of sale, deeds, assignments and such other instruments of
conveyance as shall be effective to vest in Purchaser good and
marketable title to the Assets, free and clear of all liens, claims
and encumbrances, other than Permitted Liens (as defined in Section
4.4 (c)). Seller shall from and after the Closing Date, upon
request of Purchaser, execute, acknowledge and deliver, or cause to
be, executed, acknowledged or delivered, all such further acts,
deeds, assignments, transfers or conveyances as may be reasonably
required to assign, transfer, grant or convey to Purchaser, or to
aid in reducing to possession of Purchaser, title to and possession
of Purchaser, title to or possession of any of the Assets to be
transferred pursuant to this Agreement.
Section 4.2 Conditions to Each Party's Obligation to Close.
The respective obligations of each party to close the transactions
contemplated by this Agreement shall be subject to the fulfillment
at or prior to the Closing of the following conditions:
(a) This Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requisite vote
of the shareholders and the Board of Directors of Seller and the
Board of Directors of Purchaser and the shareholders of Purchaser
shall have approved of the issuance of securities required to
finance the purchase of the Assets, under applicable law and
applicable listing requirements;
(b) No preliminary or permanent injunction or other
order or decree by any court which prevents the consummation of the
transactions contemplated hereby shall have been issued and remains
in effect (each party agreeing to use all best efforts to have any
such injunction, order or decree lifted); and
(c) All governmental consents and approvals required by
law for the consummation of the transactions contemplated hereby
shall have been obtained and be in effect on the Closing Date on
terms and conditions that would not have a material adverse effect
on the prospects of the business operated by Seller.
Section 4.3 Conditions to Obligation of Seller to Close.
The obligation of Seller to close the transactions contemplated by
this Agreement shall be subject to the fulfillment at or prior to
the Closing Date of the following additional conditions:
(a) Purchaser shall have performed in all material
respects its agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations
and warranties of Purchaser contained in this Agreement shall be
true and correct in all material respects on and as of the date of
this Agreement and at and as of the Closing Date as if made on and
as of such date or time, except as contemplated or permitted by
this Agreement, and Seller shall have received a certificate of the
4
<PAGE>
Chief Executive Officer and Chief Financial Officer of Purchaser to
that effect;
(b) Seller shall have received an opinion addressed to
Seller from Petree Stockton, L.L.P., or other legal counsel
selected by Purchaser and reasonably satisfactory to Seller, dated
the Closing Date, substantially in the form set forth in Exhibit C
hereto; and
(c) Purchaser shall be ready, willing and able to pay
the Purchase Price in full as contemplated by Article III hereof.
Section 4.4 Conditions to Obligation of Purchaser to Close.
The obligation of Purchaser to close the transactions contemplated
by this Agreement shall be subject to the fulfillment at or prior
to the Closing Date of the additional following conditions:
(a) Seller shall have performed in all material respects
its agreements contained in this Agreement required to be performed
at or prior to the Closing Date, and the representations and
warranties of Seller contained in this Agreement shall be true and
correct in all material respects on and as of the date of this
Agreement and at and as of the Closing Date as if made on and as of
such date or time, except as contemplated or permitted by this
Agreement, and Purchaser shall have received a Certificate of the
Chief Executive Officer and Chief Financial Officer of Seller to
that effect;
(b) Purchaser shall have received an opinion addressed
to Purchaser from Henson & Efron, P.A., or other legal counsel
selected by Seller and reasonably satisfactory to Purchaser, dated
as of the Closing date, substantially in the form set forth in
Exhibit D hereto;
(c) Seller shall have executed and delivered bills of
sale assignments, consents to assignment and transfer, waivers of
liens and other documents of title and related documents as
Purchaser shall reasonably request, in any event sufficient to
convey to Purchaser good and marketable title to all the Assets
free and clear of all liens, charges, claims and encumbrances of
any nature whatsoever, other than the liens, claims and
encumbrances set forth on Disclosure Schedule 4.4(c) (the
"Permitted Liens");
(d) Seller and Petree Stockton, L.L.P., as Escrow Agent,
shall have executed and delivered to Purchaser an Escrow Agreement
substantially in the form set forth in Exhibit B hereto;
(e) Purchaser shall be reasonably satisfied that the key
employees of Seller identified on Disclosure Schedule 4.4(e) are
willing to become employed by Purchaser on terms and conditions
5
<PAGE>
acceptable to Purchaser and as generally described on Disclosure
Schedule 4.4(e);
(f) Seller and the key employees of Seller listed on
Disclosure Schedule 4.4 (f) hereto shall have executed and
delivered to Purchaser Noncompetition Agreements in substantially
the form of Exhibit E hereto;
(g) Seller and its officers, directors and key employees
shall have executed and delivered to Purchaser such other
certificates and other similar documents as Purchaser shall
reasonably request;
(h) Purchaser shall have raised at least Thirty Million
($30,000,000) Dollars from the sale of debt and/or equity
securities from the date of this Agreement through the Closing
Date; and
(i) No material adverse change shall have occurred in
the business of Seller, the business prospects of Seller or the
Assets.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
Section 5.1 Corporate Organization and Good Standing.
Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of Delaware, with all requisite
corporate power and authority to own, operate and lease its
properties and to carry on its business as it is now being
conducted, and is qualified or licensed to do business and is in
good standing in each jurisdiction in which the ownership or
leasing of property by it or the conduct of its business requires
such licensing or qualification, except for such failures to be so
qualified or licensed which would not have a material adverse
effect on Purchaser.
Section 5.2 Authorization; Binding Agreement. Purchaser
has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder.
The execution, delivery and performance of this Agreement by
Purchaser, and the consummation by Purchaser of the transactions
contemplated hereby, have been duly authorized by Purchaser's Board
of Directors, and no other corporate action or proceeding on the
part of Purchaser is necessary for the execution, delivery and
performance of this Agreement by Purchaser and the consummation of
the transactions contemplated hereby, other than approval by the
stockholders of Purchaser of the issuance of securities to finance
the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and is a legal,
6
<PAGE>
valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights
generally, and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity
or at law).
Section 5.3 Certain Fees. Neither Purchaser, any
subsidiary of Purchaser nor any of their officers, directors,
employees or agents has employed any broker or finder or incurred
any liability for any financial advisory, brokerage or finder's fee
or commissions in connection with the transactions contemplated
herein. Purchaser agrees to indemnify and hold harmless Seller
from and against any and all claims, suits, liabilities, costs and
expenses, including reasonable attorneys' fees, resulting from any
claims that may be made against the parties by any broker or person
claiming a commission, fee or other compensation on the basis of
any communication or agreement such broker may have had or entered
into with Purchaser or any of its subsidiaries, officers,
directors, shareholders, employees or agents.
The representations and warranties made by Purchaser shall
survive the Closing and Seller shall be entitled to rely upon such
representations and warranties for a period of two years
notwithstanding any due diligence investigations of Purchaser
conducted by Seller or any other person or any statements made by
Purchaser or any other person or entity outside this Agreement or
any Disclosure Schedule, subject to Section 12.5 (a) hereof.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELLER
The terms "to the knowledge of Seller" and "Seller is not
aware of" and other similar terms include the knowledge and
awareness of any Affiliate of Seller. If Seller has any subsidiary
or parent corporations or other entities, the representations and
warranties set forth herein shall apply to such entities to the
same extent they apply to Seller. Seller hereby represents and
warrants to Purchaser as follows:
Section 6.1 Corporate Organization and Good Standing.
Seller is a corporation duly organized, validly existing and in
good standing under the laws of Minnesota, with all requisite
corporate power and authority to own, operate and lease its
properties and to carry on its business as it is now being
conducted, and is qualified or licensed to do business and is in
good standing in each jurisdiction in which the ownership or
leasing of property by Seller or the conduct of its business
requires such licensing or qualification.
7
<PAGE>
Section 6.2 Authorization; Binding Agreement. Seller has
all requisite corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The
execution, delivery and performance of this Agreement by Seller,
and the consummation by Seller of the transactions contemplated
hereby, have been duly authorized by the Board of Directors of
Seller and no other corporate action or proceeding on the part of
Seller is necessary for the execution, delivery and performance of
this Agreement and the transactions contemplated hereby, other than
approval by Seller's shareholders, which shall be obtained prior to
the Closing. This Agreement has been duly and validly executed and
delivered by Seller and constitutes legal, valid and binding
obligations of Seller, enforceable against Seller in accordance
with its terms except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally
and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 6.3 Capitalization of Seller. The authorized
capital stock of Seller consists of 50,000 shares of Common Stock,
$1.00 par value per share. There are issued and outstanding 29,658
shares of Common Stock. There are no outstanding options,
warrants, subscriptions, conversion rights or other rights,
agreements or commitments obligating Seller to issue any additional
shares of the capital stock of Seller or any other securities
convertible into, exchangeable for or evidencing the right to
subscribe for or acquire from Seller or any of its subsidiaries any
shares of the capital stock of Seller, or any stock appreciation
rights. The names of each shareholder and the number of shares
owned by each are set forth on Disclosure Schedule 6.3 hereto. To
Seller's knowledge, no one other than the owner disclosed herein
has the right to vote any shares of capital stock of Seller, except
by duly executed proxy voted at a shareholders' meeting.
Section 6.4 Subsidiaries; Investments. Except as set forth
on Disclosure Schedule 6.4, Seller does not own, directly or
indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership
interest in any other business. Seller has no obligations or
commitments to invest any funds in any business or entity.
Section 6.5 Financial Statements. Attached as Exhibit F
hereto are true and complete copies of the audited financial
statements of Seller for the two fiscal years ended December 31,
1993 and 1994 and unaudited financial statements for the five-month
period ended May 31, 1995 (the "Financial Statements"). The
Financial Statements (including any related notes) were prepared in
conformity with generally accepted accounting principles applied on
a consistent basis (except as otherwise stated in such financial
statements), and present fairly the consolidated financial
position, results of operations and cash flows of Seller as of the
8
<PAGE>
dates and for the periods indicated, subject, in the case of
unaudited interim financial statements to condensation, the absence
of certain notes thereto and normal year-end audit adjustments.
The financial records of Seller are sufficient to allow the
accountants of Purchaser to audit the Financial Statements of
Seller for the periods covered by the Financial Statements.
Section 6.6 Absence of Certain Changes. Since the end of
the period covered by the Financial Statements (i) no material
adverse changes have occurred with respect to Seller or its
business or the Assets, (ii) Seller has not taken action or failed
to act, nor has any event occurred or failed to occur, which action
or event or failure is likely to result in a material adverse
effect on the business of Seller or the Assets compared to the
business and Assets reflected on the unaudited Financial Statements
or on the ability of Seller to perform this Agreement and close the
transactions contemplated hereby.
Section 6.7 Certain Fees. Neither Seller nor any of its
officers, directors, employees or agents has employed any broker or
finder or incurred any liability for any financial advisory,
brokerage or finder's fee or commissions in connection with the
transactions contemplated herein. No other agent or broker or
other person is entitled to any commission or finder's fee in
connection with the transaction contemplated by this Agreement.
Seller agrees to indemnify and hold harmless Purchaser from and
against any and all claims, suits, liabilities, costs and expenses,
including reasonable attorneys' fees, resulting from any claims
that may be made against the parties by any broker or person
claiming a commission, fee or other compensation on the basis of
any communication or agreement such broker may have had or entered
into with Seller, or any of its officers, directors, shareholders,
employees or agents.
Section 6.8 Consents and Approvals; No Violations.
(a) Seller is not in violation in any material respect,
of any applicable law, statute, ordinance, order, rule or
regulation promulgated or judgment, decree, order, concession,
grant, permit, license or other governmental authorization or
approval, issued or entered by, any federal, state or local, court
or governmental authority relating to or affecting the operation,
conduct or ownership of the property or business of Seller.
(b) No filing or registration with, no notice to and no
permit, authorization, consent or approval of any public or
governmental body or authority is necessary for the consummation by
Seller of the transactions contemplated by this Agreement or to
enable Purchaser after the Closing Date to continue to conduct the
same business conducted by Seller in a manner which is consistent
with that in which it is presently conducted by Seller.
9
<PAGE>
(c) Seller has provided Purchaser with true, complete
and correct copies of the Articles of Incorporation and Bylaws of
Seller, both as amended to date. Neither the execution and
delivery of this Agreement by Seller, the performance by Seller of
its obligations hereunder nor the consummation by Seller of the
transactions contemplated hereby will (i) conflict with or result
in any breach of any provision of the Articles of Incorporation or
By-laws of Seller, (ii) subject to obtaining any necessary
consents, all of which shall have been obtained by Seller prior to
the Closing Date unless waived by Purchaser, result in a violation
or breach of, or constitute (with or without due notice or lapse of
time or the happening or occurrence of any other event) a default
by Seller, or permit the termination of, or result in the
acceleration of, or entitle any party to accelerate (or give rise
to the creation of any lien, charge, security interest or
encumbrance upon any properties or assets of Seller), under, or
violate or breach, any of the terms, conditions or provisions of
any contract, note, bond, mortgage, indenture, license, agreement
or other instrument or obligation to which Seller is a party or by
which Seller or any of its properties or assets may be bound or
(iii) violate any order, writ, injunction, decree, statute, rule or
regulation of any court or governmental authority applicable to
Seller, or any of its properties or assets, provided that if Seller
is not named therein, this clause (iii) shall be to the knowledge
of Seller.
Section 6.9 Litigation. Except as set forth on Disclosure
Schedule 6.9 hereof, there is no action, suit, set of related
actions or suits concerning a common issue, complaint, arbitration,
inquiry, proceeding or investigation pending or, to the knowledge
of Seller, threatened against or involving Seller, or any
properties or rights of Seller, before any court, arbitrator or
administrative or governmental body, and there is no judgment,
decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator
outstanding against Seller which would individually or in the
aggregate, if adversely determined, have a material adverse effect
on Seller or result in any claim, lien or other encumbrance on any
of the Assets. There are no actions, suits or proceedings pending
or, to the knowledge of Seller, threatened against Seller arising
out of or in any way related to this Agreement, or any of the
transactions contemplated hereby.
Section 6.10 Certain Employment Matters. Except as set
forth in Disclosure Schedule 6.10, there are no written employment
or consulting agreements or contracts in effect between Seller with
any of the employees of Seller, nor any oral contracts or
understandings of employment or consultation, or any applicable
law, which (i) are not terminable upon the giving of notice not to
exceed ten (10) days, or (ii) provide for any severance or other
payments to any employee of Seller upon termination of employment
or upon any change of control of Seller or sale of the assets of
10
<PAGE>
Seller. Except as set forth on Disclosure Schedule 6.10, Seller
has complied with all applicable laws, rules and regulations
relating to the employment of labor which could have a material
adverse effect on the business, assets, condition or prospects,
financial or otherwise, of Seller, including without limitation
those relating to wages, hours, collective bargaining, age and sex
discrimination and the payment and withholding of taxes; Seller has
withheld all amounts required by law or agreement to be withheld
from the wages or salaries of employees of Seller and made all
required withholding payments to the appropriate government agency
within the required periods; and Seller has no unaccrued liability
for any arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing with respect to employees of
Seller. Except as set forth in Disclosure Schedule 6. 10, there
are no controversies pending, threatened or reasonably anticipated
between Seller and any employee or former employee of Seller. None
of the employees of Seller are represented by a labor union, and no
petition has been filed or proceeding instituted of which Seller
has notice by any employee or group of employees with any labor
relations boards seeking recognition of a bargaining
representative. There is no material dispute or controversy with
any union or other organization representing employees, and no
arbitration proceeding is pending or threatened involving such a
dispute or controversy.
Section 6.11 Employee Benefit Plans. (a) The following
terms shall have the meanings set forth below:
(i) "Benefit Plan" means each plan, program or agreement,
other than an ERISA Plan, providing deferred compensation,
insurance, bonuses or other incentive compensation which is
established or maintained by Seller.
(ii) "Code" means the Internal Revenue Code of 1986, as
amended.
(iii)"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(iv) "ERISA Plan" means any Pension Plan and any Welfare Plan.
(v) "IRS" means the Internal Revenue Service.
(vi) "PBGC" means the Pension Benefit Guaranty Corporation.
(vii)"Pension Plan" means any employee pension benefit plan as
defined in ERISA Section 3(2) which is established or maintained by
Seller.
(viii)"Plan" means any Benefit Plan, Pension Plan, Welfare
Plan and any ERISA Plan.
11
<PAGE>
(ix) "Welfare Plan" means any employee welfare benefit plan as
defined in ERISA Section 3(1) which is established or maintained by
Seller or any Subsidiary of Seller.
(b) Disclosure Schedule 6.11 (b) lists all Plans established,
maintained or contributed to by Seller during the six-year period
preceding the date of this Agreement. Each such Plan is correctly
labeled on Disclosure Schedule 6.11 (b) as a Benefit Plan, Pension
Plan or Welfare Plan. No Pension Plan is a multiemployer plan
within the meaning of ERISA Section 3(37). Seller has previously
provided to Purchaser true and complete copies of all Plans
together with (i) the three most recent actuarial and financial
reports prepared with respect to each ERISA Plan, (ii) the three
most recent annual reports filed with any government agency for
each ERISA Plan, and (iii) all rulings and determination letters
and any open requests for rulings or letters that pertain to each
ERISA Plan. Seller has no commitment to create any additional
plan, program, agreement, contract or arrangement that would
constitute a Plan or to amend any Plan so as to increase benefits
thereunder.
(c) Seller has fully complied in all material respects
with all provisions of ERISA and any and all other laws, rules, and
regulations applicable to the Plans. All reports and descriptions
required by ERISA with respect to the ERISA Plans have been timely
filed and distributed and all notices required by ERISA, the Code,
or any state or federal law or any ruling or regulation of any
state or federal administrative agency with respect to the Plans
have been appropriately given.
(d) A favorable determination letter has been issued by
the IRS with respect to each Pension Plan that is intended to be
qualified under Code Section 401 to the effect that such Pension
Plan is qualified under Code Section 401 and that the trust
associated with such Pension Plan is exempt from tax under Code
Section 501. No such letter has been revoked or threatened to be
revoked and Seller knows of grounds on which such revocation may be
based. Seller has no material liability under any such plan that
is not reflected on the Financial Statements of Seller. Each such
Plan is and has been administered in accordance with its provisions
and applicable law.
(e) All contributions required to be made by Seller on
or prior to the date of this Agreement under the terms of any Plan
have been timely made.
(f) Seller has not incurred any material liability to
the PBGC or the IRS with respect to any Pension Plan except
liabilities to the PBGC pursuant to ERISA Section 4007, all of
which have been fully paid. No "reportable event" (within the
meaning of ERISA Section 4043(b)) with respect to which notice must
be provided to the PBGC has occurred during the twelve-month period
12
<PAGE>
preceding the date hereof or is continuing with respect to any
Pension Plan, and there exists no condition or set of circumstances
presenting a material risk of the termination or partial
termination of any Pension Plan which could result in a material
liability on the part of Seller to the PBGC.
(g) No "prohibited transaction" (within the meaning of
ERISA Section 406 or Code Section 4975 which is not exempt under
ERISA Section 408, Code Section 4975 or an administrative
exemption) has occurred with respect to any Plan (i) which would
result in the imposition, directly or indirectly, of an excise tax
under Code Section 4975, or (ii) the correction of which would have
an adverse effect on the financial condition, results of operations
or business of the Seller.
(h) The present value of all benefits, whether or not
vested, under each Pension Plan did not exceed as of the most
recent actuarial valuation date, and will not exceed as of the
Effective Date, the then current fair market value of the assets of
such plan. For purposes of determining the present value of
benefits under any Pension Plan, the actuarial assumptions and
methods used under such Pension Plan for the most recent actuarial
valuation shall be used, other than any assumptions relating to
employee turnover (as to which it shall be assumed there will be
none). No Pension Plan has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Code Section 412 or
ERISA Section 302. Seller has not provided, nor is it required to
provide, security to any Pension Plan pursuant to Code Section
401(a)(29).
(i) Neither Seller nor any administrator or fiduciary of
any of such Benefit Plan (or agent or delegate of any of the
foregoing) has engaged in any transaction or acted or failed to act
in any manner which could subject Seller to any direct or indirect
liability for a breach of any fiduciary, co-fiduciary, or other
duty under ERISA, which individually or in the aggregate could
result in liability to Seller. No oral or written representation
or communication by Seller with respect to any aspect of the
Benefit Plans has been or will be made to employees of Seller prior
to the Closing which is not in accordance with the written or
otherwise preexisting terms and provisions of such Benefit Plans in
effect immediately prior to the Closing. There are no unresolved
claims or disputes under the terms of, or in connection with, the
Benefit Plans and no action, legal or otherwise, has been commenced
with respect to any claim.
(j) Each Welfare Plan providing health benefits, and any
plan providing health benefits that is maintained by an entity
which is a member of a group described in Code Section 414(b),(c),
(m) or (o) that includes the Seller, has been maintained in form
and in operation in compliance with the continuation coverage
13
<PAGE>
requirements of Code Section 4980B, the corresponding provisions of
ERISA and any applicable state laws or regulations.
(k) Except as set forth on Disclosure Schedule 6.11 (k),
Seller is not obligated to provide any post-retirement welfare
benefits to its employees, including post-retirement health or life
insurance coverage.
(l) No liability under Subtitle C or D of Title IV of
ERISA has been, or is expected to be, incurred by the Seller with
respect to any ongoing, frozen or terminated "single-employer plan"
(within the meaning of ERISA Section 4001(a)(15)) currently or
formerly maintained by the Seller.
Section 6.12 Tax Matters. Seller and each of its
subsidiaries, if applicable, has filed all federal, state and other
tax returns and reports required to be filed for all periods on or
before the due dates (as extended by any valid extensions of time)
and has paid all taxes shown to be due by said returns. Such
returns reflect all taxes due and payable with respect to the
periods covered thereby and there are no liabilities, claims,
interest or penalties pending, assessed, asserted or threatened
against Seller or any of its subsidiaries in connection with any
such taxes and no basis therefor. The reserves for taxes (federal,
state and local) reflected in Seller's Financial Statements are
adequate to cover any and all taxes, including deferred taxes, and
any interest and penalties in connection therewith which may be
assessed with respect to the property, business and operations of
Seller or any of its subsidiaries up to the date of Seller's
Financial Statements and all prior periods. Seller has fully
complied with all withholding, social security and other similar
tax laws. Neither Seller nor any of its subsidiaries has given or
been requested to give waivers of any statutes of limitations
relating to the payment of taxes for any taxable period. No fact
exists which could constitute grounds for assessment of any tax
liability or lien against Purchaser or any of the Assets on account
of any tax liability of Seller.
Section 6.13 Assets. Seller has good title to all the
Assets to be sold to Purchaser hereunder free and clear of any
claim, lien or encumbrance of any third person or entity of any
nature whatsoever other than the Permitted Liens. All of the
equipment comprising the Assets is in good operating condition,
reasonable wear and tear excepted, and the use and operation of all
the Assets in the business of Seller comply in all material
respects to all applicable rules and other regulations of any
regulatory body having jurisdiction and all applicable building,
zoning and other laws, ordinances, regulations, permits, licenses
and certificates, and Seller has not received any notice of non-
compliance therewith (except for any non-compliance that has been
cured).
14
<PAGE>
Section 6.14 Intellectual Property. Seller has good title
to all the patents, trademarks, trade names, service marks,
copyrights, trade secrets and other intellectual property set forth
in Disclosure Schedule 6.14 ("Seller Intellectual Property"), free
and clear of all liens, charges or encumbrances of any nature
whatsoever, except for Permitted Liens. Seller has not granted any
person or entity any license or other rights to the Seller
Intellectual Property. Seller is not aware of any basis for any
claim by any other person or entity that Seller is infringing upon
any patent, trademark, trade name, copyright, publication right or
other intellectual property right of any other person or entity.
No infringement claim has been asserted by any other person against
Seller. Seller has no liability for, nor has Seller given any
indemnification for, patent, trademark or copyright infringement as
to any equipment, materials, services, products or supplies
manufactured, produced, used or sold by Seller. No rights of
Seller under any agreement regarding ownership, protection or
confidentiality of any trade secret or other intellectual property
of Seller have been waived by Seller. Seller has taken all
reasonable measures to protect its trade secrets, such trade
secrets have not been disclosed to others except pursuant to
reasonable confidentiality agreements and Seller has no reason to
believe any confidentiality agreement involving its trade secrets
has been breached.
Section 6.15 Contracts, Minutes and Other Instruments and
Information. Disclosure Schedule 6.15 lists all material contracts
and agreements. For purposes of this Agreement, the phrase
"material contracts and agreements" shall mean all leases for real
and personal property and all contracts, agreements and license to
which Seller is a party or by which Seller is bound (i) which have
a term longer than six months or (ii) which involve payment of
consideration in excess of $25,000 (including all similar
agreements which in the aggregate exceed $25,000). Seller has made
available to Purchaser true, correct and complete copies of all
such material contracts. Except as set forth on Disclosure
Schedule 6.15, all such material contracts and agreements are
assignable to Purchaser without the consent of the other parties
thereto. Seller is in compliance in all material aspects with all
such material contracts and agreements, and to the knowledge of
Seller, no other party is in breach thereof and no other party is
incapable of performing, or unwilling to perform, their obligations
thereunder. True, correct and complete copies of all minutes
and/or consents of all actions taken by the shareholders and Board
of Directors of Seller and all committees of the Board, all of
which are contained in the minute books of Seller or in other
records of Seller made available to Purchaser.
Section 6.16 Permits and Licenses. Seller has acquired and
currently holds all permits, licenses, franchises, authorizations,
approvals and other certificates of authority (the "Licenses") as
are required for Seller to conduct its business, and copies of all
15
<PAGE>
such documents have been provided to Purchaser. Except as
disclosed on Disclosure Schedule 6.16, Seller is in material
compliance with all the terms thereof, the Licenses are
transferable and are being transferred to Purchaser with the Assets
and Seller is not aware of any reason which any such License could
not be renewed on terms at least as advantageous to Purchaser as
the current License held by Seller. Seller is not aware of any
change in any law, rule or regulation, whether or not yet
effective, which is likely to require Purchaser to obtain in the
future any additional License to conduct the business currently
conducted by Seller. Seller has been certified by the Substance
Abuse and Mental Health Services Administration ("SAMSHA") and the
organizations and agencies listed on Disclosure Schedule 6.16
hereto, which certifications are in good standing and will be in
good standing as of the Closing Date. Pursuant to such
certifications, Seller has designated the persons listed on
Disclosure Schedule 6.16 to be the responsible parties where
responsible parties are required for such certifications. Seller
has made available to Purchaser all material correspondence and
other documents relating to such certifying organizations.
Section 6.17 Real Property; Environmental Matters. Seller
does not own any real property and is not a party to any agreement
to acquire ownership of any real property or any interests in real
property, and does not occupy or otherwise use any real property,
other than real property subject to lease(s) to which Seller is a
party and are being assigned to Purchaser as part of the Seller
Assets, copies of which have been provided to Purchaser. Seller
has not (either with or without negligence) caused or permitted the
escape, disposal or release in violation of applicable law of any
biologically active or other hazardous substances, or materials
causing harm in or on any real property occupied or utilized by
Seller in conducting its business (the "Premises"). Seller has not
allowed the storage or use of such substances or materials in any
manner not sanctioned by law or by commercially reasonable
standards in the industry for the storage and use of such
substances or materials. Seller has not allowed to be brought onto
the Premises any such materials or substances except to use in the
ordinary course of Seller's business. During the use and occupancy
of the Premises by Seller, Seller has kept and maintained the
Premises so as to be in material compliance with all then existing
statutes, laws, rules, ordinances, orders, permits and regulations
of all governmental and regulatory authorities, agencies and bodies
pertaining to environmental matters, or regulating, prohibiting or
otherwise having to do with asbestos and all other toxic,
radioactive or hazardous wastes or materials. Seller is not aware
of any hazardous waste, toxic material, asbestos or other
environmental or health problem associated with the Premises,
whether or not caused by Seller or any other person or entity, and
whether or not pre-dating Seller's occupancy of the Premises.
16
<PAGE>
Section 6.18 Related Party Transactions. Set forth on
Disclosure Schedule 6.18 hereto, is a true and complete list of all
transactions between the Seller and any Interested Party (i) which
have been agreed to in the immediately preceding twelve months, or
(ii) which all or any part have been performed in the immediately
preceding twelve months or (iii) which all or any part are to be
performed in the future. True, complete and accurate copies of all
documents relating to the transactions so disclosed have been
provided to Purchaser. "Interested Party" shall mean: (i) any
director, officer or employee of Seller; (ii) any current nominee
for election as a director or officer of Seller; (iii) any security
holder of Seller owning (including options, warrants or other
rights to acquire) more than five (5%) percent of any class of
Seller's securities; (iv) any member of the immediate family of any
of the foregoing persons; and (v) any entity in which any person
described in any of the preceding clauses of this sentence is an
officer, director, partner, nominee, or ten (10%) percent owner.
Section 6.19 Customers. All customers of Seller, who in
any of the three preceding fiscal years of Seller was responsible
for more than two (2%) percent of the gross revenues of Seller, are
listed on Disclosure Schedule 6.19, together with the volume of
business each such year. No such customer has notified Seller of
its intention to reduce or terminate its business with Seller or
demanded to change the terms (including price) of its business, and
Seller is not otherwise aware of any reason any such customer would
decide to terminate or reduce its business with Seller.
Section 6.20 Insurance. Disclosure Schedule 6.20 hereto
contains a list of all insurance policies maintained by Seller,
true, complete and correct copies of which have been provided to
Purchaser. Copies of all claims and correspondence with any
insurer during the past three years have been provided to
Purchaser. Seller has paid all premiums due under all such
policies and no circumstances exist which could justify any insurer
denying the coverage stated in such policies.
Section 6.21 Material Statements or Omissions. Seller has
fully described to Purchaser all facts that are material to
understanding the business of Seller, has not misstated any facts
material to understanding the business of Seller and has not
omitted any fact which is necessary to understand the facts that
have been disclosed, or which is necessary to avoid having any of
the facts disclosed be misleading in any respect.
The representation and warranties made by Seller shall survive
the Closing and Purchaser shall be entitled to rely upon such
representations and warranties for a period of two years
notwithstanding any due diligence investigations of Seller
conducted by Purchaser or any other person or any statements made
by Seller or any other person or entity outside this Agreement or
any Disclosure Schedule, subject to Section 12.5 (a) hereof.
17
<PAGE>
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE CLOSING
Section 7.1 Conduct of Business by Seller Pending the
Closing. Except as otherwise expressly contemplated hereby, after
the date hereof and prior to the Closing or earlier termination of
this Agreement, unless Purchaser shall otherwise agree in writing
or as otherwise expressly contemplated by this Agreement, Seller
shall:
(a) conduct its business only in the ordinary and usual
course of business and consistent with past practice as previously
disclosed to Purchaser;
(b) use its best efforts to: preserve intact its
business organization and goodwill, keep available the services of
its present officers and key employees, and preserve the goodwill
and business relationships with suppliers, distributors, customers,
employees and others having business relationships with Seller;
(c) confer on a regular and frequent basis with one or
more representatives of Purchaser to discuss operational matters of
materiality and the general status of ongoing operations of Seller,
provided that Seller need not follow any course of action requested
by Purchaser;
(d) promptly notify Purchaser of any significant changes
in the business, properties, assets, condition (financial or other)
or results of operations of Seller;
(e) not directly or indirectly, (i) sell, lease,
encumber or otherwise transfer any Assets or stock of Seller,
(including, any merger, consolidation or similar transactions)
other than sales of nonmaterial amounts of inventory in the
ordinary course of business ("Prohibited Transactions"), (ii) enter
into or negotiate any agreement with respect to any Prohibited
Transaction, (iii) submit to any other person or entity any offer
or proposal for, or provide any information useful for, or relating
to, any Prohibited Transaction, (iv) solicit or encourage any offer
from any third party for any Prohibited Transaction, (v) otherwise
participate in discussions or take any other action that is
designed to promote any Prohibited Transaction or (vi) take any
other action that is inconsistent with a good faith attempt to
fulfill the purposes of this Agreement;
(f) not enter into any material contract, agreement or
lease;
(g) not increase the salary or other compensation of any
employee of Seller or enter into or amend any employment,
noncompetition, severance, bonus, special pay arrangement with
18
<PAGE>
respect to termination of employment or other similar arrangements
or agreements other than pursuant to normal annual reviews
consistent with past practice of Seller as previously disclosed to
Purchaser;
(h) not adopt, enter into or amend any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, health care, employment or other employee benefit
plan, agreement, trust, fund or arrangement for the benefit or
welfare of any employee or retiree of Seller, except (i) as
required to comply with changes in applicable law occurring after
the date hereof and (ii) with respect to all plans other than in
the ordinary course of business and consistent with past practice
as previously disclosed to Purchaser;
(i) maintain and pay premiums for all insurance policies
in effect on the date of this Agreement until the Closing and at
the option of the Purchaser for a period of thirty (30) days
following the Closing, provided Purchaser pays all post-closing
premiums.
(j) use reasonable efforts to obtain any consent or
approval required to assign any of the contracts and agreements
being assigned to Purchaser hereunder;
(k) not take any action that a reasonable person would
have reason to believe may harm the good will or reputation of the
business purchased from Seller by Purchaser or relationship with
customers, suppliers or employees of Seller;
(l) take all reasonable actions requested by Purchaser,
but not including the expenditure of any money, to extend the term
of any contract or agreement being assigned to Purchaser hereunder;
(m) not disclose any of its trade secrets to others,
except in the ordinary course of its business, consistent with past
practice as previously disclosed to Seller, and shall cooperate
with Purchaser to protect against further use of such trade secrets
by others;
(n) maintain normal levels of inventory and conduct
normal levels of equipment maintenance consistent with past
practice as previously disclosed to Purchaser;
(o) not accelerate collection of account receivables
faster than past practice as previously disclosed to Purchaser;
(p) pay all trade payables, employment withholding,
social security, workmen's compensation, sales and other taxes,
pension plan, 401 (k), health and other contributions, and other
obligations as and when due consistent with past practice as
previously disclosed to Purchaser; and
19
<PAGE>
(q) not agree orally or in writing, or otherwise, to
take any of the foregoing actions or any other action which would
make any representation or warranty contained in Article VI untrue
or incorrect in any material respect as of the time of the Closing.
Section 7.2 Enforcement. Purchaser shall be entitled to
obtain an injunction or other restraining order requiring
compliance with this Article VII. In the event Seller or any of
its Affiliates shall engage in any activity prohibited by Section
7.1 (e) hereof, if Seller consummates a sale with the person or
entity involved in such activity, Seller shall pay Purchaser the
sum of Eight Hundred Fifty Thousand ($850,000) Dollars as a break-
up fee in addition to expense reimbursement pursuant to Section 8.4
hereof.
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 Access to Information. (a) Seller shall
afford to Purchaser and its accountants, counsel, investment
bankers, potential investors and other representatives reasonable
access during normal business hours and upon reasonable notice
throughout the period prior to the Closing to all properties,
books, contracts, commitments and records related to the business
of Seller or the Assets and all other information concerning the
businesses, properties and personnel of Seller as Purchaser may
reasonably request. Seller shall promptly advise Purchaser in
writing of any change or occurrence of any event after the date of
this Agreement having, or which, insofar as can reasonably be
foreseen, in the future may have, a material adverse affect on
Seller.
Section 8.2 Shareholders' Approval. Seller in accordance
with applicable law, shall promptly submit this Agreement and the
transactions contemplated hereby for the approval of its respective
Board of Directors and shareholders. Purchaser shall not be
required to solicit proxies from its shareholders until this
Agreement and the transactions contemplated hereby have been
approved by the Board of Directors and the shareholders of Seller.
If both such approvals are not obtained, or if an opinion of
Seller's legal counsel with respect to such approvals in
substantially the form attached as Exhibit G hereto is not
delivered to Purchaser within twenty (20) days after the date of
this Agreement, the date of the Seller Termination Date pursuant to
Section 10.1(b) and the time afforded Purchaser to raise funds as
provided in Section 10.1(d) shall be extended by the amount of the
delay in obtaining such approvals or delivering such opinion.
Purchaser shall use its best efforts to submit its preliminary
proxy materials to the Securities and Exchange Commission within
thirty (30) days after this Agreement is executed and delivered by
Seller and Purchaser, but notwithstanding the foregoing, Purchaser
20
<PAGE>
shall not be required to file such proxy materials until fifteen
(15) days after the earlier of the (i) Purchaser's receipt of
notice that Seller's shareholders have approved the transactions
contemplated hereby or (ii) Purchaser's receipt of an opinion from
Seller's legal counsel in the form specified above.
Section 8.3 Employees. Seller agrees to take efforts
reasonably requested by Purchaser to encourage Seller's employees
to accept employment with Purchaser. Purchaser has no obligation
to hire any employee of Seller, provided, that if Purchaser shall
hire any of Seller's employees, Purchaser shall assume any and all
obligations of Seller accruing after the Closing Date under any
employment agreement between Seller and such employee if such
agreement has been disclosed and provided to Seller prior to the
date of this Agreement. Purchaser covenants that if the
transactions contemplated hereby are not consummated for any
reason, it will not, for a period of one year from the date of this
Agreement, solicit the employment of any employee of Seller.
Section 8.4 Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, except
that if either party breaches this Agreement causing the Closing
not to be held the breaching party shall pay the expenses of the
nonbreaching party, including any expenses of Purchaser associated
with fundraising, provided that any recovery by Purchaser for
fundraising expenses shall not exceed One Hundred Fifty Thousand
($150,000) Dollars.
Section 8.5 Agreement to Cooperate. Subject to the terms
and conditions herein provided, each of the parties hereto shall
use reasonable efforts to take, or cause to be taken, all action to
do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement.
Section 8.6 Public Statements. Purchaser shall have the
right to issue a press release immediately following execution and
delivery of this Agreement and/or file a Report on Form 8-K with
the Securities and Exchange Commission, which press release and
report may disclose this Agreement and the transactions
contemplated hereby. Purchaser shall also have the right to make
disclosures in accordance with proxy solicitation and other
securities rules and regulations. Seller and its legal counsel
shall have the right to review and comment upon such statements
before they are released provided such comments shall not
unreasonably be delayed. Seller and Purchaser shall consult with
each other prior to issuing any other public announcement or
statement with respect to this Agreement or the transactions
contemplated hereby and shall not issue any such public
announcement or statement prior to such consultation, except as may
be required by law or any listing agreement with the American Stock
21
<PAGE>
Exchange or other national securities exchange, in which case prior
oral or written notice shall be sent to Seller. No public
statement by either party shall be made for the purpose of harming
the business of the other party.
Section 8.7 Allocation of Purchase Price. The purchase
price shall be allocated among the Assets in accordance with
Schedule 8.7 attached hereto, subject to adjustment as shall be
appropriate to reflect changes in the Assets between the date
hereof and the Closing Date.
ARTICLE IX
POST CLOSING COVENANTS
Section 9.1 Names and Marks. From and after the Closing
Date neither Seller nor any of its Affiliates shall use the names
or marks sold to Purchaser nor any name or mark similar to any name
or mark sold to Purchaser. Within ten (10) days after the Closing
Date, Seller shall have amended its corporate charter to change its
corporate name. All rights to use names and marks shall be
assigned to Purchaser and on the Closing Date, or at any time after
the Closing Date, Seller shall execute such documents as are
requested by Purchaser to allow Purchaser to use such names and
marks. Where any name or mark is registered or otherwise
protected, Seller shall so inform Purchaser and facilitate transfer
of such registration or other protection to Purchaser.
Section 9.2 Trade Secrets. From and after the Closing
Date, neither Seller nor any of its Affiliates shall use or
disclose, whether orally or in writing, the trade secrets or other
intellectual property sold to Purchaser. Seller has delivered to
Purchaser a list of all the trade secrets of Seller, any license
of, and copies of, such trade secrets and on or prior to the
Closing Date Seller shall deliver to Purchaser the information
required to enable Purchaser to utilize such trade secrets. All
copies of such information in whatever form not delivered to
Purchaser shall be destroyed. From and after the date hereof,
Seller (i) shall not disclose such trade secrets to others, whether
orally or in writing, and (ii) shall cooperate with Purchaser to
protect against future use of such trade secrets by others.
Section 9.3 Good Will and Customers. As Purchaser is
paying for the goods of Seller as a going concern, from and after
the date hereof neither Seller nor any of its Affiliates shall take
any action that a reasonable person would have reason to believe
may harm the good will or reputation of the business purchased from
Seller by Purchaser or relationships with customers, suppliers or
employees of Seller. For a period of sixty (60) days after the
Closing Date, Seller and the Affiliates of Seller shall, without
additional compensation, assist Purchaser to encourage the
customers of Seller to become customers of Purchaser.
22
<PAGE>
Section 9.4 Noncompetition. For a period of two (2) years
following the Closing, Seller shall not directly or indirectly
engage in the business conducted by Seller prior to the Closing,
nor any other similar business at any location in the United States
or at any location outside the United States if such business
solicits customers located in the United States.
Section 9.5 Contract Rights. To the extent that any of the
Assets include contracts, licenses, sublicenses, leases or other
agreements ("Contract Rights") that require the consent or approval
of any other parties thereto, Seller and its Affiliates shall
arrange for the consent or approval of the assignment of all such
Contract Rights to Purchaser in form and substance acceptable to
Purchaser, unless Purchaser executes a waiver of this requirement.
Section 9.6 Title; Liens; Assignments. After the Closing
Seller shall execute and deliver any and all documents reasonably
requested by Purchaser to evidence transfer of title to the Assets
to Purchaser and to remove any liens. Seller shall also assist
Purchaser to obtain consents from any person whose consent is
required to assign any contract, license or other agreement
assigned by Seller to Purchaser, unless Purchaser executes a waiver
of this requirement.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any
time prior to the Closing:
(a) by mutual consent of Seller and Purchaser; or
(b) by Seller, if Purchaser shall have breached any of
its material obligations under this Agreement, if any material
representation or warranty of Purchaser shall have been untrue when
made or shall have subsequently become untrue as of any date prior
to the Closing or if the Closing shall not have been consummated on
or before one hundred twenty days (120) after the date of this
Agreement (the "Seller Termination Date") through no fault of
either Seller or any of its Affiliates; or
(c) by Purchaser, if Seller shall have breached any of
its material obligations under this Agreement, any material
representation or warranty of Seller shall have been untrue when
made or shall have subsequently become untrue as of any date prior
to the Closing or if the Closing shall not have been consummated on
or before one hundred twenty days after the date of this Agreement
(the "Purchaser Termination Date") without breach of this Agreement
by Purchaser; or
23
<PAGE>
(d) by Seller or Purchaser, if within one hundred twenty
(120) days following the date of this Agreement Purchaser, or the
investment bankers or other agents of Purchaser on behalf of
Purchaser, do not have in its possession an amount of cash equal to
the full Purchase Price, provided that in the event the proxy
materials for the stockholders meeting of Purchaser to be called to
approve the transactions contemplated hereby are not approved by
the Securities and Exchange Commission within thirty (30) days
after the filing of preliminary proxy materials with the
Commission, the Seller Termination Date pursuant to Section 10.1(b)
hereof and such 120-day period shall automatically be extended by
the number of days delay in obtaining approval from the Commission.
Purchaser agrees to seek to move expeditiously in obtaining
approval of the proxy materials.
Section 10.2 Effect of Termination. In the event of
termination of this Agreement, as provided in Section 10.1, this
Agreement shall forthwith become void, and there shall be no
obligation hereunder on the part of any party, except pursuant to
Sections 7.2, 8.4, 11.1 and 13.4 hereof and the Escrow Agreement in
the form of Exhibit A hereto. Nothing in this Section 10.2 shall
relieve any party from liability for any breach of this Agreement.
Section 10.3 Amendment. This Agreement may be amended by
the parties hereto at any time but only by an instrument in writing
signed by each of the parties hereto.
Section 10.4 Waiver. At any time prior to the Closing, the
parties hereto may (i) extend the time for the performance of any
of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions
contained herein; provided, however, that waiver of compliance with
any agreements or conditions herein shall not limit the parties'
obligations to comply with all other agreements or conditions
herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE XI
CONFIDENTIALITY
Section 11.1 Confidential Information. The parties agree
that in the event the transactions contemplated by this Agreement
are not consummated, all information of one another (i) shall be
treated in accordance with the existing nondisclosure agreements
executed by the parties prior to this Agreement and (ii) all
recorded evidence thereof shall be delivered to Seller together
with a certificate to the effect that no copies thereof remain in
possession of Purchaser or Purchaser's agents, affiliates, counsel
or auditors except to the extent required by any party to document
24
<PAGE>
a justifiable termination of this Agreement, breach by the other
party of this Agreement or to assert any legal right or to defend
against the assertion of any legal right. The obligations of the
parties under this Article XI shall survive the termination of this
Agreement.
ARTICLE XII
INDEMNIFICATION
Section 12.1 Indemnification. (a) From and after the
Closing, Seller will indemnify and hold Purchaser and its
subsidiaries, divisions, affiliates, officers, directors, agents
and employees (the "Purchaser Parties") harmless from and against
any damage, loss, liability or expense, including reasonable
attorneys' fees and court costs (collectively, "Indemnifiable
Damages") incurred as a result of, or in connection with, any
untruth, inaccuracy, violation or breach of any representations,
warranties, or covenants of Seller set forth in this Agreement.
Purchaser shall have the right to defend or compromise any claim,
proceeding or other action by any third party in its sole
discretion. Prior to settling any claim, Purchaser shall consult
with Seller. Purchaser need not follow any course of action
suggested by Seller, unless Seller deposits into escrow with legal
counsel for Purchaser under the terms of the escrow agreement to
which such legal counsel, Seller and Purchaser are parties, the
amount of potential liability and estimated defense expenses
associated with the claim, in which case Purchaser shall follow the
reasonable suggestions of Seller with respect to settlement of
claims. Seller shall not be required to make such deposits until
Excess Claims (as defined in Section 12.1 (e) hereof) exist.
(b) Purchaser hereby agrees not to make any claim for
indemnity hereunder except in good faith and for reasonable cause.
Purchaser will give Seller notice of each time that Purchaser
becomes aware of any fact or circumstance which may give rise to an
obligation of the Seller to indemnify any Purchaser Parties under
this Section, which notice shall be accompanied by a copy of any
claim made which may result in such indemnification obligation.
Notice shall be given as promptly as possible, but in no event more
than thirty (30) days after Purchaser becomes aware of the facts or
circumstances giving rise to the potential indemnification
obligation. Failure to provide timely notice as required by this
Paragraph (b) shall not relieve Seller of its indemnification
obligations hereunder, unless such notice is not provided within
one hundred twenty (120) days after Purchaser becomes aware of the
facts or circumstances giving rise to the potential indemnification
obligation.
(c) Except with respect to any matter (i) which results from
the fraud or willful misconduct of Seller or any of its Affiliates,
or (ii) which involves the reporting, payment or liability for
federal, state, local and foreign taxes, or (iii) which involves
25
<PAGE>
the title of Seller to the Assets, including any lien, encumbrance
or other claim against the Assets, Seller will have no obligation
to indemnify Purchaser hereunder, unless written notice of claim is
received by Seller no later than the first anniversary of the
Closing. With respect to claims for indemnification involving the
matters which survive the first anniversary of the Closing
described in subclauses (i), (ii) and (iii) of this Section
12.1(c), no claim may be made later than the running of all
applicable statutes of limitation, after giving effect to any
tolling or waiver of any time periods or statutes of limitation
granted by Seller or any third party, if any.
(d) Any recovery by Purchaser for Indemnifiable Damages shall
be limited as follows: (i) Purchaser shall not be entitled to
recover any Indemnifiable Damages under this Article XII until the
aggregate amount of Purchaser's Indemnifiable Damages shall exceed
Fifty Thousand ($50,000) Dollars in the aggregate (the
"Deductible"), except that Purchaser shall be entitled to recover
Indemnifiable Damages for any claim that exceeds Twenty Five
Thousand ($25,000) Dollars notwithstanding that aggregate claims do
not exceed the Deductible; and (ii) in no event shall Seller be
liable for indemnification for an amount greater than the Purchase
Price.
(e) Purchaser shall be entitled to recover any Indemnifiable
Damages from funds other than the funds held by the Escrow Agent
only if Excess Claims exist. "Excess Claims" shall be deemed to
exist if the aggregate unpaid claims of Purchaser for Indemnifiable
Damages (including Purchaser's estimate of the cost of defense of
any claim), that have not been resolved against Purchaser pursuant
to arbitration hereunder, exceed the amount then held by the escrow
agent for the purpose of compensating Purchaser for Indemnifiable
Damages.
Section 12.2 Indemnification of Seller. (a) From and after
the Closing, Purchaser will indemnify and hold Seller and its
subsidiaries, officers, directors, shareholders, agents and
employees (the "Seller Parties") harmless from and against any
Indemnifiable Damages incurred as a result of, or in connection
with, any untruth, inaccuracy, violation or breach of any
representations, warranties or covenants of Purchaser set forth in
this Agreement or out of the failure of Purchaser to pay, discharge
or perform any liability or obligation assumed by Purchaser
hereunder.
(b) Seller hereby agrees not to make any claim for
indemnity hereunder except in good faith and for reasonable cause.
Seller will give Purchaser notice of each time that Seller becomes
aware of any fact or circumstance which may give rise to an
obligation of the Purchaser to indemnify any Seller Parties under
this Section, which notice shall be accompanied by a copy of any
claim made which may result in such indemnification obligation.
26
<PAGE>
Notice shall be given as promptly as possible but in no event more
than thirty (30) days after Seller becomes aware of the facts or
circumstances giving rise to the potential indemnification
obligation. Failure to provide timely notice as required by this
Paragraph (b) shall not relieve Purchaser of its indemnification
obligations hereunder, unless such notice is not provided within
one hundred twenty (120) days after Seller becomes aware of the
facts or circumstances giving rise to the potential indemnification
obligation.
(c) Purchaser shall have no liability for any claim,
unless Seller has complied with the notice provisions of Section
12.2 (b) prior to the first anniversary of the Closing Date. The
liability of Purchaser for indemnity hereunder shall be limited to
the actual direct damages suffered as a result of the untruth,
inaccuracy, violation or breach by Purchaser. Seller shall not be
entitled to recover any Indemnifiable Damages under this Article
XII until the aggregate amount of Seller's Indemnifiable Damages
shall exceed Fifty Thousand ($50,000) Dollars in the aggregate (the
"Deductible"), except that Seller shall be entitled to recover
Indemnifiable Damages for any claim that exceeds Twenty Five
Thousand ($25,000) Dollars notwithstanding that aggregate claims do
not exceed the Deductible. Notwithstanding the foregoing, in the
case of any breach by Purchaser of its obligations to pay Assumed
Liabilities (as defined in Section 2.1 hereof), the Deductible and
the one-year notice of claim requirement contained in this Section
12.2 (c) shall not apply to any claim for Indemnifiable Damages
made by Seller.
Section 12.3 Other Remedies. The remedies provided for
in this Article XII and the Escrow Agreement shall be in addition
to and not in lieu of any other remedies available to Purchaser
under this Agreement or otherwise. Seller acknowledges that the
amount Purchaser is entitled to claim as Indemnifiable Damages is
not limited by the amount of the Escrowed Purchase Price. All
claims of Purchaser or Seller under this Article XII shall be
deemed to be a "claim" for purposes of the Minnesota Uniform
Fraudulent Transfer Act. Minn St. Section 513.41 (3).
Section 12.4 Setoff. Purchaser may withhold payment of
any obligation due to Seller to the extent Purchaser has reason to
believe (i) it is entitled to indemnification hereunder and (ii)
the amount of the indemnity obligation is equal to or greater than
the amount withheld. Upon determination of such indemnification
rights, the indemnity obligation may be set-off against the
obligation for which payment was withheld or any other obligation
of Purchaser to Seller.
Section 12.5 Knowledge of Breach (a) In the event any
party to whom a representation or warranty is made (the "Warranty
Receiving Party") pursuant to Article V or VI hereof has actual
knowledge on the Closing Date that the representation or warranty
27
<PAGE>
is materially inaccurate or incomplete, the Warranty Receiving
Party shall not be entitled to Indemnifiable Damages caused by such
breached representation or warranty, unless the party making such
breached representation or warranty had actual knowledge at the
time the representation or warranty was made of the inaccuracy or
incompleteness of the representation or warranty. Notwithstanding
that the Warranty Receiving Party is not entitled to Indemnifiable
Damages, the representation or warranty in question will be deemed
to have been breached for all purposes of this Agreement other than
the collection of Indemnifiable Damages, including the
determination whether conditions to closing by the Warranty
Receiving Party contained in Article IV hereof have been satisfied.
(b) The failure of any party to comply with any covenant or
agreement of such party pursuant to this Agreement shall entitle
the other party (the "Covenant Receiving Party") to Indemnifiable
Damages caused by such breach if the Covenant Receiving Party
decides to close the transactions contemplated hereby
nothwithstanding knowledge by the Covenant Receiving Party of the
breach by the other party. Notwithstanding that Indemnifiable
Damages are available if the Covenant Receiving Party decides to
close the transactions contemplated hereby, the breach shall be
considered in determining whether conditions to closing by the
Covenant Receiving Party contained in Article IV hereof have been
satisfied.
ARTICLE XIII
GENERAL PROVISIONS
Section 13.1 Survival of Representations, Warranties
and Agreements. All representations, warranties and agreements in
this Agreement shall survive the Closing for a period of two years.
Section 13.2 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
given and effective (i) when delivered personally to the persons
named below at any location or (ii) when delivered by any means
(including Fax, mail or expedited delivery service, such as Federal
Express) to the locations provided below, addressed as follows:
(a) If to Purchaser to:
EDITEK, Inc.
1238 Anthony Rd.
Burlington, NC 27215
Attention: James D. Skinner
with copies to:
Petree Stockton, L. L. P.
4101 Lake Boone Trail, Suite 400
28
<PAGE>
Raleigh, NC 27607
Attention: James F. Verdonik, Esq.
(b) If to Seller, to:
Medtox Laboratories, Inc.
402 West County Road D
New Brighton, MN 55112
Attention: James S. Arrington
with a copy to:
Henson & Efron, P.A.
1200 Title Insurance Building
400 Second Avenue South
Minneapolis, MN 55401
Attention: Alan C. Eidness, Esq.
Any party hereto may change the address provided hereinabove
or the person to whom notice is to be given by giving notice to the
other parties in the manner hereinabove provided.
Section 13.3 Miscellaneous. This Agreement (including the
documents and instruments referred to herein) (a) constitutes the
entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof; (b) shall not be
assigned except that Purchaser may assign this agreement to any
Affiliate of Purchaser or any subsequent purchaser of all or any
substantial part of the Assets, provided such assignment shall not
relieve Purchaser of any obligation of Purchaser hereunder; and (c)
shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Minnesota
(without giving effect to the provisions thereof relating to
conflicts of law). The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
Section 13.4 Dispute Resolution. Any controversy or claim
between Seller and Purchaser arising out of or in connection with
this Agreement, other than a matter under one of the two escrow
agreements which shall be arbitrated as provided in such
agreements, shall be settled in binding arbitration in Chicago,
Illinois or at another location acceptable to both Seller and
Purchaser. Seller or Purchaser may initiate arbitration by sending
notice of such initiation to the other party and to the American
Arbitration Association ("AAA"). Such arbitration shall be
conducted before a panel of three arbitrators (one appointed by
Seller, one appointed by Purchaser, and one appointed by the other
29
<PAGE>
two so appointed all of which appointments shall be made within
twenty (20) days after arbitration is instituted) in accordance
with the then-current commercial arbitration rules of the AAA. The
arbitrators shall make their determination within forty-five (45)
days after their appointment and the determination of the
arbitrator(s) shall be final, binding and nonappealable. No party
shall be precluded hereby from seeking provisional remedies in the
courts of any jurisdiction, including, without limitation,
temporary restraining orders and preliminary injunctions, nor shall
the pursuit of such provisional relief constitute a waiver of such
party's right to arbitrate a dispute arising under this Agreement,
unless such waiver is expressed in writing and signed by such
party. The losing party shall bear all costs of the arbitration.
Section 13.5 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
agreement. Facsimile signatures shall be binding on all parties
upon delivery thereof.
Section 13.6 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto
and nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature
whatsoever under this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
30
<PAGE>
IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
PURCHASER:
EDITEK, INC.
By:_________________________________
Title:______________________________
ATTEST:
[SEAL]
_______________________
Secretary
MEDTOX LABORATORIES, INC.
By:_________________________________
Title:______________________________
ATTEST:
[SEAL]
_________________________
Secretary
31
<PAGE>
EXHIBIT A
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made by and among MedTox
Laboratories, a Minnesota corporation ("Seller"), EDITEK, Inc., a Delaware
corporation ("Purchaser"), and Henson & Efron, P.A., a Minnesota professional
association (the "Escrow Agent").
WHEREAS, Seller and Purchaser have executed and delivered an Asset
Purchase Agreement, dated effective as of July 1, 1995 (the "Asset Purchase
Agreement"), pursuant to which Purchaser is to purchase all the assets of
Seller; and
WHEREAS, Seller desires to have Purchaser deposit with the Escrow Agent
the amount of Five Hundred Thousand Dollars ($500,000) Dollars to demonstrate
the good faith of Purchaser (the "Escrowed Funds") for the Escrow Agent to hold
and deliver in accordance with the provisions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Deposits. Immediately upon execution and delivery of the Asset
Purchase Agreement, Purchaser shall deliver the Escrowed Funds to the Escrow
Agent to hold and deliver in accordance with the provisions of this Agreement.
2. Escrow Agent. The Escrow Agent agrees to accept the Escrowed Funds
from Purchaser and to hold and deliver the Escrowed Funds in accordance with the
provisions of this Agreement. The Escrow Agent shall issue to Purchaser a
receipt for the Escrowed Funds and shall deliver to Seller a written notice that
the Escrowed Funds have been received by the Escrow Agent. The Escrow Agent may
require any person to whom the Escrowed Funds are delivered to execute a receipt
therefor as a condition to delivery. The Escrow Agent is, and shall be
considered, an independent contractor, and not an agent of Seller or Purchaser.
3. Investment. The Escrow Agent shall hold the Escrowed Funds in a
trust account, which may be interest bearing or noninterest bearing in the sole
discretion of the Escrow Agent. In the event the Escrow Agent is delivered a
written notice executed by Seller and Purchaser, which specifies an investment
of the Escrowed Funds, the Escrow Agent shall invest the Escrowed Funds in the
investment specified in such written notice. The Escrow Agent shall implement
any order to sell or otherwise change the investment contained in any written
notice executed by Seller and Purchaser. If the investment expires prior to the
Escrow Agent delivering the Escrowed Funds, the Escrow Agent shall renew the
investment in the same type of investment, unless the Escrow Agent receives
written notice executed by Seller and Purchaser instructing the Escrow Agent to
not renew such investment, in which case the Escrow Agent shall
<PAGE>
implement such instructions. The Escrow Agent shall have no liability whatsoever
for any losses associated with investment of the Escrowed Funds or delays in
implementing investment instructions. Any interest, gains or other income
derived from investment of the Escrowed Funds shall constitute Escrowed Funds to
be held and delivered by the Escrow Agent in accordance with the provisions of
this Agreement. The Escrow Agent shall pay any expenses associated with
investments from the Escrowed Funds.
4. Notices. The Escrow Agent shall be protected in acting upon any
written notice request, waiver, consent, receipt or other paper or document
furnished to it in accordance with the terms of this Agreement, not only in
assuming its due execution and the validity and effectiveness of its provisions,
but also as to the truth and acceptability of any information therein contained,
which it in good faith believes to be genuine and what it purports to be.
5. Additional Duties or Liabilities. In no event shall the Escrow Agent
be liable for any act or failure to act under the provisions of this Agreement,
except where its acts are the result of its gross negligence or malfeasance. The
Escrow Agent shall have no duties except those which are expressly set forth
herein, and it shall not be bound by any notice of a claim, or demand with
respect thereto, or any waiver, modification, amendment, termination or
rescission of this Agreement, unless received in writing by it, and, if its
duties or liabilities herein are affected, unless it shall have given its prior
written consent thereto.
6. Indemnity. The parties to this Agreement hereby jointly and
severally indemnify the Escrow Agent against any loss, liability, or damage
(other than any caused by the gross negligence or malfeasance of the Escrow
Agent), including reasonable costs of litigation and counsel fees, arising from
or in connection with the performance of its duties under this Agreement.
7. Conditions to Release of Escrowed Funds. Seller and Purchaser hereby
agree that the Escrowed Funds shall be owned, held and delivered as provided
below:
(a) The Escrowed Funds shall be owned by Purchaser until such time as it is
determined pursuant to the terms of this Section 7 or Section 8 that
the Escrowed Funds are owned by Seller.
(b) If the transactions contemplated by the Asset Purchase Agreement close,
Five Hundred Thousand Dollars ($500,000) (or such lesser amount if
investment losses and expenses have reduced the Escrowed Funds or such
greater amount if interest or other income has been earned), shall be
delivered by the Escrow Agent to Seller at the closing of the
transactions contemplated by the Asset Purchase Agreement as a credit
against the purchase price payable by Purchaser in connection with the
Asset Purchase Agreement.
(c) Purchaser shall have the right to have the Escrowed Funds delivered to
Purchaser, or to any designee of Purchaser, and all claims of Seller to
the Escrowed Funds
2
<PAGE>
shall terminate, upon the earlier to occur of (i) failure of Seller to
satisfy all conditions to Purchaser's obligation to close set forth in
Sections 4.1, 4.2 and 4.4 of the Asset Purchase Agreement on or before
the Purchaser Termination Date (as defined in Section 10.1(c) of the
Asset Purchase Agreement) or (ii) Purchaser's or Seller's determination
not to close the asset purchase contemplated by the Asset Purchase
Agreement, except under the circumstances described in Section 7(d)
hereof.
(d) Seller shall have the right to have the Escrowed Funds delivered to
Seller, or a designee of Seller, and all claims of Purchaser to the
Escrowed Funds shall terminate, if all the following conditions are
satisfied (i) all conditions to Purchaser closing set forth in Sections
4.1, 4.2 and 4.4 of the Asset Purchase Agreement, have been satisfied
on or before the Purchaser Termination Date (as defined in Section
10.1(c) of the Asset Purchase Agreement), (ii) following satisfaction
of such conditions, Purchaser shall fail to notify Seller on or before
the Seller Termination Date (as defined in Section 10.1(b) of the Asset
Purchase Agreement that Purchaser is ready, willing and able to close,
(iii) Seller terminates the Asset Purchase Agreement pursuant to
Section 10.1(b) of the Asset Purchase Agreement before Purchaser
notifies Seller that Purchaser is ready, willing and able to close,
(iv) Purchaser's failure to notify Seller as to its ability to close
was caused solely by the failure of the Purchaser to raise an amount
equal to the purchase price pursuant to the Asset Purchase Agreement
from sales of securities or loans and (v) Purchaser's failure to raise
such amount of funds was not caused, in whole or in part, directly or
indirectly, by Seller or any Affiliate of Seller other than by (x) any
action of Seller taken after the date of this Agreement in the ordinary
course of its business as previously disclosed to Seller, if such act
would not breach the Asset Purchase Agreement, (y) any aspect of
Seller's financial condition or results of operations, if the same has
been disclosed to Purchaser by Seller in the Asset Purchase Agreement
or in the due diligence review of Seller by Purchaser conducted prior
to the date of the Asset Purchase Agreement and (z) any nonmaterial
change in the financial condition or results of operations of Seller,
if such nonmaterial change was caused by any action of Seller (A) that
is taken after the date of this Agreement in the ordinary course of
business as previously disclosed to Purchaser and (B) that would not
breach the Asset Purchase Agreement. Notwithstanding clause (iv) of the
preceding sentence, if Purchaser raises $24,000,000 (the amount equal
to the purchase price pursuant to the Asset Purchase Agreement) and
fails to raise $30,000,000, which is a condition to Purchaser closing
pursuant to Section 4.4 (h) of the Asset Purchase Agreement, and if
Purchaser shall fail to waive such Section 4.4 (h) of the Asset
Purchase Agreement prior to the Seller terminating the Asset Purchase
Agreement pursuant to Section 10.1 (b) thereof, Purchaser shall be
deemed not to have raised the $24,000,000 for purposes of clause (iv)
of the preceding sentence.
3
<PAGE>
(e) Purchaser shall have the right to have the Escrowed Funds delivered to
Purchaser, or a designee of Purchaser, and all claims of Seller to the
Escrowed Funds shall terminate, upon Purchaser's or Seller's
determination not to close the asset purchase contemplated by the Asset
Purchase Agreement except under the circumstances described in Section
7 (d) hereof.
(f) Upon determination by Purchaser that Purchaser or Seller is entitled to
delivery of the Escrowed Funds as provided above in this Section 7,
Purchaser may instruct the Escrow Agent in writing either (i) to
deliver all or part of the Escrowed Funds to Seller, in which case the
Escrow Agent shall deliver the specified Escrowed Funds to Seller as
soon as practicable after receipt of such notice from Purchaser or (ii)
to deliver all or part of the Escrowed Funds to Purchaser, in which
case the Escrow Agent shall afford Seller the opportunity to object to
such delivery as follows. As soon as practical after receipt of the
written instructions from Purchaser, the Escrow Agent shall provide a
copy of such written instructions to Seller. Unless within fifteen (15)
days following the date the Escrow Agent sends to Seller a copy of the
instructions of Purchaser, the Escrow Agent receives from Seller a
written notice executed by Seller objecting to delivery of the Escrowed
Funds to Purchaser, the Escrow Agent shall deliver to Purchaser the
Escrowed Funds specified in Purchaser's notice, and all claims of
Seller to such specified Escrowed Funds shall terminate notwithstanding
the underlying reasons for the failure to close the asset purchase
contemplated by the Asset Purchase Agreement. Seller's rights to the
Escrowed Funds shall survive delivery of such funds to the Purchaser.
(g) Upon determination by Seller that Seller or Purchaser is entitled to
delivery of the Escrowed Funds as provided in this Section 7, Seller
may instruct the Escrow Agent in writing either (i) to deliver all or
part of the Escrowed Funds to Purchaser, in which case the Escrow Agent
shall deliver the specified Escrowed Funds to Purchaser as soon as
practicable after receipt of such instructions from Seller, or (ii) to
deliver all or part of the Escrowed Funds to Seller, in which case the
Escrow Agent shall afford Purchaser the opportunity to object to such
delivery as follows. As soon as practical after receipt of written
instructions from Seller, the Escrow Agent shall provide a copy of such
written instructions to Purchaser. Unless within fifteen (15) days
following the date the Escrow Agent sends to Purchaser a copy of the
instructions of Seller, the Escrow Agent receives a written notice
executed by Purchaser objecting to delivery of the Escrowed Funds to
Seller, the Escrow Agent shall deliver to Seller the Escrowed Funds
specified in Seller's notice, and any balance owed to Purchaser and all
claims of Purchaser to such specified Escrowed Funds shall terminate
notwithstanding the underlying reasons for the failure to close the
asset purchase contemplated by the Asset Purchase Agreement.
(h) Seller and Purchaser hereby agree not to make any claim for the
Escrowed Funds, and not to dispute any claim for the Escrowed Funds
made by the other party, except in good faith and for reasonable cause.
(i) In performing its duties as escrow agent hereunder to hold or deliver
the Escrowed Funds, the Escrow Agent shall follow the provisions set
forth above and shall not allow any
4
<PAGE>
independent judgment it may form about the validity of any claims of
either Seller or Purchaser to the Escrowed Funds to affect its
performance hereunder, notwithstanding any independent knowledge the
Escrow Agent may have of the validity or invalidity of such claims.
8. Dispute Resolution. Any controversy or claim between Seller and the
Escrow Agent or Purchaser and the Escrow Agent (but not any dispute between
Purchaser and Seller, which shall be arbitrated pursuant to the Asset Purchase
Agreement) arising out of or in connection with this Agreement shall be settled
in binding arbitration in the City of Minneapolis, Minnesota. Any of Seller,
Purchaser or the Escrow Agent may initiate arbitration by sending notice of such
initiation to the other parties hereto and to the American Arbitration
Association ("AAA"). Such arbitration shall be conducted before a panel of three
arbitrators (one appointed by Seller, one appointed by Purchaser, and one
appointed by the other two so appointed, all of which appointments shall be made
within twenty (20) days after arbitration is instituted) in accordance with the
then-current commercial arbitration rules of the AAA. The arbitrators shall make
their decision within forty-five (45) days after their appointment and the
determination of the arbitrator(s) shall be final, binding and nonappealable. No
party shall be precluded hereby from seeking provisional remedies in the courts
of any jurisdiction, including, without limitation, temporary restraining orders
and preliminary injunctions, nor shall the pursuit of such provisional relief
constitute a waiver of such party's right to arbitrate a dispute arising under
this Agreement, unless such waiver is expressed in writing and signed by such
party. The Escrow Agent, upon receipt of any order of any court or arbitrator
shall hold or deliver the Escrowed Funds in accordance with such order. The
Escrow Agent shall not question the jurisdiction or authority of the court or
arbitrator or whether the order is appealable. The losing party, if other than
the Escrow Agent, shall bear all costs of the arbitration.
9. Payment of Fees. The Escrow Agent shall be entitled to reimbursement
of expenses, plus a fee at its normal hourly rates, for performance of its
duties hereunder. Fees and expenses shall be paid 50% by Seller and 50% by
Purchaser, provided that any fees or expenses of the Escrow Agent associated
with the preparation or negotiation of this Agreement, or any amendment or
modification for this Agreement shall be the exclusive responsibility of Seller.
The Escrow Agent shall not be entitled to deduct expenses or fees from the
Escrowed Funds (except as provided above with respect to expenses incurred in
connection with investing the Escrowed Funds), nor shall the Escrow Agent be
entitled to delay delivery of the Escrowed Funds on account of any party's
failure to pay its fees or expenses.
10. Termination. This Agreement shall terminate upon delivery of the
Escrowed Funds pursuant to Section 7 hereof or pursuant to an order entered by
the arbitrator(s) pursuant to Section 8.
11. Resignation or Removal of the Escrow Agent. The Escrow Agent may at
any time resign, which resignation shall be effective on the thirtieth (30th)
day following the effective date of written notice of resignation sent to Seller
and Purchaser. Upon such resignation, the Escrow Agent shall deliver the
Escrowed Funds to a substitute Escrow Agent designated in a written
5
<PAGE>
notice executed by both Seller and Purchaser. If Seller and Purchaser fail to
provide written notice of the same substitute Escrow Agent prior to
effectiveness of resignation, the Escrow Agent shall deliver the Escrowed Funds
to a substitute Escrow Agent of its own choice and shall notify Seller and
Purchaser of same. The Escrow Agent may be removed at any time upon written
notice executed by both Seller and Purchaser, whereupon the Escrow Agent shall
deliver the Escrowed Funds in accordance with the instructions set forth in such
notice. Upon delivery of the Escrowed Funds, the duties of the Escrow Agent
hereunder shall immediately terminate.
12. Miscellaneous.
12.1 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof,
and supersedes any and all prior agreements, understandings, promises, and
representations concerning the subject matter hereof and the terms applicable
thereto other than those expressly set forth herein.
12.2 Amendments. This Agreement may not be modified, amended,
altered, or supplemented except by a written instrument executed and delivered
by all of the parties hereto.
12.3 Assignments: Binding Effect. This Agreement shall not be
assigned by operation of law or otherwise without the prior written consent of
the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the parties hereto
and their respective successors and assigns.
12.4 Severability. If any term or other provision of this
Agreement is invalid, illegal, or unenforceable by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in a manner which is
materially adverse to any party. Upon determination that any term or other
provision is invalid, illegal, or unenforceable, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties.
12.5 Notice. Unless otherwise expressly provided herein, all
notices and other communications to be given or made pursuant to this Agreement
shall be in writing and if sent by the Escrow Agent shall be deemed to have been
received, effective (i) on the third day following deposit in the United States
Mail, postage prepaid, certified, return receipt requested, or (ii) or on the
day following delivery to Federal Express, Express Mail, or other nationally
recognized expedited mail or package service, next day delivery, delivery
prepaid, addressed to the parties as follows:
If to Seller: Medtox Laboratories, Inc.
402 West County Road D
New Brighton, MN 55112
Attn: James S. Arrington
6
<PAGE>
With a copy to: Henson & Efron, P.A.
1200 Title Insurance Building
400 Second Avenue South
Minneapolis, MN 55401
Attn: Alan C. Eidsness, Esq.
If to Purchaser: EDITEK, Inc.
1238 Anthony Road
Burlington, NC 27215
Attn: James D. Skinner
With a copy to: Petree Stockton, L.L.P.
4101 Lake Boone Trail
Suite 400
Raleigh, NC 27607
Attn: James F. Verdonik, Esq.
If to Escrow Agent: Henson & Efron, P.A.
1200 Title Insurance Building
400 Second Avenue South
Minneapolis, MN 55401
Attn: Alan C. Eidsness, Esq.
Any notice sent by a party to the Escrow Agent shall be deemed
to have been received by the Escrow Agent when it is actually received by the
Escrow Agent at the address indicated above. Any notice sent by Seller or
Purchaser to the other shall be subject to the notice provisions of the Asset
Purchase Agreement.
Any party hereto may change the address provided hereinabove
or the person to whose attention the notice is to be given by giving notice to
the other parties in the manner hereinabove provided.
12.6 Headings. The headings contained in this Agreement are
for reference purposes only, and shall not affect in any way the meaning or
interpretation of this Agreement.
12.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the substantive law of the State of Minnesota
without giving effect to the principles of conflicts of law thereof.
12.8. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
shall together constitute one and the same instrument.
7
<PAGE>
12.9 Waivers. The failure of any party hereto to insist, in
any one or more instances, upon the performance of any term, covenant, or
condition of this Agreement, or to exercise any rights hereunder, shall not be
construed as a waiver or relinquishment of the future performance of any such
term, covenant, or condition, or the future exercise of such right, but the
obligations of the non-performing party with respect to such future performance
shall continue in full force and effect.
12.10 Further Assurances. The parties hereto will execute and
deliver all such further documents and instruments, and take all further actions
as may be necessary to consummate the transactions contemplated hereby.
12.11 Escrow Agent Representation of Seller; Conflict of
Interest. The parties hereby acknowledge that the Escrow Agent regularly
represents Seller as legal counsel and has acted as legal counsel for Seller in
connection with the negotiation of the Asset Purchase Agreement and this
Agreement. Purchaser agrees that it will not raise any objection to any future
representation of Seller by the Escrow Agent on account of the Escrow Agent
acting as escrow agent pursuant to the Agreement, including, without limitation,
in connection with any dispute arising out of, or in connection with, the Asset
Purchase Agreement or this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of this ___ day of June, 1995.
[CORPORATE SEAL] MEDTOX LABORATORIES, INC.
ATTEST: By:______________________________
Name:_________________________
Title:__________________________
By:_________________________
______________, Secretary
[CORPORATE SEAL] EDITEK, INC.
ATTEST: By:______________________________
Name:_________________________
Title:________________________
By:_________________________
______________, Secretary
ESCROW AGENT:
HENSON & EFRON, P.A.
By:______________________________
Name:_________________________
Title:________________________
9
<PAGE>
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made by and among MedTox
Laboratories, a Minnesota corporation ("Seller"), EDITEK, Inc., a
Delaware corporation ("Purchaser"), and Petree Stockton, L. L. P., a
North Carolina Limited Liability Partnership (the "Escrow Agent").
WHEREAS, Seller and Purchaser have executed and delivered an Asset
Purchase Agreement dated effective as of July 1, 1995 (the "Asset
Purchase Agreement"), pursuant to which Purchaser is to purchase all the
assets of Seller; and
WHEREAS, Article XII of the Asset Purchase Agreement provides for
Seller to indemnify Purchaser for Indemnifiable Damages (as defined in
the Asset Purchase Agreement); and
WHEREAS, the Asset Purchase Agreement provides for Five Hundred
Thousand ($500,000) of the Purchase Price to be delivered into escrow by
Purchaser at the Closing to be held and delivered pursuant to this
Agreement (the "Escrowed Funds") for the Escrow Agent to provide a ready
source of payment to Purchaser should there be any Indemnifiable
Damages.
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Deposits. At the Closing Purchaser shall deliver the
Escrowed Funds to the Escrow Agent to hold and deliver in accordance
with the provisions of this Agreement.
2. Escrow Agent. The Escrow Agent agrees to accept the Escrowed
Funds from Purchaser and to hold and deliver the Escrowed Funds in
accordance with the provisions of this Agreement. The Escrow Agent
shall issue to Purchaser a receipt for the Escrowed Funds and shall
deliver to Seller a written notice that the Escrowed Funds have been
received by the Escrow Agent. The Escrow Agent may require any person
to whom the Escrowed Funds are delivered to execute a receipt therefor
as a condition to delivery. The Escrow Agent is, and shall be
considered, an independent contractor, and not an agent of Seller or
Purchaser.
3. Investment. The Escrow Agent shall hold the Escrowed Funds
in a trust account, which may be interest bearing or noninterest bearing
in the sole discretion of the Escrow Agent. In the event the Escrow
Agent is delivered a written notice executed by Seller and Purchaser,
which specifies an investment of the Escrowed Funds, the Escrow Agent
shall invest the Escrowed Funds in the investment specified in such
written notice. The Escrow Agent shall implement any order to sell or
otherwise change the investment contained in any written notice executed
by Seller and Purchaser. If the investment expires prior to the Escrow
Agent delivering the Escrowed Funds, the Escrow Agent shall renew the
investment in the same type of investment, unless the Escrow Agent
receives written notice executed by Seller and Purchaser
<PAGE>
instructing the Escrow Agent to not renew such investment, in which case
the Escrow Agent shall implement such instructions. The Escrow Agent
shall have no liability whatsoever for any losses associated with
investment of the Escrowed Funds, or delays in implementing investment
instructions. Any interest, gains or other income derived from
investment of the Escrowed Funds shall constitute Escrowed Funds to be
held and delivered by the Escrow Agent in accordance with the provisions
of this Agreement. The Escrow Agent shall pay any expenses associated
with investments from the Escrowed Funds.
4. Notices. The Escrow Agent shall be protected in acting upon
any written notice request, waiver, consent, receipt or other paper or
document furnished to it in accordance with the terms of this Agreement,
not only in assuming its due execution and the validity and
effectiveness of its provisions, but also as to the truth and
acceptability of any information therein contained, which it in good
faith believes to be genuine and what it purports to be.
5. Additional Duties or Liabilities. In no event shall the
Escrow Agent be liable for any act or failure to act under the
provisions of this Agreement, except where its acts are the result of
its gross negligence or malfeasance. The Escrow Agent shall have no
duties except those which are expressly set forth herein, and it shall
not be bound by any notice of a claim, or demand with respect thereto,
or any waiver, modification, amendment, termination or rescission of
this Agreement, unless received in writing by it, and, if its duties or
liabilities herein are affected, unless it shall have given its prior
written consent thereto.
6. Indemnity. The parties to this Agreement hereby jointly and
severally indemnify the Escrow Agent against any loss, liability, or
damage (other than any caused by the gross negligence or malfeasance of
the Escrow Agent), including reasonable costs of litigation and counsel
fees, arising from or in connection with the performance of its duties
under this Agreement.
7. Conditions to Release of Escrowed Funds. Seller and
Purchaser hereby agree that the Escrowed Funds shall be owned, held and
delivered as provided below:
(a) The Escrowed Funds shall be owned by Seller until such time as it
is determined pursuant to the terms of this Section 7 or Section 8
that the Escrowed Funds are owned by Purchaser.
(b) In the event Purchaser has any claims for Indemnifiable Damages for
which Seller may be responsible pursuant to the Asset Purchase
Agreement, the following procedures shall be followed:
(i) Purchaser shall give written notice to Seller, and shall send
a copy of such notice to the Escrow Agent, which notice shall
set forth a detailed description of the claimed breach and
the amount of loss, damage, cost or expense which Purchaser
claims to have sustained by reason thereof;
2
<PAGE>
(ii) The Escrow Agent shall pay to Purchaser the amount of such
claim from the Escrowed Purchase Price upon the expiration of
thirty (30) days from the date a copy of such notice is
received by the Escrow Agent (the "Notice of Contest Period")
if a written notice of dispute from Seller is not received by
the Escrow Agent prior to expiration of the Notice of Contest
Period; and
(iii) If, prior to the expiration of the Notice of Contest Period,
Seller shall notify Purchaser in writing of an intention to
dispute the claim and if such dispute is not resolved by
agreement of both Purchaser and Seller delivered to the
Escrow Agent within 30 days after expiration of such Period
(the "Resolution Period"), then any party may submit the
dispute to arbitration pursuant to Section 8 hereof.
(iv) If a written notice of dispute from Seller is received by the
Escrow Agent prior to expiration of the Notice of Contest
Period, the Escrow Agent shall pay Purchaser the amount (i)
set forth in any written instruction executed by Seller and
Purchaser and/or (ii) set forth in any arbitration award or
order pursuant to Section 8 hereof.
(c) On the first anniversary of the date of this Agreement, the Escrow
Agent shall pay to Seller the amount, if any, by which (i) the
Escrowed Funds then held by the Escrow Agent on such date exceed
(ii) the amount of claims against the Escrowed Funds made by
Purchaser that have not been either paid from the Escrowed Funds or
determined against Purchaser pursuant to Section 8 hereof.
(d) Seller and Purchaser hereby agree not to make any claim for the
Escrowed Funds, and not to dispute any claim for the Escrowed Funds
made by the other party, except in good faith and for reasonable
cause.
(e) In performing its duties as escrow agent hereunder to hold or
deliver the Escrowed Funds, the Escrow Agent shall follow the
provisions set forth above and shall not allow any independent
judgment it may form about the validity of any claims of either
Purchaser or Seller to the Escrowed Funds under the terms of the
Asset Purchase Agreement to affect its performance hereunder,
notwithstanding any independent knowledge the Escrow Agent may have
of the validity of such claims.
8. Dispute Resolution. Any controversy or claim between Seller
and the Escrow Agent or between Purchaser and the Escrow Agent (but not any
dispute between Seller and Purchaser, which shall be arbitrated pursuant to the
Asset Purchase Agreement) arising out of or in connection with this
Agreement shall be settled in binding arbitration in the City of
Raleigh, North Carolina. Any of Seller, Purchaser or the Escrow Agent
may initiate arbitration by sending notice of such initiation to the
other parties hereto and to the American Arbitration Association
("AAA"). Such arbitration shall be conducted before a panel of three
arbitrators (one appointed by Seller, one appointed by Purchaser, and
one appointed by the other two so appointed all of which appointments
shall be made within twenty (20) days after arbitration is instituted) in
3
<PAGE>
accordance with the then-current commercial arbitration rules of the
AAA. The arbitrators shall make their decision within forty-five (45)
days after their appointment and the determination of the arbitrator(s)
shall be final, binding and nonappealable. No party shall be precluded
hereby from seeking provisional remedies in the courts of any
jurisdiction, including, without limitation, temporary restraining
orders and preliminary injunctions, nor shall the pursuit of such
provisional relief constitute a waiver of such party's right to
arbitrate a dispute arising under this Agreement, unless such waiver is
expressed in writing and signed by such party. The Escrow Agent, upon
receipt of any order of any court or arbitrator shall hold or deliver
the Escrowed Funds in accordance with such order. The Escrow Agent
shall not question the jurisdiction or authority of the court or
arbitrator or whether the order is appealable. The losing party, if
other than the Escrow Agent, shall bear all costs of the arbitration.
9. Payment of Fees. The Escrow Agent shall be entitled to
reimbursement of expenses, plus a fee at its normal hourly rates, for
performance of its duties hereunder. Fees and expenses shall be paid
50% by Seller and 50% by Purchaser, provided that any fees or expenses
of the Escrow Agent associated with the preparation or negotiation of
this Agreement, or any amendment or modification for this Agreement
shall be the exclusive responsibility of Purchaser. The Escrow Agent
shall not be entitled to deduct expenses or fees from the Escrowed Funds
(except as provided above with respect to expenses incurred in
connection with investing the Escrowed Funds), nor shall the Escrow
Agent be entitled to delay delivery of the Escrowed Funds on account of
any party's failure to pay its fees or expenses.
10. Termination. This Agreement shall terminate upon delivery of
the Escrowed Funds pursuant to Section 7 hereof or pursuant to an order
entered by the arbitrator(s) pursuant to Section 8.
11. Resignation or Removal of the Escrow Agent. The Escrow Agent
may at any time resign, which resignation shall be effective on the
thirtieth (30th) day following the effective date of written notice of
resignation sent to Seller and Purchaser. Upon such resignation, the
Escrow Agent shall deliver the Escrowed Funds to a substitute Escrow
Agent designated in a written notice executed by both Seller and
Purchaser. If Seller and Purchaser fail to provide written notice of
the same substitute Escrow Agent prior to effectiveness of resignation,
the Escrow Agent shall deliver the Escrowed Funds to a substitute Escrow
Agent of its own choice and shall notify Seller and Purchaser of same.
The Escrow Agent may be removed at any time upon written notice executed
by both Seller and Purchaser, whereupon the Escrow Agent shall deliver
the Escrowed Funds in accordance with the instructions set forth in such
notice. Upon delivery of the Escrowed Funds, the duties of the Escrow
Agent hereunder shall immediately terminate.
12. Miscellaneous.
12.1 Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject
matter hereof, and supersedes any and all prior agreements,
understandings, promises, and representations concerning the subject
matter hereof and the terms applicable thereto other than those
expressly set forth herein.
4
<PAGE>
12.2 Amendments. This Agreement may not be modified,
amended, altered, or supplemented except by a written instrument
executed and delivered by all of the parties hereto.
12.3 Assignments: Binding Effect. This Agreement shall not
be assigned by operation of law or otherwise without the prior written
consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and
assigns.
12.4 Severability. If any term or other provision of this
Agreement is invalid, illegal, or unenforceable by any rule of law or
public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is
not affected in a manner which is materially adverse to any party. Upon
determination that any term or other provision is invalid, illegal, or
unenforceable, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the
parties.
12.5 Notice. Unless otherwise expressly provided herein,
all notices and other communications to be given or made pursuant to
this Agreement shall be in writing and if sent by the Escrow Agent shall
be deemed to have been received, effective (i) on the third day
following deposit in the United States Mail, postage prepaid, certified,
return receipt requested, or (ii) or on the day following delivery to
Federal Express, Express Mail, or other nationally recognized expedited
mail or package service, next day delivery, delivery prepaid, addressed
to the parties as follows:
If to Seller: Medtox Laboratories, Inc.
402 West County Road D
New Brighton, MN 55112
Attn: James S. Arrington
With a copy to: Henson & Efron, P.A.
1200 Title Insurance Building
400 Second Avenue South
Minneapolis, MN 55401
Attn: Alan C. Eidsness, Esq.
If to Purchaser: EDITEK, Inc.
1238 Anthony Road
Burlington, NC 27215
Attn: James D. Skinner
With a copy to: Petree Stockton, L.L.P.
4101 Lake Boone Trail
Suite 400
5
<PAGE>
Raleigh, NC 27607
Attn: James F. Verdonik, Esq.
If to Escrow Agent: Henson & Efron, P.A.
1200 Title Insurance Building
400 Second Avenue South
Minneapolis, MN 55401
Attn: Alan C. Eidsness, Esq.
Any notice sent by a party to the Escrow Agent shall be deemed to
have been received when it is actually received by the Escrow Agent at
the address indicated above. Any notice sent by Seller or Purchaser to
the other shall be subject to the notice provisions of the Asset
Purchase Agreement.
Any party hereto may change the address provided hereinabove or the
person to whose attention the notice is to be given by giving notice to
the other parties in the manner hereinabove provided.
12.6 Headings. The headings contained in this Agreement are
for reference purposes only, and shall not affect in any way the meaning
or interpretation of this Agreement.
12.7 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the substantive law of the State of
North Carolina without giving effect to the principles of conflicts of
law thereof.
12.8. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same instrument.
12.9 Waivers. The failure of any party hereto to insist, in
any one or more instances, upon the performance of any term, covenant,
or condition of this Agreement, or to exercise any rights hereunder,
shall not be construed as a waiver or relinquishment of the future
performance of any such term, covenant, or condition, or the future
exercise of such right, but the obligations of the non-performing party
with respect to such future performance shall continue in full force and
effect.
12.10 Further Assurances. The parties hereto will execute
and deliver all such further documents and instruments, and take all
further actions as may be necessary to consummate the transactions
contemplated hereby.
12.11 Escrow Agent Representation of Purchaser; Conflict of
Interest. The parties hereby acknowledge that the Escrow Agent
regularly represents Purchaser as legal counsel and has acted as legal
counsel for Purchaser in connection with the Asset Purchase Agreement
and this Agreement. Seller agrees that it will not raise any objection
to any future representation of
6
<PAGE>
Purchaser by the Escrow Agent on account of the Escrow Agent acting as
escrow agent pursuant to the Agreement, including, without limitation,
in connection with any dispute arising out of, or in connection with,
the Asset Purchase Agreement or this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of this ___ day of June, 1995.
[CORPORATE SEAL] MEDTOX LABORATORIES, INC.
ATTEST: By:______________________________
Name:_________________________
Title:__________________________
By:_________________________
______________, Secretary
[CORPORATE SEAL] EDITEK, INC.
ATTEST: By:______________________________
Name:_________________________
Title:________________________
By:_________________________
______________, Secretary
ESCROW AGENT:
PETREE STOCKTON, L. L. P.
By:______________________________
Name:_________________________
Title:________________________
<PAGE>
EXHIBIT C
______________, 1996
MedTox Laboratories, Inc.
402 West County Road D
New Brighton, MN 55112
Re: Sale of Certain Assets of MedTox Laboratories, Inc.
Gentlemen:
This opinion letter is being delivered pursuant to paragraph 4.3(b) of
that certain Asset Purchase Agreement dated effective July 1, 1995 by and
between MedTox Laboratories, Inc., a Minnesota corporation ("Seller"), and
EDITEK, Inc., a Delaware corporation ("Purchaser"), as amended by an Amendment
Agreement dated as of December 1, 1995 (the "Purchase Agreement"), in our
capacity as counsel to Purchaser in connection with the negotiation, execution
and delivery of the Purchase Agreement and the closing of the transactions
contemplated by the Purchase Agreement.
Capitalized terms used in this opinion letter and not defined in it
have the respective meanings given to those terms in the Purchase Agreement.
In our capacity as such counsel, we have reviewed the Purchase
Agreement (including the exhibits and schedules thereto), agreements in the form
attached as Exhibits to the Purchase Agreement, as amended ("the Exhibit
Agreements"), the Certificate of Incorporation (as amended), Bylaws (as
amended), and minutes of meetings of the Board of Directors and stockholders of
Purchaser and such other documents, records, agreements and certificates and
have made such inquiries as we deemed appropriate. We have relied as to factual
matters upon certificates of officers of Purchaser, but we have no reason to
believe the facts stated therein are incorrect, incomplete or misleading, and
upon certificates or statements or both of various governmental officials. In
all examinations of such documents, we have assumed the genuineness of
signatures on original documents and the conformity to original documents of all
copies submitted to us as certified, conformed or
<PAGE>
photographic copies, the legal competence of natural persons and that the
Purchaser Delivered Documents (as defined below) are enforceable against all
parties thereto (other than Purchaser). As to certificates or statements or both
of public officials, we have assumed that they have been properly given and to
be accurate.
Except as set forth in the following sentence, the opinions set forth
in this letter are based upon and limited to (i) the laws of the State of North
Carolina, (ii) the General Corporation Law of the State of Delaware, and (iii)
the federal laws of the United States of America, and we express no opinion
herein concerning the laws of any other jurisdiction. The opinions set forth in
numbered paragraphs 1, 2(a) and 2(b) below are also based upon and limited to
the Delaware General Corporation Law.
Based upon the foregoing and subject to the qualifications and
limitations set forth herein, we are of the following opinions:
1. Purchaser is a corporation duly incorporated,
organized and entitled to conduct business under, and is validly
existing and in good standing under, the laws of the State of Delaware.
2. With respect to the Purchase Agreement and any
other agreements, instruments and documents executed and delivered by
Purchaser pursuant to the Purchase Agreement (collectively, together
with the Purchase Agreement, the "Purchaser Delivered Agreements"):
(a) Buyer has the corporate power and
authority to execute and deliver the Purchaser Delivered
Agreements and to consummate the transactions contemplated by,
and otherwise to comply with and perform under, them;
(b) the execution and delivery by Purchaser
of the Purchaser Delivered Agreements, the consummation by
Purchaser of the transactions contemplated by them and
Purchaser's other compliance with or performance under them
have been duly authorized by all necessary corporate action on
the part of Purchaser in compliance with any governing or
applicable agreements,
<PAGE>
instruments or other documents (including without limitation
its Certificate of Incorporation and Bylaws) and applicable
law; and
(c) Buyer has duly executed and delivered the Buyer Delivered
Agreements.
3. The Purchaser Delivered Agreements constitute
valid and binding agreements of Purchaser that are enforceable against
it in accordance with their terms.
4. Neither the execution and delivery by Purchaser of
the Purchaser Delivered Agreements nor the consummation by Purchaser of
the transactions contemplated thereby nor other compliance with or
performance under them will (with the passage of time or the giving of
notice or both) constitute a violation of (i) any term or provision of
the Certificate of Incorporation or Bylaws of Purchaser, (ii) any
permit, judgment, decree or order of any governmental authority known
to us or (iii) any applicable law which in our experience is normally
applicable to the transactions of the type contemplated in the
Purchaser Delivered Agreements.
5. No consent, approval, order or authorization of,
or registration, declaration of filing with, any governmental authority
or other person on the part of Purchaser is required in connection with
Purchaser's execution or delivery of the Purchase Agreement or the
other Purchaser Delivered Agreements, or Purchaser's consummation of
the transactions contemplated by them or Purchaser's other compliance
with or performance under them, including the issuance of the Closing
Shares and the Additional Shares, except that offers and sales of the
Closing Shares and the Additional Shares may require filings with, and
approvals by state securities regulators following the Closing and
Purchaser is required to file a Form D with the Securities and Exchange
Commission following the Closing and the performance of the
Registration Rights Agreement will require filings with, and approvals
by, the Securities and Exchange Commission and various state securities
regulators.
6. Upon issuance in accordance with the provisions of
the Purchase Agreement, the Closing Shares and the Additional Shares
will constitute duly and validly authorized, fully-
<PAGE>
paid and nonassessable shares of Common Stock of the Purchaser
The foregoing opinions are further subject to the following
qualifications and assumptions:
Our opinions as to enforceability (i) are given as if
the laws of the State of North Carolina govern the Purchase Agreement,
the other Purchaser Delivered Agreements (ii) may be limited by
applicable bankruptcy, insolvency and other laws (including without
limitation fraudulent conveyance and other laws of similar import), by
equitable principles affecting creditors' rights generally, and by the
discretion of the courts in granting equitable remedies (regardless of
whether such enforceability is considered in a proceeding at law or in
equity and regardless of whether such limitations are derived from
constitutions, statutes, judicial decisions or otherwise). In addition,
no opinion is expressed herein as to the enforceability of any
provision in the Registration Rights Agreement regarding
indemnification, contribution or related matters set forth in Sections
6 and 7 of the Registration Rights Agreement.
In addition, and subject to the qualifications and assumptions set
forth previously in this letter, we confirm to you that to our knowledge no
litigation or other proceeding against Purchaser has been instituted or
threatened to restrain or prohibit any of the transactions contemplated by the
Purchase Agreement.
This opinion letter is delivered in connection with the consummation of
the transactions contemplated in the Purchase Agreement, may be relied upon only
by you and your counsel in connection therewith, may not be relied upon by you
for any other purpose or by anyone else for any purpose, and may not be quoted,
published or otherwise disseminated without our prior written consent.
Very truly yours,
PETREE STOCKTON, L.L.P.
<PAGE>
EXHIBIT C
______________, 1995
MedTox Laboratories, Inc.
402 West County Road D
New Brighton, MN 55112
Re: Sale of Certain Assets of MedTox Laboratories, Inc.
Gentlemen:
This opinion letter is being delivered pursuant to paragraph
4.3(b) of that certain Asset Purchase Agreement (the "Purchase
Agreement") dated effective July 1, 1995 by and between MedTox
Laboratories, Inc., a Minnesota corporation ("Seller"), and EDITEK,
Inc., a Delaware corporation ("Purchaser"), in our capacity as
counsel to Purchaser in connection with the negotiation, execution
and delivery of the Purchase Agreement and the closing of the
transactions contemplated by the Purchase Agreement.
Capitalized terms used in this opinion letter and not defined
in it have the respective meanings given to those terms in the
Purchase Agreement.
In our capacity as such counsel, we have reviewed the Purchase
Agreement (including the exhibits and schedules thereto),
agreements in the form attached as Exhibits to the Purchase
Agreement ("the Exhibit Agreements") the Certificate of
Incorporation (as amended), Bylaws (as amended), and minutes of
meetings of the Board of Directors and stockholders of Purchaser
and such other documents, records, agreements and certificates and
have made such inquiries as we deemed appropriate. We have relied
as to factual matters upon certificates of officers of Purchaser,
but we have no reason to believe the facts stated therein are
incorrect, incomplete or misleading, and upon certificates or
statements or both of various governmental officials. In all
examinations of such documents, we have assumed the genuineness of
signatures on original documents and the conformity to original
documents of all copies submitted to us as certified, conformed or
photographic copies, the legal competence of natural persons and
that the Purchaser Delivered Documents (as defined below) are
enforceable against all parties thereto (other than Purchaser). As
to certificates or statements or both of public officials, we have
assumed that they have been properly given and to be accurate.
Except as set forth in the following sentence, the opinions
set forth in this letter are based upon and limited to (i) the laws
of the State of North Carolina, (ii) the General Corporation Law of
the State of Delaware, and (iii) the federal laws of the United
States of America, and we express no opinion herein concerning the
<PAGE>
MedTox Laboratories, Inc.
, 1995
Page 2
laws of any other jurisdiction. The opinions set forth in numbered
paragraphs 1, 2(a) and 2(b) below are also based upon and limited
to the Delaware General Corporation Law.
Based upon the foregoing and subject to the qualifications and
limitations set forth herein, we are of the following opinions:
1. Purchaser is a corporation duly incorporated,
organized and entitled to conduct business under, and is
validly existing and in good standing under, the laws of the
State of Delaware.
2. With respect to the Purchase Agreement and any other
agreements, instruments and documents executed and delivered
by Purchaser pursuant to the Purchase Agreement (collectively,
together with the Purchase Agreement, the "Purchaser Delivered
Agreements"):
(a) Buyer has the corporate power and authority to
execute and deliver the Purchaser Delivered Agreements
and to consummate the transactions contemplated by, and
otherwise to comply with and perform under, them;
(b) the execution and delivery by Purchaser of the
Purchaser Delivered Agreements, the consummation by
Purchaser of the transactions contemplated by them and
Purchaser's other compliance with or performance under
them have been duly authorized by all necessary corporate
action on the part of Purchaser in compliance with any
governing or applicable agreements, instruments or other
documents (including without limitation its Certificate
of Incorporation and Bylaws) and applicable law; and
(c) Buyer has duly executed and delivered the Buyer
Delivered Agreements.
3. The Purchaser Delivered Agreements constitute valid
and binding agreements of Purchaser that are enforceable
against it in accordance with their terms.
4. Neither the execution and delivery by Purchaser of
the Purchaser Delivered Agreements nor the consummation by
Purchaser of the transactions contemplated thereby nor other
compliance with or performance under them will (with the
passage of time or the giving of notice or both) constitute a
violation of (i) any term or provision of the Certificate of
Incorporation or Bylaws of Purchaser, (ii) any permit,
judgment, decree or order of any governmental authority known
to us or (iii) any applicable law which in our experience is
<PAGE>
MedTox Laboratories, Inc.
, 1995
Page 3
normally applicable to the transactions of the type
contemplated in the Purchaser Delivered Agreements.
5. No consent, approval, order or authorization of, or
registration, declaration of filing with, any governmental
authority or other person on the part of Purchaser is required
in connection with Buyer's execution or delivery of the
Purchase Agreement or the other Purchaser Delivered
Agreements, or Purchaser's consummation of the transactions
contemplated by them or Purchaser's other compliance with or
performance under them.
The foregoing opinions are further subject to the following
qualifications and assumptions:
Our opinions as to enforceability (i) are given as
if the laws of the State of North Carolina govern the Purchase
Agreement, the other Purchaser Delivered Agreements (ii) may
be limited by applicable bankruptcy, insolvency and other laws
(including without limitation fraudulent conveyance and other
laws of similar import), by equitable principles affecting
creditors' rights generally, and by the discretion of the
courts in granting equitable remedies (regardless of whether
such enforceability is considered in a proceeding at law or in
equity and regardless of whether such limitations are derived
from constitutions, statutes, judicial decisions or
otherwise).
In addition, and subject to the qualifications and assumptions
set forth previously in this letter, we confirm to you that to our
knowledge no litigation or other proceeding against Purchaser has
been instituted or threatened to restrain or prohibit any of the
transactions contemplated by the Purchase Agreement.
This opinion letter is delivered in connection with the
consummation of the transactions contemplated in the Purchase
Agreement, may be relied upon only by you and your counsel in
connection therewith, may not be relied upon by you for any other
purpose or by anyone else for any purpose, and may not be quoted,
published or otherwise disseminated without our prior written
consent.
Very truly yours,
PETREE STOCKTON, L.L.P.
<PAGE>
EXHIBIT D
_______, 1996
EDITEK, Inc.
1238 Anthony Road
Burlington, NC 27215
Re: Sale of Certain Assets of MedTox Laboratories
Gentlemen:
This opinion letter is being delivered pursuant to paragraph
4.4(b) of that certain Asset Purchase Agreement dated effective
July 1, 1995 by and between MedTox Laboratories, a Minnesota
corporation ("Seller"), and EDITEK, Inc., a Delaware corporation
("Purchaser"), as amended by an Amendment Agreement dated as of
December 1, 1995 (the "Purchase Agreement"), in our capacity as
counsel to Seller in connection with the negotiation, execution
and delivery of the Purchase Agreement and the closing of the
transactions contemplated by the Purchase Agreement.
Capitalized terms used in this opinion letter and not
defined in it have the respective meanings given to those terms
in the Purchase Agreement.
In our capacity as such counsel, we have reviewed the
Purchase Agreement, as amended (including the exhibits and
schedules thereto), the Articles of Incorporation (as amended),
Bylaws (as amended), and minutes books of Seller and such other
documents, records, agreements and certificates and have made
such inquiries as we deemed appropriate. We have relied as to
factual matters upon a certificate of an officer of Seller, but
we have no reason to believe the facts stated therein are
incorrect, incomplete or misleading, and upon certificates or
statements or both of various governmental officials. In all
examinations of such documents, we have assumed the genuineness
of signatures on original documents and the conformity to
original documents of all copies submitted to us as certified,
conformed or photographic copies, the legal competence of natural
persons and that the Seller Delivered Agreements (as defined
below) are enforceable against all parties thereto (other than
Seller). As to certificates or statements or both of public
<PAGE>
EDITEK, Inc.
, 1996
Page 2
officials, we have assumed that they have been properly given and
to be accurate.
Except as set forth in the following sentence, the opinions
set forth in this letter are based upon and limited to (i) the
laws of the State of Minnesota and (ii) the federal laws of the
United States of America, and we express no opinion herein
concerning the laws of any other jurisdiction.
Based upon the foregoing and subject to the qualifications
and limitations set forth herein, we are of the following
opinions:
1. Seller and The Forensic Resource Group, Inc.
("Subsidiary") are corporations duly incorporated, organized and
entitled to conduct business under, and are validly existing and
in good standing under the laws of the State of Minnesota.
2. Seller and Subsidiary have all requisite corporate
power and authority to own, operate and lease their properties
and to carry on their businesses as conducted on the date hereof.
Seller is qualified or licensed to do business in the States of
Illinois, California, New Jersey and Connecticut.
3. With respect to the Purchase Agreement and any
other agreements, instruments and documents executed and
delivered by Seller, pursuant to the Purchase Agreement
(collectively, together with the Purchase Agreement, the "Seller
Delivered Agreements"):
(a) Seller has the corporate power and authority
to execute and deliver the Seller Delivered Agreements to which
it is a party and to consummate the transactions contemplated by,
and otherwise to comply with and perform under, them;
(b) The execution and delivery by Seller of the
Seller Delivered Agreements, the consummation by Seller of the
transactions contemplated by them and Seller's other compliance
with or performance under them have been duly authorized by all
necessary corporate action on the part of Seller in compliance
with any governing or applicable agreements, instruments or other
documents (including without limitation its Articles of
Incorporation and Bylaws) and applicable law, and no other
corporate action or proceeding on the part of Seller or any of
its shareholders, directors or officers is necessary for the
execution, delivery and performance of the Seller Delivered
<PAGE>
EDITEK, Inc.
, 1996
Page 3
Agreements by Seller and the consummation of the transactions
contemplated hereby.
(c) Seller has duly executed and delivered the
Seller Delivered Agreements; and
(d) the transfer instruments included in the
Seller Delivered Agreements effectively convey to Purchaser all
of Seller's right, title and interest to and in the Assets.
4. The Seller Delivered Agreements (including without
limitation the transfer instruments delivered by Seller with
respect to the Assets) constitute valid and binding obligations
of Seller enforceable against it in accordance with their terms,
except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, by general
equitable principles and by discretion of the courts in granting
equitable remedies (regardless of whether such enforceability is
considered in a proceeding in equity or at law). In addition, no
opinion is expressed herein as to the enforceability of any
provision in the Registration Rights Agreement regarding
indemnification, contribution or related matters set forth in
Sections 6 and 7 of the Registration Rights Agreement.
5. The Noncompetition Agreements have been duly
executed and delivered by Harry G. McCoy and D. Gary Hemphill and
constitute valid and binding obligations of each of them
enforceable against them in accordance with their respective
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, by general
equitable principles and by discretion of the courts in granting
equitable remedies (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
6. Except as set forth in the Purchase Agreement,
neither the execution or delivery of the Seller Delivered
Agreements nor the consummation by Seller of the transactions
contemplated thereby nor other compliance with or performance
under them will (with the passage of time or the giving of notice
or both):
(a) constitute a violation of, constitute a
default or require any payment under, permit a termination of, or
result in the creation or imposition of any security interest,
lien or other encumbrance or adverse claim against Seller or upon
<PAGE>
EDITEK, Inc.
, 1996
Page 4
any of the Assets (with or without due notice or lapse of time or
the happening or occurrence of any other event) under (i) any
term or provision of the Articles of Incorporation (as amended)
or Bylaws (as amended) of Seller, or (ii) any applicable law
which in our experience is normally applicable to transactions of
the type contemplated by the Purchase Agreement; or
(b) create, or cause the acceleration of the
maturity of, any indebtedness, obligation, or liability of Seller
known to us.
7. Except for any notice or filing which may be
required in connection with licenses and permits which are
identified by Seller in Schedule 6.16 to the Purchase Agreement,
no consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority or other
person on the part of Seller is required in connection with
Seller's execution or delivery of the Purchase Agreement or the
other Seller Delivered Agreements, Seller's consummation of the
transactions contemplated by them, or Seller's other compliance
with or performance under them.
8. Except as set forth in the Disclosure Schedule to
the Purchase Agreement, to the best of our knowledge upon due
inquiry, (i) there is no action, suit, set of related actions or
suits concerning a common issue, complaint, arbitration, inquiry,
proceeding or investigation pending or threatened against or
involving Seller, Subsidiary or any of the Assets, before any
court, arbitrator or administrative or governmental body, and
there is no judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against Seller,
Subsidiary or any of the Assets, which would, individually or in
the aggregate, if adversely determined against Seller or
Subsidiary, subject Seller or Subsidiary to liability in excess
of $25,000 for any single event or $50,000 for all events in the
aggregate, or result in a claim lien or other encumbrance on any
of the Assets; and (ii) there are no actions, suits or
proceedings pending or threatened against Seller, Subsidiary or
any of the Assets arising out of or in any way related to the
Seller Delivered Agreements, or any of the transactions
contemplated thereby. We have not conducted any investigation to
determine whether, and Seller has not provided us with any
information that would cause us to, advise Seller that it is in
violation of any applicable material law, statute, ordinance,
order, rule or regulation promulgated or judgment, decree, order,
concession, grant, permit, license or other governmental
<PAGE>
EDITEK, Inc.
, 1996
Page 5
authorization or approval, issued or entered by, any federal,
state or local, court or governmental authority relating to or
affecting the operation, conduct or ownership of the property or
business of Seller or Subsidiary.
9. The authorized capital stock of Seller consists of
50,000 shares of Common Stock, $1.00 par value per share, of
which 29,658 shares are issued and outstanding. The authorized
capital stock of Subsidiary consists of 25,000 shares of Common
Stock, $1.00 par value per share, of which 1,000 shares are
issued and outstanding. To the best of our knowledge upon due
inquiry, (i) there are no outstanding options, warrants,
subscriptions, conversion rights or other rights, agreements or
commitments obligating Seller or Subsidiary to issue any
additional shares of the capital stock of Seller or any other
securities convertible into, exchangeable for or evidencing the
right to subscribe for or acquire from Seller or Subsidiary or
any stock appreciation rights; (ii) no one other than the owner
disclosed in the Purchase Agreement has the right to vote any
shares of capital stock of Seller or Subsidiary; and (iii)
neither Seller nor Subsidiary owns, directly or indirectly, any
capital stock or other equity securities of any corporation or
have any direct or indirect equity or ownership interest in any
other business other than Subsidiary.
10. We have not conducted any investigation to
determine whether, and Seller has not provided us with any
information that would cause us to, advise Seller that it is in
violation of any provisions of ERISA or any other law, rule, or
regulation applicable to Seller's Plans.
11. Except as set forth in the Purchase Agreement, to
our actual knowledge, (i) Seller has good title to all the
Assets, free and clear of all liens, charges or encumbrances of
any nature whatsoever; and (ii) neither Seller nor Subsidiary has
granted any person or entity any license or other rights to the
Seller Intellectual Property. Seller has not sought our advice
with respect to any claims by any other person or entity that the
business conducted by Seller and/or Subsidiary infringes the
intellectual property of any other person or entity and no person
or entity has asserted any such infringement claim and Seller has
not otherwise advised of any such claim or of any basis for any
such claim.
12. We have not conducted any investigation to
determine whether, and Seller has not provided us with any
<PAGE>
EDITEK, Inc.
, 1996
Page 6
information that would cause us to, advise Seller that it is in
violation of any material Licenses.
13. To our actual knowledge, there are no false
statements by Seller in the Purchase Agreement or in any of the
Disclosure Schedules thereto.
This opinion letter is delivered in connection with the
consummation of the transactions contemplated in the Purchase
Agreement, may be relied upon only by you and your counsel in
connection therewith, may not be relied upon by you for any other
purpose or by anyone else for any purpose, and may not be quoted,
published or otherwise disseminated without our prior written
consent.
Very truly yours,
HENSON & EFRON, P.A.
<PAGE>
EXHIBIT D
_______, 1995
EDITEK, Inc.
1238 Anthony Road
Burlington, NC 27215
Re: Sale of Certain Assets of MedTox Laboratories
Gentlemen:
This opinion letter is being delivered pursuant to paragraph
4.4(b) of that certain Asset Purchase Agreement (the "Purchase
Agreement") dated effective July 1, 1995 by and between MedTox
Laboratories, a Minnesota corporation ("Seller"), and EDITEK,
Inc., a Delaware corporation ("Purchaser"), in our capacity as
counsel to Seller in connection with the negotiation, execution
and delivery of the Purchase Agreement and the closing of the
transactions contemplated by the Purchase Agreement.
Capitalized terms used in this opinion letter and not
defined in it have the respective meanings given to those terms
in the Purchase Agreement.
In our capacity as such counsel, we have reviewed the
Purchase Agreement (including the exhibits and schedules
thereto), the Articles of Incorporation (as amended), Bylaws (as
amended), and minutes books of Seller and such other documents,
records, agreements and certificates and have made such inquiries
as we deemed appropriate. We have relied as to factual matters
upon a certificate of an officer of Seller, but we have no reason
to believe the facts stated therein are incorrect, incomplete or
misleading, and upon certificates or statements or both of
various governmental officials. In all examinations of such
documents, we have assumed the genuineness of signatures on
original documents and the conformity to original documents of
all copies submitted to us as certified, conformed or
photographic copies, the legal competence of natural persons and
that the Seller Delivered Agreements (as defined below) are
enforceable against all parties thereto (other than Seller). As
to certificates or statements or both of public officials, we
have assumed that they have been properly given and to be
accurate.
<PAGE>
EDITEK, Inc.
, 1995
Page 2
Except as set forth in the following sentence, the opinions
set forth in this letter are based upon and limited to (i) the
laws of the State of Minnesota and (ii) the federal laws of the
United States of America, and we express no opinion herein
concerning the laws of any other jurisdiction.
Based upon the foregoing and subject to the qualifications
and limitations set forth herein, we are of the following
opinions:
1. Seller and The Forensic Resource Group, Inc.
("Subsidiary") are corporations duly incorporated, organized and
entitled to conduct business under, and are validly existing and
in good standing under the laws of the State of Minnesota.
2. Seller and Subsidiary have all requisite corporate
power and authority to own, operate and lease their properties
and to carry on their businesses as conducted on the date hereof.
Seller is qualified or licensed to do business in the States of
Illinois, California, New Jersey and Connecticut.
3. With respect to the Purchase Agreement and any
other agreements, instruments and documents executed and
delivered by Seller, pursuant to the Purchase Agreement
(collectively, together with the Purchase Agreement, the "Seller
Delivered Agreements"):
(a) Seller has the corporate power and authority
to execute and deliver the Seller Delivered Agreements to which
it is a party and to consummate the transactions contemplated by,
and otherwise to comply with and perform under, them;
(b) The execution and delivery by Seller of the
Seller Delivered Agreements, the consummation by Seller of the
transactions contemplated by them and Seller's other compliance
with or performance under them have been duly authorized by all
necessary corporate action on the part of Seller in compliance
with any governing or applicable agreements, instruments or other
documents (including without limitation its Articles of
Incorporation and Bylaws) and applicable law, and no other
corporate action or proceeding on the part of Seller or any of
its shareholders, directors or officers is necessary for the
execution, delivery and performance of the Seller Delivered
Agreements by Seller and the consummation of the transactions
contemplated hereby.
<PAGE>
EDITEK, Inc.
, 1995
Page 3
(c) Seller has duly executed and delivered the
Seller Delivered Agreements; and
(d) the transfer instruments included in the
Seller Delivered Agreements effectively convey to Purchaser all
of Seller's right, title and interest to and in the Assets.
4. The Seller Delivered Agreements (including without
limitation the transfer instruments delivered by Seller with
respect to the Assets) constitute valid and binding obligations
of Seller enforceable against it in accordance with their terms,
except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, by general
equitable principles and by discretion of the courts in granting
equitable remedies (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
5. The Noncompetition Agreements have been duly
executed and delivered by Harry G. McCoy and D. Gary Hemphill and
constitute valid and binding obligations of each of them
enforceable against them in accordance with their respective
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, by general
equitable principles and by discretion of the courts in granting
equitable remedies (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
6. Except as set forth in the Purchase Agreement,
neither the execution or delivery of the Seller Delivered
Agreements nor the consummation by Seller of the transactions
contemplated thereby nor other compliance with or performance
under them will (with the passage of time or the giving of notice
or both):
(a) constitute a violation of, constitute a
default or require any payment under, permit a termination of, or
result in the creation or imposition of any security interest,
lien or other encumbrance or adverse claim against Seller or upon
any of the Assets (with or without due notice or lapse of time or
the happening or occurrence of any other event) under (i) any
term or provision of the Articles of Incorporation (as amended)
or Bylaws (as amended) of Seller, or (ii) any applicable law
which in our experience is normally applicable to transactions of
the type contemplated by the Purchase Agreement; or
<PAGE>
EDITEK, Inc.
, 1995
Page 4
(b) create, or cause the acceleration of the
maturity of, any indebtedness, obligation, or liability of Seller
known to us.
7. Except for any notice or filing which may be
required in connection with licenses and permits which are
identified by Seller in Schedule 6.16 to the Purchase Agreement,
no consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority or other
person on the part of Seller is required in connection with
Seller's execution or delivery of the Purchase Agreement or the
other Seller Delivered Agreements, Seller's consummation of the
transactions contemplated by them, or Seller's other compliance
with or performance under them.
8. Except as set forth in the Disclosure Schedule to
the Purchase Agreement, to the best of our knowledge upon due
inquiry, (i) there is no action, suit, set of related actions or
suits concerning a common issue, complaint, arbitration, inquiry,
proceeding or investigation pending or threatened against or
involving Seller, Subsidiary or any of the Assets, before any
court, arbitrator or administrative or governmental body, and
there is no judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against Seller,
Subsidiary or any of the Assets, which would, individually or in
the aggregate, if adversely determined against Seller or
Subsidiary, subject Seller or Subsidiary to liability in excess
of $25,000 for any single event or $50,000 for all events in the
aggregate, or result in a claim lien or other encumbrance on any
of the Assets; and (ii) there are no actions, suits or
proceedings pending or threatened against Seller, Subsidiary or
any of the Assets arising out of or in any way related to the
Seller Delivered Agreements, or any of the transactions
contemplated thereby. We have not conducted any investigation to
determine whether, and Seller has not provided us with any
information that would cause us to, advise Seller that it is in
violation of any applicable material law, statute, ordinance,
order, rule or regulation promulgated or judgment, decree, order,
concession, grant, permit, license or other governmental
authorization or approval, issued or entered by, any federal,
state or local, court or governmental authority relating to or
affecting the operation, conduct or ownership of the property or
business of Seller or Subsidiary.
9. The authorized capital stock of Seller consists of
50,000 shares of Common Stock, $1.00 par value per share, of
<PAGE>
EDITEK, Inc.
, 1995
Page 5
which 29,658 shares are issued and outstanding. The authorized
capital stock of Subsidiary consists of 25,000 shares of Common
Stock, $1.00 par value per share, of which 1,000 shares are
issued and outstanding. To the best of our knowledge upon due
inquiry, (i) there are no outstanding options, warrants,
subscriptions, conversion rights or other rights, agreements or
commitments obligating Seller or Subsidiary to issue any
additional shares of the capital stock of Seller or any other
securities convertible into, exchangeable for or evidencing the
right to subscribe for or acquire from Seller or Subsidiary or
any stock appreciation rights; (ii) no one other than the owner
disclosed in the Purchase Agreement has the right to vote any
shares of capital stock of Seller or Subsidiary; and (iii)
neither Seller nor Subsidiary owns, directly or indirectly, any
capital stock or other equity securities of any corporation or
have any direct or indirect equity or ownership interest in any
other business other than Subsidiary.
10. We have not conducted any investigation to
determine whether, and Seller has not provided us with any
information that would cause us to, advise Seller that it is in
violation of any provisions of ERISA or any other law, rule, or
regulation applicable to Seller's Plans.
11. Except as set forth in the Purchase Agreement, to
our actual knowledge, (i) Seller has good title to all the
Assets, free and clear of all liens, charges or encumbrances of
any nature whatsoever; and (ii) neither Seller nor Subsidiary has
granted any person or entity any license or other rights to the
Seller Intellectual Property. Seller has not sought our advice
with respect to any claims by any other person or entity that the
business conducted by Seller and/or Subsidiary infringes the
intellectual property of any other person or entity and no person
or entity has asserted any such infringement claim and Seller has
not otherwise advised of any such claim or of any basis for any
such claim.
12. We have not conducted any investigation to
determine whether, and Seller has not provided us with any
information that would cause us to, advise Seller that it is in
violation of any material Licenses.
13. To our actual knowledge, there are no false
statements by Seller in the Purchase Agreement or in any of the
Disclosure Schedules thereto.
<PAGE>
EDITEK, Inc.
, 1995
Page 6
This opinion letter is delivered in connection with the
consummation of the transactions contemplated in the Purchase
Agreement, may be relied upon only by you and your counsel in
connection therewith, may not be relied upon by you for any other
purpose or by anyone else for any purpose, and may not be quoted,
published or otherwise disseminated without our prior written
consent.
Very truly yours,
HENSON & EFRON, P.A.
<PAGE>
EXHIBIT E
FORM OF NONCOMPETITION AGREEMENT
NONCOMPETITION AGREEMENT ("this Agreement") dated __________ ___,
1995 by and among EDITEK, INC., a Delaware corporation ("Purchaser") and
__________________ ("Employee").
The parties to this Agreement, in consideration of the mutual
agreements set forth below in this Agreement (the mutuality, adequacy,
receipt and sufficiency of which are hereby acknowledged), hereby agree
as follows:
1. Background. This Agreement is being executed and delivered
contemporaneously with and as a condition to the acquisition by
Purchaser of substantially all the assets of MedTox Laboratories, Inc.,
a Minnesota corporation ("Seller") the Company (the "Acquisition").
Seller is in the business of forensic, medical, clinical, biological
and/or pharmacological toxicology (the "Business"). Employee is
_______________________ of Seller. Employee understands that Purchaser
will not consummate such acquisition without the assurance that Employee
will not engage in the activities prohibited by this Agreement, and in
order to induce the Purchaser to consummate the acquisition and other
transactions contemplated by the acquisition agreement, Employee agrees
to restrict his actions as provided in this Agreement. Employee
acknowledges and agrees that such restrictions are reasonable in light
of the business of Seller and the direct and substantial benefits of the
acquisition to Employee.
2. Territory. Employee acknowledges and agrees that Seller sells
its services throughout the United States (the "Territory") and that
Purchaser intends to continue and to increase its sales and operations
throughout the Territory.
3. Noncompetition Period. The Noncompetition Period commences on
the date of this Agreement and shall terminate on the later of (i) the
second anniversary of the closing date of the Acquisition or (ii) the
first anniversary of termination of employment with Purchaser.
4. Noncompetition. Employee agrees that during the
Noncompetition Period, he will not, directly or indirectly, either:
(a) have any interest in (whether as proprietor, officer,
director or otherwise),
(b) enter the employment of,
(c) act as agent, broker, or distributor for or adviser or
consultant to, or
<PAGE>
(d) provide information useful in conducting the Business to,
solicit customers or employees on behalf of or otherwise provide any
substantial assistance useful in conducting the Business to any person,
firm, corporation or business entity which is engaged, or which Employee
reasonably knows is undertaking to become engaged, in the Territory in
the Business or outside the Territory if sales are solicited from
customers located inside the Territory.
Notwithstanding the foregoing, Employee shall not be prohibited
from (i) being employed by or acting as an agent, broker or distributor
for or advisor or consultant to any Non-Business Affiliate of a person,
division, firm, corporation, a business entity ("Parent") which
("Parent"), as one of its businesses, is or may become engaged in the
Business so long as (x) Employee has no relationship or contact with any
portion of Parent which is competitive with the Business, (y) Employee's
activities are not described in clause (d) above and (z) the Business
does not constitute more than ten (10%) of the aggregate revenues of
Parent on a consolidated basis; or (ii) owning not more than 1% of the
issued and outstanding securities of a publicly traded entity which may
be engaged in whole or in part in the Business. A Non-Business
Affiliate is a person, division, firm, corporation or business entity
which does not, and is not preparing to, engage in the Business.
5. No Interference with Purchaser Customers. Employee agrees
that during the Noncompetition Period, he will not, directly or
indirectly:
(a) solicit, divert or take away, or attempt to solicit,
divert or take away, the business of any Purchaser Customer; or
(b) attempt or seek to cause any of the Purchaser Customers
to refrain, in any respect, from maintaining or acquiring from or
through the Purchaser any product or service of the Business sold (or
offered for sale) to such Purchaser Customer by Seller or Purchaser
during the twelve-month period prior to the date of this Agreement or
during the Noncompetition Period.
As used in this section, "Purchaser Customer" means any customer of
Seller or Purchaser located in the Territory served or solicited by
Seller or Purchaser within the twenty-four (24) month period prior to
termination of employment with Purchaser.
6. No Interference With Employees. Employee agrees that for the
Noncompetition Period, he will not, directly or indirectly, request or
induce any employee of Purchaser to terminate his employment with
Purchaser or accept employment with another business entity engaged in
the Business in the Territory or which is located outside the Territory
if sales are solicited from customers located inside the Territory.
7. Notice to Others. Employee hereby agrees that Purchaser may
disclose the provisions of this Agreement to any person or entity,
including without limitation one that at the time employs or is
considering employing Employee.
2
<PAGE>
8. Remedies. Employee acknowledges that any violation of this
Agreement may cause irreparable harm to Purchaser and that damages are
not an adequate remedy. Employee therefore agrees that Purchaser shall
be entitled to injunctive relief, including temporary, preliminary and
permanent injunctions, by an appropriate court in the appropriate
jurisdiction, enjoining, prohibiting and restraining Employee from the
continuance of any such violation, in addition to any monetary damages
which might occur by reason of the violation of this Agreement. The
remedies provided in this Agreement are cumulative and shall not exclude
any other remedies to which any party to this Agreement may be entitled
under this Agreement or applicable law, and the exercise of a remedy
shall not be deemed an election excluding any other remedy (any such
claim by the other party to this Agreement being hereby waived).
9. Modification. It is understood and agreed by the parties
hereto that should any portion, provision or clause of the foregoing be
deemed too broad to permit enforcement to its full extent, then it shall
be enforced to the maximum extent permitted by law, and the Employee
hereby consents and agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
10. Independent. The covenants and agreements set forth in this
Agreement shall be deemed, and shall be construed as, separate and
independent covenants and agreements, and should any part or provision
of such covenants or agreements be held invalid, void or unenforceable
by any court of competent jurisdiction, such invalidity, voidness or
unenforceability shall in no way render invalid, void or unenforceable
any other part or provision thereof or any separate covenant not
declared invalid, void or unenforceable; and this Agreement shall in
that case be construed as if the void, invalid or unenforceable
provisions were omitted.
11. Miscellaneous.
(a) Notice. All notices under this Agreement shall be in
writing and given either in person, by express overnight service (with
all fees prepaid) or sent by registered or certified mail, return
receipt requested, postage prepaid, to the address of the party to this
Agreement set forth below his or its signature or to such other address
as a party to this Agreement may furnish to the other as provided in
this sentence, and shall be deemed received on the date of personal
delivery, on the first business day after sent by express overnight
service or on the date of delivery or attempted delivery as indicated by
the return receipt if sent by registered or certified mail; and if
notice is given pursuant to the foregoing of a permitted successor or
assign, then notice shall thereafter be given pursuant to the foregoing
to such permitted successor or assign.
(b) Assignment; Binding Effect. No assignment, transfer or
delegation of any rights or obligations under this Agreement by a party
shall be made without the prior written consent of the other parties to
this Agreement (which shall not be unreasonably withheld.) This
Agreement shall be binding upon the parties to this Agreement and their
respective legal representatives, heirs, devisees, legatees or other
successors and assigns, and shall inure to the benefit of the parties to
this Agreement and their respective permitted legal representatives,
heirs, devisees, legatees or other permitted successors and assigns.
3
<PAGE>
(c) Gender; Captions. Whenever the context so requires, the
singular number shall include the plural and the plural shall include
the singular, and the gender of any pronoun shall include the other
genders. Titles and captions of or in this Agreement are inserted only
as a matter of convenience and for reference and in no way affect the
scope of this Agreement or the intent of its provisions.
(d) Certain Definitions. The parties agree that "applicable
law" means all provisions of any constitution, statute, law, rule,
regulation, decision, order, decree, judgment, release, license, permit,
stipulation or the official pronouncement enacted, promulgated or issued
by any governmental authority or arbitrator or arbitration panel; that
"governmental authority" means any legislative, executive, judicial,
quasi-judicial or other public authority, agency, department, bureau,
division, unit, court or other public body, person or entity; and that
"including" and other words or phrases of inclusion, if any, shall not
be construed as terms of limitation, so that references to "included"
matters shall be regarded as non-exclusive, non- characterizing
illustrations.
(e) Entire Agreement. This Agreement constitutes the entire
agreement of the parties to this Agreement with respect to its subject
matter, supersedes all prior agreements, if any, of the parties to this
Agreement with respect to its subject matter, and may not be amended
except in writing signed by the party to this Agreement against whom the
change is being asserted.
(f) No Waiver. The failure of any party to this Agreement at
any time or times to require the performance of any provisions of this
Agreement shall in no manner affect the right to enforce the same; and
no waiver by any party to this Agreement of any provision (or of a
breach of any provision) of this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed or construed
either as a further or continuing waiver of any such provision or breach
or as a waiver of any other provision (or of a breach of any other
provision) of this Agreement.
(g) Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of
Minnesota.
(h) Counterparts. This Agreement may be executed in two or
more copies, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement or its terms to produce
or account for more than one of such copies.
DULY EXECUTED and delivered by the parties to this Agreement, under
seal, on _____________, 1995.
THE EMPLOYEE:
4
<PAGE>
__________________________________(SEAL)
Address:
__________________________________
__________________________________
THE PURCHASER: EDITEK, INC.
By:________________________________
Name:______________________________
Title:_____________________________
Address:
__________________________________
__________________________________
5
<PAGE>
EXHIBIT G
_______, 1995
EDITEK, Inc.
1238 Anthony Road
Burlington, NC 27215
Re: Sale of Certain Assets of MedTox Laboratories
Gentlemen:
This opinion letter is being delivered pursuant to paragraph
8.2 of that certain Asset Purchase Agreement (the "Purchase
Agreement") dated effective July 1, 1995 by and between MedTox
Laboratories, a Minnesota corporation ("Seller"), and EDITEK,
Inc., a Delaware corporation ("Purchaser"), in our capacity as
counsel to Seller in connection with the negotiation, execution
and delivery of the Purchase Agreement and the closing of the
transactions contemplated by the Purchase Agreement.
Capitalized terms used in this opinion letter and not
defined in it have the respective meanings given to those terms
in the Purchase Agreement.
In our capacity as such counsel, we have reviewed the
Purchase Agreement (including the exhibits and schedules
thereto), the Articles of Incorporation (as amended), Bylaws (as
amended), and minutes books of Seller and such other documents,
records, agreements and certificates and have made such inquiries
as we deemed appropriate. We have relied as to factual matters
upon a certificate of an officer of Seller, and we have no reason
to believe the facts stated therein are incorrect, incomplete or
misleading. In all examinations of such documents, we have
assumed the genuineness of signatures on original documents and
the conformity to original documents of all copies submitted to
us as certified, conformed or photographic copies, the legal
competence of natural persons and that the Seller Delivered
Agreements (as defined below) are enforceable against all parties
thereto (other than Seller). As to certificates or statements or
both of public officials, we have assumed that they have been
properly given and to be accurate.
Except as set forth in the following sentence, the opinions
set forth in this letter are based upon and limited to (i) the
laws of the State of Minnesota and (ii) the federal laws of the
United States of America, and we express no opinion herein
concerning the laws of any other jurisdiction.
<PAGE>
, 1995
Page 2
Based upon the foregoing and subject to the qualifications
and limitations set forth herein, we are of the following
opinion:
The Purchase Agreement and any other agreements, instruments
and documents to be executed and delivered by Seller, pursuant to
the Purchase Agreement are hereinafter collectively referred to
as the "Seller Delivered Agreements").
The execution and delivery by Seller of the Seller Delivered
Agreements, the consummation by Seller of the transactions
contemplated by them and Seller's other compliance with or
performance under them have been duly authorized by all necessary
corporate action on the part of Seller, including approval by
Seller's Board of Directors on ________, 1995 and approval by
Seller's shareholders on ________, 1995.
This opinion letter is delivered in connection with the
consummation of the transactions contemplated in the Purchase
Agreement, may be relied upon only by you and your counsel in
connection therewith, may not be relied upon by you for any other
purpose or by anyone else for any purpose, and may not be quoted,
published or otherwise disseminated without our prior written
consent.
Very truly yours,
HENSON & EFRON, P.A.
AMENDMENT AGREEMENT
AGREEMENT dated as of January 2, 1996 between EDITEK, Inc.
("Purchaser") and MedTox Laboratories, Inc. ("Seller").
WITNESSETH:
WHEREAS, Seller and Purchaser are parties to a certain Asset Purchase
Agreement dated July 1, 1995 (the "Purchase Agreement"), and desire to delay the
closing of the transactions contemplated by the Purchase Agreement until 1996
and to change the nature of the consideration to be paid to Seller by Purchaser.
NOW, THEREFORE, in consideration of the premises and the mutual
promises of the parties set forth below, the parties hereby agree as follows:
(1) The Purchase Agreement is hereby amended so that (i) the Seller
Termination Date referred to in Section 10.1 (b), the Purchaser
Termination Date referred to in Section 10.1 (c) and the date
contemplated by Section 10.1 (d) of the Purchase Agreement are all
changed to January 15, 1996, and (ii) Section 4.1 is changed to allow
Purchaser to set a Closing Date to be not earlier than January 1, 1996
and not later than the new Seller Termination Date.
(2) The Escrow Agent is hereby authorized pursuant to the Escrow Agreement
attached to the Purchase Agreement as Exhibit A executed
contemporaneously with the Purchase Agreement between Seller, Purchaser
and Henson & Efron, P. A., as Escrow Agent (the "Escrow Agreement") to
deliver to Seller the funds deposited into escrow by Purchaser and all
interest thereon. The amount delivered shall constitute a nonrefundable
deposit to be credited against the purchase price in the transactions
contemplated by the Purchase Agreement. If the Purchase Agreement is
terminated by either party for any reason, Seller shall be entitled to
retain the funds delivered to Seller and being held by Seller as a
nonrefundable deposit. All obligations and
rights of the parties to the Escrow Agreement are hereby terminated.
(3) Article III of the Purchase Agreement is hereby amended to read in its
entirety as follows:
<PAGE>
ARTICLE III
CONSIDERATION PAYABLE BY PURCHASER
Section 3.1 Cash Purchase Price. In addition to assumption of
the Assumed Liabilities, Purchaser shall pay Seller an aggregate cash purchase
price of Nineteen Million ($19,000,000) Dollars for the Assets as follows:
(a) Upon execution of this Amendment Agreement, $509,569.90
nonrefundable deposit delivered to Seller by legal counsel to Seller, formerly
held pursuant to the terms of the Escrow Agreement attached to the Purchase
Agreement as Exhibit A;
(b) At Closing, the remainder of the cash Purchase Price shall
be paid by wire transfer to Seller's bank account in Minneapolis, Minnesota.
Section 3.2 Definitions. The following terms shall have the
definitions set forth below:
(a) "Additional Shares" shall mean shares of Common Stock of
Purchaser issued pursuant to Section 3.4 of this Agreement.
(b) "Closing Date Market Price" shall mean the average for the
five Trading Days immediately preceding the Closing Date of the mean of the
daily high and low sales prices of the Common Stock on the American Stock
Exchange, Inc.
(c) "Closing Shares" shall mean shares of Common Stock of
Purchaser issued to Seller at the Closing of the transactions contemplated by
the Purchase Agreement.
(d) "Common Stock" shall mean shares of the Common Stock, par
value $0.15 per share, of Purchaser
(e) "Holder" shall mean Seller or the shareholder of Seller to
whom Seller distributes the Closing Shares.
(f) "Price Protection Price" shall mean the lower of (i) the
Purchase Price or (ii) the lowest Repricing Date Market Price for any previous
Repricing Date.
(g) "Purchase Price" shall mean Seventy (70%) Percent of the
Closing Date Market Price of a share of Common Stock of Purchaser.
(h) "Release Date(s)" shall mean the calendar date(s) on which
Purchaser issues a press release announcing its financial performance for (i)
the fiscal quarter that ends on March 31, 1996, but not later than May 14, 1996,
(ii) the fiscal
2
<PAGE>
quarter that ends on September 30, 1996, but not later than November 14, 1996,
(iii) the fiscal year that ends on December 31, 1996, but not later than March
31, 1997 and (iv) the fiscal quarter that ends on September 30, 1997, but not
later than November 14, 1997.
(i) "Repricing Date" shall mean the fifth Trading Day
following each Release Date, with the Trading Day immediately following the
Release Date constituting the first Trading Day.
(j) "Repricing Date Market Price" shall mean the average on
the Repricing Date and four Trading Days preceding the Repricing Date of the
mean between the daily high and low sales prices of the Common Stock of
Purchaser on the national securities exchange or NASDAQ on which the Common
Stock of Purchaser is listed or quoted.
(j) "Trading Day" shall mean any day on which at least 1,000
shares of Common Stock of Purchaser are sold on any national securities exchange
or NASDAQ; provided, however, if for any applicable period there are more than
two consecutive trading days when there are fewer than 1,000 shares of Common
Stock sold, then each trading day thereafter shall be deemed to be a Trading Day
regardless of the number of shares of Common
Stock sold.
Section 3.3 (a) Equity Purchase Price. At Closing the
Purchaser shall issue to Seller a number of shares of Common Stock ("Common
Stock") of Purchaser equal to the quotient obtained by dividing (i) Five Million
(5,000,000), by (ii) Seventy (70%) Percent of the Closing Date Market Price of a
share of Common Stock of Purchaser. No fractional shares shall be issued.
Purchaser shall have the option to pay cash or to issue a whole share in lieu of
fractional shares.
(b) Escrowed Shares. At Closing, a number of the shares of
Common Stock issuable pursuant to Section 3.3 (a) having a Closing Date Market
Price equal to Two Hundred Fifty Thousand ($250,000) Dollars shall be deposited
in escrow (the "Escrowed Shares") with legal counsel to Purchaser with executed
stock powers acceptable to Purchaser to be held and delivered pursuant to the
terms of the escrow agreement attached to the Purchase Agreement as Exhibit B;
and
Section 3.4 Additional Shares of Common Stock. To encourage
retention of the Closing Shares, Purchaser hereby agrees to compensate the
Holders of Closing Shares for declines in the market price of the Common Stock
of Purchaser below the Purchase Price as follows. To the extent necessary to
compensate a Holder for declines in the market price of the Common Stock of
Purchaser below the Purchase Price, Purchaser shall issue to the Holder a number
of Additional Shares such that after issuance of any such Additional Shares, the
Closing Shares and the Additional
3
<PAGE>
Shares held by Holder on the Repricing Date are equal in value (valued at the
applicable Repricing Date Market Price) to the product determined by multiplying
(a) the number of Closing Shares and Additional Shares held by the Holder after
the close of trading on the day immediately preceding the Repricing Date, by (b)
the Price Protection Price.
Additional Shares shall be issued within ten (10) days after
the Repricing Date. No fractional shares shall be issued. Purchaser shall have
the option to pay cash or to issue a whole share in lieu of fractional shares.
Notwithstanding the foregoing, no Additional Shares shall be
issued to any Holder who at any time prior to the Repricing Date shall engage in
any short sales of the Common Stock of Purchaser, acquire any put option or sell
any call option on the Common Stock of Purchaser, loan any shares of Common
Stock to any other person or entity who Holder knows has a short position in the
Common Stock of Purchaser or who Holder knows has any put or call options on the
Common Stock of Purchaser, sell any shares of Common Stock of Purchaser during
the period between any Release Date and the following Repricing Date or
encourage or assist any other person or entity to engage in any such trading
activity.
Section 3.6 Tax Liability.
(a) In the event Seller distributes Closing Shares to any shareholder
and a Sales Window does not occur between the date Purchaser notifies Seller in
writing that the Closing Shares and Additional Shares are registered and are
sellable under securities laws and April 10,1997, Purchaser shall pay the Tax
Liability to each of Seller's shareholders who received Closing Shares.
The term "Tax Liability" shall mean the amount determined by
multiplying (i) the amount by which the Purchase Price of a Closing Share
exceeds the Market Price of a share of Common Stock of Purchaser on April 10,
1997, by (ii) the quotient derived by dividing (x) the Federal and state income
tax liability associated with Seller's shareholder's receipt of the Closing
Shares (but not any penalties or interest), by (y) the Market Price of a share
of Common Stock of Purchaser on April 10, 1997, provided that in the event a
shareholder of Seller does not sell any Closing Shares or Additional Shares to
pay such taxes, clause (y) of the foregoing calculation
shall read as follows: "(y) the Purchase Price."
The term "Sales Window" shall mean a period of twenty (20) consecutive
Trading Days in which the aggregate Tax Liability Price of the Closing Shares
and Additional Shares issued by Purchaser equals or exceeds the Purchase Price
for the Closing Shares of such shareholder.
4
<PAGE>
The term "Tax Liability Price" for any shareholder of Seller shall mean
the sum of the following:
(i) the aggregate average Market Price during the
Trading Window of all Closing Shares and Additional Shares
held by such shareholder of Seller throughout the Trading
Window;
(ii) if during or prior to the Trading Window such
shareholder sells any Closing Shares or Additional Shares for
a price that is less than the average Market Price during the
Trading Window, the aggregate average Market Price during the
Trading Window of the Closing Shares and Additional Shares
sold by such shareholder; and
(iii)if during or prior to the Trading Window such
shareholder sells any Closing Shares or Additional Shares for
a price that is equal to or greater than the Market Price
during the Closing Window, the sales price of the Closing
Shares and Additional Shares sold by such shareholder.
The term "Market Price" shall mean the mean of the high and low sales
prices on the date in question of the Common Stock of Purchaser on any national
securities exchange or NASDAQ on which the Common Stock of
Purchaser is listed or quoted.
(b) The obligations of Purchaser to pay the Tax Liability to any
shareholder of Seller shall be subject to such shareholder providing Purchaser
with proof reasonably satisfactory to Purchaser of the amount of the Tax
Liability, including (i) the date and sales price of any Closing Shares or
Additional Shares and (ii) continued ownership of Closing Shares and Additional
Shares during the applicable period.
(c) Purchaser shall pay its Tax Liability hereunder on or before April
15, 1997, provided that Purchaser may delay payment of all or part of its Tax
Liability hereunder to the extent payment is not permissible under law or under
any covenant or agreement with the lender(s) providing financing for the
acquisition of the assets of Seller, including any covenant or agreement in any
line of credit extended in connection with the acquisition loans. If all or any
part of payment of the Tax Liability is delayed by reason of the foregoing, (i)
Purchaser shall notify Seller of the basis for the delay and (ii) Purchaser
shall pay the delayed the Tax Liability payment to the extent payment later
becomes permissible under such legal or contractual restriction on payment,
provided that in the event at any time prior to additional payment of Tax
Liability becoming permissible
5
<PAGE>
a Sales Window occurs, Purchaser shall cease to have any further obligation to
pay the tax liability that has not previously been paid. The ability to pay Tax
Liability shall be measured as of the last day of each fiscal quarter of
Purchaser.
(d) In the event of any partial payment of the Tax Liability by
Purchaser, all persons entitled to Tax Liability payments shall be paid their
pro rata share based on the number of Closing Shares distributed to them by
Seller.
Section 3.6 Stock Dividends, Splits, Combinations etc. In the event of
any stock, dividend, split, combination, reorganization or similar event with
respect to the shares of Common Stock of Purchaser, (i) shares issued on account
of or in exchange for Closing Shares shall be Closing Shares, (ii) shares issued
on account of or in exchange for Additional Shares shall be Additional Shares
and (iii) stock prices shall be proportionately adjusted to the extent
adjustment is required to fulfill the original intention of the parties.
Section 3.7 Transfer Restrictions.
(a) Holders of Closing Shares shall not sell or otherwise transfer any
Closing Shares until the sixtieth (60th) day after the Closing Date. In
determining a Holder's right to sell Closing Shares, the day immediately
following the Closing Date shall be Day One.
Notwithstanding the foregoing, nothing contained in this Section 3.7
(a) shall prohibit transfer by Seller of Closing Shares to any shareholder of
Seller who shall execute and deliver to Purchaser an agreement to comply with
the provisions of this Section 3.7.
(b) Because the Closing Shares and the Additional Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act")
or applicable state securities laws, Seller cannot dispose of any or all of the
Closing Shares or the Additional Shares unless such shares are subsequently
registered under the Securities Act, and/or applicable state securities laws, or
exemptions from such registration are available. Purchaser shall register the
Closing Shares and the Additional Shares as provided in the Registration Rights
Agreement attached as Exhibit A hereto. Seller further understands that
Purchaser, as a condition to the transfer of any of the Closing Shares or
Additional Shares, may require that the request for transfer be accompanied by
an opinion of counsel satisfactory to the Purchaser, in form and substance
satisfactory to the Purchaser and preceded by prior written notice, to the
effect that the proposed transfer does not result in violation of the Securities
Act or applicable state securities laws, unless such transfer is covered by an
effective registration statement
6
<PAGE>
under the Securities Act and all applicable state securities laws. Seller
understands that each certificate representing the Closing Shares and Additional
Shares and any securities issued on account of ownership thereof will bear the
following legend or one substantially similar thereto:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
the securities laws of any state. These securities have been acquired
for investment and not with a view to distribution or resale, and may
not be sold, mortgaged, pledged, hypothecated or otherwise transferred
without an effective registration statement for such shares under the
Securities Act and applicable state securities laws, or an opinion of
counsel satisfactory to the corporation that registration is not
required under the Securities Act and applicable state securities laws.
Section 3.8 Representations and Agreements of Seller. Seller
hereby represents, warrants and agrees as follows:
(a) Seller has a total of thirty-five (35) shareholders. The
name and address of each shareholder are set forth on Schedule 3.8 hereto.
(b) Prior to the meeting of shareholders of Seller to approve
this Amendment Agreement, Seller shall distribute to all shareholders of Seller
a copy of the Private Placement Memorandum (and all exhibits thereto) and an
Investor Questionnaire furnished by Purchaser to Seller.
(c) Seller agrees to furnish to Purchaser any other
information about Seller reasonably requested by Purchaser to allow Purchaser to
comply with securities laws and that no shares of Common Stock of Purchaser
shall be distributed to any shareholder (i) who fails to deliver to Purchaser
and/or Seller prior to the Closing a completed Investor Questionnaire of
Purchaser, or (ii) who alone or together with their Purchaser Representative (as
defined in Rule 501 (h) of Regulation D), fails to furnish prior to the Closing
such information or assurances necessary for Purchaser to conclude that the
issuance and delivery of the Closing Shares to Seller as contemplated herein, is
exempt from registration under Federal and state securities laws. Determinations
of information required and whether the conditions to exemption have been
satisfied shall be made jointly in good faith by both Purchaser and Seller.
(4) All representations and warranties made by Seller and Purchaser
Sections in 5.2 and 6.2 of the Purchase Agreement are hereby extended
to this Amendment
7
<PAGE>
Agreement and the Registration Rights Agreement and the transactions
contemplated hereby and thereby.
(5) Sections 5.4 and 5.5, which shall read in their entirety as set forth
below, are hereby added to the Purchase Agreement:
Section 5.4 Closing Shares and Additional Shares. The Closing
Shares and the Additional Shares will upon issuance in accordance with Article
III of the Purchase Agreement be duly and validly authorized, fully-paid and
nonassessable shares of Common Stock of Purchaser, except that the shareholders
of Purchaser are not required to approve this Amendment Agreement, the
Registration Rights Agreement or the transactions contemplated hereby or
thereby. Purchaser has obtained confirmation from the American Stock Exchange
("AMEX") that the vote of the shareholders of Purchaser at a meeting held on
October 26, 1995 is sufficient to satisfy AMEX rules with respect to the
transactions contemplated by this Amendment Agreement. No filing or registration
with, no notice to and no permit, authorization, consent or approval of any
public body or authority is necessary for the consummation by Purchaser of the
transactions contemplated by this Amendment Agreement or the Registration Rights
Agreement, except that (i) offers and/or sales of Closing Shares and Additional
Shares may require filings with, and approvals by, state securities regulators,
which filings and approvals will be made and obtained by Purchaser at its
expense prior to issuance of the Closing Shares and Additional Shares; (ii)
Purchaser will file a Form D at its expense with the Securities and Exchange
Commission following the Closing; and (iii) performance of the Registration
Rights Agreement will require filings with, and approvals by, the Securities and
Exchange Commission and various State securities regulators, with the expense of
such filings to be allocated as set forth in the Registration Rights Agreement.
Section 5.5 Securities Documents. The Private Placement
Memorandum delivered by Purchaser to Seller and the documents incorporated by
reference therein do not contain any untrue statements of material fact and do
not omit to state any material fact necessary to make the statements of material
fact therein, in light of the circumstances under which they were made, not
misleading. This representation shall not apply to any statements contained in,
or omitted from, such documents to the extent the statement is based on
information supplied to Purchaser by Seller.
(6) Article IV of the Purchase Agreement is hereby amended to add Section
4.2 (d), 4.3 (d), (e) and (f), and Section 4.4 (j), which shall read in
their entirety as follows:
4.2 (d) All shareholders of Seller shall have completed and delivered
to Purchaser and Seller the Investor Questionnaire in the form attached
as Exhibit A hereto, and
8
<PAGE>
together with their Purchaser Representative (as defined in Rule 501
(h) of Regulation D), shall satisfy the conditions for exempting the
offer and sale by Purchaser of shares of Common Stock to such person
under Federal or state securities laws.
4.3 (d) Purchaser shall have executed and delivered to Seller the
Registration Rights Agreement in the Form attached as Exhibit B to this
Amendment Agreement.
4.3 (e) Shareholders of Seller shall have approved the execution and
delivery of this Amendment Agreement and the consummation of the
transactions contemplated by the Purchase Agreement, as amended by this
Amendment Agreement.
4.3 (f) No holders of the outstanding shares of stock of Seller shall
have elected to exercise their dissenters rights under Minnesota
Statutes Sections 302A.471 and 302A.473.
4.4 (j) Seller shall have executed and delivered to Purchaser the
Registration Rights Agreement in the Form attached as Exhibit B to this
Amendment Agreement.
(7) The opinion letters to be delivered by attorneys for Purchaser and
attorneys for Seller pursuant to Sections 4.3 (b) and 4.4 (b) of the
Purchase Agreement shall be changed to read in their entirety as set
forth on Exhibit C and Exhibit D hereto.
(8) Section 8.4 of the Purchase Agreement is hereby amended to add the
following:
Purchaser shall pay at Closing all reasonable attorneys fees, costs and
expenses incurred by Seller on or after November 16, 1995 through the
Closing Date, and amounts reasonably estimated to be incurred after the
Closing Date up to a maximum of $25,000 in post-Closing fees, in
connection with the negotiation, preparation, documentation, execution,
delivery and performance of the Purchase Agreement, as amended by this
Amendment Agreement, and the Registration Rights Agreement, provided
that Purchaser shall not be liable for amounts related to work that
would have been performed had the Purchase Agreement closed without the
changed terms contained in the Amendment Agreement.
(9) Article VIII of the Purchase Agreement is hereby amended to add Section
8.8, which shall read in its entirety as follows:
Purchaser shall continue to have its Common Stock listed for trading on
a national securities exchange or quoted on the Automated Quotation
System of the
9
<PAGE>
National Association of Securities Dealers, Inc. until the last
Repricing Date.
(10) Except as set forth above, the Purchase Agreement shall remain
unchanged and in full force and effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
10
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment Agreement to
be signed by their respective officers thereto duly authorized as of the date
first written above.
[CORPORATE SEAL] MEDTOX LABORATORIES, INC.
ATTEST: By:______________________________
Name:_________________________
Title:_______________________
By:_________________________
______________, Secretary
[CORPORATE SEAL] EDITEK, INC.
ATTEST: By:______________________________
Name:_______________________
Title:______________________
By:______________________
______________, Secretary
11
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of January __, 1996 (this
"Agreement"), is made between Editek, Inc., a corporation organized under the
laws of Delaware (the "Company"), and MedTox Laboratories, Inc., a corporation
organized under the laws of the State of Minnesota (the "Initial Investor").
W I T N E S S E T H:
WHEREAS, in connection with the Asset Purchase Agreement, dated as of
July 1, 1995, as amended by the Amendment Agreement dated as of December 1, 1995
between the Initial Investor and the Company (the "Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of the Purchase
Agreement, to issue and sell to the Initial Investor shares of Common Stock at
the closing of the transactions contemplated by the Purchase Agreement (the
"Closing Shares"), and, under certain conditions described in the Purchase
Agreement to issue without additional cost additional shares of Common Stock
(the "Additional Shares"); and
WHEREAS, the Company is agreeing to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "Securities
Act"), and applicable state securities laws with respect to the Closing Shares
and the Additional Shares (the "Shares");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall
have the following meanings:
(i) "Register," "registered," and "registration"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the Securities Act on such
appropriate registration form promulgated by the Commission as shall be selected
by the Company and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
("SEC") and applicable state laws.
<PAGE>
(ii) "Registrable Securities" means the Closing
Shares and the Additional Shares.
(iii) "Registration Statement" means a
registration statement under the Securities Act registering securities of the
Company.
(b) As used in this Agreement, the term Investor includes (i) the
Initial Investor (as defined above) and (ii) each person who is a permitted
transferee or assignee of the Registrable Securities pursuant to Section 9 of
this Agreement.
2. Registration.
(a) Piggy-Back Registrations. Subject to the provisions of
Sections 3 and 4 hereof, if at any time the Company shall determine to prepare
and file with the SEC a Registration Statement relating to an offering under the
Securities Act of any of its equity securities for its own account or the
account of others, other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Investor who owns Registrable Securities written notice of such
determination and, if within twenty (20) days after receipt of such notice, such
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Investor's Registrable Securities
that such Investor requests to be registered, except that if, in connection with
any underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, such limitation is necessary to effect an orderly
public distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion, if any, of the Registrable
Securities with respect to which such Investor has requested inclusion
hereunder. Any exclusion of Registrable Securities and other securities having
registration rights shall be made pro rata among the Investors and other
shareholders seeking to include Registrable Securities and other securities have
registration rights and in proportion to the number of Registrable Securities
and other securities having registration rights sought to be included in such
registration; provided, however, that the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities the holders of which are not entitled to inclusion of securities in
such Registration Statement. No right to registration of Registrable Securities
under this Section 2(a) shall be construed to limit any registration required
under Section 2(b) hereof. The obligations of the Company under this Section
2(a) may be waived by Investors holding Eighty (80%) Percent in interest of the
Registrable Securities and shall terminate (i) after the Company has afforded
the opportunity for the Investors to exercise registration rights under this
Section 2(a) for two registrations; provided, however, that any Investor who
shall
2
<PAGE>
have had any Registrable Securities excluded from any Registration
Statement in accordance with this Section 2(a) shall be entitled to include in
an additional Registration Statement filed by the Company the Registrable
Securities so excluded, or (ii) after the expiration of three years after the
Closing Date of the transactions contemplated by the Purchase Agreement.
(b) Immediate Registration. Subject to the provisions of
Sections 3 and 4 hereof, the Company shall prepare and file a Registration
Statement with the SEC within fifteen (15) business days after the Closing Date
of the transactions contemplated by the Purchase Agreement; provided, however,
that such registration statement need not be filed until five (5) business days
after all persons having the right to include shares therein have provided the
Company with all information reasonably requested by the Company in connection
with such registration. The Registration Statement required by this Section 2
(b) shall cover a number of Registrable Securities of Investor equal to the
number of Closing Shares issued at the Closing of the transactions contemplated
by the Purchase Agreement, plus an equal number of Additional Shares. In the
event the Company becomes obligated to issue a number of Additional Shares in
excess of the number covered by such Registration Statement, the Company shall
either amend the Registration Statement to cover the extra Additional Shares or
file a new Registration Statement to cover the extra Additional Shares. Such
amendment or new Registration Statement shall be filed a number of days after
the issuance of such Additional Shares as the first Registration Statement is
required to be filed after the Closing Date of the transactions contemplated by
the Purchase Agreement.
(c) If any registration is underwritten, the Investors who
hold the Registrable Securities to be included in such underwriting shall pay
all underwriting discounts and commissions with respect to their Registrable
Securities and the fees and expenses of legal counsel selected by the Investors.
(d) Nothing herein shall limit the right of the Company to
grant registration rights to any other person or entity and to include shares of
such person or entity on any Registration Statement.
3. Obligations of the Company. In connection with the
registration of the Registrable Securities under this Agreement, the Company
shall:
(a) prepare promptly and file with the SEC promptly (but in no
event later than 15 business days after the Closing Date of the transactions
contemplated by the Purchase Agreement) a Registration Statement or Statements
with respect to all Registrable Securities to be included therein, and
thereafter use its best efforts to cause the Registration Statement to become
effective as soon as reasonably possible after such filing. If such Registration
Statement is filed pursuant to Rule 415, the Company shall keep the Registration
Statement effective pursuant to Rule 415 at all times until such date as is two
years after the date such Registration Statement is first ordered effective by
the SEC. In any case, the Registration
3
<PAGE>
Statement (including any amendments or supplements thereto and prospectuses
contained therein) filed by the Company shall not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that,
subject to the conditions set forth in Section 4(a) below, each Investor may
notify the Company in writing that it wishes to exclude all or a portion of its
Registrable Securities from such Registration Statement.
(b) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times until such
date as is two years after the date such Registration Statement is first ordered
effective by the SEC, and, during such period, comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities of
the Company covered by the Registration Statement until such time as all of such
Registrable Securities have been disposed of by the Investors in accordance with
the intended methods of disposition by the Investors as set forth in the
Registration Statement.
(c) furnish to each Investor whose Registrable Securities are
included in the Registration Statement, such number of copies of a prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
promptly upon approval thereof by the SEC and such other documents as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor; The Company shall provide copies
of all such documents upon approval thereof by the SEC to counsel for the
Initial Investor at such address designated in writing by the Initial Investor;
(d) (i) register or qualify, or obtain exemption from
registration or qualification for, the Registrable Securities covered by the
Registration Statement under such other securities or blue sky laws of such
jurisdictions as required for sale of the Registrable Securities by the investor
as the Investors who hold a majority in interest of the Registrable Securities
being offered reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements, (iii)
take such other actions as may be necessary to maintain such registrations or
qualifications in effect at all times until such date as is the earlier of two
years after the date such Registration Statement is first ordered effective by
the SEC or is two years after the Initial Investor acquired the Shares and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions or to otherwise permit the
Holders to dispose of the Registrable Securities; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to (I) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(d), (II) subject itself to general
taxation in any such jurisdiction, (III) file a general consent to service of
process in any such jurisdiction, (IV) make any change in its charter or
by-laws, which in each case the
4
<PAGE>
Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders or (V) subject any officer,
director or shareholder to any penalty or risk of forfeiture other than
those penalties and risks to which officers and directors are ordinarily liable
in a public offering of securities;
(e) in the event Investors who hold a majority in interest of
the Registrable Securities being offered pursuant to Section 2(b) hereof select
underwriters for the offering, or an underwritten public offering is conducted
pursuant to Section 2(a) hereof, enter into and perform its obligations under an
underwriting agreement in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering;
(f) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold pursuant
to such registration of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, contains 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, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue statement or
omission, and deliver a number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request;
(g) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold pursuant
to such registration (or, in the event of an underwritten offering, the managing
underwriters) of the issuance by the SEC of any stop order or other suspension
of effectiveness of the Registration Statement at the earliest possible time;
(h) permit a single firm of counsel designated as selling
Investors' counsel by the Investors who hold a majority in interest of the
Registrable Securities being sold pursuant to such registration to review the
Registration Statement and all amendments and supplements thereto a reasonable
period of time prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects, provided that any unreasonable
delay by such counsel shall automatically extend the period provided in this
Agreement for filing the Registration Statement;
(i) at the request of the Investors who hold a majority in
interest of the Registrable Securities being sold pursuant to an underwritten
registration, furnish on the date that Registrable Securities are delivered to
an underwriter for sale in connection with the Registration Statement (i) a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public
5
<PAGE>
accountants to underwriters in an underwriter public offering, addressed to the
underwriters; and (ii) an opinion, dated such date, from counsel
representing the Company for purposes of such Registration Statement, in form
and substance as is customarily given in an underwritten public offering,
addressed to the underwriters and Investors;
(j) make available for inspection by any Investor whose
Registrable Securities are being sold pursuant to such registration, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by any such
Investor or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary to
enable each Inspector to exercise its due diligence responsibility, and cause
the Company's officers, directors and employees to supply all information which
any Inspector may reasonably request for purposes of such due diligence;
provided, however, that each Inspector shall hold in confidence and shall not
make any disclosure (except to an Investor) of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court or government body of competent
jurisdiction or (iii) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto. Each
Investor agrees that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential. The Company
shall hold in confidence and shall not make any disclosure of information
concerning an Investor provided to the Company pursuant to Section 4(e) hereof
unless (i) disclosure of such information is necessary to comply with federal or
state securities laws, (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement, (iii)
the release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor, and
allow such Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information;
6
<PAGE>
(k) use its best efforts either to (i) cause all the
Registrable Securities covered by the Registration Statement to be listed on the
American Stock Exchange or another national securities exchange and on each
additional national securities exchange on which similar securities issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (ii) secure
designation of all the Registrable Securities covered by the Registration
Statement as a National Association of Securities Dealers Automated Quotations
System ("NASDAQ") "national market system security" within the meaning of Rule
11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the quotation of the Registrable Securities on the NASDAQ
National Market System or, if, despite the Company's best efforts to satisfy the
preceding clause (i) or (ii), the Company is unsuccessful in satisfying the
preceding clause (i) or (ii), to secure listing on a national securities
exchange or NASDAQ authorization and quotation for such Registrable Securities;
(l) provide a transfer agent and registrar, which may be
a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement;
(m) cooperate with the Investors who hold Registrable
Securities being sold pursuant to registration statements and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates to the transferees to whom such Registrable Securities
are being sold (not bearing any restrictive legends) pursuant to the
denominations or amounts as the case may be, and registered, in such names as
the managing underwriter or underwriters, if any, or the Investors may
reasonably request; and, within three business days after a Registration
Statement which includes Registrable Securities is ordered effective by the SEC,
the Company shall deliver, or shall cause legal counsel selected by the Company
to deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are being sold) instructions to the
transfer agent to issue new stock certificates without a legend to such
transferees and an opinion of such counsel that the shares have been registered;
and
(n) take all other reasonable actions necessary to expedite
and facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
(o) Notwithstanding the foregoing, the Company's
obligations in connection with the registration of Registrable Securities shall
be limited as follows:
(i) The Company shall not be obligated under
this Agreement to register or include in any registration Registrable Securities
that any Investor has requested to be registered if the Company shall furnish
such Investor with a written opinion of counsel reasonably satisfactory to
such Investor, that all Registrable Securities that such Investor holds may
be publicly offered, sold or distributed without registration under the Act
pursuant to Rule 144 without restriction as to the amount of securities that
can be sold.
7
<PAGE>
(ii) The Company's obligation to amend,
supplement and cause to continue to be effective any registration statement may
be suspended, for a reasonable period of time, not to exceed 45 days, if the
Company has been advised in writing by independent legal counsel that such
filing would require the disclosure of a material transaction or other facts
and the Board of Directors of the Company determines reasonably and in good
faith that such disclosure would have a material, adverse effect on the
Company; provided, however, that the Company shall not under any
circumstances be permitted to exercise such rights more than two (2) times in
any twelve (12) month period. The Company shall immediately notify in
writing all Investors who hold Registrable Securities covered by such
registration statement of such determination, and such Investors shall maintain
the confidentiality of such notice and shall cease all trading in the securities
of the Company until the Company notifies such Investors in writing that the
circumstances that caused such suspension or postponement are no longer present
and that the Registration Statement is currently effective. The Company shall
use its best efforts to promptly take all such actions necessary to eliminate
any such suspension or postponement as soon as reasonably possible.
(iii) The Company may in its discretion grant to
any owner of securities of the Company registration rights of any kind or
nature.
(p) If the Company shall fail to file the Registration
Statement required to be filed by the Company pursuant to Section 2 (b) hereof
within the time provided therefor, or if the Company shall fail to actively
attempt to obtain effectiveness of the Registration Statement, the Investors
shall be entitled, at the Company's expense, to prepare a Registration Statement
and/or to attempt to obtain effectiveness of the Registration Statement. In such
event, the Company shall cause its directors and officers to provide all
required information and to execute all documents as reasonably requested by
such Investors to file such Registration Statement and/or cause such
Registration Statement to become effective.
4. Obligations of the Investors. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement with respect to each
Investor that such Investor furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of the Registrable Securities and execute
such documents in connection with such registration as the Company may
reasonably request. At least fifteen (15) days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor of the information the Company requires from each such investor (the
"Requested Information") if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement. If within five
(5) business days
8
<PAGE>
prior to the filing date the Company has not received a signed writing
containing the Requested Information from an Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement;
(c) In the event the Company or Investors holding a majority
in interest of the Registrable Securities being registered determine to engage
the services of an underwriter in accordance with Section 2(b) hereof, or in
connection with any underwritten public offering pursuant to Section 2(a)
hereof, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement, and the Company shall
have no obligation to register the Registrable Securities of any Investor who
fails to comply with this paragraph;
(d) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
and 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall, at the option of the Investor, either (i)
deliver to the Company or (ii) destroy (and deliver to the Company a certificate
of destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice; and
(e) No Investor may participate and the Company shall have no
obligation to register the Registrable Securities of any Investor in any
underwritten registration hereunder unless such Investor (i) agrees to sell such
Investor's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Investors entitled hereunder to approve such
arrangements, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and (iii) agrees to
pay its pro rata share of all underwriting discounts and commissions applicable
with respect to its Registrable Securities,
9
<PAGE>
in each case to the extent not payable by the Company pursuant to the terms of
this Agreement.
5. Expenses of Registration. All expenses (other than underwriting
discounts and commissions or brokerage commissions) incurred in connection with
registrations, filings or qualifications pursuant to Section 3, including,
without limitation, all registration, listing and qualifications fees, printers'
and accounting fees and the fees and disbursements of counsel for the Company,
shall be borne by the Company; provided, however, that the Investors shall bear
the fees and out-of-pocket expenses of the one legal counsel selected by the
Investors pursuant to Section 3(h) hereof.
6. Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act, any underwriter (as defined in the
Securities Act) for the Investors, the directors, if any, of such underwriter
and the officers, if any, of such underwriter, and each person, if any, who
controls any such underwriter within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Person"), against any losses, claims,
damages, expenses or liabilities (joint or several) (collectively "Claims") to
which any of them become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such Claims (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or 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, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act or any state securities law or any rule or regulation (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such
10
<PAGE>
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) (I) shall not apply to
a Claim arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished in writing to the Company
by any Indemnified Person or underwriter for such Indemnified Person expressly
for use in connection with the preparation of the Registration Statement,
preliminary prospectus, final prospectus or any amendments thereof or
supplements thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (II) with respect to any preliminary prospectus
shall not inure to the benefit of any such person from whom the person asserting
any such Claim purchased the Registrable Securities that are the subject thereof
(or to the benefit of any person controlling such person) if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected in the prospectus, as then amended or supplemented, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; and (III) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Persons and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and hold
harmless, to the same extent and in the same manner set forth in Section 6(a),
the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement of any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified person, an "Indemnified Party"),
against any Claims to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claims(s) arises out of or
is based upon any Violation(s), in each case to the extent (and only to the
extent) that such Violation(s) occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and such Investor will promptly
reimburse any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim as does not exceed the net
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors
11
<PAGE>
pursuant to Section 9. Notwithstanding anything to the contrary herein, the
indemnification agreement contained in this Section 6(b) with respect to
any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, 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
control of the defense thereof with counsel mutually satisfactory to the
indemnifying parties; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel retained by the indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party and indemnifying party in
such proceeding. The Company shall pay for only one separate legal counsel for
such of the Investors as may become Indemnified Parties or Indemnified Persons;
such legal counsel shall be selected by the Investors holding a majority in
interest of the Registrable Securities. 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 Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
(e) Any Holder required to indemnify the Company as provided
in this Section 6 shall cease to have the right to participate in any other
registration pursuant to this Agreement.
7. Contribution. To the extent any indemnification provided for herein
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution
12
<PAGE>
with respect to any amounts for which it would otherwise be liable under
Section 6 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the maker would
not have been liable for indemnification under the fault standards set forth
in Section 6, (b) no Holder of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any Holder of Registrable Securities
who was not guilty of such fraudulent misrepresentation and (c)
contribution by any Holder of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such Holder from the sale of such
Registrable Securities.
8. Reports under Exchange Act. With a view to making available to the
Investors the benefits of Rule 144 or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration, until such time as the Investors
have sold all the Registrable Securities held by them pursuant to a Registration
Statement or Rule 144 or otherwise, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (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 to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. Assignment of the Registration Rights. The rights to have the
Company register Registrable Securities pursuant to this Agreement may be
assigned by the Initial Investor to any shareholder of the Initial Investor to
whom the Initial Investor transfers any Closing Shares or Additional Shares if:
(a) the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (b) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, and (c) at or before the time the Company receives the written notice
contemplated by clause (a) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained
13
<PAGE>
herein. Except for transfers to shareholders of the Initial Investor that
comply with the requirements of this Section, registration rights are not
transferable.
10. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a majority in interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing (including facsimile) and shall be deemed to be sufficiently given
and delivered when personally delivered, faxed (with a copy sent by first class
mail) or when sent by registered mail, return receipt requested, addressed (i)
if to the Company, at EDITEK, Inc., 1238 Anthony Road, Burlington, North
Carolina 27215, Attention: Peter J. Heath, Chief Financial Officer, (ii) if to
the Initial Investor, at the address set forth in the Purchase Agreement, with a
copy to Henson & Efron, P. A., 1200 Title Insurance Building, Minneapolis,
Minnesota 55401, Attention Alan C. Eidsness, Esq. and (iii) if to any other
Investor, at such address as such Investor shall have provided in writing to the
Company, or at such other address as each such party furnishes by notice given
in accordance with this Section 11(b), with a copy to Henson & Efron, P. A.,
1200 Title Insurance Building, Minneapolis, Minnesota 55401, Attention Alan C.
Eidsness, Esq., and shall be effective, when personally delivered, upon receipt,
when faxed, the day after transmission, and when so sent by certified mail, four
business days after deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement, or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of New York applicable to the
agreements made and to be performed entirely within such state. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall
14
<PAGE>
be deemed inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform with such statute or rule of law. Any provision
hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may required.
(h) The headings in the Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of day and
year first above written.
EDITEK, INC. MEDTOX LABORATORIES, INC.
By: _______________________ By:_______________________
Title:_____________________ Title:____________________
15
<PAGE>
EDITEK, INC. QUESTIONNAIRE
As partial consideration for the acquisition of substantially all of
the assets of MedTox Laboratories, Inc. ("MedTox") by EDITEK, Inc. (the
"Company"), shares (the "Shares") of the common stock, par value $.15 per share
("Common Stock"), of the Company are being offered to MedTox, at a purchase
price and on the terms described in the Company's Private Placement Memorandum
(the "Offering").
The Shares are being offered without registration under the Securities
Act of 1933, as amended (the "Securities Act"), or the securities laws of
certain states, in reliance on the exemption contained in Section 4(2) of the
Securities Act and on Regulation D promulgated by the Securities and Exchange
Commission pursuant to the Securities Act ("Regulation D"), and in reliance on
applicable exemptions claimed under certain applicable state laws. The Company
has agreed to file a registration statement on Form S-3 (the "Registration
Statement") with the Securities and Exchange Commission to registering for
resale the Shares.
PURPOSES OF THIS QUESTIONNAIRE
PART I: Suitability Requirements and General Solicitation
Restrictions.
Under the Securities Act, Regulation D and certain state laws, the
Company must determine that an individual meets certain suitability requirements
before selling (or, in some states, offering) the Shares to such individual and
must ensure that no general solicitation occurs in connection with the Offering.
This Questionnaire does not constitute an offer to sell or a solicitation of an
offer to sell or a solicitation of an offer to buy the Shares or any other
security.
THE COMPANY WILL NOT OFFER OR SELL SHARES TO ANY INDIVIDUAL WHO HAS NOT
COMPLETED AND EXECUTED THIS QUESTIONNAIRE.
PART II: Stock Ownership.
Certain information regarding ownership of the Company's securities and
the intended plan of distribution of the Shares is necessary to prepare the
Registration Statement and other securities documents which may be required in
connection with the Registration Statement to be filed by the Company with the
Securities and Exchange Commission to register for resale the Shares, in
accordance with the rights granted to you pursuant to the Registration Rights
Agreement between the Company and MedTox (the "Registration Rights Agreement").
Because the information provided herein will be used in connection with
the preparation of documents to be filed with state or federal agencies, it
should be accurate, complete and true, and not omit any material or important
information.
<PAGE>
One copy of this questionnaire should be completed and delivered to
Editek, Inc., 1238 Anthony Road, Burlington, NC 27215, Attn: Peter J. Heath.
SHARES WILL NOT BE INCLUDED IN THE REGISTRATION UNLESS YOU COMPLETE
THIS QUESTIONNAIRE.
PART I
INSTRUCTIONS TO PART I:
PLEASE ANSWER ALL QUESTIONS. If the appropriate answer is "None" or
"Not Applicable," so state. Please print or type your answers to all questions.
Attach additional sheets if necessary to complete your answers to
any item.
Your answers to Part I will be kept strictly confidential at all times;
however, the Company may present this Questionnaire to such parties (including
lenders or governmental entities) as it deems appropriate in order to assure
itself and such entities that the offer and sale of the Units will not result in
a violation of the registration provisions of the Securities Act or a violation
of Regulation D or the securities laws of any state.
NOTE: Individuals responding to this questionnaire should answer
questions 1 through 3.2 of Part I. Partnerships, corporations, trusts or other
entities responding to this questionnaire should answer questions 4 through 7.2
of Part I.
A. INDIVIDUALS
1. Name and Address.
Name:_____________________________________ Date of Birth:__________________
Residence Address (include Zip Code):__________________________________________
- ------------------------------------------------------------------------------
Business Address (include Zip Code)____________________________________________
- ------------------------------------------------------------------------------
2
<PAGE>
Telephone Nos. Res.:_______________________ Bus.:_____________________
Preferred Mailing Address: [ ] Residence [ ] Business
Citizenship: [ ] U.S. [ ] Other (specify)_____________________________
State of Residence:____________________________________________________________
Social Security No.:___________________________________________________________
Marital Status:________________________________________________________________
2. Financial Condition. Please answer the following questions
concerning your financial condition by marking the appropriate response box.
2.1 Did your individual annual gross income (net of expenses
directly related to the production of such income) during each
of 1993 and 1994 exceed $200,000, and do you reasonably expect
your individual annual income during 1995 to exceed $200,000?
[ ] [ ]
Yes No
2.2 Did your joint annual gross income (together with your spouse)
(net of expenses directly related to the production of such
income) during each of 1993 and 1994 exceed $300,000, and do
you reasonably expect your joint annual income during 1995 to
exceed $300,000?
[ ] [ ]
Yes No
2.3 Does your individual or joint (together with your spouse)
net worth 1 exceed $1,000,000?
[ ] [ ]
Yes No
1 For this purpose, a person's net worth is the excess of all of the person's
assets over all of the person's liabilities, based upon current fair market
value.
3
<PAGE>
3. Sophistication:
3.1 (a) Do you consider yourself to have sufficient
knowledge and experience in financial and business
matters to enable you to evaluate the merits and
risks of an investment in the Shares?
[ ] [ ]
Yes No
(b) If the answer to 3.1(a) is "No," you will be required
to have an attorney, accountant or other investment
adviser serve as your purchaser representative(s) to
evaluate and advise you with respect to your
prospective investment in the Shares. Each such
person must complete, and you must review and
acknowledge, a separate Purchaser Representative
Questionnaire and Disclosure Statement and
Acknowledgement which must be returned to the Company
prior to the sale of any Shares to you.
3.2 In connection with your proposed investment in the Shares,
will you seek advice from any attorney, accountant, investment
adviser or other person or persons?
[ ] [ ]
Yes No
If yes, please set forth the name, profession or occupation,
business address and telephone number of each such prospective
adviser and, if more than one, explain briefly the division of
responsibilities between them:
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
4
<PAGE>
B. PARTNERSHIPS, CORPORATIONS, TRUSTS OR OTHER ENTITIES
4. Name and Address.
Name of entity: ________________________________________________________________
Indicate type of entity:
[ ] General Partnership
[ ] Limited Partnership
[ ] Corporation
[ ] Trust
[ ] Other ____________________________________
(Specify)
Taxpayer identification number:___________________
Business address:______________________________________________________________
(Street)
- ------------------------------------------------------------------------------
(City) (State) (Zip Code)
Business telephone number:_______________________________________
(Area Code) (Number)
State in which organized or incorporated:
- ------------------------------------------------------------------------------
Date of organization or incorporation:
- ------------------------------------------------------------------------------
Was this partnership, corporation, trust or other entity formed for the specific
purpose of investing in the Shares?
[ ] Yes [ ] No
5. Business
Please describe the nature of the business the entity conducts.
----------------------------------------------------------------------
5
<PAGE>
----------------------------------------------------------------------
6. Financial Condition:
6.1 Please answer Questions 6.1.1 through 6.1.6 by checking the
appropriate box or boxes below:
6.1.1 The undersigned entity is (a) a bank, as defined in
Section 3(a)(2) of the Securities Act os 1933, as amended (the
"Act"), or a savings and loan association or other institution
as defined in Section 3(a)(5)(A) of the Act, whether acting in
its individual or fiduciary capacity; (b) a broker or dealer
registered pursuant to Section 15 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"); (c) an insurance
company, as defined in Section 2(13) of the Act; (d) an
investment company registered under the Investment Partnership
Act of 1940 (the "1940 Act") or a business development company
as defined in Section 310(c) or (d) of the Small Business
Investment Act of 1958; (e) a plan established and maintained
by a state, it political subdivision, or any agency or
instrumentality of a state or its political subdivisions, for
the benefit of its employees if such plan has total assets in
excess of $5,000,000; or an employee benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974
("ERISA"), if the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of ERISA, that is
either a bank, savings and loan association, insurance company
or registered investment adviser, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by
persons that are accredited investors.
[ ] [ ]
Yes No
6.1.2 The undersigned entity is a "private business
development company" as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940.
[ ] [ ]
Yes No
6.1.3 The undersigned entity is an organization described in
Section 501(c)(3) of the Internal Revenue Code, a corporation,
a Massachusetts or similar business trust, or a partnership,
not formed for the specific purpose of making the investment,
with total assets in excess of $5,000,000.
[ ] [ ]
Yes No
7
<PAGE>
6.1.4 The undersigned entity is a trust, with total assets in
excess of $5,000,000, not formed for the purpose of investing
in the Shares.
[ ] [ ]
Yes No
6.1.5 The undersigned is an entity and each partner (including
general and limited partners), shareholder, grantor of a
revocable trust or other equity owner of the undersigned
entity (a) has a net worth, individually or jointly with his
or her spouse, of at least $1,000,000; (b) had an individual
income in excess of $200,000 in each of 1993 and 1994 and
reasonably expects such individual income to exceed $200,000
in 1995 (or with his or her spouse, had and expects to have an
income of $300,000 for such periods; (c) is an officer or
director of the Company; or (d) meets the requirements of any
of categories 6.1.1, 6.1.2, 6.1.3, 6.1.4 above.
[ ] [ ]
Yes No
6.1.6 The undersigned entity does not meet any of the
standards set forth in the categories listed in 6.1.1 through
6.1.5 above.
[ ] [ ]
Yes No
7. Sophistication
7.1 (a) Does the entity have sufficient knowledge and
experience in financial and business matters to
enable it to evaluate the merits and risks of an
investment in the Shares?
[ ] [ ]
Yes No
(b) If the answer to 7.1(a) is "No," the entity will be
required to have an attorney, accountant or other
investment adviser serve as its purchaser
representative(s) to evaluate and advise it with
respect to the prospective investment in the Shares.
Each such person must complete, and the entity must
review and acknowledge, a separate Purchaser
Representative Questionnaire and Disclosure Statement
and Acknowledgement which must be returned to the
Company prior to the sale of any Shares to the
entity.
8
<PAGE>
7.2 In connection with the proposed investment in the Shares, will
the entity seek advice from any attorney, accountant,
investment adviser or other person or persons?
[ ] [ ]
Yes No
If yes, please set forth the name, profession or occupation,
business address and telephone number of each such prospective
adviser and, if more than one, explain briefly the division of
responsibilities between them:
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
9
<PAGE>
PART II
INSTRUCTIONS TO PART II:
Please answer each question fully, giving the most exact and accurate
answers possible and provide information as of December 1, 1995. Certain terms
used in Part II are defined in Appendix A hereto, which should be referred to in
completing this part of the questionnaire.
For purposes of the questions in Part II, references to "you" or "your"
refer equally to individuals and entities responding to this questionnaire.
1. General.
State your name as it should appear in any securities
registration filings made.
NAME:________________________________________________________
If an entity, indicate principal contact for questions:
NAME:________________________________________________________
TELEPHONE:___________________________________________________
2. Business.
Please describe the nature of the business your organization
conducts.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
10
<PAGE>
3. Relationship with the Company.
Please state your (or the undersigned entity's) current
position or relationship with the Company (or its affiliates) and any
relationship with the Company (or its affiliates) during the past three years:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
4. Security Holdings.
(a) Please state below the respective numbers of shares of the
Company's Common Stock (or any other class of equity securities), excluding the
shares of the Company's Common Stock offered by the Company as partial
consideration for the acquisition of the assets of MedTox, owned of record or
beneficially*, directly or indirectly, by you or members of your family, or by a
group* of which you are a member, or by an associate* of yours, as indicated, as
of __________________ (the "Non-MedTox Shares"). For purposes of this question,
your family members include your spouse, your minor children and any relative of
you or your spouse who lives with you.
<TABLE>
<CAPTION>
Class & Number of Name and Amount and
Non-MedTox Shares Address of Nature of
Currently Owned Beneficial Owner* Beneficial Ownership2
<S> <C> <C> <C>
Non-MedTox Shares owned
by you, both of record
and beneficially*
Non-MedTox Shares owned
by you, of record only
Non-MedTox Shares owned
by you, beneficially* only
Non-MedTox Shares owned
of record or beneficially*
by your spouse, your
minor children and
relatives of yours or
of your spouse
(including adult children)
living in your home
</TABLE>
2 State whether this is by (1) sole voting power, (2) shared voting power, (3)
sole investment power, (4) shared investment power, or any combination of the
foregoing.
11
<PAGE>
<TABLE>
<CAPTION>
Class & Number of Name and Amount and
Non-MedTox Share Address of Nature of
Currently Owned Beneficial Owner* Beneficial Ownership3
<S> <C> <C> <C>
Non-MedTox Shares owned
by a group* of which you
are a member, both of
record and beneficially*
Non-MedTox Shares owned
by a group* of which
you are a member,
of record only
Non-MedTox Shares owned
by a group* of which
you are a member,
beneficially* only
Non-MedTox Shares
which you have a
right to acquire
pursuant to options,
warrants or otherwise
within 60 days of
_____________, 1995
(please describe
arrangements on reverse
side of this page)
</TABLE>
(b) Are any of the shares of stock or notes of the Company owned by you
subject to any pledge or other contractual arrangement*?
No _____ Yes _____
If yes, please explain such pledge or other contractual
arrangement*:
3 State whether this is by (1) sole voting power, (2) shared voting power,
(3) sole investment power, (4) shared investment power, or any combination
of the foregoing.
12
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(c) Please describe any other rights to purchase securities of the
Company that you have:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
5. Plan of Distribution. Attached as Appendix B hereto is a description
of a plan of distribution that is intended to be used in the Registration
Statement. Please indicate whether anything stated in Appendix B is inaccurate
or misleading with respect to any plan you may have to distribute the securities
owned by you or whether Appendix B omits to state any information about such
plan of distribution.
No _____ Yes _____
If yes, describe below specifically in what manner Appendix B
is inaccurate or misleading. Please also describe below any additional
information about any plan you may have to distribute the securities that you
own.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
13
<PAGE>
CERTIFICATION
The undersigned hereby affirms that the preceding information is
correct as of the date hereof. The undersigned will promptly notify the Company
or its legal counsel of any changes in such information. The undersigned
understands and agrees that this Questionnaire, as completed, and any further
communications by the undersigned regarding the matters contemplated herein,
will be relied upon, in connection with the offering by the Company of the
Shares and the filings related to the Registration Statement, by the Company,
its legal counsel, and the representatives of the underwriters (if any) and
their counsel.
-----------------------------------------------
Signature of Investor 4
----------------------------------------------
Please type or print name and title, if any
---------------------------------------------
Date
4 If this Questionnaire is being completed by or on behalf of a person* other
than an individual, the entity on whose behalf the Questionnaire is being
completed should be stated.
14
<PAGE>
APPENDIX A
1. Affiliate, Affiliated Company. The term "affiliate" or "affiliated
company" means any person* that directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common
control with a specific entity, by means of possession of the power to
direct or cause the direction of its management and policies, whether
through ownership or otherwise. Persons who have acted or are acting on
behalf or for the benefit of any entity include, but are not
necessarily limited to, directors, officers, employees, agents,
consultants and sales representatives.
2. Associate. The term "associate" means:
(a) Any corporation or organization, except the Company and its
subsidiaries, of which you are an executive officer or partner
or of which you, together with other officers or directors of
the Company, are, directly or indirectly, the beneficial owner
of 10% or more of any class of equity securities.
(b) Any trust or other estate in which you have a substantial
beneficial interest or as to which you serve as trustee or in
a similar fiduciary capacity.
(c) Any relative, your spouse or any relative of your spouse who
resides with your or who is a director of officer of the
Company or its subsidiaries.
3. Beneficial Owner. A "beneficial owner" of securities is any person who,
directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares:
(i) Voting power, which includes the power to vote, or to direct
the voting of, such security; and/or,
(ii) Investment power, which includes the power to dispose or
direct the disposition of, such security.
Furthermore, a "beneficial owner" of a security includes any person who
has the right to acquire beneficial ownership of such security at any
time within sixty (60) days. The right to acquire beneficial ownership
could (but need not necessarily) be through (i) the exercise of any
option, warrant or right, (ii) the conversion of a security, (iii) a
power to revoke or automatic termination of a trust, discretionary
account, or similar arrangement, or otherwise.
15
<PAGE>
A "beneficial owner" also includes any person who, directly or
indirectly, creates or uses a trust, proxy, power of attorney, pooling
arrangement or any other contract, arrangement, or device with the
purpose or effect of divesting such person or beneficial ownership of a
security or preventing the vesting of such beneficial ownership as part
of a plan to evade the reporting requirements of any federal or state
securities act.
Securities owned beneficially would include not only securities held by
you for your own benefit, whether in bearer form or registered in your
own name or otherwise, but would also include securities held by others
for your benefit (regardless of whether or how they are registered),
such as, for example, securities held for you by banks or other
custodians, brokers (whether in your name, their name or in "street
name"), executors, administrators, or trustees (including trusts in
which you have only a remainder interest) and securities held for your
account by pledges, and securities owned by a partnership in which you
are a member, and securities owned by any corporation in which you and
your associates* own 10% or more of the stock. A person is deemed to be
the beneficial owner of securities beneficially owned by his spouse,
his minor children, or any relative sharing his home.
"Indirectly", when used to refer to beneficial ownership of securities,
means ownership through another such as a controlled corporation,
member of the family, estate, trust, partnership or other entity.
4. Family Member. The term "family member" means your spouse, parents,
children, siblings, mothers and fathers-in-law, sons and
daughters-in-law, and brothers and sisters-in-law.
5. Family Relationship. The term "family relationship" means any
relationship by blood, marriage or adoption, not more remote than first
cousin.
6. Group. The term "group" means any two or more persons acting as a
partnership, limited partnership, syndicate or otherwise.
7. Person. The term "person" means a natural person, company, partnership,
joint venture, limited partnership, trust, estate, government, or other
entity, or a political subdivision, agency, or instrumentality of a
government.
8. Public Company. The term "public company" means a company with a class
of securities registered pursuant to section 12 of the Securities
Exchange Act of 1934 or subject to the requirements of section 15(d) of
that Act or any company registered as an investment company under the
Investment Company Act of 1940.
16
<PAGE>
9. Arrangement. Any plan,* contract, authorization or understanding,
whether or not set forth in a formal document.
10. Immediate Family. Any relationship by blood, marriage or adoption,
including the person's spouse, parents, children, brothers and sisters,
mothers and fathers-in-law, sons and daughters-in-law and brothers and
sisters-in law, but not more remote than first cousin.
17
<PAGE>
APPENDIX B
PLAN OF DISTRIBUTION
The MedTox Shareholders may from time to time effect the sale of their
Shares in one or more transactions in the public market, at prices and at terms
then prevailing or at prices related to the then-current market price, or in
negotiated transactions or otherwise. The Shares may be sold pursuant to the
Registration Statement, another registration statement or pursuant to an
exemption from registration, including Rule 144. If all or a portion of the
Shares are sold in such transactions, they may be sold by means of: (a) a block
trade in which the broker or dealer so engaged will attempt to sell the Shares
as agent but may position and resell a portion of the block as principal to
facilitate the transactions; (b) purchases by a broker as principal and resale
by such broker for its account pursuant to the Prospectus that is a part of the
Registration Statement; (c) an exchange distribution in accordance with the
rules of such exchange; (d) ordinary brokerage transactions and transactions in
which the broker solicits purchasers; or (e) a combination of the foregoing
methods. In effecting sales, brokers or dealers engaged by the MedTox
Shareholders may arrange for other brokers or dealers to participate. The
brokers or dealers engaged by the MedTox Shareholders will receive commissions
or discounts from the MedTox Shareholders in amounts to be negotiated prior to
the sale. Such brokers or dealers and any other participating brokers or
dealers, as well as the MedTox Shareholders, may be deemed to be "underwriters"
within the meaning of the Securities Act in connection with such sales. There
are currently no plans, arrangements or understandings between any of the MedTox
Shareholders and any broker or dealer regarding the sale of stock by the MedTox
Shareholders.
18
<PAGE>
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT ("Assignment") is made and entered into as of
the 10th day of January, 1996, by and between EDITEK, INC., a Delaware
corporation ("Purchaser"), MEDTOX LABORATORIES, INC., a Minnesota corporation
("Seller"), and PSYCHIATRIC DIAGNOSTIC LABORATORIES OF AMERICA, INC., a Delaware
corporation ("Assignee").
WHEREAS, Seller and Purchaser are parties to that certain Asset
Purchase Agreement dated as of July 1, 1995, and that certain Amendment
Agreement dated as of January 2, 1996, pursuant to which Purchaser agreed to
purchase and Seller agreed to sell substantially all of the assets of Seller
(collectively, the "Purchase Agreement"); and
WHEREAS, Purchaser desires to assign to Assignee, Assignee has agreed
to assume and Seller desires to consent to the assignment of, Purchaser's rights
under the Purchase Agreement under the terms and conditions set forth herein;
and
WHEREAS, Assignee is an Affiliate of Purchaser (as such term is
contemplated in the Purchase Agreement) of Purchaser; and
WHEREAS, the assignment effected hereby is permitted under Section 13.3
of the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Assignment. Purchaser hereby assigns and transfers to Assignee,
Purchaser's rights to purchase assets pursuant to the terms of the Purchase
Agreement.
2. Acceptance of Assignment. Assignee hereby accepts the rights being
assigned hereby and assumes all responsibilities and obligations of Purchaser as
set forth in the Purchase Agreement. Assignee hereby covenants and agrees to
perform all terms and conditions contained in the Purchase Agreement.
3. Non-Release of Purchaser. In accordance with the provisions of
Section 13.3 of the Purchase Agreement, Purchaser agrees that the assignment to
Assignee of its rights under the Purchase Agreement shall not operate to release
Purchaser from any liability to Seller under the Purchase Agreement, and
Purchaser shall remain obligated to perform all terms and conditions and shall
remain liable for all indemnification obligations contained in the Purchase
Agreement required to be performed by Purchaser.
<PAGE>
4. Seller's Consent. Seller hereby consents to the foregoing assignment
on the terms and conditions set forth herein, and in connection therewith,
agrees to treat Assignee for all purposes as Purchaser under the Purchase
Agreement and to take whatever action may be necessary to transfer Seller's
assets to Assignee, including without limitation, executing or causing the
execution of deeds, assignments, consents and other similar documents in the
name of Assignee.
5. Additional Party. By execution of this Assignment, Assignee shall
become a party to the Purchase Agreement and shall hereafter be bound by the
terms and conditions thereof.
6. Warranties of Purchaser. Purchaser warrants and represents to
Assignee as follows: (a) the Purchase Agreement is in full force and effect; (b)
neither the Purchase Agreement nor any of the obligations, duties and
responsibilities of the Purchaser or Seller thereunder have been amended,
modified or altered in any manner other than as reflected in the Amendment
Agreement; and (c) there exists no circumstance, condition or act of default
which would entitle or permit Seller to terminate the Purchase Agreement or to
abridge any rights of Purchaser thereunder or exercise any remedies for default.
7. Binding Effect. This Assignment shall be binding upon successors and
assigns of the parties. The parties shall execute and deliver such further and
additional instruments, agreements and other documents as may be necessary to
evidence or carry out the provisions of this Assignment.
8. Counterparts. This Assignment 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.
9. Governing Law; Interpretation. The execution and performance of this
Assignment shall be governed by the substantive laws of the State of Minnesota,
without giving effect to the provisions thereof relating to conflicts of law.
Unless otherwise defined herein, capitalized terms shall have the meanings given
to them under the Purchase Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
effective as of the day and year first above written.
PURCHASER:
EDITEK, INC.
ATTEST: By: _______________________________
Title: ____________________________
[SEAL]
- ----------------------
Secretary
SELLER:
MEDTOX LABORATORIES, INC.
ATTEST: By: _______________________________
Title: ____________________________
[SEAL]
- ----------------------
Secretary
ASSIGNEE:
PSYCHIATRIC DIAGNOSTIC LABORATORIES OF
AMERICA, INC.
ATTEST: By: _______________________________
Title: ____________________________
[SEAL]
- ---------------------
Secretary
<PAGE>
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is dated as of January ___, 1996, and
entered into by and between EDITEK, INC., a Delaware corporation, PSYCHIATRIC
DIAGNOSTIC LABORATORIES OF AMERICA, INC., a Delaware corporation, and
DIAGNOSTIX, INC., a Delaware corporation (collectively, "Borrowers"), with their
principal place of business at 1238 Anthony Road, Burlington, North Carolina
27215, and HELLER FINANCIAL, INC., a Delaware corporation ("Lender"), with
offices at 500 West Monroe Street, Chicago, Illinois 60661. All capitalized
terms used herein are defined in Section 1 of this Agreement.
WHEREAS, Borrowers desire that Lender extend a credit facility to
provide working capital financing and to provide funds for other general
corporate purposes; and
WHEREAS, Borrowers desire to secure their obligations under the Loan
Documents by granting to Lender a security interest in and lien upon certain of
Borrowers' property;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrowers and Lender agree as
follows:
1 DEFINITIONS
1.1 Certain Defined Terms. The following terms used in this Agreement
shall have the following meanings:
"Accounts" means, all "accounts" (as defined in the UCC), accounts
receivable, contract rights and general intangibles relating thereto, notes,
drafts and other forms of obligations owed to or owned by a Borrower arising or
resulting from the sale of goods or the rendering of services.
"Affiliate" means any Person (other than Lender): (a) directly or
indirectly controlling, controlled by, or under common control with, a Borrower;
(b) directly or indirectly owning or holding five percent (5%) or more of any
equity interest in a Borrower; or (c) five percent (5%) or more of whose voting
stock or other equity interest is directly or indirectly owned or held by a
Borrower. For purposes of this definition, "control" (including with correlative
meanings, the terms "controlling", "controlled by" and "under common control
with") means the possession directly or indirectly of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities or by contract or otherwise.
"Agreement" means this Loan and Security Agreement as it may be
amended, supplemented or otherwise modified from time to time.
<PAGE>
"Asset Disposition" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any or all of
the assets of a Borrower or any of its Subsidiaries other than sales of
Inventory in the ordinary course of business.
"Availability" means, at any time of determination thereof, the Maximum
Revolving Loan Amount, less the outstanding principal balance of the Revolving
Loan.
"Base Rate" means a variable rate of interest per annum equal to the
higher of (a) the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System as the "Bank Prime Loan" rate in Federal
Reserve Statistical Release H.15(519) entitled "Selected Interest Rates" or any
successor publication of the Federal Reserve System reporting the Bank Prime
Loan rate or its equivalent, or (b) the Federal Funds Effective Rate. The
statistical release generally sets forth a Bank Prime Loan rate for each
Business Day. In the event the Board of Governors of the Federal Reserve System
ceases to publish a Bank Prime Loan rate or its equivalent, the term "Base Rate"
shall mean a variable rate of interest per annum equal to the highest of the
"prime rate", "reference rate", "base rate", or other similar rate announced
from time to time by any of Bankers Trust Company, The Chase Manhattan Bank,
National Association or Chemical Bank, or their successors (with the
understanding that any such rate may merely be a reference rate and may not
necessarily represent the lowest or best rate actually charged to any customer
by any such bank).
"Blocked Accounts" has the meaning assigned to that term in subsection
5.6.
"Borrowers" has the meaning assigned to that term in the preamble to
this Agreement.
"Borrowing Base" has the meaning assigned to that term in subsection
2.1(B).
"Borrowing Base Certificate" means a certificate and assignment
schedule duly executed by an officer of the applicable Borrower appropriately
completed and in substantially the form of Exhibit A.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the States of Minnesota, New Jersey,
Illinois, Pennsylvania or North Carolina or is a day on which banking
institutions located in any such state are closed.
"Capital Expenditures" means all expenditures (including deposits) for,
or contracts for expenditures (excluding contracts for expenditures under or
with respect to Capital Leases, but including cash down payments for assets
acquired under Capital Leases) with respect to any fixed assets or improvements,
or for replacements, substitutions or additions thereto, which have a useful
life of more than one year, including the direct or indirect acquisition of such
assets by way of increased product or service charges, offset items or
otherwise.
2
<PAGE>
"Capital Lease" means any lease of any property (whether real, personal
or mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.
"Cash Equivalents" means: (a) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's Corporation or at least P-1 from Moody's Investors Service, Inc.; and (c)
certificates of deposit or bankers' acceptances maturing within six (6) months
from the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $250,000,000 and not subject to
setoff rights in favor of such bank.
"Closing Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Borrowers in a form reasonably
acceptable to Lender
"Closing Date" means January ___, 1996.
"Collateral" has the meaning assigned to that term in subsection 2.7.
"Collecting Banks" has the meaning assigned to that term in subsection
5.6.
"Commitment" or "Commitments" means the commitment or commitments of
Lender to make Loans as set forth in subsections 2.l(A) and 2.1(B).
"Compliance Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Borrowers appropriately
completed and in substantially the form of Exhibit B.
"Default" means a condition or event that, after notice or lapse of
time or both, would constitute an Event of Default if that condition or event
were not cured or removed within any applicable grace or cure period.
"Default Rate" has the meaning assigned to that term in subsection 2.2.
3
<PAGE>
"diAGnostix" means diAGnostix, Inc., a Delaware corporation, and its
successors and permitted assigns.
"EBITDA" means, for any period, without duplication, the total of the
following for Borrowers and their respective Subsidiaries on a consolidated
basis, each calculated for such period: (1) net income determined in accordance
with GAAP; plus, to the extent included in the calculation of net income, (2)
the sum of (a) income and franchise taxes paid or accrued; (b) Interest
Expenses, net of interest income, paid or accrued; (c) interest paid in kind;
(d) amortization and depreciation; (e) other non-cash charges (excluding
accruals for cash expenses made in the ordinary course of business) and (f)
Registration Payments paid or accrued; less, to the extent included in the
calculation of net income, (3) the sum of (a) the income of any Person other
than wholly-owned Subsidiaries of Borrowers in which a Borrower or a wholly
owned Subsidiary of a Borrower has an ownership interest unless such income is
received by a Borrower or such wholly-owned Subsidiary in a cash distribution;
(b) gains or losses from sales or other dispositions of assets (other than
Inventory in the normal course of business); and (c) extraordinary or
non-recurring gains, but not net of extraordinary or non-recurring "cash"
losses.
"Editek" means EDITEK, Inc., a Delaware corporation, and its successors
and permitted assigns.
"Eligible Accounts" has the meaning assigned to that term in subsection
2.1(B).
"Eligible Inventory" has the meaning assigned to that term in
subsection 2.1(B).
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of any
Loan Party or any ERISA Affiliate or (b) has at any time within the preceding
six (6) years been maintained for the employees of any Loan Party or any current
or former ERISA Affiliate.
"Environmental Claims" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials.
"Environmental Laws" means any present or future federal, state or
local law, rule, regulation or order relating to pollution, waste, disposal or
the protection of human health or safety, plant life or animal life, natural
resources or the environment.
"Equipment" means all "equipment" (as defined in the UCC), including,
without limitation, all machinery, motor vehicles, trucks, trailers, vessels,
aircraft and rolling stock and all parts thereof and all additions and
accessions thereto and replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
4
<PAGE>
"ERISA Affiliate", as applied to any Loan Party, means any Person who
is a member of a group which is under common control with any Loan Party, who
together with any Loan Party is treated as a single employer within the meaning
of Section 414(b) and (c) of the IRC.
"Event of Default" means each of the events set forth in subsection
8.1.
"Excess Cash Flow" means, for any period, the greater of (A) zero (0);
or (B) without duplication, the total of the following for Borrowers and their
respective Subsidiaries on a consolidated basis, each calculated for such
period: (1) EBITDA; plus (2) tax refunds actually received; less (3) Capital
Expenditures (to the extent actually made in cash and/or due to be made in cash
within such period but in no event more than the amount permitted by subsection
6.5 hereof); less (4) income and franchise taxes paid or accrued excluding any
provision for deferred taxes included in the determination of net income; less
(5) decreases in deferred income taxes resulting from payments of deferred taxes
accrued in prior periods; less (6) Interest Expenses paid or accrued; less (7)
scheduled amortization of Indebtedness actually paid and/or due to be paid
within such period and permitted under subsection 7.5; less (8) voluntary
prepayments of the Term Loans.
"Federal Funds Effective Rate" means, for any day, the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the
immediately following Business Day by the Federal Reserve Bank of New York or,
if such rate is not published for any Business Day, the average of the
quotations for the day of the requested Loan received by Lender from three
Federal funds brokers of recognized standing selected by Lender.
"Fiscal Year" means each twelve month period ending on the last day of
December in each year.
"Fixed Charge Coverage" means, for any period, Operating Cash Flow
divided by Fixed Charges.
"Fixed Charges" means, for any period, and each calculated for such
period (without duplication), (a) Interest Expenses paid or accrued by Borrowers
and their respective Subsidiaries; plus (b) scheduled payments of principal with
respect to all Indebtedness of Borrowers and their respective Subsidiaries; plus
(c) any provision for (to the extent it is greater than zero) income or
franchise taxes included in the determination of net income, excluding any
provision for deferred taxes; plus (d) Restricted Junior Payments made in cash
to the extent permitted under subsection 7.5(b); plus (e) payment of deferred
taxes accrued in any prior period.
"Funding Date" means the date of each funding of a Loan.
5
<PAGE>
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.
"Hazardous Material" means all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
Environmental Laws or regulations as "hazardous substances", "hazardous
materials", "hazardous wastes", "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity or "EP toxicity"; (b) oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources; (c)
any flammable substances or explosives or any radioactive materials; and (d)
asbestos in any form or electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty parts per million.
"Indebtedness", as applied to any Person, means without duplication:
(a) all indebtedness for borrowed money; (b) obligations under leases which in
accordance with GAAP constitute Capital Leases; (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; and (e) all indebtedness secured by any
Lien on any property or asset owned or held by that Person regardless of whether
the indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person.
"Intangible Assets" means all intangible assets (determined in
conformity with GAAP) including, without limitation, goodwill, trademarks, trade
names, licenses, organizational costs, deferred amounts, covenants not to
compete, unearned income and restricted funds.
"Intellectual Property" means all present and future designs, patents,
patent rights and applications therefor, trademarks and registrations or
applications therefor, trade names, inventions, copyrights and all applications
and registrations therefor, software or computer programs, license rights, trade
secrets, methods, processes, know-how, drawings, specifications, descriptions,
and all memoranda, notes and records with respect to any research and
development, whether now owned or hereafter acquired, all goodwill associated
with any of the foregoing, and proceeds of all of the foregoing, including,
without limitation, proceeds of insurance policies thereon.
"Interest Coverage" means, for any period, Operating Cash Flow divided
by Interest Expenses.
6
<PAGE>
"Interest Expenses" means, without duplication, for any period, the
following, for Borrowers and their respective Subsidiaries each calculated for
such period: interest expenses deducted in the determination of net income
(excluding (i) the amortization of fees and costs with respect to the
transactions contemplated hereunder on the Closing Date which have been
capitalized as transaction costs; and (ii) interest paid in kind).
"Interest Rate" has the meaning assigned to that term in subsection
2.2(A).
"Inventory" means all "inventory" (as defined in the UCC) including,
without limitation, finished goods, raw materials, work in process and other
materials and supplies used or consumed in a Person's business, and goods which
are returned or repossessed.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder.
"Lender" means Heller Financial, Inc. together with its successors and
permitted assigns pursuant to
subsection 9.1.
"Lender's Account" means ABA No. 0710-0001-3, Account No. 52-98695 at
First National Bank of Chicago, One First National Plaza, Chicago, IL 60670,
Reference: Heller Business Credit for the benefit of Editek.
"Liabilities" shall have the meaning given that term in accordance with
GAAP and shall include Indebtedness.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan" or "Loans" means an advance or advances under the Term Loan
Commitment or the Revolving Loan Commitment.
"Loan Documents" means this Agreement, the Term Notes, the Pledge
Agreements and all other instruments, documents and agreements executed by or on
behalf of a Borrower and delivered concurrently herewith or at any time
hereafter to or for Lender in connection with the Loans and other transactions
contemplated by this Agreement, all as amended, restated, supplemented or
modified from time to time.
"Loan Party" means, collectively, Borrowers, Borrowers' respective
Subsidiaries and any other Person (other than Lender) which is or becomes a
party to any Loan Document.
7
<PAGE>
"Loan Year" means each period of twelve (12) consecutive months
commencing on the Closing Date and on each anniversary thereof.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of any Loan Party on an individual basis or taken as a whole or (b)
the ability of any Loan Party to perform its obligations under any Loan Document
to which it is a party or Lender to enforce or collect any of the Obligations.
"Maximum Revolving Loan Amount" has the meaning assigned to that term
in subsection 2.1(B).
"MedTox" means MedTox Laboratories, Inc., a Minnesota corporation, and
its successors and permitted assigns.
"MedTox Acquisition" means the acquisition by PDLA of the business of
MedTox occurring on or about the Closing Date.
"MedTox Acquisition Agreement" means that certain Asset Purchase
Agreement dated effective July 1, 1995, between Editek and MedTox, as amended by
that certain Amendment Agreement dated as of January 2, 1996, between Editek and
MedTox.
"MedTox Acquisition Documents" means the MedTox Acquisition Agreement
and all other documents, agreements and instruments executed or delivered in
connection with the MedTox Acquisition.
"Net Worth" means, as of any date, the sum of the capital stock and
additional paid-in capital plus retained earnings (or minus accumulated deficit)
calculated in conformity with GAAP.
"Obligations" means all obligations, liabilities and indebtedness of
every nature of each Loan Party from time to time owed to Lender under the Loan
Documents including the principal amount of all debts, claims and indebtedness
(whether incurred before or after the Termination Date), accrued and unpaid
interest and all fees, costs and expenses, whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter owing, due or payable.
"Operating Cash Flow" means, for any period, (a) EBITDA; less (b)
Capital Expenditures; less (c) Registration Payments paid or accrued.
"PDLA" means Psychiatric Diagnostic Laboratories of America, Inc., a
Delaware corporation, and its successors and permitted assigns.
8
<PAGE>
"Permitted Encumbrances" means the following types of Liens: (a) Liens
(other than Liens relating to Environmental Claims or ERISA) for taxes,
assessments or other governmental charges not yet due and payable; (b) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
similar liens imposed by law, which are incurred in the ordinary course of
business for sums not more than thirty (30) days delinquent; (c) Liens (other
than any Lien imposed by ERISA) incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (d) easements, rights-of-way, restrictions,
and other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of any Loan Party or any of
its Subsidiaries; (e) Liens for purchase money obligations, provided that (i)
the purchase of the asset subject to any such Lien is permitted under subsection
6.5, (ii) the Indebtedness secured by any such Lien is permitted under
subsection 7.1, and (iii) such Lien encumbers only the asset so purchased; (f)
Liens in favor of Lender, and (g) Liens set forth on Schedule 1.1(A).
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Pledge Agreements" means the stock pledge agreements to be executed
and delivered by each of Editek and Princeton in favor of Lender, in form and
substance reasonably satisfactory to Lender.
"PPSA" means the Personal Property Security Act (Ontario), as amended
from time to time.
"Preferred Stock" means the Series A Convertible Preferred Stock of
Editek, $1.00 par value per share.
"Princeton" means Princeton Diagnostic Laboratories of America, Inc., a
Delaware corporation, and its successors and permitted assigns.
"Pro Forma" means the unaudited consolidated and consolidating balance
sheet of Borrowers and their respective Subsidiaries as of the Closing Date
after giving effect to the MedTox Acquisition and the other transactions
contemplated by this Agreement. The Pro Forma is annexed hereto as Schedule
1.1(B).
9
<PAGE>
"Projections" means Borrowers' forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, all prepared on a division by
division and Subsidiary by Subsidiary basis and otherwise consistent with
Borrowers' historical financial statements, together with appropriate supporting
details and a statement of underlying assumptions.
"Registration Payment" means a cash payment made or required to be made
by a Borrower to a holder of Preferred Stock as a result of Editek's failure to
register the common stock into which such Preferred Stock is convertible or
converted, as provided in Section 2(d) of the Registration Rights Agreements or
any successor or substitute provision.
"Registration Rights Agreements" means those certain Registration
Rights Agreements dated on or about the Closing Date, executed by Editek in
favor of the holders of the Preferred Stock.
"Restricted Junior Payment" means: (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of a Borrower or any of its Subsidiaries now or hereafter outstanding, except a
stock dividend; (b) any payment or prepayment of principal of, premium, if any,
or interest on, or any redemption, conversion, exchange, retirement, defeasance,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any Subordinated Debt or any shares of any class of stock of a
Borrower or any of its Subsidiaries now or hereafter outstanding; (c) any
payment made to retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of stock of a Borrower or
any of its Subsidiaries now or hereafter outstanding; (d) any payment by a
Borrower or any of its Subsidiaries of any management fees or similar fees to
any Affiliate, whether pursuant to a management agreement or otherwise; (e) any
Registration Payment; and (f) any payment of the Tax Liability.
"Revolving Loan" means all advances made by Lender pursuant to
subsection 2.1(B) and any amounts added to the principal balance of the
Revolving Loan pursuant to this Agreement.
"Revolving Loan Commitment" means the commitment of Lender to make the
Revolving Loan in the aggregate not to exceed at anytime $7,000,000.
"Scheduled Installment" has the meaning assigned to that term in
subsection 2.1(A).
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned
10
<PAGE>
or controlled, directly or indirectly, by that Person or one or more of the
other subsidiaries of that Person or a combination thereof.
"Tangible Net Worth" means an amount equal to: (a) Net Worth; less (b)
Intangible Assets; less (c) prepaid expenses; less (d) all obligations owed to
such Person or any of its Subsidiaries by any Affiliate of such Person or any of
its Subsidiaries; and less (e) all loans by such Person to its officers,
stockholders or employees; provided, however, that in computing Tangible Net
Worth hereunder, up to $2,000,000 in book value of patents, trademarks and trade
names shall be deemed not to be Intangible Assets.
"Tax Liability" has the meaning assigned to such term in the MedTox
Acquisition Agreement.
"Term Loans" means, collectively, Term Loan A and Term Loan B.
"Term Loan A" means the advance made pursuant to subsection 2.1(A)(1).
"Term Loan B" means the advance made pursuant to subsection 2.1(A)(2).
"Term Loan Commitment" means the commitment of Lender to make the Term
Loans as set forth in this Agreement.
"Term Note" or "Term Notes" means each promissory note of Borrowers in
a form reasonably acceptable to Lender, issued pursuant to subsection 2.1(E).
"Termination Date" means the date this Agreement is terminated as set
forth in subsection 2.5.
"Total Loan Commitment" means the aggregate commitment of Lender with
respect to the Revolving Loan Commitment and the Term Loan Commitment.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of Illinois, as amended from time to time, and any successor
statute.
"Working Capital" means: (a) current assets; less (b) current
liabilities; and less (c) the amount of any obligations owed to such Person or
any of its Subsidiaries by any Affiliate of such Person or any of its
Subsidiaries.
11
<PAGE>
1.2 Accounting Terms. For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to such terms in conformity with GAAP. Financial statements and other
information furnished to Lender pursuant to subsection 5.1 shall be prepared in
accordance with GAAP (as in effect at the time of such preparation) on a
consistent basis. In the event any "Accounting Changes" (as defined below) shall
occur and such changes affect financial covenants, standards or terms in this
Agreement, then Borrowers and Lender agree to enter into negotiations in order
to amend such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating the
financial condition of Borrowers shall be the same after such Accounting Changes
as if such Accounting Changes had not been made, and until such time as such an
amendment shall have been executed and delivered by Borrowers and Lender, (A)
all financial covenants, standards and terms in this Agreement shall be
calculated and/or construed as if such Accounting Changes had not been made, and
(B) Borrowers shall prepare footnotes to each Compliance Certificate and the
financial statements required to be delivered hereunder that show the
differences between the financial statements delivered (which reflect such
Accounting Changes) and the basis for calculating financial covenant compliance
(without reflecting such Accounting Changes). "Accounting Changes" means: (a)
changes in accounting principles required by GAAP and implemented by Borrowers;
(b) changes in accounting principles recommended by Borrowers' certified public
accountants; and (c) changes in carrying value of Borrowers' or any of their
Subsidiaries' assets, liabilities or equity accounts resulting from (i) the
application of purchase accounting principles (A.P.B. 16 and/or 17 and EITF
88-16 and FASB 109) to the MedTox Acquisition or (ii) any other adjustments
that, in each case, were applicable to, but not included in, the Pro Forma. All
such adjustments resulting from expenditures made subsequent to the Closing Date
(including, but not limited to, capitalization of costs and expenses or payment
of pre-Closing Date liabilities) shall be treated as expenses in the period the
expenditures are made and deducted as part of the calculation of EBITDA in such
period.
1.3 Other Definitional Provisions. References to "Sections",
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection 1.1 may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. In this Agreement, words importing any gender include the
other genders; the words "including," "includes" and "include" shall be deemed
to be followed by the words "without limitation"; references to agreements and
other contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
12
<PAGE>
2 LOANS AND COLLATERAL
2.1 Loans.
(A)(1) Term Loan A. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and warranties of
Borrowers herein set forth, Lender agrees to lend to Borrowers on the Closing
Date Term Loan A, which is in the amount of $2,000,000. Term Loan A shall be
funded in one drawing. Amounts borrowed under this subsection 2.1(A)(1) and
repaid may not be reborrowed. Borrowers shall make principal payments in the
amounts of the applicable Scheduled Installments of Term Loan A (or such lesser
principal amount as shall then be outstanding) on the dates and in the amounts
set forth below.
"Scheduled Installment of Term Loan A means, for each date set forth
below, the amount set forth opposite such date.
Date Scheduled Installment
---- ---------------------
August 1, 1997 $111,111.11
September 1, 1997 111,111.11
October 1, 1997 111,111.11
November 1, 1997 111,111.11
December 1, 1997 111,111.11
January 1, 1998 111,111.11
February 1, 1998 111,111.11
March 1, 1998 111,111.11
April 1, 1998 111,111.11
May 1, 1998 111,111.11
June 1, 1998 111,111.11
July 1, 1998 111,111.11
August 1, 1998 111,111.11
September 1, 1998 111,111.11
October 1, 1998 111,111.11
November 1, 1998 111,111.11
December 1, 1998 111,111.11
January 1, 1999 111,111.13
If at any time prior to the commencement of Scheduled Installments of
Term Loan A set forth above, Term Loan B is fully repaid, then on the first day
of each month, commencing on the first day of the month following repayment of
Term Loan B and continuing through July 1, 1997, Borrowers shall make principal
prepayments of Term Loan A in the amount of $111,111.11 each, which prepayments
shall be applied to the Scheduled Installments of Term Loan A in inverse order
of maturity.
13
<PAGE>
(A)(2) Term Loan B Term Loan B. Subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of Borrowers herein set forth, Lender agrees to lend to Borrowers on
the Closing Date Term Loan B, which is in the amount of $2,000,000. Term Loan B
shall be funded in one drawing. Amounts borrowed under this subsection 2.1(A)(2)
and repaid may not be reborrowed. Borrowers shall make principal payments in the
amount of the applicable Scheduled Installment of Term Loan B (or such lesser
principal amount as shall then be outstanding) on the dates and in the amounts
set forth below
"Scheduled Installment of Term Loan B" means, for each date set forth
below, the amount set forth opposite such date.
Date Scheduled Installment
---- ---------------------
February 1, 1996 $111,111.11
March 1, 1996 111,111.11
April 1, 1996 111,111.11
May 1, 1996 111,111.11
June 1, 1996 111,111.11
July 1, 1996 111,111.11
August 1, 1996 111,111.11
September 1, 1996 111,111.11
October 1, 1996 111,111.11
November 1, 1996 111,111.11
December 1, 1996 111,111.11
January 1, 1997 111,111.11
February 1, 1997 111,111.11
March 1, 1997 111,111.11
April 1, 1997 111,111.11
May 1, 1997 111,111.11
June 1, 1997 111,111.11
July 1, 1997 111,111.13
(B) Revolving Loan. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Borrowers
herein set forth, Lender agrees to lend to Borrowers from time to time an
aggregate amount not to exceed at any time $7,000,000. Amounts borrowed under
this subsection 2.1(B) may be repaid and reborrowed at any time prior to the
earlier of (i) the termination of the Revolving Loan Commitment pursuant to
subsection 8.3 or (ii) the Termination Date. Lender shall have no obligation to
make advances under this subsection 2.1(B) to a Borrower to the extent the
requested advance would cause the balance of the Revolving Loan of such Borrower
then outstanding (after giving effect to any immediate application of the
proceeds thereof) to exceed the Maximum Revolving Loan Amount of such Borrower
or to the extent any requested advance would cause the balance of the Revolving
Loan of all Borrowers then
14
<PAGE>
outstanding (after giving effect to any immediate application of the proceeds
thereof) to exceed the Revolving Loan Commitment; provided that Lender may,
in its sole discretion, elect from time to time to make Loans in excess of the
Maximum Revolving Loan Amount of a Borrower or the Revolving Loan Commitment.
Borrowers shall maintain records of the Revolving Loan advanced to or for the
benefit of each Borrower and the amount of all repayments made by each Borrower
of such advances from proceeds of Accounts or otherwise. To the extent that the
outstanding balance of the Revolving Loan owing by a Borrower exceeds such
Borrower's Borrowing Base at any time, such excess shall be deemed to
constitute an intercompany loan to such Borrower from another Borrower whose
outstanding balance of the Revolving Loan is less than its Borrower's
Borrowing Base, which intercompany loans shall be subordinate in right of
payment to the Obligations and shall be subject to the limitations of
subsection 7.1(b).
(1) "Maximum Revolving Loan Amount" means, with respect to
each Borrower, as of any date of determination, the lesser of (a) the Revolving
Loan Commitment and (b) the Borrowing Base of such Borrower.
(2) "Borrowing Base" means, with respect to a Borrower, as of
any date of determination, an amount equal to the sum of (a) eighty-five percent
(85%) of such Borrower's Eligible Accounts plus (b) the lesser of (i) such
Borrower's Inventory Sublimit, and (ii) fifty percent (50%) of such Borrower's
Eligible Inventory, less in each case such reserves as Lender in its reasonable
discretion elects to establish.
(3) "Inventory Sublimit" means, with respect to Editek, the
amount of $800,000, with respect to PDLA, the amount of $500,000 and with
respect to diAGnostix, the amount of $200,000.
(C) Eligible Collateral.
"Eligible Accounts" means, with respect to a Borrower, as at any date
of determination, the aggregate of all Accounts of such Borrower that Lender, in
its reasonable judgment, deems to be eligible for borrowing purposes. Without
limiting the generality of the foregoing, unless otherwise agreed by Lender, the
following Accounts are not Eligible Accounts:
(1) Accounts which, at the date of issuance of the respective
invoice therefor, were payable more than sixty (60) days after the date of
issuance of such invoice;
(2) Accounts which remain unpaid for more than sixty (60) days
after the due date specified in the original invoice or for more than ninety
(90) days after invoice date if no due date was specified;
(3) Accounts which are otherwise eligible with respect to
which the account debtor is owed a credit by a Borrower, but only to the extent
of such credit;
15
<PAGE>
(4) Accounts due from a customer whose principal place of
business is located outside the United States of America unless such Account is
backed by a letter of credit, in form and substance acceptable to Lender, and
issued or confirmed by a bank that is organized under the laws of the United
States of America or a State thereof, that is acceptable to Lender, provided
that such letter of credit has been delivered to Lender as additional
collateral, or the applicable Borrower is the beneficiary of credit insurance
with respect to such account in such amounts and against such risks as shall be
acceptable to Lender;
(5) Accounts due from a customer which Lender has notified
Borrowers does not have a satisfactory credit standing;
(6) Accounts with respect to which the customer is the United
States of America, any state or any municipality, or any department, agency or
instrumentality thereof, unless the applicable Borrower has, with respect to
such Accounts, complied with the Federal Assignment of Claims Act (31 U.S.C.
Section 3727) or any applicable statute or municipal ordinance of similar
purpose and effect;
(7) Accounts with respect to which the customer is an
Affiliate of a Borrower or a director, officer, agent, stockholder or employee
of a Borrower or any of its Affiliates;
(8) Accounts due from a customer if more than twenty-five
percent (25%) of the aggregate amount of Accounts of such customer have at the
time remained unpaid for more than sixty (60) days after due date or ninety (90)
days after the invoice date if no due date was specified;
(9) Accounts with respect to which there is any unresolved
dispute with the respective customer (but only to the extent of such dispute);
(10) Accounts evidenced by an "instrument" or "chattel paper"
(as defined in the UCC) not in the possession of Lender;
(11) Accounts with respect to which Lender does not have a
valid, first priority and fully perfected security interest;
(12) Accounts subject to any Lien except those in favor of
Lender;
(13) Accounts with respect to which the customer is the
subject of any bankruptcy or other insolvency proceeding;
16
<PAGE>
(14) Accounts due from a customer to the extent that all
Accounts of such customer owing to all Borrowers exceed in the aggregate an
amount equal to twenty percent (20%) of the aggregate of all otherwise Eligible
Accounts of all Borrowers at said date;
(15) Accounts with respect to which the customer's obligation
to pay is conditional or subject to a repurchase obligation or right to return
or with respect to which the goods or services giving rise to such Account have
not been delivered (or performed, as applicable) and accepted by such account
debtor, including progress billings, bill and hold sales, guarantied sales, sale
or return transactions, sales on approval or consignment sales;
(16) Accounts with respect to which the customer is located in
Indiana, New Jersey, Minnesota, or any other state denying creditors access to
its courts in the absence of a Notice of Business Activities Report or other
similar filing, unless the applicable Borrower has either qualified as a foreign
corporation authorized to transact business in such state or has filed a Notice
of Business Activities Report or similar filing with the applicable state agency
for the then current year;
(17) Accounts with respect to which the customer is a creditor
of a Borrower, provided, however, that any such Account shall only be ineligible
as to that portion of such Account which is less than or equal to the amount
owed by such Borrower to such Person.
"Eligible Inventory" means, with respect to a Borrower, as at any date
of determination, the value (determined at the lower of cost or market on a
first-in, first-out basis) of all Inventory that is readily marketable raw
materials, supplies in unopened containers or finished goods consisting of
pre-packaged test kits, in each case owned by and in the possession of such
Borrower and located in the United States of America and that Lender, in its
reasonable credit judgment, deems to be eligible for borrowing purposes. Without
limiting the generality of the foregoing, unless otherwise agreed by Lender, the
following is not Eligible Inventory: (a) work-in-process; (b) sample collection
kits; (c) finished goods which do not meet the specifications of the purchase
order for such goods; (d) Inventory which Lender determines, is unacceptable for
borrowing purposes due to age, quality, type, category and/or quantity; (e)
Inventory with respect to which Lender does not have a valid, first priority and
fully perfected security interest; (f) Inventory with respect to which there
exists any Lien in favor of any Person other than Lender; (g) Inventory produced
in violation of the Fair Labor Standards Act and subject to the so-called "hot
goods" provisions contained in Title 29 U.S.C. 215 (a)(i); and (h) Inventory
located at any location other than those set forth on Schedule 4.7.
17
<PAGE>
(D) Borrowing Mechanics. On any day when a Borrower desires to borrow
under this subsection 2.1, Editek, acting as agent for such Borrower, shall give
Lender telephonic notice of the proposed borrowing by 11:00 a.m. (Chicago time).
Lender shall not incur any liability to Borrowers for acting upon any telephonic
notice Lender believes in good faith to have been given by a duly authorized
officer or other person authorized to borrow on behalf of a Borrower or for
otherwise acting in good faith under this subsection 2.1(D). Lender will not
make any advance pursuant to any telephonic notice unless Lender has also
received the most recent Borrowing Base Certificates and all other documents
required under subsection 5.1(F). Each advance made to a Borrower under the
Revolving Loan shall be deposited by wire transfer in immediately available
funds in such account of Editek, as agent for each Borrower, as Editek may from
time to time designate to Lender in writing, and Editek shall forward the
appropriate amount of proceeds of each such advance to or for the benefit of the
appropriate Borrower. Unless payment is otherwise timely made by a Borrower, the
becoming due of any amount required to be paid under this Agreement or any of
the other Loan Documents as principal, accrued interest and fees shall be deemed
irrevocably to be a request by such Borrower for a Revolving Loan on the due
date of, and in the amount required to pay, such principal, accrued interest and
fees, and the proceeds of each such Revolving Loan if made by Lender shall be
disbursed by Lender by way of direct payment of the relevant obligation.
Anything herein to the contrary notwithstanding, Lender may elect at any time to
disburse directly to each Borrower advances of the Revolving Loan that are based
upon the Borrowing Base of such Borrower.
(E) Term Notes. Borrowers shall execute and deliver to Lender a Term
Note to evidence each of the Term Loans, such Term Notes to be in the principal
amount of the respective Term Loan Commitment and with other appropriate
insertions. In the event of an assignment under subsection 9.1, Borrowers shall,
upon surrender of the assigning Lender's Notes, issue new Notes to reflect the
new Commitments of the assigning Lender and its assignee.
(F) Evidence of Revolving Loan Obligations. The advances constituting
the Revolving Loan shall be evidenced by this Agreement and notations made from
time to time by Lender in its books and records, including computer records.
Lender's books and records shall constitute presumptive evidence, absent
manifest error, of the accuracy of the information contained therein. Failure by
the Lender to make any such notation or record shall not affect the obligations
of Borrowers to Lender with respect to the Revolving Loans.
2.2 Interest Interest
(A) Rate of Interest. The Loans and all other Obligations shall bear
interest from the date such Loans are made or such other Obligations become due
to the date paid at a rate per annum equal to (i) one and one-half percent
(1.50%) plus the Base Rate with respect to the Revolving Loan, (ii) two percent
(2.00%) plus the Base Rate with respect to Term Loan A and (iii) two and
one-half percent (2.50%) plus the Base Rate with respect to Term Loan B (the
"Interest
18
<PAGE>
Rate"). After the occurrence and during the continuance of an Event of Default,
the Loans and all other Obligations shall, at Lender's option, bear interest
at a rate per annum equal to three percent (3.0%) plus the Interest Rate
(the "Default Rate").
(B) Computation and Payment of Interest. Interest on the Loans and all
other Obligations shall be computed on the daily principal balance on the basis
of a 360 day year for the actual number of days elapsed in the period during
which it accrues and shall be payable monthly in arrears on the first day of
each month. Any publicly announced change in the Base Rate shall result in an
adjustment to the Interest Rate on the day such change takes effect. Whenever
interest payable hereunder is calculated on the basis of a year of 360 days,
each rate of interest determined pursuant to such calculation expressed as an
annual rate for the purpose of the Interest Act (Canada) is equivalent to such
rate as so determined multiplied by the number of days in the calendar year in
which the same is to be ascertained and divided by 360.
(C) Interest Laws. Notwithstanding any provision to the contrary
contained in this Agreement or any other Loan Document, Borrowers shall not be
required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by law ("Excess
Interest"). If any Excess Interest is provided for or determined by a court of
competent jurisdiction to have been provided for in this Agreement or in any
other Loan Document, then in such event: (1) the provisions of this subsection
shall govern and control; (2) neither Borrowers nor any Loan Party shall be
obligated to pay any Excess Interest; (3) any Excess Interest that Lender may
have received hereunder shall be, at Lender's option, (a) applied as a credit
against the outstanding principal balance of the Obligations or accrued and
unpaid interest (not to exceed the maximum amount permitted by law), (b)
refunded to the payor thereof, or (c) any combination of the foregoing; (4) the
interest rate(s) provided for herein shall be automatically reduced to the
maximum lawful rate allowed from time to time under applicable law (the "Maximum
Rate"), and this Agreement and the other Loan Documents shall be deemed to have
been and shall be, reformed and modified to reflect such reduction; and (5)
neither Borrowers nor any Loan Party shall have any action against Lender for
any damages arising out of the payment or collection of any Excess Interest.
Notwithstanding the foregoing, if for any period of time interest on any
Obligations is calculated at the Maximum Rate rather than the applicable rate
under this Agreement, and thereafter such applicable rate becomes less than the
Maximum Rate, the rate of interest payable on such Obligations shall remain at
the Maximum Rate until Lender shall have received the amount of interest which
Lender would have received during such period on such Obligations had the rate
of interest not been limited to the Maximum Rate during such period.
2.3 Fees.
(A) Closing Fee. Borrowers shall pay to Lender on the Closing Date a
closing fee in the amount of $165,000.
19
<PAGE>
(B) Unused Line Fee. Borrowers shall pay to Lender a fee in an amount
equal to the Revolving Loan Commitment less the sum of the average daily balance
of the Revolving Loan during the preceding month multiplied by three-eighths
percent (0.375) per annum, such fee to be calculated on the basis of a 360
day year for the actual number of days elapsed and to be payable monthly in
arrears on the first day of the first month following the Closing Date and the
first day of each month thereafter.
(C) Prepayment Fees. If Borrowers voluntarily prepay the Obligations in
full (other than voluntary prepayments of the Revolving Loan which do not
terminate the Revolving Loan Commitment, including payments of the Revolving
Loan from the Blocked Accounts), or, in the case of any voluntary prepayment of
any Term Loan, in part, prior to the Termination Date, Borrowers at the time of
prepayment shall pay to Lender, as compensation for the costs of being prepared
to make funds available to Borrowers under this Agreement, and not as a penalty,
an amount determined by multiplying the percentage set forth below by (1) in the
case of a prepayment in full of the Obligations, the sum of the outstanding
principal balance of the Term Loans at the date of such prepayment plus the
amount of the Revolving Loan Commitment, or (2) in the case of a prepayment of
the Term Loans only, in whole or in part, the amount of such prepayment: three
percent (3.00%) upon a prepayment during the first Loan Year; two percent
(2.00%) upon a prepayment during the second Loan Year; and one percent (1.00%)
upon a prepayment during the third Loan Year. Borrower shall not be required to
pay prepayment fees in connection with any mandatory prepayments of the
Obligations pursuant to subsection 2.4(B) or the last sentence of subsection
2.1(A)(1).
(D) Collateral Monitoring Fee. On the Closing Date and on the first day
of each calendar quarter thereafter, Borrowers shall pay Lender a nonrefundable
collateral monitoring fee of $5,000; provided, however, that if as a result of a
Borrower's merging with another Borrower, the number of Borrowers decreases to
two or fewer, then such collateral monitoring fee shall reduce to $2,500 per
quarter commencing on the first day of the calendar quarter following such
merger.
(E) Audit Fees. Borrowers agree to pay Lender an audit fee for each
inspection equal to $650 per auditor per day or any portion thereof, excluding
all full days spent by Lender traveling to or from Borrowers' locations,
together with out-of-pocket expenses, or the reasonable fees, expenses and
out-of-pocket costs paid to third party auditors. Audit fees shall not exceed
$20,000 per year, plus out-of-pocket expenses, except during the existence of an
Event of Default.
(F) Other Fees and Expenses. Borrowers shall pay to Lender, for its own
account, all charges for returned items and all other bank charges incurred by
Lender, as well as Lender's standard wire transfer charges for each wire
transfer made under this Agreement.
20
<PAGE>
2.4 Payments and Prepayments.
(A) Manner and Time of Payment. In its sole discretion, Lender may
charge interest and other amounts payable hereunder to the Revolving Loan, all
as set forth on Lender's books and records. If Lender elects to bill Borrowers
for any amount due hereunder, such amount shall be immediately due and payable
with interest thereon as provided herein. All payments made by Borrowers with
respect to the Obligations shall be made without deduction, defense, setoff or
counterclaim. All payments to Lender hereunder shall, unless otherwise directed
by Lender, be made in accordance with subsection 5.6. Proceeds remitted to
Lender's Account shall be credited to the Obligations on the day such proceeds
were received, provided, however, for the purpose of calculating interest on the
Obligations, such funds shall be deemed received on the first Business Day
thereafter. Proceeds remitted to Lender's Account by wire transfer shall be
credited to the Obligations on the Business Day received; provided, however, for
the purpose of calculating interest on the Obligations such funds shall be
deemed received the first Business Day thereafter.
(B) Mandatory Prepayments.
(1) Overadvance. At any time that the principal balance of the
Revolving Loan exceeds the Maximum Revolving Loan Amount, Borrowers shall, upon
demand by Lender, immediately repay the Revolving Loan to the extent necessary
to reduce the principal balance to an amount that is equal to or less than the
Maximum Revolving Loan Amount.
(2) Proceeds of Asset Dispositions. For so long as any portion
of either Term Loan remains outstanding, immediately upon receipt by a Borrower
or any of its Subsidiaries of proceeds of any Asset Disposition (in one or a
series of related transactions), which proceeds exceed $10,000 (it being
understood that if the proceeds exceed $10,000, the entire amount and not just
the portion above $10,000 shall be subject to this subsection 2.4(B)(2)),
Borrowers shall prepay the Term Loans in an amount equal to such proceeds. If
Borrowers reasonably expect the proceeds of any Asset Disposition to be
reinvested within 180 days to repair or replace such assets with like assets,
Borrowers shall deliver the proceeds to Lender to be applied to the Revolving
Loan, and Borrowers may, so long as no Default or Event of Default shall have
occurred and be continuing, reborrow such proceeds only for such repair or
replacement. If Borrowers fail to reinvest such proceeds within 180 days,
Borrowers hereby authorize Lender to make a Revolving Loan to repay the Term
Loans as required hereby. All such prepayments shall be applied first in payment
of Scheduled Installments of Term Loan B in the inverse order of maturity and
second in payment of Scheduled Installments of Term Loan A in the inverse order
of maturity.
21
<PAGE>
(3) Prepayments from Excess Cash Flow. For so long as any
portion of either Term Loan remains outstanding, within ninety (90) days after
the end of each Fiscal Year, Borrowers shall prepay the Term Loans in an amount
equal to fifty percent (50%) of Excess Cash Flow for such prior Fiscal Year
calculated on the basis of the audited financial statements for such Fiscal Year
delivered to Lender pursuant to subsection 5.1(C). All such prepayments from
Excess Cash Flow shall first be applied in payment of Scheduled Installments of
Term Loan B until repaid in full and then in repayment of Term Loan A each in
inverse order of maturity. Concurrently with the making of any such payment,
Borrowers shall deliver to Lender a certificate of Borrowers' chief executive
officer or chief financial officer demonstrating its calculation of the amount
required to be paid.
(C) Voluntary Prepayments and Repayments. Except as provided in
subsection 2.4(B) and except for partial prepayments from the proceeds of equity
securities issued by Borrowers on or after the Closing Date, Borrowers'
Obligations may only be prepaid in full and not in part. Borrowers may, at any
time upon not less than three Business Days' prior notice to Lender, prepay the
Term Loans or terminate the Revolving Loan Commitment; provided, however, the
Revolving Loan Commitment may not be terminated by Borrowers until the Term
Loans are paid in full.
(D) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, the
payment may be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the amount of interest or fees due
hereunder.
2.5 Term of this Agreement. This Agreement shall be effective
until December 31, 1998 (the "Termination Date"). The Commitments shall (unless
earlier terminated) terminate upon the earlier of (i) the occurrence of an event
specified in subsection 8.3 or (ii) the Termination Date. Upon termination in
accordance with subsection 8.3 or on the Termination Date, all Obligations shall
become immediately due and payable without notice or demand. Notwithstanding any
termination, until all Obligations have been fully paid and satisfied, Lender
shall be entitled to retain security interests in and liens upon all Collateral,
and even after payment of all Obligations hereunder, Borrowers' obligation to
indemnify Lender in accordance with the terms hereof shall continue.
2.6 Statements. Lender shall render a monthly statement of account
to Borrowers within twenty (20) days after the end of each month. Such statement
of account shall constitute an account stated unless Borrowers make written
objection thereto within thirty (30) days from the date such statement is mailed
to Borrowers. Borrowers promise to pay all of the Obligations as such amounts
become due or are declared due pursuant to the terms of this Agreement.
22
<PAGE>
2.7 Grant of Security Interest. To secure the payment and
performance of the Obligations, including all renewals, extensions,
restructurings and refinancings of any or all of the Obligations, each Borrower
hereby grants to Lender a continuing security interest, lien and mortgage in and
to all right, title and interest of such Borrower in the following property of
such Borrower, whether now owned or existing or hereafter acquired or arising
and regardless of where located (all being collectively referred to as the
"Collateral"): (A) Accounts, and all guaranties and security therefor, and all
goods and rights represented thereby or arising therefrom including the right of
stoppage in transit, replevin and reclamation; (B) Inventory; (C) general
intangibles (as defined in the UCC); (D) documents (as defined in the UCC) or
other receipts covering, evidencing or representing goods; (E) instruments (as
defined in the UCC); (F) chattel paper (as defined in the UCC); (G) Equipment;
(H) Intellectual Property; (I) all deposit accounts of such Borrower maintained
with any bank or financial institution; (J) all cash and other monies and
property of such Borrower in the possession or under the control of Lender or
any participant; (K) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software that at any
time evidence or contain information relating to any of the property described
above or are otherwise necessary or helpful in the collection thereof or
realization thereon; and (L) proceeds of all or any of the property described
above, including, without limitation, the proceeds of any insurance policies
covering any of the above described property.
2.8 Capital Adequacy and Other Adjustments. In the event Lender
shall have determined that the adoption after the date hereof of any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by Lender or any corporation controlling Lender with any request
or directive regarding capital adequacy, reserve requirements or similar
requirements (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) from any central bank or governmental
agency or body having jurisdiction does or shall have the effect of increasing
the amount of capital, reserves or other funds required to be maintained by
Lender or any corporation controlling Lender and thereby reducing the rate of
return on Lender's or such corporation's capital as a consequence of its
obligations hereunder, then Borrowers shall from time to time within fifteen
(15) days after notice and demand from Lender (together with the certificate
referred to in the next sentence) pay to Lender additional amounts sufficient to
compensate such Lender for such reduction. A certificate as to the amount of
such cost and showing the basis of the computation of such cost submitted by
Lender to Borrowers shall, absent manifest error, be final, conclusive and
binding for all purposes.
2.9 Taxes.
(A) No Deductions. Any and all payments or reimbursements made
hereunder or under the Term Notes shall be made free and clear of and without
deduction for any and all taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto; excluding, however, the
following: taxes imposed on the net income of Lender by the jurisdiction under
the laws of which Lender is organized or doing business or any political
subdivision thereof
23
<PAGE>
and taxes imposed on its net income by the jurisdiction of Lender's applicable
lending office or any political subdivision thereof (all such taxes, levies,
imposts, deductions, charges or withholdings and all liabilities with
respect thereto excluding such taxes imposed on net income, herein "Tax
Liabilities"). If Borrowers shall be required by law to deduct any such Tax
Liabilities from or in respect of any sum payable hereunder to Lender, then the
sum payable hereunder shall be increased as may be necessary so that, after
making all required deductions, Lender receives an amount equal to the sum it
would have received had no such deductions been made.
(B) Changes in Tax Laws. In the event that, subsequent to the Closing
Date, (i) any changes in any existing law, regulation, treaty or directive or in
the interpretation or application thereof, (ii) any new law, regulation, treaty
or directive enacted or any interpretation or application thereof, or (iii)
compliance by Lender with any request or directive (whether or not having the
force of law) from any governmental authority, agency or instrumentality:
(1) does or shall subject Lender to any tax of any kind
whatsoever with respect to this Agreement, the other Loan Documents or any Loans
made hereunder, or change the basis of taxation of payments to Lender of
principal, fees, interest or any other amount payable hereunder (except for net
income taxes, or franchise taxes imposed in lieu of net income taxes, imposed
generally by federal, state or local taxing authorities with respect to interest
or commitment or other fees payable hereunder or changes in the rate of tax on
the overall net income of Lender); or
(2) does or shall impose on Lender any other condition or
increased cost in connection with the transactions contemplated hereby or
participations herein; and the result of any of the foregoing is to increase the
cost to Lender of making or continuing any Loan hereunder, as the case may be,
or to reduce any amount receivable hereunder, then, in any such case, Borrowers
shall promptly pay to Lender, upon its demand, any additional amounts necessary
to compensate Lender, on an after-tax basis, for such additional cost or reduced
amount receivable, as determined by Lender with respect to this Agreement or the
other Loan Documents. If Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify Borrowers of the event by
reason of which Lender has become so entitled. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by
Lender to Borrowers shall, absent manifest error, be final, conclusive and
binding for all purposes.
3 CONDITIONS TO LOANS
3.1 Conditions to Loans. The obligations of Lender to make Loans on the
Closing Date and on each Funding Date are subject to satisfaction of all of the
conditions set forth below.
24
<PAGE>
(A) Closing Deliveries. Lender shall have received, in form and
substance satisfactory to Lender, all documents, instruments and information
identified on Schedule 3.1(A) and all other agreements, notes, certificates,
orders, authorizations, financing statements, mortgages and other documents
which Lender may at any time reasonably request.
(B) Security Interests. Lender shall have received satisfactory
evidence that all security interests and liens granted to Lender pursuant to
this Agreement or the other Loan Documents have been duly perfected and
constitute first priority liens on the Collateral, subject only to Permitted
Encumbrances.
(C) Closing Date Availability. After giving effect to the consummation
of the transactions contemplated hereunder on the Closing Date and the payment
by Borrowers of all costs, fees and expenses relating thereto, the Maximum
Revolving Loan Amount on the Closing Date shall exceed the principal balance of
the Revolving Loans by at least $1,500,000.
(D) Representations and Warranties. The representations and warranties
contained herein and in the Loan Documents shall be true, correct and complete
in all material respects on and as of that Funding Date to the same extent as
though made on and as of that date, except for any representation or warranty
limited by its terms to a specific date and taking into account any amendments
to the Schedules or Exhibits as a result of any disclosures made by Borrowers to
Lender after the Closing Date and approved by Lender.
(E) Fees. With respect to Loans to be made or issued on the Closing
Date, Borrowers shall pay the fees payable on the Closing Date referred to in
subsection 2.3 out of the proceeds of the Loan.
(F) No Default. No event shall have occurred and be continuing or would
result from the consummation of the requested borrowing that would constitute an
Event of Default or a Default.
(G) Performance of Agreements. Each Loan Party shall have performed in
all material respects all agreements and satisfied all conditions which any Loan
Document provides shall be performed by it on or before that Funding Date.
(H) No Prohibition. No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or restrain Lender
from making any Loans.
(I) No Litigation. There shall not be pending or, to the knowledge of
Borrowers, threatened, any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration by, against or affecting any
Loan Party or any of its Subsidiaries or any property of any Loan Party or any
of its Subsidiaries that has not been disclosed by Borrowers in writing, and
there shall have occurred no development in any such action, charge, claim,
demand,
25
<PAGE>
suit, proceeding, petition, governmental investigation or arbitration that,
in the opinion of Lender, would reasonably be expected to have a Material
Adverse Effect.
(J) Issuance of Preferred Stock. Editek shall have issued the Preferred
Stock for an aggregate gross purchase price of not less than $16,000,000, and
Editek shall have received the net cash proceeds from such issuance in an amount
not less than $15,040,000.
(K) MedTox Acquisition. The MedTox Acquisition shall have been
consummated on substantially the terms set forth in the MedTox Acquisition
Documents. In connection with the MedTox Acquisition, MedTox shall have accepted
shares of Editek's common stock in payment for not less than $5,000,000 of the
purchase price for such acquisition.
4 BORROWERS' REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement and to make Loans,
Borrowers represent and warrant to Lender that the following statements are and
will be true, correct and complete:
4.1 Organization, Powers, Capitalization.
(A) Organization and Powers. Each of the Loan Parties is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and qualified to do business in all states where
such qualification is required except where failure to be so qualified could not
be reasonably expected to have a Material Adverse Effect. Each of the Loan
Parties has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and proposed to be
conducted and to enter into each Loan Document.
(B) Capitalization. The authorized capital stock of each of the Loan
Parties is as set forth on Schedule 4.1(B). All issued and outstanding shares of
capital stock of each of the Loan Parties are duly authorized and validly
issued, fully paid, nonassessable, free and clear of all Liens other than those
in favor of Lender and such shares were issued in compliance with all applicable
state and federal laws concerning the issuance of securities. The capital stock
of each of the Loan Parties is owned by the stockholders and in the amounts set
forth on Schedule 4.1(B). No shares of the capital stock of any Loan Party,
other than those described above, are issued and outstanding. Except as set
forth on Schedule 4.1(B), there are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or understandings for
the purchase or acquisition from any Loan Party, of any shares of capital stock
or other securities of any such entity.
26
<PAGE>
4.2 Authorization of Borrowing, No Conflict. Each Borrower has the
corporate power and authority to incur the Obligations and to grant security
interests in the Collateral. On the Closing Date, the execution, delivery and
performance of the Loan Documents by each Loan Party signatory thereto will have
been duly authorized by all necessary corporate and shareholder action. The
execution, delivery and performance by each Loan Party of each Loan Document to
which it is a party and the consummation of the transactions contemplated by
this Agreement and the other Loan Documents by each Loan Party do not contravene
and will not be in contravention of any applicable law, the corporate charter or
bylaws of any Loan Party or any agreement or order by which any Loan Party or
any Loan Party's property is bound. This Agreement is, and the other Loan
Documents, including the Term Notes, when executed and delivered will be, the
legally valid and binding obligations of the applicable Loan Parties
respectively, each enforceable against the Loan Parties, as applicable, in
accordance with their respective terms.
4.3 Financial Condition. All financial statements concerning
Borrowers and their respective Subsidiaries which have been or will hereafter be
furnished by Borrowers and their respective Subsidiaries to Lender pursuant to
this Agreement have been or will be prepared in accordance with GAAP
consistently applied throughout the periods involved (except as disclosed
therein) and do or will present fairly the financial condition of the
corporations covered thereby as at the dates thereof and the results of their
operations for the periods then ended. The Pro Forma was prepared by Borrowers
based on the unaudited balance sheets of Borrowers dated December 31, 1995. The
Projections delivered and to be delivered have been and will be prepared by
Borrowers in light of the past operations of the business of Borrowers and their
respective Subsidiaries, and such Projections represent and will represent the
good faith estimate of Borrowers and their senior management concerning the most
probable course of its business as of the date such Projections are prepared and
delivered.
4.4 Indebtedness and Liabilities. As of the Closing Date, no
Borrower nor any of its Subsidiaries has (a) any Indebtedness except as
reflected on the Pro Forma; or (b) any Liabilities other than as reflected on
the Pro Forma or as incurred in the ordinary course of business following the
date of the Pro Forma.
4.5 Account Warranties. Borrowers represent, warrant and covenant
as to each Account that, at the time of its creation, the Account is a valid,
bona fide account, representing an undisputed indebtedness incurred by the named
account debtor for goods actually sold and delivered or for services completely
rendered; there are no setoffs, offsets or counterclaims, genuine or otherwise,
against the Account; the Account does not represent a sale to an Affiliate or a
consignment, sale or return or a bill and hold transaction; no agreement exists
permitting any deduction or discount (other than the discount stated on the
invoice); a Borrower is the lawful owner of the Account and has the right to
assign the same to Lender; the Account is free of all security interests, liens
and encumbrances other than those in favor of Lender, and the Account is due and
payable in accordance with its terms.
27
<PAGE>
4.6 Names. Schedule 4.6 sets forth all names, trade names,
fictitious names and business names under which each Borrower currently conducts
business or has at any time during the past five years conducted business.
4.7 Locations; FEIN. Schedule 4.7 sets forth the location of each
Borrower's principal place of business, the location of each Borrower's books
and records, the location of all other offices of each Borrower and all
Collateral locations, and such locations are Borrowers' sole locations for their
business and the Collateral. Each Borrower's federal employer identification
number is set forth on the signature page hereof.
4.8 Title to Properties; Liens. Each Borrower and each of its
Subsidiaries has good, sufficient and legal title, subject to Permitted
Encumbrances, to all its respective material properties and assets. Except for
Permitted Encumbrances, all such properties and assets are free and clear of
Liens. To the best knowledge of Borrowers after due inquiry, there are no
actual, threatened or alleged defaults with respect to any leases of real
property under which any Borrower or any of its Subsidiaries is lessee or lessor
which would have a Material Adverse Effect.
4.9 Litigation; Adverse Facts. There are no judgments outstanding
against any Loan Party or affecting any property of any Loan Party nor is there
any action, charge, claim, demand, suit, proceeding, petition, governmental
investigation or arbitration now pending or, to the best knowledge of Borrowers
after due inquiry, threatened against or affecting any Loan Party or any
property of any Loan Party which could reasonably be expected to result in any
Material Adverse Effect. No Loan Party has received any opinion or memorandum or
legal advice from legal counsel to the effect that it is exposed to any
liability which could reasonably be expected to result in any Material Adverse
Effect.
4.10 Payment of Taxes. All material tax returns and reports of each
Borrower and each of its Subsidiaries required to be filed by any of them have
been timely filed, and all taxes, assessments, fees and other governmental
charges upon such Persons and upon their respective properties, assets, income
and franchises which are shown on such returns as due and payable have been paid
when due and payable. As of the Closing Date, none of the United States income
tax returns of each Borrower or any of its Subsidiaries are under audit. No tax
liens have been filed and no claims (except as otherwise permitted by Section
5.9) are being asserted with respect to any such taxes. The charges, accruals
and reserves on the books of each Borrower and each of its Subsidiaries in
respect of any taxes or other governmental charges are in accordance with GAAP.
4.11 Performance of Agreements. None of the Loan Parties and none
of their respective Subsidiaries is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
contractual obligation of any such Person, and no condition exists that, with
the giving of notice or the lapse of time or both, would constitute such a
default.
28
<PAGE>
4.12 Employee Benefit Plans. Each Borrower, each of its
Subsidiaries and each ERISA Affiliate is in compliance in all material respects
with all applicable provisions of ERISA, the IRC and all other applicable laws
and the regulations and interpretations thereof with respect to all Employee
Benefit Plans. No material liability has been incurred by any Borrower, any of
its Subsidiaries or any ERISA Affiliate which remains unsatisfied for any
funding obligation, taxes or penalties with respect to any Employee Benefit
Plan.
4.13 Intellectual Property. Each Borrower and each of its
Subsidiaries owns, is licensed to use or otherwise has the right to use, all
Intellectual Property used in or necessary for the conduct of its business as
currently conducted, and all such Intellectual Property is identified on
Schedule 4.13.
4.14 Broker's Fees. Except as set forth on Schedule 4.14, no
broker's or finder's fee or commission will be payable with respect to any of
the transactions contemplated hereby.
4.15 Environmental Compliance. Each Loan Party has been and is
currently in compliance with all applicable Environmental Laws, including
obtaining and maintaining in effect all permits, licenses or other
authorizations required by applicable Environmental Laws. There are no claims,
liabilities, investigations, litigation, administrative proceedings, whether
pending or threatened, or judgments or orders relating to any Hazardous
Materials asserted or threatened against any Loan Party or relating to any real
property currently or formerly owned, leased or operated by any Loan Party.
4.16 Solvency. As of and from and after the date of this Agreement,
each Borrower: (a) owns and will own assets the fair salable value of which are
(i) greater than the total amount of its liabilities (including contingent
liabilities) and (ii) greater than the amount that will be required to pay the
probable liabilities of such Borrower as they mature; (b) has capital that is
not unreasonably small in relation to its business as presently conducted or any
contemplated or undertaken transaction; and (c) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due. There is no material fact known to a Borrower that has or
could have a Material Adverse Effect and that has not been fully disclosed
herein or in such other documents, certificates and statements furnished to
Lender for use in connection with the transactions contemplated hereby.
4.17 Disclosure. No representation or warranty of Borrowers, any of
their respective Subsidiaries or any other Loan Party contained in this
Agreement, the financial statements, the other Loan Documents, or any other
document, certificate or written statement furnished to Lender by or on behalf
of any such Person for use in connection with the Loan Documents contains any
untrue statement of a material fact or omitted, omits or will omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made. The Projections and pro forma financial information
29
<PAGE>
contained in such materials are based upon good faith estimates and assumptions
believed by such Persons to be reasonable at the time made, it being
recognized by Lender that such projections as to future events are not to
be viewed as facts and that actual results during the period or periods covered
by any such projections may differ from the projected results. There is no
material fact known to Borrowers that has had or will have a Material Adverse
Effect and that has not been disclosed herein or in such other documents,
certificates and statements furnished to Lender for use inconnection with the
transactions contemplated hereby.
4.18 Insurance. Each Borrower and each of its Subsidiaries
maintains adequate insurance policies for public liability, property damage for
its business and properties, product liability, and business interruption, no
notice of cancellation has been received with respect to such policies and each
Borrower and each of its Subsidiaries is in compliance with all conditions
contained in such policies.
4.19 Compliance with Laws. No Borrower nor any of its Subsidiaries
is in violation of any law, ordinance, rule, regulation, order, policy,
guideline or other requirement of any domestic or foreign government or any
instrumentality or agency thereof, having jurisdiction over the conduct of its
business or the ownership of its properties, including, without limitation, any
violation relating to any use, release, storage, transport or disposal of any
Hazardous Material, which violation would subject a Borrower or any of its
Subsidiaries, or any of their respective officers to criminal liability or have
a Material Adverse Effect and no such violation has been alleged.
4.20 Bank Accounts. Schedule 4.20 sets forth the account numbers
and locations of all bank accounts of each Borrower and its Subsidiaries.
4.21 Subsidiaries. Borrowers have no Subsidiaries other than as set
forth on Schedule 4.21.
4.22 Employee Matters. Except as set forth on Schedule 4.22, (a) no
Loan Party nor any of such Loan Party's employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election is
pending with respect to the employees of any Loan Party and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of any Loan Party and (c) there are no strikes,
slowdowns, work stoppages or controversies pending or, to the best knowledge of
Borrowers after due inquiry, threatened between any Loan Party and its
respective employees, other than employee grievances arising in the ordinary
course of business which could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. Except as set forth
on Schedule 4.22, no Borrower nor any of its Subsidiaries is subject to an
employment contract.
4.23 Governmental Regulation. None of the Loan Parties is, or after
giving effect to any loan will be, subject to regulation under the Public
Utility Holding Company Act of 1935, the
30
<PAGE>
Federal Power Act or the Investment Company Act of 1940 or to any federal or
state statute or regulation limiting its ability to incur indebtedness for
borrowed money.
Borrowers may, at any time and from time to time and subject to
subsection 5.13, amend any one or more of the Schedules referred in this Section
4 and any representation or warranty contained herein which refers to any such
Schedule shall from and after the date of any such amendment refer to such
Schedule as so amended, provided, however, that in no event may Borrowers amend
any such Schedule if such amendment would reflect or evidence a Default or Event
of Default.
5 AFFIRMATIVE COVENANTS
Borrowers covenant and agree that, so long as any of the Commitments
hereunder shall be in effect and until payment in full of all Obligations,
unless Lender shall otherwise give its prior written consent, Borrowers shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 5 applicable to such Person.
5.1 Financial Statements and Other Reports. Borrowers will maintain,
and cause each of their respective Subsidiaries to maintain, a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity with GAAP.
Borrowers will deliver to Lender the financial statements and other reports
described below.
(A) Monthly Financials. As soon as available and in any event
within thirty (30) days after the end of each month, Borrowers will deliver (1)
the consolidated and consolidating balance sheet of Borrowers and their
respective Subsidiaries as at the end of such month and the related consolidated
and consolidating statements of income, stockholders' equity and cash flow for
such month and for the period from the beginning of the then current Fiscal Year
to the end of such month, and (2) a schedule of the outstanding Indebtedness for
borrowed money of Borrowers and their respective Subsidiaries describing in
reasonable detail each such debt issue or loan outstanding and the principal
amount and amount of accrued and unpaid interest with respect to each such debt
issue or loan.
(B) Quarterly Financials. As soon as available and in any
event within forty-five (45) days after the end of each quarter of a Fiscal
Year, Borrowers will deliver the consolidated and consolidating balance sheet of
Borrowers and their respective Subsidiaries as at the end of such period and the
related consolidated and consolidating statements of income, stockholders'
equity and cash flow for such quarter of a Fiscal Year and for the period from
the beginning of the then current Fiscal Year to the end of such quarter of a
Fiscal Year and such financial statements shall have been reviewed by a firm of
independent certified public accountants selected by Borrowers and acceptable to
Lender.
31
<PAGE>
(C) Year-End Financials. As soon as available and in any event
within ninety (90) days after the end of each Fiscal Year, Borrowers will
deliver: (1) the consolidated balance sheet of Borrowers and their respective
Subsidiaries as at the end of such year and the related consolidated statements
of income, stockholders' equity and cash flow for such Fiscal Year; (2) a
schedule of the outstanding Indebtedness of Borrowers and their respective
Subsidiaries describing in reasonable detail each such debt issue or loan
outstanding and the principal amount and amount of accrued and unpaid interest
with respect to each such debt issue or loan; (3) a report with respect to the
financial statements from a firm of independent certified public accountants
selected by Borrowers and acceptable to Lender, which report shall be
unqualified as to going concern and scope of audit of Borrowers and their
respective Subsidiaries and shall state that (a) such consolidated financial
statements present fairly the consolidated financial position of Borrowers and
their respective Subsidiaries as at the dates indicated and the results of their
operations and cash flow for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years and (b) that the examination by
such accountants in connection with such consolidated financial statements has
been made in accordance with generally accepted auditing standards; and (4)
copies of the consolidating financial statements of Borrowers and their
respective Subsidiaries, including (a) consolidating balance sheets of Borrowers
and their respective Subsidiaries as at the end of such Fiscal Year showing
intercompany eliminations and (b) related consolidating statements of earnings
of Borrowers and their respective Subsidiaries showing intercompany
eliminations.
(D) Accountants' Certification and Reports. Together with each
delivery of consolidated financial statements of Borrowers and their respective
Subsidiaries pursuant to subsection 5.1(C), Borrowers will deliver (1) a written
statement by its independent certified public accountants (a) stating that the
examination has included a review of the terms of this Agreement as same relate
to accounting matters and (b) stating whether, in connection with the
examination, any condition or event that constitutes a Default or an Event of
Default has come to their attention and, if such a condition or event has come
to their attention, specifying the nature and period of existence thereof and
(2) a letter addressed to Lender from such accountants stating that such
accountants have been informed that a primary intent of Borrowers was to have
the professional services such accountants provided to Borrowers in preparing
their audit report and the letter referred to in this subsection 5.1(D) benefit
or influence Lender, and identifying Lenders as a party that Borrowers have
indicated intends to rely on such professional services provided to Borrowers by
such accountants. Promptly upon receipt thereof, Borrowers will deliver copies
of all significant reports submitted to Borrowers by independent public
accountants in connection with each annual, interim or special audit of the
financial statements of Borrowers made by such accountants, including the
comment letter submitted by such accountants to management in connection with
their annual audit.
(E) Compliance Certificate. Together with the delivery of each
set of financial statements referenced in subparts (A), (B) and (C) of this
subsection 5.1, Borrowers will deliver to
32
<PAGE>
Lender a Compliance Certificate, together with copies of the calculations
and work-up employed to determine Borrowers' compliance or noncompliance
with the financial covenants set forth in Section 6.
(F) Borrowing Base Certificates, Registers and Journals. On
the Closing Date and within five (5) Business Days after both the fifteenth and
the last day of each month and from time to time upon the request of Lender,
each Borrower shall deliver to Lender: (1) a Borrowing Base Certificate updated
since the date of the prior Borrowing Base Certificate, together with a report
of the outstanding balance of the Revolving Loan owing by such Borrower and the
amount of all intercompany advances owing by and to such Borrower; (2) an
invoice register or sales journal describing all sales of such Borrower since
the date of the prior invoice register, in form and substance satisfactory to
Lender, and, if Lender so requests, copies of invoices evidencing such sales and
proofs of delivery relating thereto; (3) a cash receipts journal describing all
cash receipts of such Borrower since the date of the prior cash receipts
journal; (4) an aged trial balance of all its then existing Accounts; and (5) an
aged trial balance of all its then existing accounts payable; and (6) a detailed
inventory listing and cover summary report. All such reports shall be in form
and substance satisfactory to Lender. Notwithstanding the foregoing, upon the
later of July 1, 1996, and the first day of the month following Lender's
completion of an acceptable field examination of each Borrower's reporting of
its Accounts and Inventory, provided that no Default or Event of Default shall
have occurred and be continuing and provided that Borrowers continuously
maintain thereafter aggregate Availability of not less than $750,000, Borrowers
shall be required to deliver to Lender the reports set forth in this subsection
5.1(F) only once each month, within five (5) Business Days after last day of
each month.
(G) Management Report. Together with each delivery of
financial statements of Borrowers and their respective Subsidiaries pursuant to
subdivisions (A), (B) and (C) of this subsection 5.1, Borrowers will deliver a
management report: (1) describing the operations and financial condition of
Borrowers and their respective Subsidiaries for the month then ended and the
portion of the current Fiscal Year then elapsed (or for the Fiscal Year then
ended in the case of year-end financials); (2) setting forth in comparative form
the corresponding figures for the corresponding periods of the previous Fiscal
Year and the corresponding figures from the most recent Projections for the
current Fiscal Year delivered to Lender pursuant to 5.1(O); and (3) discussing
the reasons for any significant variations. The information above shall be
presented in such detail as Lender and Borrowers shall mutually agree within two
(2) months after the Closing Date (or in the absence of an agreement, in such
detail as Lender shall reasonably request based upon similar reports received
from its other asset-based lending borrowers) and shall be certified by the
chief financial officer of Borrowers to the effect that such information fairly
presents the results of operations and financial condition of Borrowers and
their respective Subsidiaries as at the dates and for the periods indicated.
(H) Appraisals. From time to time, upon the request of Lender,
Borrowers will obtain and deliver to Lender, at Borrowers' expense, appraisal
reports in form and substance and
33
<PAGE>
from appraisers satisfactory to Lender, stating the then current fair
market and orderly liquidation values of all or any portion of the Collateral;
provided, however, so long as no Event of Default is continuing, Lender shall
not request an appraisal as to any particular category of Collateral to
be performed more than once every Loan Year at Borrowers' expense.
(I) Government Notices. Borrowers will deliver to Lender
promptly after receipt copies of all notices, requests, subpoenas, inquiries or
other writings received from any governmental agency concerning any Employee
Benefit Plan, the violation or alleged violation of any Environmental Laws, the
storage, use or disposal of any Hazardous Material, the violation or alleged
violation of the Fair Labor Standards Act or Borrowers' payment or non-payment
of any taxes including any tax audit.
(J) Events of Default, etc. Promptly upon any officer of a
Borrower obtaining knowledge of any of the following events or conditions,
Borrowers shall deliver a certificate of Borrowers' chief executive officer
specifying the nature and period of existence of such condition or event and
what action Borrowers have taken, are taking and propose to take with respect
thereto: (1) any condition or event that constitutes an Event of Default or
Default; (2) any notice of default that any Person has given to Borrowers or any
of their respective Subsidiaries or any other action taken with respect to a
claimed default; or (3) any Material Adverse Effect.
(K) Trade Names. Borrowers and each of their respective
Subsidiaries will give Lender at least thirty (30) days advance written notice
of any change of name or of any new trade name or fictitious business name. Each
Borrower's use of any trade name or fictitious business name will be in
compliance with all laws regarding the use of such names.
(L) Locations. Borrowers will give Lender at least thirty (30)
days advance written notice of any change in a Borrower's principal place of
business or any change in the location of its books and records or the
Collateral or of any new location for its books and records or the Collateral.
(M) Bank Accounts. Borrowers will give Lender prompt notice of
any new bank accounts a Borrower or any of its Subsidiaries intends to establish
prior to its their opening same.
(N) Litigation. Promptly upon any officer of a Borrower or its
subsidiaries obtaining knowledge of (1) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Loan Party or any property of any Loan Party not previously disclosed by
Borrowers to Lender or (2) any material development in any action, suit,
proceeding, governmental investigation or arbitration at any time pending
against or affecting any Loan Party or any property of any Loan Party which is
reasonably likely to have a Material Adverse Effect, Borrowers will promptly
give notice thereof to Lender and provide such other information as may be
reasonably available to them to enable Lender and its counsel to evaluate such
matter.
34
<PAGE>
(O) Projections. As soon as available and in any event no
later than the last day of Borrowers' Fiscal Year, Borrowers will deliver
consolidated and consolidating Projections of Borrowers and their respective
Subsidiaries through the Termination Date, which Projections shall be month by
month for the forthcoming Fiscal Year and shall be year by year thereafter.
(P) Preferred Stock and Indebtedness Notices. Borrowers shall
promptly deliver copies of all notices given or received by a Borrower and any
of its Subsidiaries with respect to noncompliance with any term or condition
related to the Preferred Stock or any Indebtedness, and shall promptly notify
Lender of any potential or actual event of default with respect to the Preferred
Stock or any Indebtedness.
(Q) Other Information. With reasonable promptness, Borrowers
will deliver such other information and data with respect to any Loan Party, any
Subsidiary of any Loan Party or the Collateral as Lender may reasonably request
from time to time.
(R) Opening Balance Sheet. As soon as available and in any
event within ninety (90) days after the Closing Date, Borrowers will deliver an
audited consolidated and consolidating balance sheet as of the effective date of
the MedTox Acquisition prepared by a firm of independent certified public
accountants reasonably acceptable to Lender.
5.2 Access to Accountants. Borrowers authorize Lender to discuss the
financial condition and financial statements of Borrowers and their respective
Subsidiaries with Borrowers' independent public accountants upon reasonable
notice to Borrowers of its intention to do so, and authorizes such accountants
to respond to all of Lender's inquiries.
5.3 Inspection. Borrowers shall permit Lender and any authorized
representatives designated by Lender to visit and inspect any of the properties
of Borrowers or any of its Subsidiaries, including their financial and
accounting records, and to make copies and take extracts therefrom, and to
discuss their affairs, finances and business with their officers and independent
public accountants, at such reasonable times during normal business hours and as
often as may be reasonably requested. Borrowers acknowledge that Lender intends
to make such inspections on at least a quarterly basis.
5.4 Collateral Records. Borrowers shall keep full and accurate books
and records relating to the Collateral and shall mark such books and records to
indicate Lender's security interests in the Collateral.
5.5 Account Covenants; Verification. Borrowers shall, at their own
expense: (a) cause all invoices evidencing Accounts and all copies thereof to
bear a notice that such invoices are payable to the lockboxes established in
accordance with subsection 5.6 and (b) use its best efforts to assure prompt
payment of all amounts due or to become due under the Accounts. No discounts,
35
<PAGE>
credits or allowances will be issued, granted or allowed with respect to
Accounts by Borrowers to customers and no returns will be accepted without
Lender's prior written consent; provided, that until Lender notifies Borrowers
to the contrary, Borrowers may presume consent. Borrowers will immediately
notify Lender in the event that a customer alleges any dispute or claim with
respect to an Account or of any other circumstances known to Borrowers that may
impair the validity or collectibility of an Account. Lender shall have the
right, at any time or times hereafter, to verify the validity, amount or any
other matter relating to an Account, by mail, telephone or in person. After the
occurrence of a Default or an Event of Default, Borrowers shall not, without the
prior consent of Lender, adjust, settle or compromise the amount or payment of
any Account, or release wholly or partly any customer or obligor thereof, or
allow any credit or discount thereon.
5.6 Collection of Accounts and Payments. Each Borrower shall establish
lockboxes and blocked accounts (collectively, "Blocked Accounts") in such
Borrower's name with such banks ("Collecting Banks") as are acceptable to Lender
(subject to irrevocable instructions acceptable to Lender as hereinafter set
forth) to which all account debtors of such Borrower shall directly remit all
payments on Accounts and in which such Borrower will immediately deposit all
payments made for Inventory or other payments constituting proceeds of
Collateral in the identical form in which such payment was made, whether by cash
or check. The Collecting Banks shall acknowledge and agree, in a manner
satisfactory to Lender, that all payments made to the Blocked Accounts are the
sole and exclusive property of Lender, and that the Collecting Banks have no
right of setoff against the Blocked Accounts and that all such payments received
will be promptly transferred to Lender's Account. Borrowers hereby agree that
all payments received by Lender, whether by cash, check, wire transfer or any
other instrument, made to such Blocked Accounts or otherwise received by Lender
and whether on the Accounts or as proceeds of other Collateral or otherwise will
be the sole and exclusive property of Lender. The applicable Borrower shall
irrevocably instruct each Collecting Bank to promptly transfer all payments or
deposits to the Blocked Accounts into Lender's Account. Each Borrower, and any
of its Affiliates, employees, agents or other Persons acting for or in concert
with a Borrower, shall, acting as trustee for Lender, receive, as the sole and
exclusive property of Lender, any monies, checks, notes, drafts or any other
payments relating to and/or proceeds of Accounts or other Collateral which come
into the possession or under the control of a Borrower or any of a Borrower's
Affiliates, employees, agents or other Persons acting for or in concert with a
Borrower, and immediately upon receipt thereof, Borrowers or such Persons shall
remit the same or cause the same to be remitted, in kind, to the Blocked
Accounts or to Lender at its address set forth in subsection 9.6 below.
5.7 Endorsement. Each Borrower hereby constitutes and appoints Lender
and all Persons designated by Lender for that purpose as such Borrower's true
and lawful attorney-in-fact, with power to endorse such Borrower's name to any
of the items of payment or proceeds described in subsection 5.6 above and all
proceeds of Collateral that come into Lender's possession or under Lender's
control. Both the appointment of Lender as each Borrower's attorney and Lender's
rights and powers are coupled with an interest and are irrevocable until payment
in full and complete performance of all of the Obligations.
36
<PAGE>
5.8 Corporate Existence. Each Borrower will, and will cause each of its
Subsidiaries to, at all times preserve and keep in full force and effect its
corporate existence and all rights and franchises material to its business.
Borrowers will promptly notify Lender of any change in a Borrower's or its
Subsidiaries' ownership or corporate structure.
5.9 Payment of Taxes. Borrowers will, and will cause each of their
respective Subsidiaries to, pay all taxes, assessments and other governmental
charges imposed upon it or any of its properties or assets or with respect to
any of its franchises, business, income or property before any penalty accrues
thereon provided that no such tax need be paid if a Borrower or one of its
Subsidiaries is contesting same in good faith by appropriate proceedings
promptly instituted and diligently conducted and if such Borrower or such
Subsidiary has established appropriate reserves as shall be required in
conformity with GAAP.
5.10 Maintenance of Properties; Insurance. Each Borrower will maintain
or cause to be maintained in good repair, working order and condition all
material properties used in the business of such Borrower and its Subsidiaries
and will make or cause to be made all appropriate repairs, renewals and
replacements thereof. Borrowers will maintain or cause to be maintained, with
financially sound and reputable insurers, public liability and property damage
insurance with respect to their respective businesses and properties and the
businesses and properties of their respective Subsidiaries against loss or
damage of the kinds customarily carried or maintained by corporations of
established reputation engaged in similar businesses and in amounts acceptable
to Lender. Borrowers shall cause Lender to be named as loss payee on all
insurance policies relating to any Collateral and as additional insured under
all liability policies, in each case pursuant to appropriate endorsements in
form and substance satisfactory to Lender and shall collaterally assign to
Lender as security for the payment of the Obligations all business interruption
insurance of Borrowers. Borrowers shall apply any proceeds received from any
policies of insurance relating to any Collateral to the Obligations as set forth
in subsection 2.4(B).
5.11 Compliance with Laws. Each Borrower will, and will cause each of
its Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority as now in effect and which
may be imposed in the future in all jurisdictions in which each Borrower or any
of its Subsidiaries is now doing business or may hereafter be doing business,
other than those laws the noncompliance with which would not have a Material
Adverse Effect.
5.12 Further Assurances. Each Borrower shall, and shall cause each of
its Subsidiaries to, from time to time, execute such guaranties, financing or
continuation statements, documents, security agreements, reports and other
documents or deliver to Lender such instruments, certificates of title or other
documents as Lender at any time may reasonably request to evidence, perfect or
otherwise implement the guaranties and security for repayment of the Obligations
provided for in the Loan Documents. At Lender's request, Borrowers shall cause
any Subsidiaries of Borrowers
37
<PAGE>
promptly to guaranty the Obligations and to grant to Lender security interests
in the real, personal and mixed property of such Subsidiary to secure the
Obligations.
5.13 Collateral Locations. Borrowers will keep the Collateral at
the locations specified on Schedule 4.7. With respect to any new location (which
in any event shall be within the continental United States), Borrowers will
execute such documents and take such actions as Lender deems necessary to
perfect and protect the security interests of the Lender in the Collateral prior
to the transfer or removal of any Collateral to such new location.
5.14 Bailees. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of a Borrower's agents or processors,
such Borrower shall, upon the request of Lender, notify such warehouseman,
bailee, agent or processor of the security interests in favor of Lender created
hereby and shall instruct such Person to hold all such Collateral for Lender's
account subject to Lender's instructions.
5.15 Use of Proceeds and Margin Security. Borrowers shall use the
proceeds of all Loans for proper business purposes consistent with all
applicable laws, statutes, rules and regulations. No portion of the proceeds of
any Loan shall be used by a Borrower or any of its Subsidiaries for the purpose
of purchasing or carrying of margin stock within the meaning of Regulation G or
Regulation U, or in any manner that might cause the borrowing or the application
of such proceeds to violate Regulation T or Regulation X or any other regulation
of the Board of Governors of the Federal Reserve System, or to violate the
Exchange Act.
6 FINANCIAL COVENANTS
Borrowers covenant and agree that so long as any of the Commitments
remain in effect and until payment in full of all Obligations, Borrowers shall
comply with and shall cause each of their respective Subsidiaries to comply with
all covenants in this Section 6.
6.1 Tangible Net Worth. Borrowers shall maintain a consolidated
Tangible Net Worth of at least the amounts set forth below at the end of each
quarter of a Fiscal Year set forth below.
Fiscal Quarter Amount
March 31, 1996 $ 500,000
June 30, 1996 1,000,000
September 30, 1996 1,500,000
December 31, 1996 2,000,000
March 31, 1997 2,500,000
June 30, 1997 2,500,000
September 30, 1997 2,700,000
38
<PAGE>
December 31, 1997 3,000,000
March 31, 1998 3,500,000
June 30, 1998 4,000,000
September 30, 1998 4,750,000
December 31, 1998 and as of the
end of each of each fiscal quarter
thereafter 5,250,000
6.2 Minimum EBITDA. Borrowers shall at all times maintain a
consolidated EBITDA less Registration Payments paid or accrued of at least the
amount set forth below for the applicable period set forth below.
Editek &
Period diAGnostix PDLA Consolidated
Two (2) Months ending February 29, $ 100,000 $ 50,000 $ 150,000
Three (3) months ending March 31, 1996 100,000 100,000 200,000
Four (4) months ending April 30, 1996 100,000 400,000 500,000
Five (5) months ending May 31, 1996 100,000 800,000 900,000
Six (6) months ending June 30, 1996 200,000 1,000,000 1,200,000
Seven (7) months ending July 31, 1996 200,000 1,400,000 1,600,000
Eight (8) months ending August 31, 1996 200,000 1,800,000 2,000,000
Nine (9) months ending September 30, 1996 200,000 2,100,000 2,300,000
Ten (10) months ending October 31, 1996 300,000 2,400,000 2,700,000
Eleven (11) months ending November 30, 1996 300,000 2,800,000 3,100,000
Twelve (12) month ending December 31, 1996 300,000 3,100,000 3,400,000
Twelve (12) month ending March 31, 1997 350,000 3,100,000 3,450,000
Twelve (12) month ending June 30, 1997 350,000 3,150,000 3,500,000
Twelve (12) month ending September 30, 1997 400,000 3,150,000 3,550,000
Twelve (12) month ending December 31, 1997 400,000 3,200,000 3,600,000
Twelve (12) month ending March 31, 1998 400,000 3,250,000 3,650,000
Twelve (12) month ending June 30, 1998 500,000 3,200,000 3,700,000
Twelve (12) month ending September 30, 1998 500,000 3,250,000 3,750,000
Twelve (12) month ending December 31, 1998
and for the twelve (12) months ending at the
end of each fiscal quarter thereafter 500,000 3,300,000 3,800,000
6.3 Ratio of Indebtedness to Tangible Net Worth. The ratio of (a)
Borrowers' consolidated Indebtedness to (b) Borrowers' consolidated Tangible Net
Worth, shall be no greater than the ratio set forth below at the end of each
quarter of a Fiscal Year set forth below.
39
<PAGE>
Fiscal Quarter Ratio
March 31, 1996 7.5:1
June 30, 1996 7.5:1
September 30, 1996 7.5:1
December 31, 1996 7.5:1
March 31, 1997 4.5:1
June 30, 1997 4.5:1
September 30, 1997 4.5:1
December 31, 1997 4.5:1
March 31, 1998 3.0:1
June 30, 1998 3.0:1
September 30, 1998 3.0:1
December 31, 1998 and as of the
end of each of each fiscal quarter
thereafter 3.0:1
6.4 Capital Expenditure Limits. The aggregate amount of all
Capital Expenditures of Borrowers and their respective Subsidiaries (excluding
trade-ins and excluding Capital Expenditures in respect of replacement assets to
the extent funded with casualty insurance proceeds) will not exceed $950,000 in
any Fiscal Year. In the event that a Borrower or any of its Subsidiaries enters
into a Capital Lease or other contract with respect to fixed assets, for
purposes of calculating Capital Expenditures under this subsection only, the
amount of the Capital Lease or contract initially capitalized on such Borrower's
or Subsidiary's balance sheet prepared in accordance with GAAP shall be
considered expended in full on the date that such Borrower or Subsidiary enters
into such Capital Lease or contract.
6.5 Fixed Charge Coverage. Borrowers shall not permit their
consolidated Fixed Charge Coverage for any period set forth below to be less
than the amount set forth below for such period.
Period Amount
Three (3) Months ending March 31, 1996 0.8
Six (6) months ending June 30, 1996 1.0
Nine (9) months ending September 30, 1996 1.3
Twelve (12) month ending December 31, 1996 1.3
40
<PAGE>
Twelve (12) month ending March 31, 1997 1.3
Twelve (12) month ending June 30, 1997 1.4
Twelve (12) month ending September 30, 1997 1.4
Twelve (12) month ending December 31, 1997 1.4
Twelve (12) month ending March 31, 1998 1.4
Twelve (12) month ending June 30, 1998 1.4
Twelve (12) month ending September 30, 1998 1.4
Twelve (12) month ending December 31, 1998
and for the twelve (12) months ending at the
end of each fiscal quarter thereafter 1.4
6.6 Interest Coverage. Borrowers shall not permit their
consolidated Interest Coverage for any period set forth below to be less than
the amount set forth below for such period.
Period Amount
Three (3) Months ending March 31, 1996 3.0
Six (6) months ending June 30, 1996 3.4
Nine (9) months ending September 30, 1996 4.6
Twelve (12) month ending December 31, 1996 5.6
Twelve (12) month ending March 31, 1997 6.0
Twelve (12) month ending June 30, 1997 6.0
Twelve (12) month ending September 30, 1997 6.0
Twelve (12) month ending December 31, 1997 6.0
Twelve (12) month ending March 31, 1998 6.0
Twelve (12) month ending June 30, 1998 6.0
Twelve (12) month ending September 30, 1998 6.0
Twelve (12) month ending December 31, 1998
and for the twelve (12) months ending at the
end of each fiscal quarter thereafter 6.0
7 NEGATIVE COVENANTS
Borrowers covenant and agree that so long as any of the Commitments
remain in effect and until payment in full of all Obligations, unless Borrowers
have received the prior written consent of Lender, Borrowers shall not and will
not permit any of their respective Subsidiaries to:
7.1 Indebtedness and Liabilities. Directly or indirectly create,
incur, assume, guaranty, or otherwise become or remain directly or indirectly
liable, on a fixed or contingent basis, with respect to any Indebtedness except:
(a) the Obligations; (b) intercompany Indebtedness, not to exceed $250,000
outstanding at any time in the aggregate, among Borrowers; provided that such
41
<PAGE>
Indebtedness is subordinated in right of payment to the Obligations; (c)
Indebtedness (excluding capital leases) not to exceed $100,000 in the aggregate
at any time outstanding secured by purchase money Liens; (d) Indebtedness under
Capital Leases not to exceed $250,000 outstanding at any time in the aggregate;
and (e) Indebtedness existing on the Closing Date and identified on Schedule
7.1. Except for Indebtedness described permitted in the preceding sentence,
Borrowers will not, and will not permit any of their respective Subsidiaries to,
incur any Liabilities except for trade payables and normal accruals in the
ordinary course of business not yet due and payable or with respect to a
Borrower or any of its Subsidiaries is contesting in good faith the amount or
validity thereof by appropriate proceedings and then only to the extent that
such Borrower or Subsidiary has established adequate reserves therefor, if
appropriate under GAAP.
7.2 Guaranties. Except for endorsements of instruments or items of
payment for collection in the ordinary course of business, guaranty, endorse, or
otherwise in any way become or be responsible for any obligations of any other
Person, whether directly or indirectly by agreement to purchase the indebtedness
of any other Person or through the purchase of goods, supplies or services, or
maintenance of working capital or other balance sheet covenants or conditions,
or by way of stock purchase, capital contribution, advance or loan for the
purpose of paying or discharging any indebtedness or obligation of such other
Person or otherwise.
7.3 Transfers, Liens and Related Matters.
(A) Transfers. Sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to any of the Collateral
or the assets of such Person, except that Borrowers and their respective
Subsidiaries may (i) sell inventory in the ordinary course of business; and
(ii) make Asset Dispositions if all of the following conditions are met:
(1) the market value of assets sold or otherwise disposed of in any single
transaction or series of related transactions does not exceed $25,000 and
the aggregate market value of assets sold or otherwise disposed of in any
Fiscal Year does not exceed $50,000; (2) the consideration received is at
least equal to the fair market value of such assets; (3) the sole consideration
received is cash; (4) the net proceeds of such Asset Disposition are applied as
required by subsection 2.4(B); (5) after giving effect to the sale or other
disposition of the assets included within the Asset Disposition and the
repayment of the Obligations with the proceeds thereof, Borrowers are in
compliance on a pro forma basis with the covenants set forth in Section 6
recomputed for the most recently ended month for which information is
available and is in compliance with all other terms and conditions
contained in this Agreement; and (6) no Default or Event of Default shall
then exist or result from such sale or other disposition.
(B) Liens. Except for Permitted Encumbrances, directly or indirectly
create, incur, assume or permit to exist any Lien on or with respect to any
of the Collateral or the assets of such Person or any proceeds, income or
profits therefrom.
42
<PAGE>
(C) No Negative Pledges. Enter into or assume any agreement (other than
the Loan Documents) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.
(D) No Restrictions on Subsidiary Distributions to Borrowers. Except as
provided herein, directly or indirectly create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction of any
kind on the ability of any such Subsidiary to: (1) pay dividends or make any
other distribution on any of such Subsidiary's capital stock owned by a
Borrower or any Subsidiary of a Borrower; (2) subject to subordination
provisions, pay any indebtedness owed to a Borrower or any other Subsidiary;
(3) make loans or advances to a Borrower or any other Subsidiary; or (4)
transfer any of its property or assets to a Borrower or any other
Subsidiary.
7.4 Investments and Loans. Make or permit to exist investments in
or loans to any other Person, except: (a) Cash Equivalents; and (b) loans and
advances to employees for moving, entertainment, travel and other similar
expenses in the ordinary course of business in an aggregate outstanding amount
not in excess of $50,000 at any time.
7.5 Restricted Junior Payments. Directly or indirectly declare, order,
pay, make or set apart any sum for any Restricted Junior Payment, except that:
(a) Subsidiaries of Borrowers may make Restricted Junior
Payments with respect to their common stock to the extent necessary to
permit Borrowers to pay the Obligations, to make Restricted Junior
Payments permitted under clause (b) below and to permit Borrowers to
pay expenses incurred in the ordinary course of business; and
(b) Editek may make dividend payments on the Preferred Stock
and may make Registration Payments, provided that all of the following
limitations shall be applicable to dividend payments and Registration
Payments:
(i) no Default or Event of Default may be
existence at the time of such payment or
may be created by any such payment;
(ii) no such payment may be made prior to
February 1, 1997;
(iii) no such payment may be made prior to the
repayment in full of all principal of and interest on Term
Loan B;
(iv) no such payment may be made in any Fiscal
Year prior to the delivery to Lender of Borrowers' audited
financial statements for the previous Fiscal Year;
43
<PAGE>
(v) the aggregate amount of dividend payments and
Registration Payments in a Fiscal Year shall not exceed of the
lesser of (A) nine percent (9%) of the amount of outstanding
Preferred Stock and (B) one-third of Borrowers' Excess Cash
Flow for the previous Fiscal Year, as determined from
Borrower's audited financial statements delivered to Lender;
and
(vi) after giving effect to any such payment,
Availability shall not be less than $500,000.
7.6 Restriction on Fundamental Changes. (a) Enter into any
transaction of merger or consolidation, except that a Borrower may merge with
another Borrower and PDLA may merge with Princeton; (b) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution); (c) convey, sell,
lease, sublease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any substantial part of its business or assets,
or the capital stock of any of its Subsidiaries, whether now owned or hereafter
acquired; or (d) except for the MedTox Acquisition, acquire by purchase or
otherwise all or any substantial part of the business or assets of, or stock or
other evidence of beneficial ownership of, any Person.
7.7 Changes Relating to Preferred Stock. Change or amend the terms
of the Preferred Stock if the effect of such amendment is to: (a) increase the
dividend rate thereon; (b) change the redemption provisions thereof; or (c)
change or amend any other term if such change or amendment would materially
increase the obligations of the obligor or confer additional material rights on
the holder of such Preferred Stock in a manner adverse to any Borrower, any of
its Subsidiaries, or Lender.
7.8 Transactions with Affiliates. Directly or indirectly, enter
into or permit to exist any transaction (including the purchase, sale or
exchange of property or the rendering of any service) with any Affiliate or with
any officer, director or employee of any Loan Party, except for transactions in
the ordinary course of and pursuant to the reasonable requirements of Borrowers'
business and upon fair and reasonable terms which are fully disclosed to Lender
and which are no less favorable to Borrowers than they would obtain in a
comparable arm's length transaction with an unaffiliated Person.
7.9 Environmental Liabilities. (a) Violate any applicable
Environmental Law; (b) dispose of any Hazardous Materials (except in accordance
with applicable law) into or onto or from, any real property owned, leased or
operated by any Loan Party; or (c) permit any Lien imposed pursuant to any
Environmental Law to be imposed or to remain on any real property owned, leased
or operated by any Loan Party.
44
<PAGE>
7.10 Conduct of Business. From and after the Closing Date, engage
in any business other than businesses of the type engaged in by Borrowers or
such Subsidiary on the Closing Date.
7.11 Compliance with ERISA. Establish any new Employee Benefit Plan
or amend any existing Employee Benefit Plan if the liability or increased
liability resulting from such establishment or amendment is material. No
Borrower nor any of its Subsidiaries shall fail to establish, maintain and
operate each Employee Benefit Plan in compliance in all material respects with
the provisions of ERISA, the IRC and all other applicable laws and the
regulations and interpretations thereof.
7.12 Tax Consolidations. File or consent to the filing of any
consolidated income tax return with any Person other than a Borrower or any of
its Subsidiaries.
7.13 Subsidiaries. Establish, create or acquire any new Subsidiaries.
7.14 Fiscal Year. Change its Fiscal Year.
7.15 Press Release; Public Offering Materials. Disclose the name of
Lender in any press release or in any prospectus, proxy statement or other
materials filed with any governmental entity relating to a public offering of
the capital stock of any Loan Party except as may be required by law.
7.16 Bank Accounts. Establish any new bank accounts, or amend or
terminate any Blocked Account or lockbox agreement.
8 DEFAULT, RIGHTS AND REMEDIES
8.1 Event of Default. "Event of Default" shall mean the occurrence or
existence of any one or more of the following:
(A) Payment. Failure to make payment of any of the Obligations
when due and in the case of interest, such failure shall not be cured within
five (5) days of the applicable due date; or
(B) Default in Other Agreements. (1) Failure of a Borrower or any of
its Subsidiaries to pay when due any principal or interest on any
Indebtedness (other than the Obligations) or (2) breach or default of
a Borrower or any of its Subsidiaries with respect to any Indebtedness
(other than the Obligations); if such failure to pay, breach or default
entitles the holder to cause such Indebtedness having an individual
principal amount in excess of $25,000 or having
45
<PAGE>
an aggregate principal amount in excess of $50,000 to become or be declared due
prior to its stated maturity; or
(C) Breach of Certain Provisions. Failure of Borrowers to perform
or comply with any term or condition contained in subsections 5.1 (A), (B), (C)
and (R), 5.3, 5.5 or 5.6 or contained in Section 6 or Section 7; or
(D) Breach of Warranty. Any representation, warranty, certification or
other statement made by any Loan Party in any Loan Document or in any statement
or certificate at any time given by such Person in writing pursuant or in
connection with any Loan Document is false in any material respect on the date
made; or
(E) Other Defaults Under Loan Documents. A Borrower or any other
Loan Party defaults in the performance of or compliance with any term
contained in this Agreement or the other Loan Documents and such default is
not remedied or waived within ten (10) days after receipt by Borrowers of
notice from Lender of such default (other than occurrences described in
other provisions of this subsection 8.1 for which a different grace or cure
period is specified or which constitute immediate Events of Default); or
(F) Change in Control. Editek ceases to beneficially own and
control, directly or indirectly, one hundred percent (100%) of the issued
and outstanding shares of each class of capital stock of PDLA and diAGnostix;
or
(G) Involuntary Bankruptcy; Appointment of Receiver, etc. (1) A court
enters a decree or order for relief with respect to a Borrower or any of its
Subsidiaries in an involuntary case under the Bankruptcy Code or any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, which decree or order is not stayed or other similar relief is not
granted under any applicable federal or state law; or (2) the continuance of any
of the following events for sixty (60) days unless dismissed, bonded or
discharged: (a) an involuntary case is commenced against a Borrower or any of
its Subsidiaries, under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect; or (b) adecree or order of a court for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over a Borrower or any of its Subsidiaries,
or over all or a substantial part of their respective property, is entered; or
(c) an interim receiver, trustee or other custodian is appointed without
the consent of a Borrower or any of its Subsidiaries, for all or a
substantial part of the property of such Borrower or Subsidiary; or
(H) Voluntary Bankruptcy; Appointment of Receiver, etc. (1) An
order for relief is entered with respect to a Borrower or any of its
Subsidiaries, or a Borrower or any of its Subsidiaries commences a voluntary
case under the Bankruptcy Code or any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case or to the conversion of an involuntary
case to a voluntary case under any such law or consents to the appointment
of or taking possession by a receiver, trustee or other
46
<PAGE>
custodian for all or a substantial part of its property; or (2) a Borrower or
any of its Subsidiaries makes any assignment for the benefit of creditors; or
(3) the board of directors of a Borrower or any of its Subsidiaries
adopts any resolution or otherwise authorizes action to approve any of the
actions referred to in this subsection 8.1(H); or
(I) Liens. Any lien, levy or assessment is filed or recorded with
respect to or otherwise imposed upon all or any part of the Collateral or the as
sets of a Borrower or any of its Subsidiaries by the United States or any
department or instrumentality thereof or by any state, county, municipality or
other governmental agency (other than Permitted Encumbrances) unless such lien,
levy or assessment is stayed, vacated, paid or discharged within ten (10) days
or Borrowers contest the validity thereof in good faith by appropriate
proceedings and establish appropriate reserves on their books in respect
thereof; or
(J) Judgment and Attachments. Any money judgment, writ or warrant of
attachment, or similar process involving (1) an amount in any individual case
in excess of $25,000 or (2) an amount in the aggregate at any time in excess
of $50,000 (in either case not adequately covered by insurance as to which
the insurance company has acknowledged coverage) is entered or filed against a
Borrower or any of its Subsidiaries or any of their respective assets and
remains undischarged, unvacated, unbonded or unstayed for a period of thirty
(30) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
(K) Dissolution. Any order, judgment or decree is entered against
a Borrower or any of its Subsidiaries decreeing the dissolution or split up
of a Borrower or that Subsidiary and such order remains undischarged or
unstayed for a period in excess of twenty (20) days; or
(L) Solvency. A Borrower ceases to be solvent (as represented by
Borrowers in subsection 4.17) or admits in writing its present or prospective
inability to pay its debts as they become due; or
(M) Injunction. A Borrower or any of its Subsidiaries is enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part
of its business and such order continues for more than thirty (30) days; or
(N) Invalidity of Loan Documents. Any of the Loan Documents for any
reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null
and void, or any Loan Party denies that it has any further liability under any
Loan Documents to which it is party, or gives notice to such effect; or
(O) Failure of Security. Lender does not have or ceases to have a
valid and perfected first priority security interest in the Collateral
(subject to Permitted Encumbrances), in each case, for any reason other than
the failure of Lender to take any action within its control; or
47
<PAGE>
(P) Damage, Strike, Casualty. Any material damage to, or loss,
theft or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy,
or other casualty which causes, for more than fifteen (15) consecutive
days, the cessation or substantial curtailment of revenue producing
activities at any facility of a Borrower or any of its Subsidiaries if any
such event or circumstance could reasonably be expected to have a Material
Adverse Effect; or
(Q) Licenses and Permits. The loss, suspension or revocation of,
or failure to renew, any license or permit now held or hereafter acquired
by a Borrower or any of its Subsidiaries, if such loss, suspension,
revocation or failure to renew could have a Material Adverse Effect; or
(R) Forfeiture. There is filed against a Borrower any civil
or criminal action, suit or proceeding under any federal or state
racketeering statute (including, without limitation, the Racketeer
Influenced and Corrupt Organization Act of 1970), which action, suit or
proceeding (1) is not dismissed within one hundred twenty (120) days;
and (2) could result in the confiscation or forfeiture of any
material portion of the Collateral; or
8.2 Suspension of Commitments. Upon the occurrence of any Default
or Event of Default, notwithstanding any grace period or right to cure, Lender,
without notice or demand, may immediately cease making additional Loans and the
Commitments shall be suspended; provided that, in the case of a Default, if the
subject condition or event is waived or cured within any applicable grace or
cure period, the Commitments shall be reinstated.
8.3 Acceleration. Upon the occurrence of any Event of Default
described in the foregoing subsections 8.1(G) or 8.1(H), all Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Borrowers, and the Commitments shall thereupon terminate. Upon the
occurrence and during the continuance of any other Event of Default, Lender may,
by written notice to Borrowers, declare all or any portion of the Obligations to
be, and the same shall forthwith become, immediately due and payable and the
Commitments shall thereupon terminate.
8.4 Remedies. If any Event of Default shall have occurred and be
continuing, in addition to and not in limitation of any rights or remedies
available to Lender at law or in equity, Lender may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral) and may also (a) notify any or all obligors on the Accounts to make
all payments directly to Lender; (b) require Borrowers to, and Borrowers hereby
agree that they will, at their expense and upon request of Lender forthwith,
assemble all or part of the Collateral as directed by Lender and make it
available to Lender at a place to be designated by Lender which is reasonably
convenient to both parties; (c) withdraw all cash in the Blocked Accounts and
apply such monies in payment of the Obligations in
48
<PAGE>
the manner provided in subsection 8.7; (d) without notice or demand or legal
process, enter upon any premises of a Borrower and take possession of the
Collateral; and (e) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of the Lender's offices or elsewhere, at such time or times, for cash,
on credit or for future delivery, and at such price or prices and upon such
other terms as Lender may deem commercially reasonable. Borrowers agree that,
to the extent notice of sale shall be required by law, at least ten (10) days
notice to Borrowers of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
At any sale of the Collateral, if permitted by law, Lender may bid (which bid
may be, in whole or in part, in the form of cancellation of indebtedness) for
the purchase of the Collateral or any portion thereof for the account of Lender.
Lender shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. Borrowers shall remain liable for any
deficiency. Lender may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. To
the extent permitted by law, Borrowers hereby specifically waive all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter enacted. Lender shall not be required to proceed
against any Collateral but may proceed against Borrowers directly.
8.5 Appointment of Attorney-in-Fact. Each Borrower hereby
constitutes and appoints Lender as such Borrower's attorney-in-fact with full
authority in the place and stead of such Borrower and in the name of such
Borrower, Lender or otherwise, from time to time in Lender's discretion while an
Event of Default is continuing to take any action and to execute any instrument
that Lender may deem necessary or advisable to accomplish the purposes of this
Agreement, including: (a) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral; (b) to adjust, settle or compromise the
amount or payment of any Account, or release wholly or partly any customer or
obligor thereunder or allow any credit or discount thereon; (c) to receive,
endorse, and collect any drafts or other instruments, documents and chattel
paper, in connection with clause (a) above; (d) to file any claims or take any
action or institute any proceedings that Lender may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the rights
of Lender with respect to any of the Collateral; and (e) to sign and endorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, assignments, verifications and notices in connection with Accounts and
other documents relating to the Collateral. The appointment of Lender as each
Borrower's attorney and Lender's rights and powers are coupled with an interest
and are irrevocable until payment in full and complete performance of all of the
Obligations.
49
<PAGE>
8.6 Limitation on Duty of Lender with Respect to Collateral.
Beyond the safe custody thereof, Lender shall have no duty with respect to any
Collateral in its possession or control (or in the possession or control of any
agent or bailee) or with respect to any income thereon or the preservation of
rights against prior parties or any other rights pertaining thereto. Lender
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which Lender accords its own property.
Lender shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by Lender in good faith.
8.7 Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, (a) Borrowers irrevocably waive the right to
direct the application of any and all payments at any time or times thereafter
received by Lender from or on behalf of Borrowers, and Borrowers hereby
irrevocably agree that Lender shall have the continuing exclusive right to apply
and to reapply any and all payments received at any time or times after the
occurrence and during the continuance of an Event of Default against the
Obligations in such manner as Lender may deem advisable notwithstanding any
previous entry by Lender upon any books and records and (b) the proceeds of any
sale of, or other realization upon, all or any part of the Collateral shall be
applied: first, to all fees, costs and expenses incurred by Lender with respect
to this Agreement, the other Loan Documents or the Collateral; second, to all
fees due and owing to Lender; third, to accrued and unpaid interest on the
Obligations; fourth, to the principal amounts of the Obligations outstanding;
and fifth, to any other indebtedness or obligations of any Borrower owing to
Lender. Lender shall account to Borrowers for any surplus and Borrowers shall be
liable for any deficiency.
8.8 License of Intellectual Property. Each Borrower hereby
assigns, transfers and conveys to Lender, effective during the existence of any
Event of Default hereunder, the non-exclusive right and license to use all
Intellectual Property owned or used by such Borrower together with any goodwill
associated therewith, all to the extent necessary to enable Lender to realize on
the Collateral and any successor or assign to enjoy the benefits of the
Collateral. This right and license shall inure to the benefit of all successors,
assigns and transferees of Lender and its successors, assigns and transferees,
whether by voluntary conveyance, operation of law, assignment, transfer,
foreclosure, deed in lieu of foreclosure or otherwise. Such right and license is
granted free of charge, without requirement that any monetary payment whatsoever
be made to Borrowers by Lender.
8.9 Canadian Remedies. If any Event of Default shall have occurred
and be continuing, in addition to and not in limitation of any other rights or
remedies provided for herein or any rights or remedies available to Lender or
otherwise available to it at law or in equity, Lender shall have the following
rights, powers and remedies, subject to compliance with the PPSA, in respect of
any of the Collateral to which the PPSA is applicable:
50
<PAGE>
(A) to appoint any Person to be an agent or any
Person to be a receiver, manager or receiver and manager (herein called
the "Receiver") of such Collateral and to remove any Receiver so
appointed and to appoint another if the Lender so desires, it being
agreed that any Receiver appointed pursuant to the provisions of this
Agreement will have all of the powers of the Lender hereunder, and in
addition, will have the power to carry on the business of any Borrower;
(B) to make payments to parties having prior charges or
encumbrances on properties on which any Borrower may hold charges or
encumbrances;
(C) to take possession of all or any part of such
Collateral with power to exclude the Borrowers, their agents and
servants therefrom;
(D) to preserve, protect and maintain such Collateral
and make such replacements thereof and additions thereto as the Lender
may deem advisable;
(E) to enjoy and exercise all powers necessary or
incidental to the performance of all functions provided for in this
Agreement, including, without limitation, the power to purchase on
credit, the power to borrow in any Borrower's name or in the name of
the Receiver, the power to borrow on all or any part of such Collateral
in priority to this Agreement or otherwise for such purposes as may be
approved by the Lender to be evidenced by a Receiver's certificate, and
to advance its own money to the Borrowers at such rates of interest as
it may deem reasonable, provided that the Receiver may borrow money
only with the prior consent of the Lender;
(F) to sell, lease or dispose of all or any part of
such Collateral whether by public or private sale or lease or otherwise
in such manner and on such terms as to the Lender may seem commercially
reasonable, including, without limitation, terms that provide time for
payment or credit, provided that:
(1) the Lender or the Receiver will not be
required to sell, lease or dispose of such Collateral, but may
peaceably and quietly take, hold, use, occupy, possess and
enjoy such Collateral, without molestation, eviction,
hindrance or interruption by any Borrower or any other person
or persons whomsoever;
(2) the Lender or the Receiver may
convey, transfer and assign to a purchaser or purchasers
the title to any of such Collateral so sold; and
(3) the Borrowers will be entitled to be
credited with the actual proceeds of any such sale, lease or
other disposition only when such proceeds are received by the
Lender or the Receiver in cash;
51
<PAGE>
(G) to seize, collect, demand, enforce, recover and
receive all or any part of the Accounts, and to notify account debtors
of the Borrowers to pay such Accounts to the Lender or the Receiver,
and to give valid and binding receipts and discharges therefor and in
respect thereof, and to compromise all or any part of the Accounts that
may seem bad or doubtful to the Lender or the Receiver, and to give
time for payment thereof, with or without security;
(H) to enjoy and exercise all of the rights and
remedies of a secured party under the PPSA;
(I) to dispose of all or any part of such Collateral
in the condition in which it was on the date possession of it was
taken, or after any commercially reasonable repair, processing or
preparation for disposition;
(J) if such Collateral is perishable, or the Lender
or the Receiver believes on reasonable grounds that any part of such
Collateral will decline speedily in value, such Collateral is of a type
customarily sold on a recognized market, the cost of care and storage
of such Collateral is disproportionately large relative to its value,
or the Receiver disposes of such Collateral in the course of the
Borrowers' business, then the Lender or Receiver may sell or otherwise
dispose of any part of such Collateral without giving any notice
whatsoever;
(K) to commence, continue or defend proceedings in
any court of competent jurisdiction in the name of the Lender, the
Receiver or any Borrower for the purpose of exercising any of the
rights, powers and remedies set out in this subsection 8.09, including
the institution of proceedings for the appointment of a receiver,
manager or receiver and manager of such Collateral; and
(L) at the sole option of the Lender, elect to retain
all or any part of such Collateral in satisfaction of the Obligations.
8.10 Waivers, Non-Exclusive Remedies. No failure on the part of
Lender to exercise, and no delay in exercising and no course of dealing with
respect to, any right under this Agreement or the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise by Lender
of any right under this Agreement or any other Loan Document preclude any other
or further exercise thereof or the exercise of any other right. The rights in
this Agreement and the other Loan Documents are cumulative and are not exclusive
of any other remedies provided by law.
8.11 Judgment.
52
<PAGE>
(A) If for the purposes of obtaining judgment in any
court it is necessary to convert a sum due hereunder or under any instrument
delivered hereunder in any currency (the "Original Currency") into another
currency (the "Other Currency"), the parties hereto agree, to the fullest
extent permitted by law, that the rate of exchange used shall be that at
which in accordance with normal banking procedures the Lender could
purchase the Original Currency with the Other Currency on the Business
Day preceding that on which the payment is made.
(B) The obligation of any Borrower with respect to any
sum due from it to the Lender hereunder or under such instrument shall,
notwithstanding any judgment in any Other Currency, be discharged only to
the extent that on the Business Day following receipt by the Lender of any sum
adjudged to be so due in the Other Currency, the Lender may, in accordance with
normal banking procedures, purchase the Original Currency with the Other
Currency. If the amount of the Original Currency so purchased is less than the
sum originally due to the Lender in the Original Currency, such Borrower
agrees to indemnify the Lender against such loss, and if the amount of the
Original Currency so purchased exceeds the sum originally due to the Lender
in the Original Currency, the Lender agrees to remit to the Borrowers
such excess. This indemnity shall constitute an obligation separate and
independent from the other obligations contained in this Agreement, shall give
rise to a separate and independent cause of action, shall apply irrespective of
any indulgence granted by the Lender from time to time and shall continue in
full force and effect notwithstanding any judgment or order for a liquidated
sum in respect of any amount due hereunder or under any judgment or order.
9 MISCELLANEOUS
9.1 Assignments and Participations. Lender may assign its rights
and delegate its obligations under this Agreement and further may assign, or
sell participations in, all or any part of the Loans, the Commitments or any
other interest herein to an Affiliate or to another Person. In the case of an
assignment authorized under this subsection 9.1, the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as it would
if it were a Lender hereunder. Lender shall be relieved of its obligations
hereunder with respect to the Commitments or assigned portion thereof. Borrowers
hereby acknowledge and agree that any assignment will give rise to a direct
obligation of Borrowers to the assignee and that the assignee shall be
considered to be a "Lender". Lender may furnish any information concerning
Borrowers and their respective Subsidiaries in its possession from time to time
to assignees and participants (including prospective assignees and
participants).
9.2 Set Off. In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, Lender, each assignee of Lender's interest,
and each participant is hereby authorized by Borrowers at any time or from time
to time, without notice to Borrowers or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all balances held
53
<PAGE>
by it at any of its offices for the account of a Borrower or any of its
Subsidiaries (regardless of whether such balances are then due to a Borrower
or its Subsidiaries) and any other property at any time held or owing by that
Lender or assignee to or for the credit or for the account of a Borrower
against and on account of any of the Obligations then outstanding; provided,
that no participant shall exercise such right without the prior written consent
of Lender.
Borrowers hereby agree, to the fullest extent permitted by law, that
any Lender, assignee or participant may exercise its right of setoff with
respect to amounts in excess of its pro rata share of the Obligations (or, in
the case of a participant, in excess of its pro rata participation interest in
the Obligations) and that such Lender, assignee or participant, as the case may
be, shall be deemed to have purchased for cash in the amount of such excess,
participations in each other Lender's or holder's share of the Obligations.
9.3 Expenses and Attorneys' Fees. Whether or not the transactions
contemplated hereby shall be consummated, Borrowers agree to promptly pay all
reasonable fees, costs and expenses incurred by Lender in connection with any
matters contemplated by or arising out of this Agreement or the other Loan
Documents including the following, and all such reasonable fees, costs and
expenses shall be part of the Obligations, payable on demand and secured by the
Collateral: (a) reasonable fees, costs and expenses (including reasonable
attorneys' fees, allocated costs of internal counsel and reasonable fees of
environmental consultants, accountants and other professionals retained by
Lender) incurred in connection with the examination, review, due diligence
investigation, documentation and closing of the financing arrangements evidenced
by the Loan Documents; (b) reasonable fees, costs and expenses (including
reasonable attorneys' fees, allocated costs of internal counsel and reasonable
fees of environmental consultants, accountants and other professionals retained
by Lender) incurred in connection with the review, negotiation, preparation,
documentation, execution and administration of the Loan Documents, the Loans,
and any amendments, waivers, consents, forbearances and other modifications
relating thereto or any subordination or intercreditor agreements; (c)
reasonable fees, costs and expenses incurred in creating, perfecting and
maintaining perfection of Liens in favor of Lender; (d) reasonable fees, costs
and expenses incurred in connection with forwarding to Borrowers the proceeds of
Loans including Lender's standard wire transfer fee; (e) reasonable fees, costs,
expenses and bank charges, including bank charges for returned checks, incurred
by Lender in establishing, maintaining and handling lock box accounts, blocked
accounts or other accounts for collection of the Collateral; (f) reasonable
fees, costs, expenses (including reasonable attorneys' fees and allocated costs
of internal counsel) and costs of settlement incurred in collecting upon or
enforcing rights against the Collateral or incurred in any action to enforce
this Agreement or the other Loan Documents or to collect any payments due from
Borrowers or any other Loan Party under this Agreement or any other Loan
Document or incurred in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement, whether in the nature of a
"workout" or in connection with any insolvency or bankruptcy proceedings or
otherwise.
54
<PAGE>
9.4 Indemnity. In addition to the payment of expenses pursuant to
subsection 9.3, whether or not the transactions contemplated hereby shall be
consummated, Borrowers agree to indemnify, pay and hold Lender, and the
officers, directors, employees, agents, consultants, auditors, persons engaged
by Lender to evaluate or monitor the Collateral, affiliates and attorneys of
Lender and such holders (collectively called the "Indemnitees") harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including the reasonable fees and disbursements of counsel
for such Indemnitees in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not such Indemnitee
shall be designated a party thereto) that may be imposed on, incurred by, or
asserted against that Indemnitee, in any manner relating to or arising out of
this Agreement or the other Loan Documents, the consummation of the transactions
contemplated by this Agreement, the statements contained in the commitment
letters, if any, delivered by Lender, Lender's agreement to make the Loans
hereunder, the use or intended use of the proceeds of any of the Loans or the
exercise of any right or remedy hereunder or under the other Loan Documents (the
"Indemnified Liabilities"); provided that Borrowers shall have no obligation to
an Indemnitee hereunder with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of that Indemnitee as determined by a
court of competent jurisdiction.
9.5 Amendments and Waivers. No amendment, modification,
termination or waiver of any provision of this Agreement or of the other Loan
Documents, or consent to any departure by Borrowers therefrom, shall be
effective unless the same shall be in writing and signed by Lender and
Borrowers. Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given.
9.6 Notices. Unless otherwise specifically provided herein, all
notices shall be in writing addressed to the respective party as set forth below
and may be personally served, telecopied or sent by overnight courier service or
United States mail and shall be deemed to have been given: (a) if delivered in
person, when delivered; (b) if delivered by telecopy, on the date of
transmission if transmitted on a Business Day before 4:00 p.m. Chicago time or,
if not, on the next succeeding Business Day; (c) if delivered by overnight
courier, two (2) days after delivery to such courier properly addressed; or (d)
if by U.S. Mail, four (4) Business Days after depositing in the United States
mail, with postage prepaid and properly addressed.
If to Borrowers: Editek, Inc.
1238 Anthony Road
Burlington, North Carolina 27215
Attention: President
Telecopy No.: (910) 229-4471
55
<PAGE>
With a copy to: Petree Stockton, L.L.P.
4101 Lake Boone Trail, Suite 400
Raleigh, North Carolina 27607-6519
Attention: James F. Verdonik
Telecopy No.: (919) 420-1800
If to Lender: HELLER FINANCIAL, INC.
Attn: HBC Portfolio Manager
500 West Monroe Street
Chicago, Illinois 60661
Telecopy No.: (312) 441-6969
With a copy to: HELLER FINANCIAL, INC.
Attn: Legal Department
500 West Monroe Street
Chicago, Illinois 60661
Telecopy No. (312) 441-7367
or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this subsection
9.6.
9.7 Survival of Warranties and Certain Agreements. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrowers set forth in subsections 9.3 and 9.4 shall survive
the payment of the Loans and the termination of this Agreement.
9.8 Indulgence Not Waiver. No failure or delay on the part of
Lender in the exercise of any power, right or privilege shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
9.9 Marshaling; Payments Set Aside. Lender shall not be under any
obligation to marshal any assets in favor of any Loan Party or any other party
or against or in payment of any or all of the Obligations. To the extent that
any Loan Party makes a payment or payments to Lender or Lender enforces its
security interests or exercise its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor, shall be revived and
continued
56
<PAGE>
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
9.10 Entire Agreement. This Agreement, the Term Notes, and the
other Loan Documents referred to herein embody the final, entire agreement among
the parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties hereto.
9.11 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
9.12 Severability. The invalidity, illegality or unenforceability
in any jurisdiction of any provision in or obligation under this Agreement or
the other Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents or of such provision or obligation in any other
jurisdiction.
9.13 Headings. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
9.14 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.15 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns except that Borrowers may not assign their rights or obligations
hereunder without the prior written consent of Lender.
9.16 No Fiduciary Relationship; Limitation of Liabilities.
(A) No provision in this Agreement or in any
of the other Loan Documents and no course of dealing between the parties
shall be deemed to create any fiduciary duty by Lender to Borrowers.
57
<PAGE>
(B) Neither Lender, nor any affiliate, officer,
director, shareholder, employee, attorney, or agent of Lender shall have any
liability with respect to, and Borrowers hereby waive, release, and
agree not to sue any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by Borrowers in
connection with, arising out of, or in any way related to, this Agreement
or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the other Loan Documents.
Borrowers hereby waive, release, and agree not to sue Lender or any of Lender's
affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the transactions
contemplated hereby.
9.17 CONSENT TO JURISDICTION. EACH BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK,
STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TERM
NOTES OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH
BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE TERM
NOTES, THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS.
9.18 WAIVER OF JURY TRIAL. EACH BORROWER AND LENDER HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT, THE TERM NOTES OR THE OTHER LOAN
DOCUMENTS. BORROWERS AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED
ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, THE TERM NOTES AND THE OTHER LOAN
DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. BORROWERS AND LENDER FURTHER WARRANT AND REPRESENT THAT EACH
HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
9.19 Construction. Each Borrower and Lender each acknowledge that
it has had the benefit of legal counsel of its own choice and has been afforded
an opportunity to review this Agreement and the other Loan Documents with its
legal counsel and that this Agreement and the other Loan Documents shall be
construed as if jointly drafted by Borrowers and Lender.
58
<PAGE>
9.20 Counterparts; Effectiveness. This Agreement and any
amendments, waivers, consents, or supplements may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all of
which counterparts together shall constitute but one and the same instrument.
This Agreement shall become effective upon the execution of a counterpart hereof
by each of the parties hereto.
9.21 No Duty. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Lender shall have the right to
act exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to Borrowers or any of any Borrower's shareholders or any other
Person.
9.22 Confidentiality. Lender shall hold all nonpublic information
identified as such by Borrowers in accordance with such Person's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound business practices and in any event may make
disclosure reasonably required by a bona fide offeree or assignee (or
participation), or as required or requested by any Governmental Authority or
representative thereof, or pursuant to legal process, or to its accountants,
lawyers and other advisors, and shall require any such offeree or assignee (or
participant) to agree (and require any of its offerees, assignees or
participants to agree) to comply with this Section 9.22. In no event shall
Lender be obligated or required to return any materials furnished by Borrowers;
provided, however, each Offeree shall be required to agree that if it does not
become a assignee (or participant) it shall return all materials furnished to it
by Borrowers in connection herewith.
[Signatures appear on following page]
59
<PAGE>
Loan and Security Agreement - Signature Page
Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
HELLER FINANCIAL, INC.
By:
Title:
EDITEK, INC.
By:
Title:
FEIN:
PSYCHIATRIC DIAGNOSTIC
LABORATORIES OF AMERICA, INC.
By:
Title:
FEIN:
DIAGNOSTIX, INC.
By:
Title:
FEIN:
60
<PAGE>
LOAN AND SECURITY AGREEMENT
DATED AS OF JANUARY ___, 1996
between
EDITEK, INC.
PSYCHIATRIC DIAGNOSTIC LABORATORIES OF AMERICA, INC.
DIAGNOSTIX, INC.
as Borrowers
and
HELLER FINANCIAL, INC.
as Lender
61
<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms...................................... 1
1.2 Accounting Terms........................................... 11
1.3 Other Definitional Provisions.............................. 12
SECTION 2 LOANS AND COLLATERAL
2.1 Loans...................................................... 12
(A)(1) Term Loan A....................................... 12
(A)(2) Term Loan B....................................... 13
(B) Revolving Loan................... ............ 14
(C) Eligible Collateral................... ......... 15
(D) Borrowing Mechanics............................... 17
(E) Term Notes........................................ 18
(F) Evidence of Revolving Loan Obligations............ 18
2.2 Interest................................................... 18
(A) Rate of Interest......................... ........ 18
(B) Computation and Payment of Interest............... 18
(C) Interest Laws..................................... 18
2.3 Fees....................................................... 19
(A) Closing Fee....................................... 19
(B) Unused Line Fee................................... 19
(C) Prepayment Fees.................................. 19
(D) Collateral Monitoring Fee......................... 20
(E) Audit Fees........................................ 20
(F) Other Fees and Expenses........................... 20
2.4 Payments and Prepayments................................... 20
(A) Manner and Time of Payment........................ 20
(B) Mandatory Prepayments............................. 21
(1) Overadvance.............................. 21
(2) Proceeds of Asset Dispositions........... 21
(3) Prepayments from Excess Cash Flow........ 21
(C) Voluntary Prepayments and Repayments............. 21
(D) Payments on Business Days......................... 22
2.5 Term of this Agreement..................................... 22
2.6 Statements................................................. 22
2.7 Grant of Security Interest................................. 22
2.8 Capital Adequacy and Other Adjustments..................... 23
i
<PAGE>
(A) No Deductions..................................... 23
(B) Changes in Tax Laws............................... 23
SECTION 3 CONDITIONS TO LOANS
3.1 Conditions to Loans........................................ 24
(A) Closing Deliveries................................ 24
(B) Security Interests................................ 24
(C) Closing Date Availability......................... 24
(D) Representations and Warranties.................... 24
(E) Fees.............................................. 25
(F) No Default........................................ 25
(G) Performance of Agreements......................... 25
(H) No Prohibition.................................... 25
(I) No Litigation..................................... 25
(J) Issuance of Preferred Stock....................... 25
(K) MedTox Acquisition................................ 25
SECTION 4 BORROWERS' REPRESENTATIONS AND WARRANTIES
4.1 Organization, Powers, Capitalization....................... 26
(A) Organization and Powers........................... 26
(B) Capitalization.................................... 26
4.2 Authorization of Borrowing, No Conflict................ ... 26
4.3 Financial Condition........................................ 27
4.4 Indebtedness and Liabilities............................... 27
4.5 Account Warranties......................................... 27
4.6 Names...................................................... 27
4.7 Locations; FEIN............................................ 27
4.8 Title to Properties; Liens................................. 27
4.9 Litigation; Adverse Facts.................................. 28
4.10 Payment of Taxes........................................... 28
4.11 Performance of Agreements.................................. 28
4.12 Employee Benefit Plans..................................... 28
4.13 Intellectual Property...................................... 28
4.14 Broker's Fees.............................................. 29
4.15 Environmental Compliance................................... 29
4.16 Solvency................................................... 29
4.17 Disclosure................................................. 29
4.18 Insurance.................................................. 29
4.19 Compliance with Laws....................................... 30
4.20 Bank Accounts.............................................. 30
ii
<PAGE>
4.21 Subsidiaries............................................... 30
4.22 Employee Matters........................................ . 30
4.23 Governmental Regulation.....................................30
iii
<PAGE>
SECTION 5 AFFIRMATIVE COVENANTS
5.1 Financial Statements and Other Reports..................... 31
(A) Monthly Financials................................ 31
(B) Quarterly Financials.............................. 31
(C) Year-End Financials............................... 31
(D) Accountants' Certification and Reports............ 32
(E) Compliance Certificate............................ 32
(F) Borrowing Base Certificates, Registers and
Journals.......................................... 32
(G) Management Report........................... ..... 33
(H) Appraisals........................................ 33
(I) Government Notices................................ 33
(J) Events of Default, etc............................ 34
(K) Trade Names....................................... 34
(L) Locations......................................... 34
(M) Bank Accounts..................................... 34
(N) Litigation........................................ 34
(O) Projections....................................... 34
(P) Preferred Stock and Indebtedness Notice........... 34
(Q) Other Information................................. 35
(R) Opening Balance Sheet............................. 35
5.2 Access to Accountants...................................... 35
5.3 Inspection................................................. 35
5.4 Collateral Records......................................... 35
5.5 Account Covenants; Verification............................ 35
5.6 Collection of Accounts and Payments........................ 36
5.7 Endorsement................................................ 36
5.8 Corporate Existence........................................ 36
5.9 Payment of Taxes........................................... 36
5.10 Maintenance of Properties; Insurance....................... 37
5.11 Compliance with Laws....................................... 37
5.12 Further Assurances......................................... 37
5.13 Collateral Locations....................................... 37
5.14 Bailees.................................................... 38
5.15 Use of Proceeds and Margin Security........................ 38
SECTION 6 FINANCIAL COVENANTS
6.1 Tangible Net Worth......................................... 38
6.2 Minimum EBITDA............................................. 39
6.3 Ratio of Indebtedness to Tangible Net Worth................ 39
6.4 Capital Expenditure Limits................................. 40
iv
<PAGE>
6.5 Fixed Charge Coverage...................................... 40
6.6 Interest Coverage.......................................... 40
SECTION 7 NEGATIVE COVENANTS
7.1 Indebtedness and Liabilities............................... 41
7.2 Guaranties................................................. 42
7.3 Transfers, Liens and Related Matters....................... 42
(A) Transfers......................................... 42
(B) Liens............................................. 42
(C) No Negative Pledges............................... 42
(D) No Restrictions on Subsidiary Distributions to
Borrowers......................................... 42
7.4 Investments and Loans...................................... 43
7.5 Restricted Junior Payments................................. 43
7.6 Restriction on Fundamental Changes......................... 43
7.7 Changes Relating to Preferred Stock........................ 44
7.8 Transactions with Affiliates............................... 44
7.9 Environmental Liabilities.................................. 44
7.10 Conduct of Business........................................ 44
7.11 Compliance with ERISA...................................... 44
7.12 Tax Consolidations......................................... 44
7.13 Subsidiaries............................................... 44
7.14 Fiscal Year................................................ 44
7.15 Press Release; Public Offering Materials................... 45
7.16 Bank Accounts.............................................. 45
SECTION 8 DEFAULT, RIGHTS AND REMEDIES
8.1 Event of Default........................................... 45
(A) Payment........................................... 45
(B) Default in Other Agreements....................... 45
(C) Breach of Certain Provisions...................... 45
(D) Breach of Warranty................................ 45
(E) Other Defaults Under Loan Documents............... 45
(F) Change in Control................................. 46
(G) Involuntary Bankruptcy; Appointment of
Receiver, etc..................................... 46
(H) Voluntary Bankruptcy; Appointment of
Receiver, etc..................................... 46
(I) Liens............................................. 46
(J) Judgment and Attachments.......................... 46
(K) Dissolution....................................... 47
(L) Solvency.......................................... 47
(M) Injunction........................................ 47
v
<PAGE>
(N) Invalidity of Loan Documents...................... 47
(O) Failure of Security............................... 47
(P) Damage, Strike, Casualty.......................... 47
(Q) Licenses and Permits.............................. 47
(R) Forfeiture........................................ 47
8.2 Suspension of Commitments.................................. 48
8.3 Acceleration............................................... 48
8.4 Remedies................................................... 48
8.5 Appointment of Attorney-in-Fact............................ 49
8.6 Limitation on Duty of Lender with Respect to Collateral.... 49
8.7 Application of Proceeds.................................... 49
8.8 License of Intellectual Property........................... 50
8.9 Canadian Remedies.......................................... 50
8.10 Waivers, Non-Exclusive Remedies............................ 52
8.11 Judgment................................................... 52
SECTION 9 MISCELLANEOUS
9.1 Assignments and Participations..............................53
9.2 Set Off.................................................... 53
9.3 Expenses and Attorneys' Fees............................... 53
9.4 Indemnity.................................................. 54
9.5 Amendments and Waivers..................................... 55
9.6 Notices.................................................... 55
9.7 Survival of Warranties and Certain Agreements.............. 56
9.8 Indulgence Not Waiver...................................... 56
9.9 Marshaling; Payments Set Aside............................. 56
9.10 Entire Agreement........................................... 56
9.11 Independence of Covenants.................................. 56
9.12 Severability............................................... 56
9.13 Headings................................................... 57
9.14 APPLICABLE LAW............................................. 57
9.15 Successors and Assigns..................................... 57
9.16 No Fiduciary Relationship; Limitation of Liabilities....... 57
9.17 CONSENT TO JURISDICTION.................................... 57
9.18 WAIVER OF JURY TRIAL....................................... 58
9.19 Construction............................................... 58
9.20 Counterparts; Effectiveness................................ 58
9.21 No Duty.................................................... 58
9.22 Confidentiality............................................ 58
vi
<PAGE>
EXHIBITS
A Borrowing Base Certificate
B Compliance Certificate
SCHEDULES
1.1(A) Other Liens
1.1(B) Pro Forma
3.1(A) List of Closing Documents
4.1(B) Capitalization of Loan Parties
4.6 Trade Names (Present and Past Five Years)
4.7 Location of Principal Place of Business, Books
and Records and Collateral
4.13 Intellectual Property
4.14 Brokers Fees
4.20 Bank Accounts
4.21 Subsidiaries
4.22 Employee Matters
7.1 Existing Indebtedness
vii
<PAGE>
EXHIBIT B
[FORM OF COMPLIANCE CERTIFICATE]
_________________, 19___
Heller Business Credit
500 West Monroe Street
Chicago, Illinois 60661
Re: Compliance Certificate for EDITEK and Subsidiaries
Ladies and Gentlemen:
This certificate is given in accordance with subsection 5.1(E) of that
certain Loan and Security Agreement dated as of January ___, 1996 by and between
EDITEK, Inc., Psychiatric Diagnostic Laboratories of America, Inc. and
DiAgnostix, Inc. ("Borrowers") and Heller Financial, Inc. (as the same may be
amended, supplemented or otherwise modified from time to time, the "Loan
Agreement"). Capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Loan Agreement. I hereby certify that:
(a) I am the [Chief Executive Officer] [Chief Financial Officer]
of Editek;
(b) The enclosed consolidated and consolidating balance sheets,
income statements and cash flow statements of Borrowers and
their respective Subsidiaries fairly present the consolidated
and consolidating financial condition of Borrowers and their
respective Subsidiaries as of the dates indicated, and I have
reviewed such statements in preparing this certificate;
(c) I have reviewed the terms of the Loan Agreement and have made,
or caused to be made under my supervision, a review in
reasonable detail of the transactions and financial condition
of Borrowers during the accounting period covered by the
enclosed financial statements;
(d) The examination in paragraph (c) did not disclose and I have
no knowledge of the existence of any condition or event that
constitutes a Default or an Event of Default as of the date of
this certificate except as set forth below.
Described below (or in a separate attachment hereto) are the
exceptions, if any, to paragraph (d), listing in detail, the
nature of the condition or event, the period during
which it has existed and the action which Borrowers have
taken, are taking or propose to take with respect to each
such condition or event:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
<PAGE>
(e) Except as disclosed in paragraph (d) above, Borrowers are in
compliance with the financial covenants contained in Section 6
of the Loan Agreement, as detailed in the worksheet attached
as Schedule I.
The foregoing certifications and the financial statements delivered
with this Certificate in support hereof are made and delivered this _____ day of
_____________, 19___.
Name:
Title:
<PAGE>
SCHEDULE I
COVENANT COMPLIANCE WORKSHEET
Based upon financial statements dated: _________________________, 19___
1. TANGIBLE NET WORTH (ss.6.1)
(A) Net Worth $
less (B) Intangible Assets (including patents, $
trademarks and trade names)
plus (C) Patents, Trademarks and Trade Names $
(up to $2,000,000)
less (D) prepaid expenses $
less (E) Affiliate obligations $
less (F) loans to officers, stockholders
or employees $
TANGIBLE NET WORTH (A - B - C - D - E) $
Required TANGIBLE NET WORTH $
COMPLIANCE
YES NO
2. EBITDA (ss.6.2) - Editek and diAGnostix
(A) net income $
plus (B) to the extent included in the calculation of net $
income, income and franchise taxes paid or accrued
plus (C) to the extent included in the calculation of net $
income, Interest Expense, net of interest
income, paid or accrued
<PAGE>
plus (D) to the extent included in the calculation of net $
income, amortization and depreciation
plus (E) to the extent included in the calculation of net $
income, other non-cash charges (excluding
accruals for cash expenses made in the ordinary
course of business)
less (F) to the extent included in the calculation of net $
income, the income of any Person in which
a Borrower has an ownership interest unless such
income is received by a Borrower in a cash distribution
less (G) to the extent included in the calculation of net $
income, gains or losses from sales or other dispositions
of assets, other than gains or losses from sales
or other dispositions of Inventories in the normal
course of business
less (H) to the extent included in the calculation of net $
income, other extraordinary or non-recurring
gains, but not net of extraordinary or
non-recurring "cash" losses
EBITDA (A + B + C + D + E - F - G - H) $
less Registration Payments $
= EBITDA - Registration Payments $
Required EBITDA - Registration Payments $
COMPLIANCE
YES NO
3. EBITDA (ss.6.2) - PDLA
(A) net income $
plus (B) to the extent included in the calculation of net $
<PAGE>
income, income and franchise taxes paid or accrued
plus (C) to the extent included in the calculation of net $
income, Interest Expense, net of interest
income, paid or accrued
plus (D) to the extent included in the calculation of net $
income, amortization and depreciation
plus (E) to the extent included in the calculation of net $
income, other non-cash charges (excluding
accruals for cash expenses made in the ordinary
course of business)
less (F) to the extent included in the calculation of net $
income, the income of any Person in which
a Borrower has an ownership interest unless such
income is received by a Borrower in a cash distribution
less (G) to the extent included in the calculation of net $
income, gains or losses from sales or other dispositions
of assets, other than gains or losses from sales
or other dispositions of Inventories in the normal
course of business
less (H) to the extent included in the calculation of net $
income, other extraordinary or non-recurring
gains, but not net of extraordinary or
non-recurring "cash" losses
EBITDA (A + B + C + D + E - F - G - H) $
less Registration Payments $
= EBITDA - Registration Payments $
Required EBITDA - Registration Payments $
COMPLIANCE
YES NO
<PAGE>
4. EBITDA (ss.6.2) - Consolidated
(A) net income $
plus (B) to the extent included in the calculation of net $
income, income and franchise taxes paid or accrued
plus (C) to the extent included in the calculation of net $
income, Interest Expense, net of interest
income, paid or accrued
plus (D) to the extent included in the calculation of net $
income, amortization and depreciation
plus (E) to the extent included in the calculation of net $
income, other non-cash charges (excluding
accruals for cash expenses made in the ordinary
course of business)
less (F) to the extent included in the calculation of net $
income, the income of any Person in which
a Borrower has an ownership interest unless such
income is received by a Borrower in a cash distribution
less (G) to the extent included in the calculation of net $
income, gains or losses from sales or other dispositions
of assets, other than gains or losses from sales
or other dispositions of Inventories in the normal
course of business
less (H) to the extent included in the calculation of net $
income, other extraordinary or non-recurring
gains, but not net of extraordinary or
non-recurring "cash" losses
EBITDA (A + B + C + D + E - F - G - H) $
less Registration Payments $
= EBITDA - Registration Payments $
Required EBITDA - Registration Payments $
<PAGE>
COMPLIANCE
YES NO
5. RATIO OF INDEBTEDNESS TO TANGIBLE NET WORTH (ss.6.3)
(A) Indebtedness $
(B) Tangible Net Worth $
INDEBTEDNESS TO TANGIBLE NET WORTH (A / B :1)
Required INDEBTEDNESS TO TANGIBLE NET WORTH
COMPLIANCE
YES NO
6. CAPITAL EXPENDITURES (ss.6.5)
Capital Expenditures (excluding trade-ins and excluding Capital
Expenditures in respect of replacement assets to the extent funded with
casualty insurance proceeds)
for Fiscal Year ended _______________, 19___ $
CAPITAL EXPENDITURE Limit: $
COMPLIANCE
YES NO
5. FIXED CHARGE COVERAGE (ss.6.6)
(A) Sum of:
(i) EBITDA for Period $
<PAGE>
less (ii) Capital Expenditures $
less (iii) Registration Payments $
= Operating Cash Flow $
(B) Fixed Charges for Period $
FIXED CHARGE COVERAGE (A / B)
Required FIXED CHARGE COVERAGE
COMPLIANCE
YES NO
5. INTEREST COVERAGE (ss.6.7)
(C) Sum of:
(i) EBITDA for Period $
less (ii) Capital Expenditures $
less (iii) Registration Payments $
= Operating Cash Flow $
(D) Interest Expenses for Period $
INTEREST COVERAGE (A / B)
Required INTEREST COVERAGE
COMPLIANCE
YES NO
Schedule 1.1(A)
Permitted Liens
Debtor Secured Party Jurisdiction Collateral
MedTox Hewlett-Packard Minnesota See item 1
MedTox Hewlett-Packard Minnesota See item 2
MedTox Hewlett-Packard Minnesota See item 3
MedTox Hewlett-Packard Minnesota See item 6
MedTox SYVA Co. Minnesota See item 7
MedTox SYVA Co. Minnesota See item 8
MedTox Hewlett-Packard Minnesota See item 9
Psychiatric First Wisconsin National New Jersey See item 12
Diagnostic Bank of Milwaukee
Laboratories First Wisconsin National New Jersey See item 13
Princeton Bank of Milwaukee
Diagnostic
Laboratories
Editek Graybar Financial Services Alamance See item 14
County
Psychiatric SYVA Co. New Jersey See item 20
Diagnostic Lab
Psychiatric SYVA Co. New Jersey See item 21
Diagnostic Lab
Editek Graybar Financial Services North Carolina See item 26
<PAGE>
Schedule 1.1(B)
Pro Forma
Attached is a copy of the unaudited consolidated balance sheet
of Borrowers after giving effect to the MedTox Acquisition.
<PAGE>
Schedule 3.1(A)
List of Closing Documents
<PAGE>
Schedule 4.1(B)
I. Capitalization of Borrowers and Affiliates
A. Editek, Inc.
The authorized capital stock of Editek, Inc. consists of
31,000,000 shares of which 30,000,000 are designated common
stock, $0.15 par value and 1,000,000 are designated preferred
stock, $1.00 par value. As of the Closing, 10,440,083 shares of
common stock and 240 shares of preferred stock are outstanding.
B. diAGnostix, Inc.
The authorized capital stock of diAGnostix, Inc. consists of
7,500,000 shares of common stock, $0.01 par value, of which 1,000
shares are issued and outstanding and are owned by Editek, Inc.
C. Princeton Diagnostic Laboratories of America, Inc.
The authorized capital stock of Princeton Diagnostic Laboratories
of America, Inc. consists of 7,500,000 shares of common stock,
$0.01 par value, of which 500 shares are issued and outstanding
and are owned by Editek, Inc.
D. Psychiatric Diagnostic Laboratories of America, Inc.
The authorized capital stock of Psychiatric Diagnostic
Laboratories of America, Inc. consists of 256,000 shares of which
250,000 shares are designated common stock, $0.004 par value and
6,000 shares are designated preferred stock, no par value. As of
the closing, 500 shares of common stock are issued and
outstanding and are owned by Princeton Diagnostic Laboratories of
America, Inc. No shares of preferred stock are outstanding.
E. National Consortium For A Drug-Free Workplace, Inc.
The authorized capital stock of National Consortium For A
Drug-Free Workplace, Inc. consists of 100 shares of common stock,
$0.01 par value, of which 50 shares are issued and outstanding
and are owned by Princeton Diagnostics Laboratories of America,
Inc.
<PAGE>
II. Outstanding Conversion Rights, Options, Warrants for Purchase of
Capital Stock of Borrowers and Affiliates
A. EDITEK, Inc.
Outstanding options to purchase an aggregate of 449,406 shares of
Common Stock pursuant to awards under the EDITEK, Inc. 1983
Incentive Stock Option Plan.
Outstanding options to purchase an aggregate of 47,864 shares of
Common Stock pursuant to awards under the EDITEK, Inc. Amended
and Restated Stock Option Plan for Non-Employee Directors.
Outstanding option to purchase 7,760 shares of Common Stock
pursuant to Stock Option Agreement dated January 14, 1993 between
EDITEK, Inc. and Mark D. Dibner.
Outstanding subscriptions to purchase an aggregate of 5,446
shares of Common Stock pursuant to awards under the EDITEK, Inc.
Qualified Employee Stock Purchase Plan.
Outstanding options to purchase an aggregate of 33,333 shares of
Common Stock pursuant to nonqualified stock option agreements
between EDITEK, Inc. and James D. Skinner.
Outstanding options to purchase an aggregate of 721,289 shares of
Common Stock pursuant to awards under the EDITEK, Inc. Amended
and Restated Equity Compensation Plan.
Stock Purchase Warrants to purchase an aggregate of 473,229
shares of Common Stock.
B. diAGnostix, Inc.
None.
C. Princeton Diagnostic Laboratories of America, Inc.
None.
D. Psychiatric Diagnostic Laboratories of America, Inc.
None.
E. National Consortium For A Drug-Free Workplace, Inc.
None.
<PAGE>
Schedule 4.6
Trade Names (Present and Past Five Years)
NONE
<PAGE>
Schedule 4.7
Location of Principal Place of Business, Books
and Records and Collateral
A. Editek, Inc.
Corporate headquarters, research and development, operations and
administrative functions are located in the NOVA building at 1238
Anthony Road, Burlington, North Carolina 27215.
Editek also leases laboratory space and land for its Granite Hall
Laboratory Animal Facility in Warrenton, North Carolina. The
address for the facility is Route 1, Box 110-S, Warrenton, North
Carolina 27589.
B. Princeton Diagnostic Laboratories of America, Inc.
Corporate headquarters are located at the NOVA building at 1238
Anthony Road, Burlington, North Carolina 27215.
C. Psychiatric Diagnostic Laboratories of America, Inc.
Laboratory testing facility including administrative functions
are located at 100 Corporate Court, South Plainfield, New Jersey
07080.
The leases assumed by Psychiatric Diagnostic Laboratories of
America, Inc., pursuant to the MedTox acquisition are as follows:
Location Description
402 West County Road D Primary laboratory location
St. Paul, Minnesota 55112 and administrative
offices
8600 West Catalpa Avenue Facility empty
Chicago, Illinois 60656
109 West Dudleytown Road Service center, local client
Bloomfield, Connecticut 06002 service and courier service
6160 Variel Avenue Subleased premises to
Woodland Hills, California 91367 TOXWORX Laboratories
<PAGE>
Schedule 4.7
(continued)
D. diAGnostix, Inc.
Warehouse and administrative functions located at 5730 Coopers
Avenue, Unit #27, Mississauga, Ontario Canada L4Z 2E9.
E. National Consortium For A Drug-Free Workplace, Inc.
Administrative facilities located at 100 Corporate Court, South
Plainfield, New Jersey 07080.
<PAGE>
Schedule 4.13
Intellectual Property
A. The following patents are owned by Editek. The other Borrowers
do not own any patents.
Patent
Jurisdiction Patent Name Number Issue Date
U.S. Rapid Radioimmunoassay 4,399,229 08/16/83
Product and Method of Making
and Using Same
U.S. Rotary Fluid Manipulator 4,938,927 07/03/90
U.S. Rotary Fluid Manipulator 5,141,875 08/25/92
U.S. Test Kit For Determining The 4,900,663 02/13/90
Presence of Organic Materials
and Method of Utilizing Same
U.S. Test Kit For Determining The 5,240,844 08/31/93
Presence of Organic Materials
and Method of Utilizing Same
U.S. Suspension Liquid Separator 4,696,797 09/29/87
U.S. Multi-Layered Test Card For 5,202,268 04/13/93
The Determination of Substances
In Liquids
U.S. Devise For Analysis For 5,435,970 07/25/95
Constituents In Biological Fluids
U.S. Animal Cage and Method 4,593,650 06/10/86
U.S. Method For Preserving Plated 4,709,819 12/01/87
Media and Products
Australia Test Kit - Original 594,942 09/13/85
Australia Test Kit - Bi-Directional Flow 608,956 03/14/88
Continuation
Australia Suspension Liquid Separator 586,849 04/15/85
Belgium Test Kit - Original 904,484 03/25/86
<PAGE>
Patent
Jurisdiction Patent Name Number Issue Date
Belgium Test Kit - Bi-Directional Flow 0 333 286 03/13/89
Continuation
Belgium Suspension Liquid Separator Pending Pending
Canada Test Kit - Original 1,258,626 08/22/89
Canada Test Kit - Bi-Directional Flow Pending Pending
Continuation
Canada Suspension Liquid Separator 1,271,709 07/17/90
Canada Multi-Layered Test Card Pending Pending
France Test Kit - Original 2,587,488 04/03/86
France Test Kit - Bi-Directional Flow 0 333 286 03/13/89
Continuation
France Suspension Liquid Separator 904,484 03/25/86
France Multi-Layered Test Card Pending Pending
Germany Test Kit - Original 3,606,124 02/26/86
Germany Test Kit - Bi-Directional Flow 689 19 103 03/13/89
Continuation
Germany Suspension Liquid Separator Pending Pending
Germany Multi-Layered Test Card Pending Pending
G. Britain Test Kit - Original 2,180,645 12/28/89
G. Britain Test Kit - Bi-Directional Flow 0 333 286 03/13/89
Continuation
G. Britain Suspension Liquid Separator 2,181,662 06/21/89
G. Britain Multi-Layered Test Card Pending Pending
Holland Test Kit - Original Pending Pending
Holland Test Kit - Bi-Directional Flow 0 333 286 03/13/89
Continuation
Holland Suspension Liquid Separator Pending Pending
Holland Multi-Layered Test Card Pending Pending
Italy Test Kit - Original 1,190,191 02/16/88
<PAGE>
Patent
Jurisdiction Patent Name Number Issue Date
Italy Test Kit - Bi-Directional Flow 0 333 286 03/13/89
Continuation
Italy Suspension Liquid Separator 1,190,204 02/16/88
Italy Multi-Layered Test Card Pending Pending
Japan Test Kit - Original Pending Pending
Japan Test Kit - Bi-Directional Flow Pending Pending
Continuation
Japan Suspension Liquid Separator 1916522 03/23/95
Japan Multi-Layered Test Card Pending Pending
Sweden Test Kit - Original 86,004,546 04/08/93
Sweden Test Kit - Bi-Directional Flow 0 333 286 03/13/89
Continuation
Sweden Suspension Liquid Separator 86,000,197 04/15/85
Sweden Multi-Layered Test Card Pending Pending
Switzerland Test Kit - Original 671,467 02/27/86
Switzerland Test Kit - Bi-Directional Flow 0 333 286 03/13/89
Continuation
Switzerland Suspension Liquid Separator 671,343 02/15/86
Luxembourg Multi-Layered Test Card Pending Pending
<PAGE>
Schedule 4.13
(continued)
B. The following trademarks are owned by Editek:
Trade Mark Registration Number Registration Date
EDITEK 1,879,044 02/14/95
BIOMAN 363,506 11/10/89
LOGO 1,374,423 12/10/85
QUIK-CARD 1,387,168 03/25/86
EZ-SCREEN 1,412,788 10/14/86
DAIRISCREEN 1,629,710 01/01/91
DAIRYSCREEN 1,629,709 01/01/91
VERDICT 1,771,281 05/18/93
PREDICT 1,877,141 01/31/95
RECON 1,847,306 07/26/94
EZ-QUANT 1,917,508 09/12/95
B. The following trademarks are owned by Princeton.
Trade Mark Registration Number Registration Date
PDLA 1,477,191 02/16/88
C. The following trademarks are owned by PDLA. The other Borrowers
do not own any trademarks.
Trade Mark Registration Number Registration Date
MEDTOX 1,542,034 05/30/89
<PAGE>
Schedule 4.14
Broker's Fees
Pursuant to the issuance of the Convertible Preferred Stock, Shoreline
Pacific, The Institutional Division of Financial West Group, will be
paid 6% of the gross proceeds in cash and will be issued warrants to
purchase shares of common stock of Editek, Inc., having a fair market
value and aggregate exercise price equal to 8% of the gross proceeds.
Interstate Johnson Lane will be paid a commission of $122,000 at the closing.
<PAGE>
Schedule 4.20
Bank Accounts
Psychiatric Diagnostic Laboratories of America, Inc.
First Fidelity - New Jersey
Account Number: 508-006533-1 (operating account)
Account Number: 508-005627-1 (payroll account)
Account Number: 3000397418 (blocked account)
Norwest - M.N.
Account Number: 3973656691 (operating account)
Account Number: 3973656552 (payroll account)
Account Number: 3973656616 (blocked account)
Editek, Inc.
First Union National Bank of N.C.
Account Number: 2000000009889 (payroll account)
Account Number: 2000000009892 (operating account)
Account Number: 2000000706674 (money market account)
Account Number: 2000000706645 (flexible benefits account)
Account Number: 2000000034825 (401(k) account)
Account Number: 2000000734905 (blocked account)
diAGnostix, Inc.
The Toronto-Dominion Bank
Account Number: 0566 7302749 (operating account)
Account Number: 0566 0314541 (payroll account)
Princeton Diagnostic Laboratories of America, Inc. and National
Consortium For A Drug- Free Workplace, Inc. do not have any bank
accounts.
<PAGE>
Schedule 4.21
Subsidiaries
Editek, Inc. owns all of the issued and outstanding stock of: (i)
Princeton Diagnostic Laboratories of America, Inc., a Delaware
corporation; and (ii) diAGnostix, Inc., a Delaware corporation.
Princeton Diagnostic Laboratories of America, Inc., in turn, owns all of
the issued and outstanding stock of: (i) Psychiatric Diagnostic
Laboratories of America, Inc., a Delaware corporation; and (ii) National
Consortium For A Drug-Free Workplace, Inc., a Delaware corporation.
National Consortium For A Drug-Free Workplace, Inc. has no assets.
<PAGE>
Schedule 4.22
Employee Matters
A. Employment and Other Contracts
1. Editek, Inc.
a. Employment Agreement with James Skinner, dated on
or about January 25, 1996;
b. Employment Agreement with Peter Heath, dated on or
about January 25, 1996;
c. Employment Agreement with Michael Terretti, dated
on or about January 25, 1996; and
d. Severance Agreement with James S. Arrington, dated
on or about January 25, 1996.
2. Princeton Diagnostic Laboratories of America, Inc.
NONE
3. Psychiatric Diagnostic Laboratories of America, Inc.
a. Letter dated February 15, 1995 regarding the
employment of Dr. Lawrence J. Felice;
b. Employment Agreement with Harry G. McCoy, dated on
or about January 25, 1996;
c. Employment Agreement with D. Gary Hemphill, dated
on or about January 25, 1996;
d. Employment Agreement with Jennifer S. Collins,
dated on or about January 25, 1996;
e. Employment Agreement with Jacquelyn L. Heytens,
dated January 25, 1996;
f. Employment Agreement with Susan E. Puskas, dated
on or about January 25, 1996;
g. Employment Agreement with Barbara S. Mayer, dated
on or about January 25, 1996; and
<PAGE>
Schedule 4.22
(continued)
h. Employment Agreement with Gregory A. Lowery, dated
on or about January 25, 1996.
4. diAGnostix, Inc.
NONE
5. National Consortium For A Drug-Free Workplace, Inc.
NONE
<PAGE>
Schedule 7.1
Existing Indebtedness
<TABLE>
<CAPTION>
<S> <C>
Editek, Inc.
North Carolina Biotechnology $ 62,834.75
Center (NCBC) Promissory Note
due August 15, 1996
Novamann International, Final 14,497.85
payment due for purchase of
Bioman Products, Inc.
Dr. Samuel C. Powell, 90 Day 100,000.00
Note due March 17, 1996
(Unsecured loan made by Dr.
Powell to provide operating funds
prior to recently completed private
placement)
First Union National Bank of NC, 15,700.00 (est)
Promissory Note secured by
1996 Ford Pickup Truck, Serial #
1FTEF15Y3TLA11649
$193,032.60
Psychiatric Diagnostic Laboratories of America, Inc.
Norwest Loan #031597 $407,853.27 (to be paid at 1/29/96 closing)
Norwest Loan #033095 437,463.95 (to be paid at 1/29/96 closing)
Norwest Equipment Loans 368,906.20 (to be paid at 1/29/96 closing)
$1,214,223.42
__________
$1,407,256.02
<PAGE>
Schedule 7.1
(continued)
Princeton Diagnostic Laboratories of America, Inc.
NONE
diAGnostix, Inc.
NONE
National Consortium For A Drug Free Work Place, Inc.
NONE
</TABLE>
<PAGE>
TERM NOTE A
$2,000,000 January ___, 1996
FOR VALUE RECEIVED, undersigned, EDITEK, INC., a Delaware corporation,
PSYCHIATRIC DIAGNOSTIC LABORATORIES OF AMERICA, INC., a Delaware corporation,
and DIAGNOSTIX, a Delaware corporation (collectively, the "Borrowers"), hereby
unconditionally jointly and severally promise to pay to the order of HELLER
FINANCIAL, INC., a Delaware corporation (the "Lender"), at the Lender's office
located at 500 West Monroe Street, Chicago, Illinois 60661, or at such other
place as the holder of this Note may from time to time designate in writing, in
lawful money of the United States of America and in immediately available funds,
the principal sum of TWO MILLION DOLLARS ($2,000,000), payable in installments
on the dates and in the amounts set forth in that certain Loan and Security
Agreement of even date herewith, between the Borrowers and the Lender (the "Loan
Agreement"; capitalized terms used herein and not otherwise specifically defined
herein shall have the meanings assigned to them in the Loan Agreement).
This Note is a Term Note referred to in subsection 2.1(E) of the Loan
Agreement and is issued to evidence the Term Loan A made to the Borrowers by the
Lender pursuant to the provisions of the Loan Agreement, to which reference is
hereby made for a statement of the terms, conditions and covenants under which
the loan evidenced hereby was made and is to be repaid, including, but not
limited to, those related to the mandatory prepayment of the principal hereof
and the acceleration of the indebtedness represented hereby upon the occurrence
of an Event of Default or upon the termination of the financing of which this
Note is part pursuant to the Loan Agreement. Payment of this Note is secured,
inter alia, by the Collateral.
The Borrowers jointly and severally promise to pay interest on the
outstanding unpaid principal amount hereof at the rate and on the dates set
forth in the Loan Agreement. Interest shall be computed on the daily principal
balance on the basis of a 360-day year for the actual number of days elapsed in
the period during which it accrues.
In no contingency or event whatsoever shall interest charged hereunder,
however such interest may be characterized or computed, exceed the highest rate
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto. In the event that such a court
determines that the Lender has received interest hereunder in excess of the
highest rate applicable hereto, the provisions of the Loan Agreement relating
thereto shall control.
The Borrowers hereby waive demand, presentment, protest, notice of
demand, dishonor, presentment, protest, nonpayment and all other notices in
connection with this Note.
<PAGE>
If this Note is collected by or through an attorney-at-law, all costs
of collection, including reasonable attorneys' fees, shall be payable by the
undersigned.
THIS NOTE HAS BEEN DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE
AT CHICAGO, ILLINOIS, AND SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF
THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED
TO CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF ILLINOIS. Whenever
possible each provision of this Note shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Note
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Note. Whenever in this Note reference is made to the Lender or the Borrowers,
such reference shall be deemed to include, as applicable, a reference to their
respective successors and assigns. The provisions of this Note shall be binding
upon and shall inure to the benefit of such successors and assigns. The
Borrowers' successors and assigns shall include, without limitation, a receiver,
trustee or debtor in possession of or for the Borrowers.
[Signatures appear on following page]
<PAGE>
WITNESS the hand and seal of the undersigned, as of the date first
above written.
EDITEK, INC.
By:
Title:
Attest:
Title:
[CORPORATE SEAL]
PSYCHIATRIC DIAGNOSTIC
LABORATORIES OF AMERICA, INC.
By:
Title:
Attest:
Title:
[CORPORATE SEAL]
DIAGNOSTIX, INC.
By:
Title:
Attest:
Title:
[CORPORATE SEAL]
<PAGE>
TERM NOTE B
$2,000,000 January ___, 1996
FOR VALUE RECEIVED, undersigned, EDITEK, INC., a Delaware corporation,
PSYCHIATRIC DIAGNOSTIC LABORATORIES OF AMERICA, INC., a Delaware corporation,
and DIAGNOSTIX, a Delaware corporation (collectively, the "Borrowers"), hereby
unconditionally jointly and severally promise to pay to the order of HELLER
FINANCIAL, INC., a Delaware corporation (the "Lender"), at the Lender's office
located at 500 West Monroe Street, Chicago, Illinois 60661, or at such other
place as the holder of this Note may from time to time designate in writing, in
lawful money of the United States of America and in immediately available funds,
the principal sum of TWO MILLION DOLLARS ($2,000,000), payable in installments
on the dates and in the amounts set forth in that certain Loan and Security
Agreement of even date herewith, between the Borrowers and the Lender (the "Loan
Agreement"; capitalized terms used herein and not otherwise specifically defined
herein shall have the meanings assigned to them in the Loan Agreement).
This Note is a Term Note referred to in subsection 2.1(E) of the Loan
Agreement and is issued to evidence the Term Loan B made to the Borrowers by the
Lender pursuant to the provisions of the Loan Agreement, to which reference is
hereby made for a statement of the terms, conditions and covenants under which
the loan evidenced hereby was made and is to be repaid, including, but not
limited to, those related to the mandatory prepayment of the principal hereof
and the acceleration of the indebtedness represented hereby upon the occurrence
of an Event of Default or upon the termination of the financing of which this
Note is part pursuant to the Loan Agreement. Payment of this Note is secured,
inter alia, by the Collateral.
The Borrowers jointly and severally promise to pay interest on the
outstanding unpaid principal amount hereof at the rate and on the dates set
forth in the Loan Agreement. Interest shall be computed on the daily principal
balance on the basis of a 360-day year for the actual number of days elapsed in
the period during which it accrues.
In no contingency or event whatsoever shall interest charged hereunder,
however such interest may be characterized or computed, exceed the highest rate
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto. In the event that such a court
determines that the Lender has received interest hereunder in excess of the
highest rate applicable hereto, the provisions of the Loan Agreement relating
thereto shall control.
The Borrowers hereby waive demand, presentment, protest, notice of
demand, dishonor, presentment, protest, nonpayment and all other notices in
connection with this Note.
<PAGE>
If this Note is collected by or through an attorney-at-law, all costs
of collection, including reasonable attorneys' fees, shall be payable by the
undersigned.
THIS NOTE HAS BEEN DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE
AT CHICAGO, ILLINOIS, AND SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF
THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED
TO CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF ILLINOIS. Whenever
possible each provision of this Note shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Note
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Note. Whenever in this Note reference is made to the Lender or the Borrowers,
such reference shall be deemed to include, as applicable, a reference to their
respective successors and assigns. The provisions of this Note shall be binding
upon and shall inure to the benefit of such successors and assigns. The
Borrowers' successors and assigns shall include, without limitation, a receiver,
trustee or debtor in possession of or for the Borrowers.
[Signatures appear on following page]
<PAGE>
WITNESS the hand and seal of the undersigned, as of the date first
above written.
EDITEK, INC.
By:
Title:
Attest:
Title:
[CORPORATE SEAL]
PSYCHIATRIC DIAGNOSTIC
LABORATORIES OF AMERICA, INC.
By:
Title:
Attest:
Title:
[CORPORATE SEAL]
DIAGNOSTIX, INC.
By:
Title:
Attest:
Title:
[CORPORATE SEAL]
ASSIGNMENT FOR SECURITY
(Patents)
STATE OF GEORGIA )
) ss.:
COUNTY OF FULTON )
WHEREAS, EDITEK, INC., a Delaware corporation (the
"Assignor"), holds Letters Patent of the United States and applications for
Letters Patent of the United States as set forth on Exhibit A (collectively, the
"Patents"), and
WHEREAS, the Assignor is the sole owner of the entire right,
title and interest in and to the Patents and the inventions which are the
subject matter thereof, and
WHEREAS, Assignor has entered into that certain Loan and
Security Agreement, dated of even date (as amended, supplemented or restated
from time to time, the "Loan Agreement"), between Assignor, certain of its
affiliates and HELLER FINANCIAL, INC., a Delaware corporation ("Lender"), and
Lender has, on the date hereof, made certain loans to or for the benefit of
Assignor and may make additional loans to or for the benefit of Assignor, and
WHEREAS, pursuant to the Loan Agreement and as a condition
precedent to the extension of the financial accommodations to or for the benefit
of the Assignor under the Loan Agreement, the Assignor has agreed to assign to
Lender and to grant to Lender a continuing security interest in, and a
continuing lien on, all of the Assignor's right, title and interest in and to
the following (collectively the "Patent Collateral"),
(a) the Patents, together with any reissue, continuation,
continuation-in-part or extension of any thereof, along with all
rights, benefits and privileges derived therefrom,
(b) the inventions which are the subject matter thereof, and
(c) all proceeds thereof, including, but not limited to, any
claims and demands arising out of any infringement of the Patents,
including the right to settle disputes concerning such claims and
demands.
NOW, THEREFORE, in order to induce Lender to consummate the
financial accommodations to the Assignor provided for in the Loan Agreement, and
for other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the Assignor does hereby assign to Lender and grant to
Lender a continuing security interest in and a continuing
<PAGE>
lien on, the entire right, title and interest of Assignor in and to the
Patent Collateral. The Patent Collateral shall serve as collateral security
to Lender for the payment and performance of the Obligations (as such term
is defined in the Loan Agreement) and shall constitute a part of the
Collateral (as such term is defined in the Loan Agreement), and shall be
subject to all of the terms and conditions of the Loan Agreement, which is
incorporated herein by reference.
Unless and until said lien and security interest is foreclosed
upon, Assignor (i) shall be deemed and is hereby licensed to remain in exclusive
and undisturbed possession of the Patents, (ii) shall exclusively retain all
rights to make, use, and sell the inventions claimed in the Patents, to license
others under the Patents, but only in a manner consistent with the preservation
of their current substance, validity, registration and the security interest
granted herein, and (iii) may bring suit for the infringement of the Patents and
to retain the proceeds of the foregoing. Lender need not be joined as a
plaintiff in any such infringement suit; provided, that should it be necessary,
in Lender's sole judgment, that Lender be joined as an indispensable party or
true party in interest in any such infringement suit, Lender shall, at its
option, either
(1) appoint Assignor its attorney in fact for the purpose of
prosecuting such infringement suit on the express condition that
Assignor indemnify and hold Lender harmless for any liability incurred
by Lender as a result of such appointment, or
(2) participate actively in the prosecution of such suit.
Assignor further agrees (i) that while a secured party
hereunder, Lender shall have no obligation or responsibility to protect or
defend the Patent Collateral and Assignor shall at its own expense protect,
defend and maintain the same to the extent reasonably advisable for its
business, (ii) to use its best efforts to detect any infringers of the Patent
Collateral, to forthwith advise Lender in writing of infringements detected, and
protect, defend and maintain the Patent Collateral against any infringements,
(iii) that if Assignor fails to comply with the foregoing clauses (i) and (ii),
Lender may do so in Assignor's name or in Lender's name but at Assignor's
expense, and Assignor hereby agrees to reimburse Lender for all expenses,
including reasonable attorneys' fees, incurred by Lender in protecting,
defending and maintaining the Patent Collateral owned by Assignor, and (iv) to
use the Patents only in its businesses as they are presently conducted.
The security interest in the Patent Collateral granted
hereunder shall remain in full force and effect until the later of the
termination of the Loan Agreement and the payment and satisfaction in full of
the Obligations. At any time thereafter, Lender shall, if requested by Assignor,
execute and deliver to Assignor, or to a third party upon Assignor's
instructions, for filing with the United States Patent and Trademark Office and
in each office in which any financing statement relative to the security
interest granted hereby may have been filed, (i) documentation in accordance
with the rules and regulations of said office, (ii) termination statements under
the Uniform Commercial Code and (iii) any other documentation reasonably
requested by Assignor, all as may be necessary to release Lender's interest in
the Patent Collateral, and all at the cost and expense of Assignor.
-2-
<PAGE>
IN WITNESS WHEREOF, the Assignor has caused this Assignment to
be duly executed by its authorized officer or agent as of January ___, 1996.
EDITEK, INC.
By:
Title:
Attest:
Title:
[CORPORATE SEAL]
STATE OF GEORGIA )
) ss.:
COUNTY OF FULTON )
On this ___ day of January, 1996, before me personally came
___________________ and _____________________, to me known, who, being by me
duly sworn, did depose and say that they are, respectively, the
____________________and _____________________ of EDITEK, INC., the corporation
described herein and which executed the foregoing instrument; that they know the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation and that they signed thereto by like order.
Sworn to and subscribed before
me this ___ day of January, 1996.
Notary Public
[NOTARIAL SEAL]
My Commission Expires:
-3-
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Patent
Patent Name Number Issue Date
<S> <C> <C>
Rapid Radioimmunoassay Product and Method of Making and 4,399,229 08/16/83
Using Same
Rotary Fluid Manipulator 4,938,927 07/03/90
Rotary Fluid Manipulator 5,141,875 08/25/92
Test Kit for Determining the Presence of Organic 4,900,663 02/13/90
Materials and Method of Utilizing Same
Test Kit for Determining the Presence of Organic 5,240,844 08/13/93
Materials and Method of Utilizing Same
Suspension Liquid Separator 4,696,797 09/29/87
Multi-Layered Test Card for the Determination of 5,202,268 04/13/93
Substances in Liquids
Device for Analysis for Constituents in Biological Fluids 5,435,970 07/25/90
Animal Cage and Method 4,593,650 06/10/86
Method for Preserving Plated Media and Products 4,709,819 12/01/87
</TABLE>
-4-
<PAGE>
<PAGE>
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
STATE OF GEORGIA )
) SS.:
COUNTY OF FULTON )
WHEREAS, EDITEK, INC., a Delaware corporation (the
"Assignor"), has adopted, used and is using marks which are either registered or
applied for in the United States Patent and Trademark Office as set forth on
Exhibit A (the "Trademarks"), and
WHEREAS, the Assignor is the sole owner of the entire right,
title and interest in and to the Trademarks which are registered and the
goodwill of the business symbolized by the Trademarks and the registrations
thereof, and
WHEREAS, Assignor has entered into that certain Loan and
Security Agreement, dated of even date (as amended, supplemented or restated
from time to time, the "Loan Agreement"), between Assignor, certain of its
affiliates and HELLER FINANCIAL, INC., a Delaware corporation ("Lender"), and
Lender has, on the date hereof, made certain loans to or for the benefit of
Assignor and may make additional loans to or for the benefit of Assignor, and
WHEREAS, pursuant to the Loan Agreement and as a condition
precedent to the extension of the financial accommodations to or for the benefit
of the Assignor under the Loan Agreement, the Assignor has agreed to assign to
Lender and to grant to Lender a continuing security interest in, and a
continuing lien on, all of the Assignor's right, title and interest in and to
the following (collectively the "Trademark Collateral"),
(a) the Trademarks, together with all rights, benefits and
privileges derived therefrom, and the goodwill of the business
symbolized by the Trademarks and the registrations thereof, and
(b) all proceeds thereof, including, but not limited to, any
claims and demands arising out of any infringement of the Trademarks,
including the right to settle disputes concerning such claims and
demands.
NOW, THEREFORE, in order to induce Lender to consummate the
financial accommodations to the Assignor provided for in the Loan Agreement, and
for other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the Assignor does hereby assign to Lender and grant to
Lender a continuing security interest in and a continuing lien on, the entire
right, title and interest of Assignor in and to the Trademark Collateral.
<PAGE>
The Trademark Collateral shall serve as collateral security to Lender
for the payment and performance of the Obligations (as such term is defined
in the Loan Agreement)and shall constitute a part of the Collateral (as such
term is defined in the Loan Agreement), and shall be subject to all of
the terms and conditions of the Loan Agreement, which is incorporated
herein by reference.
Unless and until said lien and security interest is foreclosed
upon, Assignor (i) shall be deemed to remain in exclusive and undisturbed
possession of the Trademarks, (ii) shall exclusively retain all rights to
license others under the Trademarks, but only in a manner consistent with the
preservation of their current substance, validity, registration and the security
interest granted herein, and (iii) may bring suit for the infringement of the
Trademarks and to retain the proceeds of the foregoing. Lender need not be
joined as a plaintiff in any such infringement suit; provided, that should it be
necessary, in Lender's sole judgment, that Lender be joined as an indispensable
party or true party in interest in any such infringement suit, Lender shall, at
its option, either
(1) appoint Assignor its attorney in fact for the purpose of
prosecuting such infringement suit on the express condition that
Assignor indemnify and hold Lender harmless for any liability incurred
by Lender as a result of such appointment, or
(2) participate actively in the prosecution of such suit.
Assignor further agrees (i) that while a secured party
hereunder, Lender shall have no obligation or responsibility to protect or
defend the Trademark Collateral and Assignor shall at its own expense protect,
defend and maintain the same to the extent reasonably advisable for its
business, (ii) to use its best efforts to detect any infringers of the Trademark
Collateral, to forthwith advise Lender in writing of infringements detected, and
protect, defend and maintain the Trademark Collateral against any infringements,
(iii) that if Assignor fails to comply with the foregoing clauses (i) and (ii),
Lender may do so in Assignor's name or in Lender's name but at Assignor's
expense, and Assignor hereby agrees to reimburse Lender for all expenses,
including reasonable attorneys' fees, incurred by Lender in protecting,
defending and maintaining the Trademark Collateral owned by Assignor, and (iv)
to use the Trademarks only in its businesses as they are presently conducted.
The security interest in the Trademark Collateral granted
hereunder shall remain in full force and effect until the later of the
termination of the Loan Agreement and the payment and satisfaction in full of
the Obligations. At any time thereafter Lender shall, if requested by Assignor,
execute and deliver to Assignor, or to a third party upon Assignor's
instructions, for filing with the United States Patent and Trademark Office and
in each office in which any financing statement relative to the security
interest granted hereby may have been filed, (i) documentation in accordance
with the rules and regulations of said office, (ii) termination statements under
the Uniform Commercial Code and (iii) any other documentation reasonably
requested by Assignor, all as may be necessary to release Lender's interest in
the Trademark Collateral, and all at the cost and expense of Assignor.
-2-
<PAGE>
IN WITNESS WHEREOF, the Assignor has caused this Assignment to
be duly executed by its authorized officer or agent as of January ___, 1996.
<PAGE>
EDITEK, INC.
By:
Title:
Attest:
Title:
[CORPORATE SEAL]
STATE OF GEORGIA )
) ss.:
COUNTY OF FULTON )
On this ___ day of January, 1996, before me personally came
___________________ and _____________________, to me known, who, being by me
duly sworn, did depose and say that they are, respectively, the
____________________and _____________________ of EDITEK, INC., the corporation
described herein and which executed the foregoing instrument; that they know the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation and that they signed thereto by like order.
Sworn to and subscribed before me
this ___ day of January, 1996.
Notary Public
[NOTARIAL SEAL]
-3-
<PAGE>
My Commission Expires:
-4-
<PAGE>
EXHIBIT A
TRADEMARK REGISTRATION NUMBER REGISTRATION DATE
EDITEK 1,879,044 02/14/95
BIOMAN 363,506 11/10/89
LOGO 1,374,423 12/10/85
QUIK-CARD 1,387,168 03/25/86
EZ-SCREEN 1,412,788 10/14/86
DAIRISCREEN 1,629,710 01/01/91
DAIRYSCREEN 1,629,709 01/01/91
VERDICT 1,771,281 05/18/93
PREDICT 1,877,141 01/31/95
RECON 1,847,306 07/26/94
EZ-QUANT 1,917,508 09/12/95
<PAGE>
<PAGE>
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
STATE OF GEORGIA )
) SS.:
COUNTY OF FULTON )
WHEREAS, PRINCETON DIAGNOSTIC LABORATORIES OF AMERICA, INC., a
Delaware corporation (the "Assignor"), has adopted, used and is using marks
which are either registered or applied for in the United States Patent and
Trademark Office as set forth on Exhibit A (the "Trademarks"), and
WHEREAS, the Assignor is the sole owner of the entire right,
title and interest in and to the Trademarks which are registered and the
goodwill of the business symbolized by the Trademarks and the registrations
thereof, and
WHEREAS, Assignor has entered into that certain Guaranty dated
of even date (as amended, supplemented or restated from time to time, the
"Guaranty") in favor of HELLER FINANCIAL, INC., a Delaware corporation
("Lender"), and
WHEREAS, as a condition precedent to the extension of the
financial accommodations to or for the benefit of certain affiliates of the
Assignor pursuant to the Loan Agreement (as defined in the Guaranty), the
Assignor has agreed to assign to Lender and to grant to Lender a continuing
security interest in, and a continuing lien on, all of the Assignor's right,
title and interest in and to the following (collectively the "Trademark
Collateral"),
(a) the Trademarks, together with all rights, benefits and
privileges derived therefrom, and the goodwill of the business
symbolized by the Trademarks and the registrations thereof, and
(b) all proceeds thereof, including, but not limited to, any
claims and demands arising out of any infringement of the Trademarks,
including the right to settle disputes concerning such claims and
demands.
NOW, THEREFORE, in order to induce Lender to consummate the
financial accommodations to certain affiliates of the Assignor as provided in
the Loan Agreement, and for other good and valuable consideration, receipt and
sufficiency of which are hereby acknowledged, the Assignor does hereby assign to
Lender and grant to Lender a continuing security interest in and a continuing
lien on, the entire right, title and interest of Assignor in and to the
Trademark Collateral. The Trademark Collateral shall serve as collateral
security to Lender for the payment
<PAGE>
and performance of the obligations of the Assignor under the Guaranty
and for the payment and performance of the Obligations (as such term is
defined in the Loan Agreement) and shall constitute a part of the Collateral
(as such term is defined in the Loan Agreement), and shall be subject to all
of the terms and conditions of the Loan Agreement, which is incorporated
herein by reference.
Unless and until said lien and security interest is foreclosed
upon, Assignor (i) shall be deemed to remain in exclusive and undisturbed
possession of the Trademarks, (ii) shall exclusively retain all rights to
license others under the Trademarks, but only in a manner consistent with the
preservation of their current substance, validity, registration and the security
interest granted herein, and (iii) may bring suit for the infringement of the
Trademarks and to retain the proceeds of the foregoing. Lender need not be
joined as a plaintiff in any such infringement suit; provided, that should it be
necessary, in Lender's sole judgment, that Lender be joined as an indispensable
party or true party in interest in any such infringement suit, Lender shall, at
its option, either
(1) appoint Assignor its attorney in fact for the purpose of
prosecuting such infringement suit on the express condition that
Assignor indemnify and hold Lender harmless for any liability incurred
by Lender as a result of such appointment, or
(2) participate actively in the prosecution of such suit.
Assignor further agrees (i) that while a secured party
hereunder, Lender shall have no obligation or responsibility to protect or
defend the Trademark Collateral and Assignor shall at its own expense protect,
defend and maintain the same to the extent reasonably advisable for its
business, (ii) to use its best efforts to detect any infringers of the Trademark
Collateral, to forthwith advise Lender in writing of infringements detected, and
protect, defend and maintain the Trademark Collateral against any infringements,
(iii) that if Assignor fails to comply with the foregoing clauses (i) and (ii),
Lender may do so in Assignor's name or in Lender's name but at Assignor's
expense, and Assignor hereby agrees to reimburse Lender for all expenses,
including reasonable attorneys' fees, incurred by Lender in protecting,
defending and maintaining the Trademark Collateral owned by Assignor, and (iv)
to use the Trademarks only in its businesses as they are presently conducted.
The security interest in the Trademark Collateral granted
hereunder shall remain in full force and effect until the later of the
termination of the Loan Agreement and the payment and satisfaction in full of
the Obligations and the obligations of the Assignor under the Guaranty. At any
time thereafter Lender shall, if requested by Assignor, execute and deliver to
Assignor, or to a third party upon Assignor's instructions, for filing with the
United States Patent and Trademark Office and in each office in which any
financing statement relative to the security interest granted hereby may have
been filed, (i) documentation in accordance with the rules and regulations of
said office, (ii) termination statements under the Uniform Commercial Code and
(iii) any other documentation reasonably requested by Assignor, all as may be
necessary to release Lender's interest in the Trademark Collateral, and all at
the cost and expense of Assignor.
-2-
<PAGE>
IN WITNESS WHEREOF, the Assignor has caused this Assignment to
be duly executed by its authorized officer or agent as of January ___, 1996.
PRINCETON DIAGNOSTIC
LABORATORIES OF AMERICA, INC.
By:
Title:
Attest:
Title:
[CORPORATE SEAL]
STATE OF GEORGIA )
) ss.:
COUNTY OF FULTON )
On this ___ day of January, 1996, before me personally came
___________________ and _____________________, to me known, who, being by me
duly sworn, did depose and say that they are, respectively, the
____________________and _____________________ of PRINCETON DIAGNOSTIC
LABORATORIES OF AMERICA, INC., the corporation described herein and which
executed the foregoing instrument; that they know the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation and that they
signed thereto by like order.
Sworn to and subscribed before me
me this ___ day of January, 1996.
Notary Public
-3-
<PAGE>
[NOTARIAL SEAL]
My Commission Expires:
-4-
<PAGE>
EXHIBIT A
TRADEMARK REGISTRATION NUMBER REGISTRATION DATE
PDLA 1,477,191 02/16/88
AMENDMENT NO. 2 TO LEASE
DATED AS OF MARCH 5, 1992 BETWEEN
MEDTOX LABORATORY, INC., A MINNESOTA CORPORATION ("TENANT")
AND
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY,
(FORMERLY PHOENIX MUTUAL LIFE INSURANCE COMPANY)
A NEW YORK CORPORATION ("LANDLORD")
THIS AGREEMENT IS MADE AND ENTERED INTO this 27th day of June. 1994, by
and between Phoenix Home Life Mutual Insurance Company ("Landlord") and Medtox
Laboratories, Inc., a Minnesota Corporation ("Tenant") for the purpose of
amending that certain Lease Agreement ("the Lease") entered into between the
Landlord and Tenant on March 5, 1992, covering the premises presently occupied
by Tenant at 402 West County Road D, New Brighton, Minnesota.
WHEREAS, Landlord and Tenant amended said Lease (Amendment No. 1 -
March 12, 1993), expanding the premises by 9,989 square feet to a total of
37,630 square feet.
WHEREAS, Landlord and Tenant hereby agree that the lease shall be
further amended as follows:
1. Article 1: Description of Premises. The Leased Premises shall remain at Suite
402, County Road D and 35W, New Brighton, Minnesota, but the square footage
shall be increased by 3,387 square feet by adding Suite 382 (shown on attached
Exhibit) for a total amended square footage of 41,017 square feet. The Premises
now includes Suites 108, 410, 412, 414 and 382 as shown on the attached Exhibit.
2. Article 2: Term and Base Rent. Effective October 1, 1994, Tenant agrees to
pay a Base Rent during the remainder of the term of the Lease on the following
rent schedule:
Months Monthly Base Rent
10/1/94 - 3/31/97 $27,501.43
3. Additional Rent. Effective October 1, 1994, the Additional Rent shall be
calculated on 41,017 square feet.
4. Tenant Improvement Allowance. None; Tenant accepts Premises in "As Is"
condition.
7. Except as expressly provided herein above, the Lease remains in full force
and effect and has not been otherwise amended.
TENANT: LANDLORD:
Medtox Laboratories, Inc. Phoenix Home Life Mutual Insurance Co.
By: /s/ James S. Arrington By: /s/ Donald P. Maurus
Its: Chairman & CEO Its: Managing Director
<PAGE>
EXHIBIT
INTERSTATE 35W
(New Brighton Business Plaza Floor Plan appears here)
<PAGE>
AMENDMENT NO. 1 TO LEASE
DATED AS OF MARCH 5, 1992 BETWEEN
MEDTOX LABORATORY INC., A MINNESOTA CORPORATION ("TENANT")
AND
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY,
(FORMERLY PHOENIX MUTUAL LIFE INSURANCE COMPANY)
A NEW YORK CORPORATION ("LANDLORD")
THIS AGREEMENT IS MADE AND ENTERED INTO this 12th day of March , 1993
by and between Phoenix Home Life Mutual Insurance Company ("Landlord") and the
Medtox Laboratories Inc., a Minnesota Corporation ("Tenant) for the purpose of
amending that certain Lease Agreement ("the Lease") entered into between the
Landlord and Tenant on March 5, 1992 covering the premises presently occupied by
Tenant at 402 West County Road D, New Brighton, Minnesota.
The Landlord and Tenant hereby agree that the lease shall be amended as follows:
1. Article 1: Description of Premises. The Leased Premises shall remain at Suite
402, County Road D and 35W, New Brighton, Minnesota, but the square footage
shall be increased by 9,989 square feet (Suites 108, 410, 412 and 414) for a
total amended square footage of 37,630 square feet. The Leased Premises as
changed and amended are depicted on the building plans attached hereto as
Exhibit A-2 and said A-2 shall replace Exhibit Al originally attached to the
Lease.
2. Article 2: Term and Base Rent. The Tenant agrees to pay Base Rent during the
remainder of the term of the Lease on the following rent schedule:
Months Monthly
4/1/93 to 7/31/93 $18,749.81
8/1/93 to 2/28/94 $25,525.68
3/1/94 to 3/31/94 $0.00
4/1/94 to 3/31/97 $25,525.68
3. Additional Rent. Effective April 1, 1993, the Additional Rent shall be
calculated on 37,630 square feet.
4. Tenant Improvement Allowance. Tenant shall be given a Tenant Improvement
Allowance not to exceed the sum of $86,673.00 (9,989 sf. x $8.68 p.s.f) which
shall be paid to Tenant upon completion of the following conditions.
b. Medtox will provide Landlord a list of all contractors, subcontractors. and
vendors performing work on the project. Such list shall include contractor's
name. address, phone number, description of work performed. and name of contact
person.
c. Medtox will provide a copy of approved building permit.
d. Medtox will provide a certificate of occupancy from the City upon completion
of work.
e. Medtox will provide final lien waivers from all contractors and
subcontractors indicating final contract amount and full release of lien rights
contingent upon final payment
<PAGE>
5. Tenant/Contractor Construction Amendment. In conjunction with approval from
Landlord for the Tenant to directly perform construction activities, and prior
to the commencement of any construction, Tenant agrees to provide the following
information:
a. Contractor's Certificate of Insurance shall be forwarded to Landlord for
approval. Insurance limits and certificate shall be on forms acceptable to
Landlord.
b. A project construction schedule shall be provided to Landlord.
Tenant also agrees to perform work to the standards set forth below:
a. All roof penetrations shall be installed per details provided or approved by
Landlord.
b. All roof penetrations shall be inspected by representative of Landlord, and
any cost associated with said inspection shall be paid for by the Landlord.
c. All remaining paint, wallcovering, carpet, etc. shall be removed at
completion of construction unless Tenant specifically requests material to be
saved and stored within Tenant's Leased Premises.
Upon completion of she project, the following information shall be submitted to
Landlord:
a. Copies of all project change orders approved by Tenant.
b. Copies of project punchlist indicating all items are complete and
satisfactory to Tenant
c. As-built drawings documenting any changes made during the project.
d. Operation and maintenance manuals including warranties for all appropriate
equipment
e. Air balancing report from mechanical contractor certifying all diffusers have
been properly adjusted and all equipment has been inspected.
6. Security Deposit. Tenant agrees to provide Landlord with a current financial
statement on or before four (4) months after hue end of their fiscal year as
defined as December 31. If after reviewing said financial statement. Tenant's
net worth is less than $1,500,000, Tenant agrees upon Landlord's request to
provide Landlord with one month's base rent totaling $25,525.68 to be held as a
security deposit.
7. Except as expressly provided herein above. the Lease remains in full force
and effect and has not been otherwise amended.
This Lease Amendment is contingent upon a mutually executed Amendment between
Phoenix Home Life Mutual Insurance Company (Landlord) and The Pacesetter
Corporation (Tenant) providing for Pacesetter to vacate Suite 108 in Building
"A."
LANDLORD: TENANT:
Phoenix Home Life Mutual Insurance Co. Medtox Laboratories Inc.
By: /s/ Donald P. Maurus By: Kingsley R. Labrosse
Its: Managing Director Its: President
North Central Region
By:
Its:
<PAGE>
EXHIBIT A-2
(Amended New Brighton Business Plaza Floor Plan appears here)
<PAGE>
STANDARD LEASE AGREEMENT
FOR OFFICE/SERVICE SPACE
This lease, made this ________ day of ____________, 19___ by and between Phoenix
Mutual Life insurance Company, a Connecticut corporation, (hereinafter called
the "Landlord"), and MEDTOX Laboratories, Inc. (hereinafter called "Tenant").
WITNESSETH
ARTICLE 1 - DESCRIPTION OF PREMISES
Landlord, in consideration of the rents and covenants herein contained,
hereby leases the following to wit: 27,641 square feet of space in Suite 402 of
an office and Warehouse building ("The Building") located at County Road D &
35W, New Brighton, MN Minnesota as outlined in red on Exhibit "A-1" to this
Lease Agreement said space hereinafter called the "Premises", having the
approximate areas: _______ square feet of office space _____ square feet of
warehouse, storage or service space. Appurtenant to the Premises shall be a
non-exclusive license for access to and use of the common areas of New Brighton
Business Center including without limitation the parking lots and driveways
thereon (together hereinafter "the Parking Area").
ARTICLE 2 - TERM AND BASE RENT
TO HAVE AND TO HOLD the Premises together with all appurtenant rights
and privileges, unto Tenant for a term of 60 months, commencing on the day of
April 1, 1992, and terminating ________ on the 31 day of March, 1997
(hereinafter called the "Term"), Tenant to pay during the Term a monthly minium
rent ("Minimum Rent") of _________________________ Dollars ($18,749.81) payable
in advance on the first day of each calendar month or any extension or renewal
thereof; provided, that said commencement and termination dates are specifically
subject to the provisions of Article 4 hereof. In the event of any fractional
calendar month. Tenant shall pay for each day in such partial month a rental
equal to 1/30 of said base rent. The monthly base rent together with any
additional rent payable hereunder, shall be paid in advance without demand on
the first of each month during the Lease Term to Landlord's Agent at its office
at United Properties Brokerager and Management Company, NW 9044, P.O. Box 1450,
Minneapolis, MN 55485, or at such other address as tenant shall be advised to
use by Landlord.
ARTICLE 3 - USE OF PREMISES
The Premises shall be used by Tenant for office/tech/laboratory/whse
and for no other purpose, subject to all regulations imposed by local state or
other governmental agencies and subject to rules and regulations which may be
promulgated by Landlord.
ARTICLE 4 - CONSTRUCTION AND POSSESSION
If construction of the Premises is not complete at the time of
execution of this Lease, Landlord agrees to complete such construction in
accordance with Exhibit A-2, which shall be attached hereto and made a part
hereof. If Landlord for any reason cannot deliver possession of the Premises to
Tenant at the commencement of the term hereof. Landlord shall not be liable to
Tenant for any loss or damage resulting therefrom nor shall such failure affect
the validity of this lease or the obligations of Tenant hereunder and shall
automatically extend the term of this Lease by the number of days that
possession is so delayed (unless Tenant chooses to accept possession prior to
completion, in which case the term shall commence from the date of
possession and full rental shall be payable from the date of possession). The
premises shall be considered to be ready to be delivered to the Tenant when the
Premises are substantially completed and generally suitable for occupancy. In
the event that the Tenant has undertaken to complete some of the finishing in
the Premises, unavailability of materials order independently by the Tenant for
installation in the Premises or any other inability on the Tenant's part to
complete that work shall not be considered a reason for the Tenant to delay
possession and hence delay and/or avoid payment of rent. If Landlord permits
Tenant to occupy the Premises prior to the commencement date of the term hereof,
such occupancy shall be subject to all of the previsions of this Lease, but
early possession shall not advance the expiration date set forth herein.
ARTICLE 5 - ADDITIONAL RENT
A. Tenant shall pay to Landlord as Additional Rent throughout the term
its pro rata share of real estate taxes and operating expenses.
(1.) Real Estate: Taxes Tenant shall pay its pro rata share of the Real
Estate Taxes. The term "Real Estate Taxes" herein shall mean all real estate
taxes, all assessments, and any taxes in lien thereof or any tax that may be
levied assessed or imposed which may become due or payable against or by the
Building or the parcel of land upon which it is constructed. All costs and
expenses incurred by Landlord during negotiations for or contests of the amount
of Real Estate Taxes shall be include within the term "Real Estate Taxes".
Tenant shall pay to Landlord, in each year during the Term of this Lease
Agreement and any extension or renewal thereof, Tenant's proportionate share of
all Real Estate Taxes paid by Landlord in that year. Any tax year commencing
during any lease year shall be deemed to correspond to such lease year. In the
event the taxing authorities include in the Real Estate Taxes the value of any
of machinery, equipment, fixtures, inventory or other personal property or asset
of Tenant, then Tenant shall pay all the taxes attributable to such items in
addition to its addition to its proportionate share of said aforementioned Real
Estate Taxes.
(2.) Common Area Operating Expense: Tenant shall pay its pro rate share
of the annual aggregate Common Area Operating Expenses ("Operating Expense")
incurred by Landlord in the operation, maintenance and repair of the Building,
the Parking Area and the parcel of land on which they are locate. The term
"Operating Expense" herein shall include but not be limited to maintenance,
operator, repair, replacement and care of all heating, lighting and plumbing
fixture in or severing common areas and of all equipment, systems, roofs,
exterior glass, landscaped areas, signs, Building exteriors (non-structural) and
parking lots, all payments by Landlord for snow removal, refuse removal
insurance premiums, management fees, wages and fringe benefits of personnel
employed for the aforesaid work and proportionate costs of equipment purchases
and used for such purposes; and the cost (amortized over such reasonable period
as Landlord shall determine) of any capital improvements made to the building by
Landlord after commencement of the Term which result in a reduction of Operating
Expenses or which are required under any governmental law or regulation that was
not applicable to the Building at the time it was constructed. Tenant shall pay
for all water, gas heat, light, power, and other utilities and services supplied
to the Premises, together with any taxes thereon. If any such services are not
separately metered to Tenant then Tenant shall pay a pro ratable share of all
charges jointly metered with other portions of the Building such ratable share
to be calculated as the ratio of the tenant's gross rentable area to the total
gross renewable area of the Building.
B. In the event the Term shall begin or expire at any time during the
calendar year. Tenant shall be responsible for his pro rata share of Additional
Rent under subdivisions 1 and 2 of paragraph A for such partial year.
<PAGE>
C. Prior to commencement of this Lease Agreement and prior to the
commencement of each calendar year thereafter commencing during the Term or any
renewal or extension thereof. Landlord may estimate for the following calendar
year, or portion, thereof remaining. Tenant's share of Real Estate Taxes and
Operating Expenses and the ___ Rent payable by Tenant during such calendar year
to cover those charges or a current basis. Such estimates will be in wrong and
will be delivered or mailed to Tenant at the Premises. The Additional Rent so
estimated shall be payable by Tenant an equal monthly installments, an advance,
on the first day of each month during such calendar year. In the event that each
estimate is delivered to Tenant after the fist day of January of such calendar
year, the estimated Additional Rent for that year shall be payable as Additional
Rent in equal monthly installments, in advance, on the first day of each month
over the balance of such calendar year, with the number of installments being
equal to the number of full calendar months remaining in such calendar year
after delivery of the estimate.
D. For purposes of this Article Tenant's "pro rata share" shall be
determined as the ratio of the local rentable square feet in the Premises to the
total rentable square feet in the Building.
E. Upon completion of each calendar year during the Term or any renewal
or extension thereof. Landlord shall determined the actual amount of the Real
Estate Taxes and Operating Expenses payable by Tenant in such calendar year and
deliver a written certification of the amounts thereof to Tenant. If Tenant has
underpaid its proportionate share of Real Estate Taxes or Operating Expenses for
such calendar year, Tenant shall pay the balance thereof within ten (10) days
after the receipt of such statement. If Tenant has overpaid the same, Landlord
shall either (i) refused such excess, or (ii) credit such excess against the
next monthly installment of Additional Rent payable by Tenant. A pro rata
adjustment shall be made for a fractional calendar year occurring during the
Term of this Lease Agreement or any renewal or extension thereof based upon the
number of days of the Term of the Lease Agreement during said calendar year as
compared to three hundred sixty-five (365) days and all additional sums payable
by Tenant or credit due Tenant as a result of the provisions of this Article 5
shall be adjusted accordingly.
F. Landlord reserves, and Tenant hereby assigns to Landlord, the sole
and exclusive right to contest, protest, petition for review, or otherwise seek
a reduction in the Real Estate Taxes.
ARTICLE 6 - TENANTS RESPONSIBILITY, CARE OF PREMISES AND UTILITIES
A. In addition to section 2 above, Tenant shall be responsible for the
maintenance of the Premises, including but not limited to maintenance, repair or
replacement of entrance doors, overhead garage doors, truck dock doors, heating,
plumbing, electrical, mechanical and air conditioning fixtures, and equipment
used by Tenant.
B. Maintenance of heating, mechanical and air conditioning fixtures and
equipment shall specifically include the reasonable cost of quarterly
inspections and repairs preformed by Landlord's own engineers and by an
independent mechanical contractor who shall be contracted for by Landlord said
cost to be included in Operating Expenses under Article 5 of this Lease
Agreement.
C. Tenant shall pay for and provide for trash removal unless Landlord
chooses to use a single trash removal company for the property and allocate the
prorata share of the cost to the Tenant. Tenant shall use the dumpster provided
by Landlord or trash removal company and shall not leave or store any materials
or trash on the grounds, in the Parking Areas or in any common areas. If
Landlord makes a trash room or area available to the Tenant in the building.
Tenant shall dispose of its trash in said room or area if so requested by
Landlord.
D. Tenant shall be responsible for prompt and adequate removal of
snow, ice and other hazardous conditions accumulating or occurring on all
sidewalk and walkways between the Premises and the Parking Areas and/or
street.*
E. Tenant further agrees (a) to keep the Premises in as good condition
and repair as it was in at the time that Tenant took possession of same
reasonable wear and tear and damage from fire and other casualty for which
insurance is normally procured excepted; (b) to keep the Premises in a clean and
sanitary condition; (c) not to commit any nuisance or waste on the Premises,
throw foreign substances in plumbing facilities, or waste any of the utilities
furnished by Landlord; (d) not to obstruct entries, halls, stairways,
lavatories, or other common areas not use the same for anything other than
their intended purposes; (e) and (f) that the use of the Premises, Parking
Areas and the common areas shall be subject to such reasonable Rules and
Regulations as may be procumlgated by Landlord for the comfort and
convenience of the owners, occupants, and visitors of the Building.
F. If Tenant shall fail to keep and preserve the Premises in the state
of condition required by the provisions of this Lease Agreement, Landlord may,
at its option, put or cause the same to be put in the condition and state of
repair agreed upon, and in such case, Tenant shall pay the cost thereof.
G. Tenant shall pay when due all charges for sewer usage or rental,
garbage disposal, refuse removal, water, electricity, gas, fuel oil, L.P. Gas
telephone and/or other utility services or energy source furnished to the
Premises during the Term or any renewal or extension thereof.
* Landlord shall remove snow one inch or greater from sidewalk.
ARTICLE 7 - LANDLORD'S RESPONSIBILITIES AND QUIET ENJOYMENT
Landlord shall at its own expense keep in good order, safe condition
and repair the structural parts of the Building including the outer walls roof
foundation, and interior support columns, except that Tenant shall be
responsible for the cost of the repairs that are caused by the fault or
negligence of Tenant its employees, or invites. Landlord warrants that it has
full right to execute and to perform this Lease Agreement and to grant the
estate ___ and that Tenant, upon payment of the rents and other amounts due and
the performance of all the terms, conditions, covenants and agreements on
Tenant's part to be observed and performed under this Lease Agreement, may
peaceably and quietly enjoy the Premises for the uses permitted hereunder,
subject, nevertheless, to the terms and conditions of this Lease Agreement.
ARTICLE 8 - ESTOPPEL CERTIFICATES
A. Each party hereto agrees that at any time, and from time to time
during the Term (but not more often than twice in each calendar year), within
ten (10) days after request by the other party hereto, it will execute,
acknowledge and deliver to such other party or to any prospective purchase,
assignee or mortgage designated by such other party, an estoppel certificate in
a form acceptable to Landlord.
ARTICLE 9 - NON PERMITTED USE
Tenant agrees not to commit or permit any act to be performed on the
Premises or any omission to occur which will be in violation of any statute,
regulation, or ordinance of any governmental body or which will increase the
insurance rates on the Building or which will be in violation of any insurance
policy carried on the Premises by Landlord. Tenant shall not disturb other
occupants of the Building by making any undue or unseemly noise and shall not do
or permit to be done in or about the Premises anything which will be dangerous
to life or limb. Tenant warrants and represents it shall not nor shall it permit
the storage, production, use or disposal of hazardous wastes or substances (as
defined under Federal or State law) in or around the Premises Building or
Parking Areas. Tenant's indemnification in the next Article shall be deemed to
include any breach of this representation and warranty. There shall be no sale
of food or beverages by mobile facility or otherwise on the Premises without the
written consent of Landlord. Tenant further agrees not to use or permit the use
by its employees or visitors of the Parking Areas for the overnight storage of
vehicles.
<PAGE>
ARTICLE 10 - INSURANCE AND INDEMNITY
A. Tenant shall maintain in full force and effect during the Term a
policy of public liability insurance under which Landlord is named additional
insured. The maximum limits of liability of such insurance shall be $1,000,000.
This limit shall apply per ___. Said insurance also provides for contractual
liability coverage by endorsement. Tenant further covenants and agrees to
indemnify and hold Landlord and Landlord's manager of the Building harmless from
any claim, loss or damage, including reasonable attorney's fees, suffered by
Landlord. Landlord's manager or Landlord's other tenants caused by any act or
omission of Tenant. Tenant's employees or anyone claiming through or by Tenant
in, at or around the Premises or the Building. If Tenant shall not comply with
its covenants made in this Article 10, Landlord may, at its option, cause
insurance as aforesaid to be issued, and in such event Tenant agrees to pay the
premium for such insurance promptly upon Landlord's demand.
B. Landlord shall carry and cause to be in full force and effect a fire
and extended coverage insurance policy on the Building but not contents owned,
leased to or otherwise in possession of Tenant. The cost of such insurance shall
be as an Operating Expense as defined in Article 5 of this Lease Agreement.
C. Landlord and Tenant each waives any and all rights of recovery
against the other or against the officers, employees, agents, and
representatives of the other, for loss of or damage to such waivering party or
property or the property of others under its control, where such loss or damage
is insured against under any insurance policy in force at the time of such loss
or damage.
ARTICLE 11 - NON-LIABILITY OF LANDLORD AND LANDLORD'S AGENTS
In the absence of fraud, no person, firm, or corperation, or the heirs,
legal representatives, successors and assigns, respectively, thereof, executing
this lease on Landlord's behalf as agent, trustee or in any other representative
capacity shall ever be deemed or held individually liable hereunder for any
reason or cause whatsoever. Landlord's liability under this lease shall not
extend to any of Landlord's assets or property other than the Building,
but shall be limited to Landlord's interest in the Building and the underlying
real estate.
ARTICLE 12 - FIRE REPAIR
In the event of damage to the Building or the Premises by fire, the
elements, or other casualty, Landlord at its option may terminate this Lease
Agreement or repair the damage. If the damage renders the Premises untenantable
in whole or in such part that it is impracticable to conduct business therein
the rent shall wholly abate until the damage has been repaired. If the damage
renders the Premises untenantable in part but Tenant continues to occupy them in
part the rent shall be reduced in the proportion that the unoccupied portion of
the Premises bears to the entire Premises until the damage has been repaired.
ARTICLE 13 - CONDEMNATION LOSS
Should all the Premises be taken in condemnation proceedings or by
exercise of any right of eminent domain, then this Lease Agreement shall
automatically terminate as of the case the condemning authority or the authority
exercising its right of eminent domain takes possession of the Premises. If
there is a partial taking but Tenant continues to occupy the Premises in part
the rent shall be reduced in the proportion that the unoccupied part of the
Premises bears to the entire Premises. If as a result of a partial taking, the
Premises are no longer usable for the purpose(s) specified in Article 3 of this
Lease Agreement. Tenant may terminate this Lease Agreement as of the date the
condemning authority or the authority exercises its right of eminent domain and
takes possession of the Premises by giving written notice thereof to Landlord.
If there is a partial taking of the Building or other Parking Area. Landlord may
terminate this Lease Agreement as of the date specified in the foregoing
sentence by giving written notice thereof to Tenant. All damages awarded for any
such taking shall belong to and be the property of Landlord irrespective of this
basis upon which they are awarded provided, however, that nothing contained
herein shall prevent Tenant from making a separate claim to the condemning
authority for its moving expenses, trade fixtures and Tenant's loss of business.
For purposes of this Article a taking by eminent domain shall include Landlord's
giving of a deed under threat of condemnation.
ARTICLE 14 - ASSIGNMENT AND SUBLETTING
A. Tenant agrees not to assign, sublet, license mortgage or encumber
this Lease Agreement the Premises or any part thereof, whether by voluntary act
operation of law, or otherwise, without the specific prior written consent of
Landlord in each instance. If Tenant is a corporation or partnership, transfer
of a controlling interest of Tenant shall be considered an assignment of this
Lease Agreement for purposes of this Article. Consent by Landlord in one such
instance shall not be a waiver of Landlord in one such instance shall not be a
waiver of Landlord's rights under this Article as to requiring consent for any
subsequent instance. In the event Tenant desires to sublet a part or all of the
Premises, or assign this Lease Agreement. Tenant shall give written notice to
Landlord at lease thirty (30) days prior to the proposed subletting or
assignment, which notice shall state the name of the proposed subtenant or
assignee, the terms of any sublease or assignment documents and copies of
financial reports or other relevant financial information of the proposed
subtenant or assignee. At Landlord's option, any and all payments by the
proposed assignee or sublessee with respect to the assignment or sublease shall
be paid directly to Landlord. In any event, no subletting or assignment shall
release Tenant of its obligation to pay the rent and to perform all other
obligations to be performed by Tenant hereunder for the Term of this Lease
Agreement. The acceptance of rent by Landlord from any other person shall not be
deemed to be a waiver by Landlord of any provision hereof. At Landlord's option,
Landlord may terminate the Lease Agreement in lien of giving it's consent to any
proposed assignment of this Lease Agreement or subletting of the Premises (which
termination may contingent upon the execution of a new lease with the proposed
assignee or subtenant).
B. Landlord's right to assign this Lease Agreement is and shall remain
unqualified upon any sale or transfer of the Building and, providing the
purchaser succeeds to the interest of Landlord under this Lease Agreement.
Landlord shall thereupon be entirely freed of all obligations of the Landlord
hereunder and shall not be subject to any liability resulting from any act or
omission or event occurring after such conveyance.
ARTICLE 15 - MECHANICS LIENS
In the event any mechanic's lien shall at any time be filed against the
Premises or any part of the Building by reason of work labor, services or
materials performed or furnished to Tenant or to anyone holding the Premises
through or under Tenant. Tenant shall forthwith cause the same to be discharged
of record. If Tenant shall fail to cause such lien forthwith to be discharged
within five (5) days after being notified of the filing thereof ___ in addition
to any other right or remedy for Landlord. Landlord may, but shall not be
obligated to discharge the same by paying the amount claimed to be due or by
bonding and the amount so paid by Landlord and all costs and expenses, including
reasonable attorney's fees incurred by Landlord in procuring the discharge of
such lien, shall be due and payable in full by Tenant to Landlord on demand.
<PAGE>
ARTICLE 16 - SURRENDER
On the last day of the Term or upon the sooner termination thereof,
Tenant shall peaceably surrender the Premises in good condition and repair
consistent with Tenant's duty to make repairs as provided in Article 6 hereof.
On or before the last day of the Term or the sooner termination thereof, Tenant
shall at its expense remove all of its equipment and other personal property
from the Premises, repairing any damage caused thereby, and any property not
removed shall be deemed abandoned. At the election of Landlord, all alterations,
additions and fixtures, other than Tenant's equipment, which have been made or
installed by either Landlord or Tenant upon the Premises shall remain as
Landlord's property and shall be surrendered with the Premises as part thereof,
or Landlord may require removal or the same at the end of the Term. It is
specifically agreed that any and all telephonic, coaxial, or other computer,
wordprocessing, facsimile, or electronic wiring installed by the Tenant within
the Premises (hereafter "Wiring") shall be removed at Tenant's cost at
expiration of the Term, unless Landlord has specifically requested in writing
that said Wiring shall remain, whereupon said Wiring shall be surrendered with
the Premises as Landlord's property. If the Premises are not surrendered at the
end of the Term or sooner termination thereof. Tenant shall indemnify Landlord
against loss or liability resulting from delay by Tenant in so surrendering the
Premises, including without limitation claims made by a succeeding tenant as a
result of such delay. Tenant shall promptly surrender all keys for the Premises
to Landlord at the place then fixed for payment of rent.
ARTICLE 17 - HOLDING OVER
In the event Tenant remains in possession of the Premises after the
expiration of this Lease Agreement, whether by lapse of time or termination, and
without the execution of a new Lease Agreement, it shall be deemed to be
occupying said Premises as a tenant at sufferance. Tenant shall pay during that
time a monthly rental at the rate of 150% of the Minimum Rent plus all
Additional Rent payable hereunder, subject to all the conditions, provisions and
obligations of this Lease Agreement insofar as the same can be applicable to
said tenancy.
ARTICLE 18 - DEFAULT OF TENANT
If any one or more of the following occurs: (1) a rent payment or any
other payment due from Tenant to Landlord shall be and remain unpaid in whole or
in part for more than fifteen (15) days after same is due and payable; (2)
Tenant shall violate or default on any of the other covenants, agreements,
stipulations or conditions herein or in any other agreement between Landlord and
Tenant relating to the Premises and such violation or defaults shall continue
for a period of thirty (30) days after written notice from Landlord of such
violation or default; (3) if Tenant or any guarantor of this Lease Agreement
shall commence or have commenced against Tenant or any guarantor proceedings
under a bankruptcy, receivership, insolvency or similar types of action; or (4)
Landlord may, without process, re-enter immediately into the Leased Premises and
remove all persons and property therefrom and at its option, cancel this Lease
as to all future rights of Tenant, and regain, repossess, and enjoy the
Premises, and Tenant hereby expressly waives the right of any notice in writing
of intention to re-entry and also the right of restoration to possession of the
Leased Premises after re-entry or after judgment for possession thereof, Tenant
shall be responsible for, in addition to the rentals and other sums agreed to be
paid hereunder, the cost of any necessary maintenance, repair, restoration,
relenting (including related cost of removal or modification of tenant
improvements) or cure as well as reasonable attorney's fees incurred or awarded
in any suit or action instituted by Landlord to enforce the provisions of this
Lease Agreement, regain possession of the Premises or the collection of the
rentals due Landlord hereunder. Tenant shall also be liable to Landlord for the
payment of a late charge in the amount of 10% of rental installment or other sum
due Landlord hereunder if said payment has not been received within ten (10)
days from the date said payment becomes due and payable, or cleared by
Landlord's bank within six (6) business days after deposit. Each night or
remedy of Landlord provided for in this Lease Agreement shall be cumulative and
shall be in addition to every other right or remedy provided for in this Lease
Agreement now or hereafter existing at law or in equity or by statute or
otherwise.
ARTICLE 19 - DEFAULT OF LANDLORD
Landlord shall be deemed to be in default under this Lease Agreement
until the Tenant has given Landlord written notice specifying the nature of
the default and Landlord does not cure such default within thirty (30) days
after receipt of such notice or within such reasonable time thereafter as may be
necessary to cure such default where such default is of such a character as to
reasonably require more than thirty (30) days to cure.
ARTICLE 20 - ALTERATIONS
* See Addendum
ARTICLE 21 - SIGNAGE
The only Tenant signage permitted on or in any part of the Premises and
visible from the exterior of the Premises shall be Landlord's standard building
signage* approved and installed by Landlord at Tenant's expense. Tenant agrees
to maintain its signage in good repair, and to hold Landlord harmless from any
loss, cost, or damages resulting from the erection, existence, maintenance, or
removal of the signage. Landlord may with reasonable notice enter the Premises
at any time and, at the expense of Tenant, remove unauthorized signs without
liability for damages. Landlord may maintain any signage at the Premises or
Building and the cost of such maintenance shall be the obligation of Tenant
payable on demand. * See Addendum
ARTICLE 22 - ENTRY
Tenant agrees to provide Landlord with a list of people which Landlord
may contact in order to gain access to Tenant's space in case of an emergency.
<PAGE>
ARTICLE 23 - SUBORDINATION
It is mutually agreed that this Lease Agreement shall be subordinated
to any and all mortgages, including any renewals, modifications, consolidations,
replacements and extensions thereof now or hereafter imposed on the building by
Landlord. Tenants right to quick possession of the Premises shall not be
disturbed if Tenant is not in default and so long as Tenant shall pay the rent
and observe and perform all of the provisions of this Lease Agreement, unless
this Lease Agreement is otherwise terminated pursuant to its terms. In the event
Landlord's mortgagee wishes to waive the subordinator right set forth in this
Article, then upon written notice to Tenant, this lease shall be deemed prior in
encumbrance to said mortgage. In confirmation of such subordination or priority,
Tenant, upon request, shall promptly execute and deliver any instrument, as
required by Landlord's mortgagee.
ARTICLE 24 - GENERAL
This Lease Agreement does not create the relationship of principal and
agent or of partnership or of joint venture or of any association between
Landlord and Tenant, the sole relationship between Landlord and Tenant being
that of landlord and tenant. The submission of this Lease Agreement for
examination does not constitute a reservation of, or option for, the Premises,
and this Lease Agreement shall become effective only upon execution and delivery
thereof by Landlord and Tenant. No waiver of any default of Tenant hereunder
shall be implied from any omission by Landlord to take any action on account of
such default if such default persists or is repeated, and no express waiver
shall affect any default other than the default specified in the express waiver
and that only for the time and to the extent therein stated. The covenants of
Tenant to pay the Minimum Rent and the Additional Rent are each independent of
any other covenant, condition, provision or agreement contained in this Lease
Agreement. The marginal or topical headings of the several paragraphs and
clauses are for convenience only and do not define, limit or construe the
contents of such paragraphs or clauses. All preliminary negotiations are merged
into and incorporated in this Lease Agreement. This Lease Agreement can only be
modified or amended by an agreement in writing signed by the parties hereto. All
provisions hereof shall be binding upon the heirs, successors and assigns of
each party hereto. Any notice required to be served in writing hereunder shall
be delivered personally or sent by registered mail to Tenant at the address of
the Premises and to Landlord at the address then fixed for payment of rent. The
place at which Tenant is to pay all rent shall be designated in a separate
writing from Landlord. This Lease Agreement shall be construed under the laws of
the State of Minnesota. If Tenant is a corporation, each individual executing
this Lease Agreement on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease Agreement on behalf of
said corporation in accordance with the Bylaws of said corporation, and that
this Lease Agreement is binding upon said corporation in accordance with its
terms. No receipt or acceptance by Landlord from Tenant of less than the monthly
rent herein stipulated shall be deemed to be other than a partial payment on
account for any due and unpaid stipulated rent no endorsement or statement of
any check or any letter or other writing accompany any check or payment of rent
to Landlord shall be deemed an accord and satisfaction, and the Landlord may
accept and negotiate such check or payment without prejudice to Landlord's
rights to: (i) recover the remaining balance of such unpaid rent or (ii) pursue
any other remedy provided in this Lease Agreement. Neither party shall record
this Lease Agreement or any memorandum thereof and any such recordation shall be
a breach of this Lease Agreement, void and without effect. Time is of the
essence with respect to the due performance of the terms, covenants and
conditions herein contained.
ARTICLE 25 - SECURITY DEPOSIT
ARTICLE 26 - SUBSTITUTION
ARTICLE 27 - EXCULPATION
Tenant agrees to look solely to Landlord's interest in the Building for
the recovery of any judgment from Landlord, it being agreed that Landlord and
Landlord's partners, whether general or limited (if Landlord is a partnership)
or its directors, officers or shareholders (if Landlord is a corporation), shall
never be personally liable for any such judgment.
IN WITNESS WHEREOF, the Landlord and Tenant have caused this instrument
to be executed in duplicate the day and year first above written. Individuals
signing on behalf of a principal's warrant that they have the authority to bind
said principal.
<TABLE>
<CAPTION>
<S> <C>
TENANT: MEDTOX Laboratories, Inc. LANDLORD: PHOENIX MUTUAL LIFE INSURANCE COMPANY
By /s/ Kingsley R. Labrosse By /s/ Donald P. Maurus
Kingsley R. Labrosse Managing Director
North Central Region
By By
ITS ITS
DATE DATE 3-5-95
</TABLE>
<PAGE>
EXHIBIT A-1
(West Brighton Building Plaza Floor Plan Appears Here)
<PAGE>
ADDENDUM
Article 2 - Term and Base Rent
Free minimum rent: Medtox, Inc. will not be required to pay minimum rent the
first six (6) months and the Twenty-fourth (24th) month of the lease term, but
shall be responsible for an other expenses pursuant to this lease.
Article 14 - Assignment and Subletting
Landlord will not unreasonably withhold consent
Article 20 - Alterations
Medtox Laboratories, Inc. shall be given a Tenant improvement allowance not to
exceed the sum of $171,752.40 which shall be paid to Medtox Laboratories, Inc.
upon the completion of the following conditions:
1. Medtox Laboratories, Inc. shall receive formal written acceptance from United
Properties approving all construction to be done. Said approval shall not be
unreasonably withheld or delayed.
2. List of all contractors, subcontractors, and vendors performing work on the
project. list shall include contractor's name, address, phone number,
description of work performed, and name of contact person.
3. Copy of approved building permit.
4. Certificate of occupancy from the City.
5. Final lien waivers from all contractors and subcontractors indicating final
contract amount and full release of lien rights contingent upon final payment.
Tenant/Contractor Construction Amendment
In conjunction with approval from United Properties for the tenant to directly
perform construction activities, tenant agrees to provide the following
information and perform to the standards as set forth below.
1. Contractor's Certificate of Insurance shall be forwarded to United Properties
for approval. Insurance limits and certificate shall be on forms acceptable to
United Properties.
2. Provide project construction schedule to United Properties.
<PAGE>
3. All roof penetrations shall be installed per details provided or approved by
United Properties.
4. All roof penetrations shall be inspected by representative of United
Properties
Upon completion of the project, the following information shall be submitted to
United Properties.
5. Copies of all project change orders approved by tenant
6. Copy of project punchlist indicating all items are complete and satisfactory
to tenant
7. As-built drawings documenting any charges made during the project
8. Submission of operation and maintenance manuals including warranties for an
appropriate equipment.
9. Air balancing report from mechanical contractor certifying all diffusers have
been properly adjusted and all equipment has been inspected.
10. All remaining paint, wallcovering, carpet, etc. shall be removed at
completion of project unless tenant specifically requests material to be saved
and stored within tenant's leased premises.
Option To Expand
Medtox shall have the one time right to expand into the adjacent 3,239 square
feet (Suite #410) on October 1, 1992 or upon availability of the Premises
whichever is sooner. Landlord shall give Tenant a 30 day prior written notice
(Notice) of the availability of such space. Upon receipt of such Notice Tenant
shall have fifteen days to notify Landlord in writing (Tenant Notice) of its
intent to take the Expansion Space. If Tenant elects to take the Expansion
Space, it shall be on the same terms and conditions as their existing lease
except that Tenant shall have a Tenant Improvement Allowance of $10.00 per
square foot and there shall be six (6) months of free Base Rent Landlord and
Tenant shall then execute a Lease Amendment memorializing this Agreement.
Picnic Area
The Landlord agrees to create at Landlord's expense a picnic area to be located
near Medtox's main entrance.
2
<PAGE>
Design Change
The landlord agrees to work with Medtox in achieving the following:
1. Increase tenant identity through signage alterations.
2. Create a greater ease of entry into Medtox's space via their current main
entry.
Any changes made to the building shall be subject to city codes and restrictions
and Landlord's sole approval. The cost of said changes shall be the
responsibility of the tenant.
Lease Contingency
This lease is contingent upon a mutually executed lease cancellation letter
between Phoenix Mutual Life Insurance Company and CRA Inc.
3
<PAGE>
LEASE CANCELLATION
A lease dated March 6, 1990 by and between Phoenix Mutual LIFE Insurance
Company, as successors in interests to WRI, Inc., DBA Winfield Realty, as agents
for the owner (the prior landlord) and C.R.A for the premises located at New
Brighton Business Center, Building "A", 382 West County Road "D" (partial Bay 2,
Bay 3 and 4, partial Bay 5) is hereby canceled effective April 1 , 1992 with the
following conditions:
Whereas: Phoenix Mutual Life Insurance Company desires to extend and expand
Medtox Laboratories in the property.
Whereas: CRA desires to relocate from the above premises.
Therefore: It is the desire of Phoenix Mutual Life Insurance Company and CRA,
Inc. to cancel this lease effective April l, 1992.
This lease cancellation is contingent upon a mutually executed lease for the
above space between Medtox Laboratories, Inc. and Phoenix Mutual Life Insurance
Company for a term of five years, beginning April 1 , 1992.
/s/ Donald P. Maurus /s/ Brian C. Boevers
Phoenix Mutual Life Insurance Company CRA, Inc., a New York corporation
<PAGE>
LANDLORD'S WAIVER OF LIEN AND AGREEMENT
THIS LANDLORD'S WAIVER OF LIEN AND AGREEMENT ("Agreement")was made and entered
into on the 28 day of July , 1993 by and between NORWEST BANK MINNESOTA, N.A.
with offices at 2329 Central Avenue N.E., Minneapolis, MN, 55418 (the "Bank')
and Phoenix Home Life Mutual Insurance Company, with offices at One American
Row, Hartford, CT 06115 (the "Landlord").
WHEREAS, MEDTOX Laboratories, Inc. (the 'Tenant") has a leasehold interest under
a certain lease (the "Lease") dated March 5, 1992, covering the following
described real property ("Leased Premises") in the County of Ramsey, State of
Minnesota to-wit:
Suite 402
New Brighton Business Center
County Road D and 35W
New Brighton, MN
WHEREAS, Bank proposes to extend loans or credit from time to time to Tenant,
which loans or credit will be evidenced by notes or loan documents which may be
extended or renewed from time to time (hereinafter referred to as the "Loans"),
which Loans may be secured by a security interest covering certain personal
property located or to be located on the Leased Premises described above; and,
WHEREAS, Bank is unwilling to make Loans to Tenant unless and until Landlord
executes this agreement with respect to the personal property of Tenant located
in or on the Leased Premises.
NOW THEREFORE, in order to induce Bank to make Loans to Tenant, and in
consideration of Bank making said loans, Landlord hereby certifies, represents
and covenants to Bank as follows:
1. That the Tenant is presently in lawful possession of the Leased Premises by
virtue of the Lease.
2. That as of the date of this Agreement no default exists under any terms of
the Lease or any other conditions relative to occupancy of the Leased Premises.
1
<PAGE>
3. That should the Tenant default in any of the Loans so that the Bank proposes
to foreclose or otherwise realize upon collateral securing any such Loan, or in
the event of termination of Tenant's rights to occupy said Leased Premises for
any reason, Bank shall have the following rights:
(a) The right to enter upon the Leased Premises, with notification to Landlord,
for the purposes of enforcing its lien upon the personal property of Tenant
located in or on the Leased Premises, including the foreclosure and sale of
machinery, equipment, furniture, or other personal property, title to which is
in Tenant and not in Bank and for the purpose of removing from the Leased
Premises such machinery, equipment, furniture, or other personal property of
Tenant; and,
(b) The right upon such entry to retain possession of Leased Premises for such
time as shall be required by Bank to effect a complete removal or complete
disposition of the personal property of the Tenant, but such duration of
possession shall in no event exceed a period of sixty (60) days from the date of
such entry and for such possession Bank shall be liable for and shall pay to
Landlord a rental of not more than the rental provided for in the Lease or the
rent last paid by Tenant prior to the entry of Bank in the event said Lease has
been terminated. Bank shall repair any damages caused by Bank's entry, use, or
removal of said personal property.
4. That none of the personal property of the Tenant situated on said Leased
Premises constitutes fixtures or any part of the real estate of the Landlord.
The personal property has been placed on said Leased Premises with the agreement
and understanding that part or all of such property may at any time be removed
therefrom by the Tenant or his assigns, and that any and all personal property
hereafter placed on said Leased Premises by Tenant may be removed therefrom and
shall not be considered affixed to or as a part of said real estate.
5. That Landlord shall give Bank written notice of any default under or breach
of the Lease which left uncured would cause a termination of the Lease by the
Landlord. Said notice shall be in writing and be forwarded to Bank by certified
mail addressed to Bank at its aforementioned address.
2
<PAGE>
This Agreement shall be incorporated as part of the Lease by reference and shall
be binding on and inure to the benefit of the signatories hereto and their
executors, administrators, heirs, successors, and assigns.
IN WITNESS WHEREOF, the undersigned have executed this Agreement this 28 day of
July, 1993.
(Landlord) PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY
By: /s/ Nadine F. Huff
Its: Directors, Real Estate
(Bank) NORWEST BANK MINNESOTA, N.A.
By: Janet Stodola
Its: Commercial Banking Officer
The undersigned hereby consents to the above agreement and agrees to be bound
thereby. Dated this of , .
(Tenant) MEDTOX Laboratories, Inc.
By: John ? McC???
Its: Executive Vice President
3
<PAGE>
SUBLEASE AGREEMENT
This Sublease Agreement, is made this l day of April, 1993, by and between
MEDTOX Laboratories, Inc., as SUBLESSOR and Wooddale Builders, Inc., as
SUBLESSEE
WHEREAS, SUBLESSOR and SUBLESSEE hereto now mutually agree to lease space as
herein provided.
1. SUBLESSEE shall sublease approximately 6,499 square feet, for the
purpose of office/showroom in the demised premises located at 410 West
County Road D, New Brighton, Minnesota.
2. Term: The term for the 6,499 square feet at 410 West County Road D
shall commence April 1, 1993 and continue until May 31, 1993.
SUBLESSEE specifically agrees to vacate premises no later than May 31,
1993.
3. Gross Rent: SUBLESSEE shall pay rent in the amount of Three Thousand
Three Hundred Eighty Five and no/100 ($3,385.00) Dollars per month
gross for the term of this Agreement. However, SUBLESSEE shall be
responsible for any utility cost throughout Sublease Term. Said gross
rent shall be due on the first of every month.
4. Master Lease: SUBLESSOR is the Lessee of the premises by virtue of a
lease hereinafter referred to as the Master Lease dated March 5, 1992,
wherein Phoenix Home Life Mutual Insurance Company is the LESSOR,
hereinafter referred to as the Master Lessor. The SUBLEASE is and shall
be at all times subject and subordinate to the Master Lease. SUBLESSOR
represents to SUBLESSEE that the Master Lease is in full force and
effect and that to the best of SUBLESSOR's knowledge and belief, no
default exists on the part of any party to the Master Lease. The terms,
conditions and respective obligations of SUBLESSOR and SUBLESSEE to
each other under this Sublease shall, be the terms and conditions of
the Master Lease except for those provisions of the Master Lease which
are directly contradicted by this Sublease in which event the terms of
this Sublease document shall control over the Master Lease. Therefore,
for the purposes of this Sublease, wherever in the Master Lease the
word "Landlord" is used it shall be deemed to mean, the SUBLESSOR
herein and wherever in the Master Lease the word "Tenant" is used it
shall be deemed to mean the SUBLESSEE herein.
<PAGE>
5. SUBLESSEE shall not at any time during its temporary occupancy make any
changes or alterations to the demised premises, structural or
otherwise, including changing of any locks, nor to any improvements or
fixtures located in the demised premises, nor shall it cause or suffer
any mechanic's or other liens or claims therefore to be imposed against
the demised premises.
6. It is expressly agreed that SUBLESSOR shall have no responsibility or
liability for damage caused to any inventory or personal property
placed by SUBLESSEE in the premises regardless of the cause of the
damage, and SUBLESSEE agrees to carry, at its own expense, adequate
inventory insurance and public liability insurance. SUBLESSOR shall be
named as an additional insured party. SUBLESSEE shall provide SUBLESSOR
with proof of insurance prior to commencement of this Sublease.
SUBLESSEE's insurance policy shall provide for at a minimum $100,000.00
individual, $300,000.00 liability, and $50,000.00 property coverages
and shall not be canceled without 15 days' prior written notice to
SUBLESSOR.
7. SUBLESSEE shall allow no improper or unlawful use of the demised
premises.
8. In the event of damage or destruction of all or any part of the demised
premises, the right of SUBLESSEE to occupancy shall immediately
terminate and any obligation of SUBLESSOR arising hereunder shall
cease.
9. SUBLESSEE agrees that SUBLESSOR and its agents shall not be liable for
any damage or injury to SUBLESSEE, its agents, employees or invitees
entering the premises; or the building of which the demised premises
forms a part; or to goods or chattels therein resulting from any defect
in the demised premises or its equipment or fixtures, and further
agrees to indemnify and save SUBLESSOR harmless from all claims of
every kind and nature resulting from its temporary occupancy of the
demised premises.
10. SUBLESSEE agrees to accept the demised premises in an "as is"
condition.
11. Utility cost incurred during the Sublease Term shall be the sole and
exclusive responsibility of SUBLESSEE. in no event shall the SUBLESSOR
be responsible for any utility costs.
12. Attorney's Fees: If any party named herein brings an action to enforce
the terms hereof or to declare rights hereunder, the prevailing party
in such action, on trial and appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as fixed by
the Court.
<PAGE>
SUBLESSEE: SUBLESSOR:
Wooddale Builders, Inc. MEDTOX Laboratories, Inc.
By: /s/ ??????? By: /s/ ??????
Its: President Its: President
Date: 4/1/93 Date: 4/9/93
Master LESSOR's Consent:
By: Nadine Huff
Its: Director, Real Estate
Date: 4/16/93
