UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________.
Commission file Number: 0-26126
SEROLOGICALS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 58-2142225
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
780 Park North Blvd.
Ste. 110
Clarkston, Georgia 30021
(Address of principal (Zip Code)
executive offices)
(404) 296-5595
(Registrant Telephone Number Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past (90) days.
Yes /X/ No ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Class Outstanding at July 31, 1996
Common Stock, $.01 par value per share 9,403,345
<PAGE>
INDEX
SEROLOGICALS CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
December 31, 1995 and June 30, 1996.......................... 3
Condensed Consolidated Statements of Income -
Six and Three Months ended July 2, 1995 and June 30, 1996.... 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended July 2, 1995 and June 30, 1996.............. 5
Notes to Condensed Consolidated Financial Statements..............6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders....... 15
Item 6. Exhibits and Reports on Form 8-K.......................... 15
SIGNATURES......................................................... 15
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
Dec. 31, 1995 June 30,1996
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $2,887,225 $17,194,307
Trade accounts receivable, net 5,607,840 6,645,663
Inventories 3,865,635 4,989,982
Other current assets 734,760 1,256,489
---------- ----------
Total current assets 13,095,460 30,086,441
---------- ----------
PROPERTY AND EQUIPMENT, net 6,595,410 7,521,201
---------- ----------
OTHER ASSETS:
Goodwill, net 27,960,637 31,806,828
FDA Licenses 1,812,839 2,564,764
Non-compete 544,475 984,814
Other 315,004 419,831
---------- ----------
30,632,955 35,776,237
---------- ----------
$50,323,825 $73,383,879
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt
and capital lease obligations $272,255 $68,828
Accounts payable 2,240,215 1,787,590
Accrued liabilities 4,331,704 4,746,792
Deferred revenue 77,650 219,484
---------- ----------
Total current liabilities 6,921,824 6,822,694
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
less current maturities 6,750,945 3,602,686
---------- ----------
OTHER LIABILITIES 58,390 60,620
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value;
30,000,000 shares authorized,
8,406,251 shares issued and outstanding
at December 31, 1995 and 9,403,345 shares
issued and outstanding at June 30, 1996 84,063 94,034
Additional paid-in capital 29,339,537 51,893,717
Retained earnings 7,131,915 10,891,575
Cumulative translation adjustment 37,151 18,553
---------- ----------
Total stockholders' equity 36,592,666 62,897,879
---------- ----------
$50,323,825 $73,383,879
========== ==========
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
July 2,1995 June 30,1996 July 2,1995 June 30,1996
<S> <C> <C> <C> <C>
Net sales $24,707,632 $31,440,175 $12,739,393 $16,661,068
Costs and expenses:
Cost of sales 14,699,632 18,509,084 7,398,042 9,837,468
Selling, general,
and administrative expenses 4,263,940 4,631,668 2,418,645 2,339,045
Product development expenses 1,107,704 1,130,169 506,946 541,375
Interest expense 1,755,466 372,608 872,382 209,797
Other expense (income), net 669,004 881,980 310,407 462,399
----------- ----------- ----------- -----------
Income before income taxes
and extraordinary loss 2,211,886 5,914,666 1,232,971 3,270,984
Provision for income taxes 894,638 2,140,799 548,024 1,125,595
----------- ----------- ----------- -----------
Income before extraordinary loss 1,317,248 3,773,867 684,947 2,145,389
Extraordinary loss on early
retirement of debt,
net of income taxes (1,822,988) (14,206) (1,822,988) (14,206)
----------- ----------- ----------- -----------
Net income (loss) (505,740) 3,759,661 (1,138,041) 2,131,183
Accretion of common stock
put warrants 45,556 - 20,556 -
----------- ----------- ----------- -----------
Net income (loss) available
for common stockholders ($551,296) $3,759,661 ($1,158,597) $2,131,183
=========== =========== ===========
Net income (loss) per
common share
Income before extraordinary
loss $0.20 $0.41 $0.10 $0.23
Extraordinary loss (0.28) - (0.27) -
------ ------ ------ ------
Net income (loss) available
for common stockholders ($0.08) $0.41 ($0.17) $0.23
====== ====== ======
Weighted average common and
common equivalent shares
outstanding 6,454,077 9,170,833 6,660,479 9,380,569
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
July 2,1995 June 30, 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income ($505,740) $3,759,661
----------- ---------
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization 1,395,936 1,670,368
Deferred income tax benefit (92,103) (52,535)
Extraordinary loss, net 1,822,988 14,206
Non-cash compensation expense 346,500 -
Payments of corporate relocation expenses (144,368) (11,444)
Changes in operating assets and liabilities:
Trade accounts receivable, net (1,150,385) (821,495)
Inventories (469,192) (856,148)
Other current assets (384,031) (488,844)
Accounts payable (108,008) (573,966)
Accrued liabilities 1,235,904 557,129
Deferred revenue 772,084 141,884
---------- ----------
Total adjustments 3,225,332 (420,845)
---------- ----------
Net cash provided by operating activities 2,719,592 3,338,816
---------- ----------
Investing activities:
Purchases of property and equipment (809,244) (1,150,460)
Purchase of businesses - (6,292,304)
Other (763,752) (199,319)
---------- ----------
Net cash used in investing activities (1,572,996) (7,642,083)
---------- ----------
Financing activities:
Proceeds from revolving line of credit 6,503,739 7,796,047
Payments on revolving line of credit (4,445,575) (9,854,803)
Proceeds from long-term debt and capital
lease obligations 21,747,699 -
Payments on long-term debt and capital
lease obligations (54,032,143) (1,306,482)
Payment of debt issuance costs 13,692 -
Proceeds from issuance of stock 24,577,618 21,670,120
Proceeds from exercise of stock options - 294,041
---------- -----------
Net cash (used in) provided by
financing activities (5,635,970) 18,598,923
---------- ----------
Effect of changes in foreign exchange rate 43,415 11,426
---------- ----------
Net (decrease) increase in cash and
cash equivalents (4,445,959) 14,307,082
Cash and cash equivalents, beginning
of period 6,900,854 2,887,225
---------- ----------
Cash and cash equivalents, end of period $2,454,895 $17,194,307
========== ===========
Supplemental Disclosures:
Interest Paid $1,544,777 $361,656
Taxes Paid $563,977 $1,842,790
The accompanying notes are an integral part of these consolidated
statements.
</TABLE>
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of Serologicals Corporation (the "Company") and its
subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation. The accompanying statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of the management of the Company, the
accompanying unaudited condensed consolidated financial statements reflect
all adjustments, which are of a normal recurring nature, to present fairly
the Company's financial position, results of operations and cash flows at
the dates and for the periods presented. Interim results of operations are
not necessarily indicative of results to be expected for a 12-month period.
The interim financial statements should be read in conjunction with the
audited consolidated financial statements as of December 31, 1995 and the
notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995. Furthermore, certain reclassifications have
been made to the 1995 financial statements to be consistent with the 1996
financial statement presentation.
2. ORGANIZATION AND BUSINESS OPERATIONS
Serologicals Corporation, is a leading worldwide provider of specialty
human antibody-based products and services to major healthcare companies.
Through the Company's network of 39 donor centers, it collects,
characterizes and provides specialty antibody products that are used as the
active ingredients in a number of pharmaceutical products. The Company is
also engaged in the development, manufacturing and sale of monoclonal
antibodies at its facilities in the U.K.
3. PUBLIC OFFERINGS OF COMMON STOCK
In June 1995, the Company completed an initial public offering ("IPO")
of 2.4 million shares of its common stock at $11.50 per share which
resulted in gross proceeds of $27.6 million (before underwriting discount
and other offering expenses). The net proceeds, approximately $24.6
million after related expenses, were used to repay long-term debt. The
early retirement of this debt resulted in an extraordinary loss of $1.8
million (net of income taxes) due to early retirement costs associated with
the $7.5 million subordinated note payable and the write-off of debt
issuance costs. In connection with the IPO, an additional 1.5 million
shares of common stock were issued in accordance with the automatic
conversion of 12,587 shares of the Company's Series A Preferred Stock.
Additionally, the Company recognized a non-recurring, non-cash charge of
$346,500 ($215,000 net of income taxes) for compensation expense related to
the acceleration of vesting of an officer's stock options at the IPO date.
Put options related to the holders of certain warrants were terminated as a
result of the IPO due to previous agreements between such holders and the
Company. This resulted in a reclassification to additional paid-in capital
of $2.2 million from Common Stock Put Warrants.
In June 1996, the Company completed an offering (the "Secondary
Offering") of 2.1 million shares of its common stock at $26.00 per share.
Of the 2.1 million shares, the Company sold 900,000 shares, which resulted
in net proceeds of approximately $22.0 million, including proceeds from
options which were exercised and the resulting shares sold pursuant to the
Secondary Offering. The net proceeds were used to retire approximately
$7.9 million of debt, with the remainder, or approximately $14.1 million,
available to the Company for general corporate purposes. The Company
recognized an extraordinary loss of $14,000 (net of income taxes) related
to the early retirement of debt.
4. EARNINGS PER SHARE
Net income per share is computed using the weighted average number of
shares of common stock outstanding plus common equivalent shares. Common
equivalent shares from convertible preferred stock (using the if-converted
method) and from stock options and warrants (using the treasury stock
method) have been included in the computation when dilutive. For periods
prior to the IPO, pursuant to the Securities and Exchange Commission Staff
Accounting Bulletins, common and common equivalent shares issued by the
Company at prices below the public offering price during the twelve-month
period prior to the IPO have been included in the calculation as if they
were outstanding for all periods presented (using the treasury stock method
and the IPO price of $11.50 per share). For the periods presented, fully
diluted earnings per share has not been presented as the effect of
including related common equivalent shares is not dilutive.
5. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations at December 31, 1995 and June
30, 1996 consisted of the following:
<TABLE>
<CAPTION>
Dec. 31, June 30,
1995 1996
-------- --------
<S> <C> <C>
$20,000,000 revolving credit facility,
variable interest rate (7.43% and 6.9%
at December 31, 1995 and June 30,
1996, respectively), payable on
July 20, 1998 $2,058,756 $ -
$3,500,000 convertible subordinated
note payable, interest at 12% and 9% at
December 31, 1995 and June 30, 1996,
respectively; interest payable monthly,
payable on December 23, 1997 3,500,000 3,500,000
Subordinated note payable with an
effective interest rate of 16%,
principal due in full on February 1,
1997; interest at 5% payable quarterly
(net of unamortized discount of $66,773
at December 31, 1995) 748,552 -
Capital lease obligations at varying
interest rates and terms, maturing
through July 1999 201,674 155,090
Other notes at varying interest rates
and terms maturing through March 2000
(net of unamortized discount of $10,213
at December 31, 1995) 514,218 16,424
---------- ----------
7,023,200 3,671,514
Less current maturities 272,255 68,828
---------- ----------
$6,750,945 $3,602,686
=========== ==========
</TABLE>
6. ACQUISITION OF AM RHO LABORATORIES AND THE SOUTHEASTERN GROUP
On February 14, 1996, the Company acquired the assets of Am Rho
Laboratories, Inc. ("Am Rho") for approximately $1.7 million. The purchase
price consisted of $1.1 million in cash at closing, the assumption of
certain liabilities and forgiveness of a $500,000 note receivable from Am-
Rho, Inc., the parent of Am-Rho. The pro forma information provided below
does not include the actual results of operations of Am Rho for the six
months ended July 2, 1995 and June 30, 1996 as the impact of these results
was not material.
On March 6, 1996 the Company, through its subsidiary Seramune, Inc.,
acquired the stock of Southeastern Biologics, Inc. and Plasma Management,
Inc. and substantially all of the assets of Concho Biologics, Inc. in a
single transaction (collectively referred to as the "Southeastern
Acquisition") for approximately $4.75 million. The Southeastern
Acquisition includes a provision for contingent consideration based on the
performance of the acquired businesses over the 12 months subsequent to
closing. The purchase price consisted of $3.6 million in cash and the
assumption of $1.1 million of indebtedness. The following unaudited data
summarizes the pro forma results of operations for the six months ended
July 2, 1995 and June 30, 1996 as if the Southeastern Acquisition had
occurred on January 1 of each period. The unaudited pro forma information
has been prepared for comparative purposes only and does not purport to
represent what the results of operations would have been had the
transaction actually occurred on the date indicated, or what the results of
operations may be in the future.
Six months ended
(In thousands, except per share data)
July 2, June 30,
1995 1996
------- -------
Net sales..................................... $27,082 $32,456
Income before extraordinary loss.............. 1,269 3,773
Income before extraordinary loss
per common share............................. $0.20 $0.41
Net income available for common stockholders.. (599) 3,759
Net income per common share................... $(0.09) $0.41
The above acquisitions were accounted for as a purchase in accordance with
APB No. 16, and accordingly, the purchase price has been preliminarily
allocated to the net assets acquired based on the estimated fair values as
of the acquisition date. The excess of the cost over the estimated fair
value of the net assets acquired has been allocated to goodwill.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
including, without limitation, statements regarding the sufficiency of the
Company's liquidity and sources of capital. These forward-looking
statements are subject to certain risks, uncertainties and other factors
which could cause actual results to differ materially. Additional
information on factors that could potentially affect the Company or its
financial results may be found in the Company's filings with the Securities
and Exchange Commission.
Overview
Serologicals Corporation (the "Company"), through its wholly-owned
subsidiaries, Serologicals, Inc., Bioscot, Ltd., and Seramune, Inc., is a
leading worldwide provider of specialty human antibody-based products and
services to major healthcare companies.
As of June 30, 1996, Serologicals operated 13 donor centers that
specialize in the collection of specialty antibodies. Bioscot operated two
FDA-licensed monoclonal antibody manufacturing facilities in Scotland.
Seramune operated 26 donor centers that collect antibodies for IVIG. The
acquisition of Seramune in December 1994 represented the Company's entry
into the IVIG antibody market.
In June 1995, the Company completed an IPO and issued 2.4 million
shares of Common Stock at a price of $11.50 per share. The net proceeds to
the Company of $24.6 million, plus cash on hand of approximately $400,000,
were used to retire $7.5 million of subordinated debt and approximately
$17.5 million of borrowings under a term credit facility incurred primarily
for the Seramune Acquisition. An extraordinary charge of $1.8 million
(net of income taxes) was recorded in relation to the early extinguishment
of this debt and associated debt issuance costs. Additionally, the Company
recognized a non-recurring, non-cash charge of $346,500 for compensation
expense ($215,000 net of income taxes) related to the acceleration of
vesting of an officer's stock options.
In July 1995, the Company amended its credit agreement with its bank
and obtained a $20.0 million revolving credit facility (the "Revolving
Credit Facility") to provide working capital and finance future
acquisitions, product development and new business opportunities.
In June 1996, the Company completed a Secondary Offering of 2.1
million shares of its Common Stock at $26.00 per share. Of the 2.1 million
shares, the Company sold 900,000 shares, which resulted in net proceeds of
approximately $22.0 million, including proceeds from options which were
exercised and the resulting shares sold pursuant to the Secondary Offering.
The net proceeds were used to retire approximately $7.9 million of debt,
with the remainder, or approximately $14.1 million, available to the
Company for general corporate purposes. The options which were exercised
and sold pursuant to the Secondary Offering generated income tax benefits
of approximately $514,000, which the Company recorded as additional paid in
capital in the second quarter. The sale of the remaining 1.2 million
shares by existing stockholders resulted in net proceeds of $29.5 million
to those stockholders.
During the second quarter of 1996, increasing regulatory scrutiny
continued to be a significant factor in shaping the industry. This
heightened level of regulatory oversight is creating the need for companies
in the industry to meet higher operating standards. The Company believes
it maintains an adequate regulatory infrastructure and is currently
allocating sufficient resources to assist it in its efforts to allow it to
meet these industry challenges.
Recent Acquisitions
On October 2, 1995, the Company acquired all of the capital stock of
Allegheny Biologicals, Inc. ("ABI"). ABI operates two specialty donor
centers, in Jacksonville, Florida and Pittsburgh, Pennsylvania. The
Company paid approximately $2.5 million in cash and also agreed to pay
additional contingent consideration of up to $500,000 in the future based
upon ABI achieving certain performance measures. On February 14, 1996, the
Company purchased a specialty donor center located in Washington, D.C. and
certain other assets located in Jacksonville, Florida from Am-Rho. The
purchase price consisted of $1.1 million in cash at closing, the assumption
of certain liabilities and forgiveness of a $500,000 note receivable from
Am-Rho Inc., the parent of Am-Rho. On March 6, 1996, the Company acquired
all of the capital stock of Southeastern Biologics, Inc. and Plasma
Management, Inc. and the assets of Concho Biologics, Inc. in the
Southeastern Acquisition. The purchase price consisted of $3.6 million in
cash, the assumption of $1.1 million of indebtedness and additional
contingent consideration to be paid based on the performance of the
acquired business over the 12 months subsequent to the closing. All of
these acquisitions were accounted for using the purchase method.
Results of Operations
The following table sets forth certain operating data of the Company
as a percentage of net sales for the years indicated below.
<TABLE>
<CAPTION>
Six months ended Three months ended
---------------- ------------------
July 2, June 30, July 2, June 30,
1995 1996 1995 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 40.5% 41.1% 41.9% 41.0%
Selling, general and
administrative costs 17.3% 14.7% 19.0% 14.0%
Product development 4.5% 3.6% 4.0% 3.2%
Income before extraordinary loss 5.3% 12.0% 5.4% 12.9%
Net income (loss) (2.0%) 12.0% (8.9%) 12.8%
</TABLE>
Six Months Ended July 2, 1995 and June 30, 1996
Net sales increased 27.2%, or $6.7 million, from $24.7 million in 1995
to $31.4 million in 1996. The increase resulted from $2.7 million of
additional net sales from recent acquisitions with the remainder due
primarily to increased sales of anti-D and IVIG antibodies. Consolidated
net sales of the Company's therapeutic products increased 45.0% while net
sales of diagnostic products decreased 10.0% from the comparable period in
the prior year. The decrease in net sales of diagnostic products was due
primarily to reduced shipments of clinical diagnostic antibodies and
polyclonal antibodies used in blood typing reagents.
Gross profit increased 29.2%, or $2.9 million, from $10.0 million in
1995 to $12.9 million in 1996. The increase in gross profit was due largely to
increased net sales of anti-D and IVIG antibodies, while $727,000 of the
increase related to recent acquisitions. Gross profit, as a percentage of
net sales, increased from 40.5% in 1995 to 41.1% in 1996 due to an increase
in the gross profit from specialty antibodies as a percentage of specialty
antibody net sales, offset in part by an increase in net sales of lower
margin IVIG antibodies and a decrease in the gross profit from IVIG
antibodies as a percentage of IVIG net sales.
Selling, general and administrative expenses increased 8.6%, or
$368,000, from $4.3 million in 1995 to $4.6 million in 1996. Recurring
expenses in 1996 increased by 19.3% or $715,000 to $4.6 million from $3.9
million, due primarily to incremental administrative expenses associated
with being a public company, the hiring of an additional vice president in
February 1996, general corporate expenses associated with the Company's
Seramune subsidiary and incremental, on-going expenses related to the
acquisition of ABI and the Am Rho and Southeastern Acquisitions. In 1995,
the Company recorded a non-recurring charge of $346,500 for compensation
expense related to the acceleration of vesting of an officer's stock
options in connection with the Company's IPO.
Product development expenses, as a percentage of net sales, decreased
from 4.5% in 1995 to 3.6% in 1996 due to an increase in net sales, while
such expenses remained essentially unchanged.
Other expense (income), net increased 31.8%, or $213,000, from
$669,000 in 1995 to $882,000 in 1996 due primarily to the amortization of
intangible assets resulting from the acquisition of ABI in October 1995 and
the Am Rho and Southeastern Acquisitions in February 1996 and March 1996,
respectively.
Interest expense decreased 78.8%, or $1.4 million, from $1.8 million
in 1995 to $373,000 in 1996, primarily as a result of the retirement of
approximately $25.0 million in debt in June 1995 with proceeds from the
IPO.
The provision for income taxes, as a percentage of income before
income taxes and extraordinary loss, decreased from 40.4% in 1995 to 36.2%
in 1996, due primarily to an increase in 1996 in tax credits related to
research and development expenditures and export sales and a tax benefit
related to a non-recurring dividend paid by the Company's foreign
subsidiary in the second quarter of 1996.
The extraordinary loss (net of income taxes) decreased $1.8 million
from $1.8 million in 1995 to $14,000 in 1996, due to the early
extinguishment of debt in the second quarter of 1995 associated with the
IPO. Approximately $1.4 million of this amount related to the acceleration
of the original issue discount ("OID") associated with the repayment of
subordinated debt. The remainder related to the write-off of the debt
issuance cost associated with the repayment of debt from IPO proceeds.
Three Months Ended July 2, 1995 and June 30, 1996
Net sales increased 30.8%, or $3.9 million, from $12.7 million in 1995
to $16.7 million in 1996. The increase in net sales was due primarily to
increased sales of anti-D and IVIG antibodies and $2.0 million of
additional net sales related to recent acquisitions. The Company's net
sales of therapeutic products increased 50.8% while net sales of diagnostic
products decreased 9.7% from the comparable period in the prior year. The
decrease in net sales of diagnostic products was due primarily to reduced
shipments of clinical diagnostic antibodies and polyclonal antibodies used
in blood typing reagents.
Gross profit increased 27.8%, or $1.5 million, from $5.3 million in
1995 to $6.8 million in 1996. The increase resulted from $399,000 of
additional gross profit related to recent acquisitions with the remainder
due primarily to increased net sales of anti-D antibodies. Gross profit,
as a percentage of net sales, decreased from 41.9% in 1995 to 41.0% in 1996
due to an increase in net sales of lower margin IVIG antibodies and a
decrease in the gross profit from IVIG antibodies as a percentage of IVIG
net sales, offset by an increase in gross profit from specialty antibodies
as a percentage of specialty antibody net sales.
Selling, general and administrative expenses decreased 3.3%, or
$80,000, from $2.4 million in 1995 to $2.3 million in 1996. The decrease
resulted primarily from a non-recurring charge of $346,500 in the 1995
period for compensation expense related to the acceleration of the vesting
of an officer's stock options in connection with the Company's IPO in June
1995. Recurring expenses in 1996 increased by 12.9%, or $267,000, from the
comparable period in 1995, but decreased as a percentage of net sales from
16.3% in 1995 to 14.0% in 1996. The increase resulted primarily from
incremental administrative expenses associated with being a public company,
the hiring of an additional vice president in February 1996, general
corporate expenses associated with the Company's Seramune subsidiary and
incremental, on-going expenses related to the acquisition of ABI and the Am
Rho and Southeastern Acquisitions.
Product development expenses, as a percentage of net sales, decreased
from 4.0% in 1995 to 3.2% in 1996 due to an increase in net sales while
such expenses remained essentially unchanged.
Other expense (income), net increased 49.0%, or $152,000 from $310,000
in 1995 to $462,000 in 1996 due primarily to the amortization of intangible
assets as a result of the acquisition of ABI in October 1995 and the Am Rho
and Southeastern Acquisitions in February 1996 and March 1996,
respectively.
Interest expense decreased 76.0%, or $663,000, from $872,000 in 1995
to $210,000 in 1996, primarily as a result of the retirement of
approximately $25.0 million in debt in June, 1995 with the proceeds of the
IPO.
The provision for income taxes, as a percentage of income before
income taxes and extraordinary loss, decreased from 44.4% in 1995 to 34.4%
in 1996, due primarily to an increase in tax credits related to research
and development expenditures and export sales and a tax benefit related to
a non-recurring dividend paid by the Company's foreign subsidiary in the
second quarter of 1996.
The extraordinary loss (net of income taxes) decreased $1.8 million
from $1.8 million in 1995 to $14,000 in 1996, due to the early
extinguishment of debt in the second quarter of 1995 associated with the
IPO. Approximately $1.4 million of this amount related to the acceleration
of the OID associated with the repayment of subordinated debt. The
remainder related to the write-off of the debt issuance cost associated
with the repayment of debt from IPO proceeds.
Liquidity and Capital Resources
As of June 30, 1996, the Company had cash on hand and working capital
of $17.2 million and $23.3 million, respectively.
Net cash flow provided by operations for the six months ended July 2,
1995 was $2.7 million, as compared to $3.3 million for the six months ended
June 30, 1996. The increase in cash flow from operations resulted mainly
from an increase in net income before extraordinary loss of $2.4 million
due to improved profitability and lower interest expense, offset by an
increase of approximately $163,000 in the Company's accounts receivables,
inventory and prepaid balances, and a decrease of approximately $1.1
million in accounts payable and accrued liabilities, and a decrease in
deferred revenue of $630,000.
Net cash flow used in investing activities for the six months ended
July 2, 1995, was $1.6 million as compared to $7.6 million for the six
months ended June 30, 1996. The increase in cash used in investing
activities related primarily to the Am-Rho and Southeastern Acquisitions,
which occurred in the first quarter of 1996.
Net cash flow (used in) provided by financing activities, including
the effects of changes in foreign currency rates, for the six months ended
July 2, 1995 was ($5.6 million) as compared to $18.6 million for the six
months ended June 30, 1996. The increase in net cash flow provided by
financing activities in 1996 related primarily to the Company raising
approximately $22.0 million in net proceeds from the Secondary Offering in
June 1996.
On June 20, 1995, the net proceeds from the Company's IPO and $400,000
of cash on hand were used to repay subordinated debt of $7.5 million and a
term credit facility of $17.5 million. An extraordinary loss of $1.8
million (net of income taxes) was recorded which related to the early
extinguishment of this debt. Furthermore, on June 4, 1996 the Company
completed the Secondary Offering of 2.1 million shares of Common Stock, at
$26.00 per share. Of the 2.1 million shares, the Company sold 900,000
shares, which resulted in net proceeds of approximately $22.0 million,
including proceeds from options which were exercised and the resulting
shares sold pursuant to the Secondary Offering. The net proceeds were used
to retire approximately $7.9 million of debt, with the remainder, or
approximately $14.1 million, available to the Company for general corporate
purposes. At June 30, 1996, total long-term debt, including current
maturities, was $3.7 million.
Capital expenditures relate primarily to the Company's facilities,
related equipment, the acquisition or development of additional specialty
and non-specialty antibody donor centers and the development of software
and information systems. During the six months ended July 2, 1995, and
June 30, 1996, capital expenditures were $809,000 and $1.3 million,
respectively. The increase in capital expenditures in 1996 is due
primarily to the renovation of a number of donor centers and the expansion
of the Company's monoclonal antibody production facilities in the United
Kingdom (U.K.).
During 1996, the Company anticipates a significant increase in capital
expenditures over prior years' levels. The major factors affecting this
increase include (i) the relocation and expansion of the Company's
monoclonal production facilities in Scotland; (ii) upgrading of the
Company's information systems to support its planned growth; and (iii) the
development, relocation and upgrading of specialty and non-specialty donor
centers to increase production capabilities and efficiencies.
In early 1996, the Company received a grant from a governmental
authority in Scotland to defray a portion of the expenses associated with
the relocation and expansion of its monoclonal production facilities. The
grant, of up to L580,000, is payable to the Company in three installments
over approximately three years and the timing and amount of the payments
are subject to (i) the level of capital expenditures made and (ii) the
creation of additional jobs at Bioscot.
On July 20, 1995, the Company entered into the Revolving Credit
Facility with NationsBank providing for maximum borrowings of $20.0
million. The Revolving Credit Facility has a three-year term with a
variable interest rate and provides for a maximum of $15.0 million for
future acquisitions. The Company anticipates using the proceeds from the
Revolving Credit Facility to fund capital expenditures, acquisitions and
any increased working capital needs. The amount outstanding under the
Revolving Credit Facility was $2.1 million at December 31, 1995 and $0 at
June 30, 1996.
The Company believes that existing cash balances, cash generated from
operations and the borrowing capacity available under the Revolving Credit
Facility are sufficient to fund operations and anticipated capital
expenditures for at least 12 months and may be used to fund the Company's
acquisition strategy.
The Company is in the second year of a five-year supply contract with
Bayer Corporation ("Bayer") for the sale of antibodies for IVIG. The
contract provides for successive one-year renewals, unless notice is given
by either party, and commitments from Bayer to purchase specified amounts
on an escalating basis over the five-year term. In addition, as part of
the Southeastern Acquisition, the Company acquired a second supply contract
with Bayer for the sale of antibodies for IVIG, with terms substantially
similar to those contained in the Company's existing contract with Bayer
except as it relates to volume levels. Early termination of these
contracts could adversely affect the Company's net cash from operations in
the short term.
On January 21, 1996, the Company entered into an amended agreement
with the holders of the $3.5 million Convertible Note. Under the terms of
the amendment, the earliest call date of the note was changed from January
21, 1996 to January 21, 1997, the interest rate decreased to 9% from 12%
and the conversion price increased to $14.00 from $10.93 per share of
common stock. The amended agreement decreases the number of shares
issuable at conversion from approximately 320,500 shares to 250,000 shares.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 121 ("SFAS 121")
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", which becomes effective for fiscal years
beginning after December 15, 1995. SFAS 121 establishes standards for
determining when impairment losses on long-lived assets have occurred and
how impairment losses should be measured. The Company adopted SFAS 121
effective January 1, 1996. The financial statement impact of adopting SFAS
121 was not material.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 ("SFAS 123") "Accounting for Stock-Based Compensation,"
which becomes effective for fiscal years beginning after December 15, 1995.
SFAS 123 establishes new financial accounting and reporting standards for
stock-based compensation plans. However, entities are allowed to elect
whether to measure compensation expense for stock-based compensation under
SFAS 123 or Accounting Principles Board No. 25 ("APB No. 25"), "Accounting
for Stock Issued to Employees." The Company has elected to remain with the
accounting under APB No. 25 and will make the required pro forma
disclosures of net income and earnings per share as if the provisions of
SFAS 123 had been applied in its December 31, 1996 financial statements.
The potential impact of adopting this standard on the Company's pro forma
disclosures of net income and earnings per share has not been quantified at
this time.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Registrant held its 1996 Annual Meeting of Stockholder on May 7,
1996.
At the Annual Meeting, Marcia T. Bates and Matthew C. Weisman were
elected directors. The number of shares of Common Stock voted in favor of
the election of each person was not less than 6,511,276 and not more than
2,690 against. In addition, the following other directors continued as such
after the meeting: James L. Currie, Samuel A. Penninger, Jr., George M.
Shaw, M.D., Ph.D. and Harold J. Tenoso, Ph.D.
In addition, at the Annual Meeting, stockholders voted upon the
approval of the 1995 Non-Employee Directors' Stock Option Plan, as amended
(the "Directors Plan"), the approval of the 1994 Amended and Restated
Omnibus Incentive Plan (the "Omnibus Plan") and the Approval of the 1996
Employee Stock Purchase Plan (the "Stock Purchase Plan"). The vote on the
Directors Plan was 5,418,721 FOR, 11,050 AGAINST and 145,290 ABSTAINING.
The vote on the Omnibus Plan was 4,929,671 FOR, 502,300 AGAINST and 143,090
ABSTAINING. The vote on the Stock Purchase Plan was 5,495,310 FOR, 8,300
AGAINST and 62,550 ABSTAINING.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
Exhibit 10.1 -- Underwriting Agreement
Exhibit 21 -- Subsidiaries
Exhibit 27 -- Financial Data Schedule
b. Reports on Form 8-K:
Current Report on Form 8-K/A, dated April 30, 1996.
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 thereunto duly authorized.
SEROLOGICALS CORPORATION
(Registrant)
Date: August 13, 1996 By: //Russell H. Plumb//
Russell H. Plumb
Vice President, Finance and
Chief Financial Officer
2,100,000 Shares
SEROLOGICALS CORPORATION
Common Stock
UNDERWRITING AGREEMENT
May 29, 1996
Smith Barney Inc.
Lehman Brothers Inc.
Volpe, Welty & Company
As Representatives of the Several Underwriters
c/o Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Serologicals Corporation, a Delaware corporation (the "Company"), proposes,
upon the terms and conditions set forth herein, to issue and sell an aggregate
of 900,000 shares of its common stock, par value $0.01 per share (the "Common
Stock"), to the several Underwriters named in Schedule III hereto (the
"Underwriters"), and the persons named in Schedule I hereto as selling
stockholders (the "Principal Selling Stockholders") propose to sell to the
several Underwriters an aggregate of 1,200,000 shares of Common Stock. The
900,000 shares of Common Stock to be issued and sold to the Underwriters by the
Company and the 1,200,000 shares of Common Stock to be sold to the Underwriters
by the Selling Stockholders are hereinafter referred to as the "Firm Shares."
In addition, solely for the purpose of covering over-allotments, the Company
and the persons named on Schedule II hereto as additional selling stockholders
(the "Additional Selling Stockholders", and, together with the Principal
Selling Stockholders, the "Selling Stockholders") propose to sell to the
Underwriters, upon the terms and conditions set forth in Section 2 hereof, up
to an additional 315,000 shares (the "Additional Shares") of Common Stock. The
Firm Shares and the Additional Shares are hereinafter collectively referred to
as the "Shares." The Company and the Selling Stockholders are hereinafter
sometimes referred to as the "Sellers."
The Sellers wish to confirm as follows their respective agreements with
you (the "Representatives") and the other several Underwriters on whose behalf
you are acting, in connection with the several purchases of the Shares by the
Underwriters.
1. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 under the Act (the "registration
statement"), including a prospectus subject to completion, relating to the
Shares. The term "Registration Statement" as used in this Agreement means
the registration statement (including all financial schedules and exhibits),
as amended at the time it becomes effective, or, if the registration
statement became effective prior to the execution of this Agreement, as
supplemented or amended prior to the execution of this Agreement. If it is
contemplated, at the time this Agreement is executed, that a post effective
amendment to the registration statement will be filed and must be declared
effective before the offering of the Shares may commence, the term
"Registration Statement" as used in this Agreement means the registration
statement as amended by said post-effective amendment. If an abbreviated
registration statement is prepared and filed with the Commission in
accordance with Rule 462(b) under the Act (an "Abbreviated Registration
Statement"), the term "Registration Statement" as used in this Agreement
includes the Abbreviated Registration Statement. The term "Prospectus" as
used in this Agreement means the prospectus in the form included in the
Registration Statement, or, if the prospectus included in the Registration
Statement omits information in reliance on Rule 430A under the Act and such
information is included in a prospectus filed with the Commission pursuant to
Rule 424(b) under the Act, the term "Prospectus" as used in this Agreement
means the prospectus in the form included in the Registration Statement as
supplemented by the addition of the Rule 430A information contained in the
prospectus filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectus" as used in this Agreement means the prospectus
subject to completion in the form included in the registration statement at
the time of the initial filing of the registration statement with the
Commission, and as such prospectus shall have been amended from time to time
prior to the date of the Prospectus.
2. Agreements to Sell and Purchase. Subject to such adjustments as you
may determine in order to avoid fractional shares, the Company hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell
to each Underwriter and, upon the basis of the representations, warranties
and agreements of the Sellers herein contained and subject to all the terms
and conditions set forth herein, each Underwriter agrees, severally and not
jointly, to purchase from the Company, at a purchase price of $24.57 per
share (the "Purchase Price Per Share"), the number of Firm Shares which bears
the same proportion to the aggregate number of Firm Shares to be issued and
sold by the Company as the number of Firm Shares set forth opposite the name
of such Underwriter in Schedule III hereto (or such number of Firm Shares
increased as set forth in Section 12 hereof) bears to the aggregate number of
Firm Shares to be sold by the Sellers.
Subject to such adjustments as you may determine in order to avoid
fractional shares, each of the Principal Selling Stockholders agrees, subject
to all the terms and conditions set forth herein, to sell to each Underwriter
and, upon the basis of the representations, warranties and agreements of the
Sellers herein contained and subject to all the terms and conditions set
forth herein, each Underwriter agrees to purchase from each of the Principal
Selling Stockholders at the Purchase Price Per Share that number of Firm
Shares which bears the same proportion to the number of Firm Shares set forth
opposite the name of each such Principal Selling Stockholders in Schedule I
hereto as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule III hereto (or such number of Firm Shares increased
as set forth in Section 12 hereof) bears to the aggregate number of Firm
Shares to be sold by the Sellers.
The Company and the Additional Selling Stockholders also agree,
subject to all the terms and conditions set forth herein, to issue (in the
case of the Company) and sell to the Underwriters, and, upon the basis of the
representations, warranties and agreements of the Company and the Selling
Stockholders herein contained and subject to all the terms and conditions set
forth herein, the Underwriters shall have the right to purchase from the
Company and the Additional Selling Stockholders, at the Purchase Price Per
Share, pursuant to an option (the "over-allotment option") which may be
exercised, in whole or in part, prior to 9:00 p.m., New York City time, on
the 30th day after the date of the Prospectus (or, if such 30th day shall be
a Saturday or Sunday or a holiday, on the next business day thereafter when
the New York Stock Exchange is open for trading), up to an aggregate of
315,000 Additional Shares, of which up to an aggregate of 165,000 Additional
Shares may be purchased from the Additional Selling Stockholders and of which
up to an aggregate of 150,000 Additional Shares may be purchased from the
Company. The maximum number of Additional Shares subject to sale by each
Additional Selling Stockholder shall be as set forth opposite the name of
such Additional Selling Stockholder on Schedule II hereto. If the
Underwriters exercise the over-allotment option, Additional Shares will be
purchased by the Underwriters, first, from the Additional Selling
Stockholders in proportion to the maximum number of Additional Shares which
each of them has agreed to sell and, second, after the Additional Selling
Stockholders have sold all Additional Shares which may be sold by them
pursuant to this Agreement, from the Company. Upon any exercise of the
over-allotment option, each Underwriter, severally and not jointly, agrees to
purchase (i) from each Additional Selling Stockholder the number of
Additional Shares (subject to such adjustments as you may determine in order
to avoid fractional shares) which bears the same proportion to the number of
Additional Shares to be sold by such Additional Selling Stockholder as the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule III hereto (or such number of Firm Shares increased as set forth in
Section 12 hereof) bears to the aggregate number of Firm Shares to be sold by
the Sellers and, if the Underwriters elect to purchase in excess of 165,000
Additional Shares pursuant to the over-allotment option, then (ii) from the
Company the number of Additional Shares (subject to such adjustments as you
may determine in order to avoid fractional shares) which bears the same
proportion to the aggregate number of Additional Shares to be issued and sold
by the Company as the number of Firm Shares set forth opposite the name of
such Underwriter in Schedule III hereto (or such number of Firm Shares
increased as set forth in Section 12 hereof) bears to the aggregate number of
Firm Shares to be sold by the Sellers.
Certificates in transferable form for the Shares (including any
Additional Shares) that each of the Selling Stockholders agrees to sell
pursuant to this Agreement have been placed in custody with State Street Bank
& Trust Company (the "Custodian") for delivery under this Agreement pursuant
to a Custody Agreement and Power of Attorney (the "Custody Agreement")
executed by each of the Selling Stockholders appointing Harold J. Tenoso,
Ph.D. and Russell H. Plumb as agents and attorneys-in-fact (the "Attorneys-
in-Fact"). Each Selling Stockholder agrees that (i) the Shares represented
by the certificates held in custody pursuant to the Custody Agreement are
subject to the interests of the Underwriters, the Company and each other
Selling Stockholder, (ii) the arrangements made by the Selling Stockholders
for such custody are, except as specifically provided in the Custody
Agreement, irrevocable and (iii) the obligations of the Selling Stockholders
hereunder and under the Custody Agreement shall not be terminated by any act
of such Selling Stockholder or by operation of law, whether by the death or
incapacity of any Selling Stockholder or the occurrence of any other event.
If any Selling Stockholder shall die or be incapacitated or if any other
event shall occur before the delivery of the Shares hereunder, certificates
for the Shares to be sold by such Selling Stockholder shall be delivered to
the Underwriters by the Attorneys-in-Fact in accordance with the terms and
conditions of this Agreement and the Custody Agreement as if such death or
incapacity or other event had not occurred, regardless of whether or not the
Attorneys-in-Fact or any Underwriter shall have received notice of such
death, incapacity or other event. Each Attorney-in-Fact represents that he
is authorized, on behalf of each of the Selling Stockholders, to execute this
Agreement and any other documents necessary or desirable in connection with
the sale of the Shares to be sold hereunder by such Selling Stockholder, to
make delivery of the certificates for such Shares, to receive the proceeds of
the sale of such Shares, to give receipts for such proceeds, to pay therefrom
any expenses to be borne by such Selling Stockholder in connection with the
sale and public offering of such Shares, to distribute the balance thereof to
such Selling Stockholder and to take such other actions as may be necessary
or desirable in connection with the transactions contemplated by this
Agreement. Each Attorney-in-Fact agrees to perform his duties under the
Custody Agreement.
3. Terms of Public Offering. The Sellers have been advised by you that
the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable and
initially to offer the Shares upon the terms set forth in the Prospectus.
4. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office
of Smith Barney Inc., 14 Wall Street, New York, New York 10005, at 10:00
A.M., New York City time, on June 4, 1996 (the "Closing Date"). The place of
closing for the Firm Shares and the Closing Date may be varied by agreement
between you and the Company and the Attorneys-in-Fact.
Delivery to the Underwriters of and payment for any Additional
Shares to be purchased by the Underwriters shall be made at the
aforementioned office of Smith Barney Inc. at such time on such date (the
"Option Closing Date"), which may be the same as the Closing Date but shall
in no event be earlier than the Closing Date nor earlier than three nor later
than ten business days after the giving of a written notice from you on
behalf of the Underwriters to the Company and the Attorneys-in-Fact of the
Underwriters' determination to purchase a number, specified in such notice,
of Additional Shares. The place of closing for any Additional Shares and the
Option Closing Date for such Shares may be varied by agreement between you
and the Company and the Attorneys-in-Fact.
Certificates for the Firm Shares and for any Additional Shares to
be purchased hereunder shall be registered in such names and in such
denominations as you shall request by written notice, it being understood
that a facsimile transmission shall be deemed written notice, prior to 1:00
P.M., New York City time, on the third business day preceding the Closing
Date or any Option Closing Date, as the case may be. Such certificates shall
be made available to you in New York City for inspection and packaging not
later than 9:30 A.M., New York City time, on the business day next preceding
the Closing Date or the Option Closing Date, as the case may be. The
certificates evidencing the Firm Shares and any Additional Shares to be
purchased hereunder shall be delivered to you on the Closing Date or the
Option Closing Date, as the case may be, against payment of the purchase
price therefor in immediately available funds.
5. Agreements of the Company. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the registration statement or a post-effective amendment
thereto or any Abbreviated Registration Statement to be declared or become
effective before the offering of the Shares may commence, the Company will
endeavor to cause the Registration Statement or such post-effective amendment
to become effective as soon as possible and will advise you promptly and, if
requested by you, will confirm such advice in writing, when the Registration
Statement or such post-effective amendment has become effective.
(b) The Company will advise you promptly and, if requested by
you, will confirm such advice in writing: (i) of any request by the
Commission for amendment of or a supplement to the Registration Statement,
any Prepricing Prospectus or the Prospectus or for additional information;
(ii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the suspension of
qualification of the Shares for offering or sale in any jurisdiction or the
initiation of any proceeding for such purpose; and (iii) within the period of
time referred to in paragraph (f) below, of any change in the Company's
condition (financial or other), business, prospects, properties, net worth or
results of operations, or of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the
making of any additions to or changes in the Registration Statement or the
Prospectus (as then amended or supplemented) in order to state a material
fact required by the Act or the regulations thereunder to be stated therein
or necessary in order to make the statements therein not misleading, or of
the necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Act or any other law. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to
obtain the withdrawal of such order at the earliest possible time.
(c) The Company will furnish to you, without charge, three
signed copies of the registration statement as originally filed with the
Commission and of each amendment thereto, including financial statements and
all exhibits to the registration statement, and will also furnish to you,
without charge, such number of conformed copies of the registration statement
as originally filed and of each amendment thereto, but without exhibits, as
you may reasonably request.
(d) The Company will not (i) file any amendment to the
Registration Statement or make any amendment or supplement to the Prospectus
of which you shall not previously have been advised or to which you shall
reasonably object after being so advised or (ii) so long as, in the opinion
of counsel for the Underwriters, a prospectus is required to be delivered in
connection with sales by any Underwriter or dealer, file any information,
documents or reports pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), without delivering a copy of such information,
documents or reports to you, as Representatives of the Underwriters, prior to
or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered or will deliver to you, without charge, in such
quantities as you have reasonably requested or may hereafter reasonably
request, copies of each form of the Prepricing Prospectus. The Company
consents to the use, in accordance with the provisions of the Act and with
the securities or Blue Sky laws of the jurisdictions in which the Shares are
offered by the several Underwriters and by dealers, prior to the date of the
Prospectus, of each Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement
as possible and thereafter from time to time for such period as in the
opinion of counsel for the Underwriters a prospectus is required by the Act
to be delivered in connection with sales by any Underwriter or dealer, the
Company will expeditiously deliver to each Underwriter and each dealer,
without charge, as many copies of the Prospectus (and of any amendment or
supplement thereto) as you may reasonably request. The Company consents to
the use of the Prospectus (and of any amendment or supplement thereto) in
accordance with the provisions of the Act and with the securities or Blue Sky
laws of the jurisdictions in which the Shares are offered by the several
Underwriters and by all dealers to whom Shares may be sold, both in
connection with the offering and sale of the Shares and for such period of
time thereafter as the Prospectus is required by the Act to be delivered in
connection with sales by any Underwriter or dealer. If during such period of
time any event shall occur that in the judgment of the Company or in the
opinion of counsel for the Underwriters is required to be set forth in the
Prospectus (as then amended or supplemented) or should be set forth therein
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary to
supplement or amend the Prospectus to comply with the Act or any other law,
the Company will forthwith prepare and, subject to the provisions of
paragraph (d) above, file with the Commission an appropriate supplement or
amendment thereto and will expeditiously furnish to the Underwriters and
dealers a reasonable number of copies thereof. In the event that the Company
and you, as Representatives of the several Underwriters, agree that the
Prospectus should be amended or supplemented, the Company, if requested by
you, will promptly issue a press release announcing or disclosing the matters
to be covered by the proposed amendment or supplement.
(g) The Company will cooperate with you and with counsel for
the Underwriters in connection with the registration or qualification of the
Shares for offering and sale by the several Underwriters and by dealers under
the securities or Blue Sky laws of such jurisdictions as you may designate
and will file such consents to service of process or other documents
necessary or appropriate in order to effect such registration or
qualification; provided that in no event shall the Company be obligated to
qualify to do business in any jurisdiction where it is not now so qualified
or to take any action that would subject it to service of process in suits,
other than those arising out of the offering or sale of the Shares, in any
jurisdiction where it is not now so subject.
(h) The Company will make generally available to its security
holders a consolidated earnings statement, which need not be audited,
covering a twelve-month period commencing after the effective date of the
Registration Statement and ending not later than 15 months thereafter, as
soon as practicable after the end of such period, which consolidated earnings
statement shall satisfy the provisions of Section 11(a) of the Act.
(i) During the period of three years hereafter, the Company
will furnish to you (i) as soon as available, a copy of each report of the
Company mailed to stockholders or filed with the Commission, and (ii) from
time to time such other information concerning the Company as you may
reasonably request.
(j) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provisions hereof (otherwise than pursuant to
the second paragraph of Section 10 hereof or by notice given by you
terminating this Agreement pursuant to Section 10 or Section 11 hereof) or if
this Agreement shall be terminated by the Underwriters because of any failure
or refusal on the part of the Company or the Selling Stockholders to comply
with the terms or fulfill any of the conditions of this Agreement, the
Company agrees to reimburse the Representatives for all documented
out-of-pocket expenses (including reasonable fees and expenses of counsel for
the Underwriters) incurred by you in connection herewith.
(k) The Company will apply the net proceeds from the sale of
the Shares sold by it substantially in accordance with the description set
forth in the Prospectus.
(l) If Rule 430A of the Act is employed, the Company will
timely file the Prospectus pursuant to Rule 424(b) under the Act and will
advise you of the time and manner of such filing.
(m) Except as provided in this Agreement, the Company will not
sell, offer to sell, contract to sell or otherwise transfer or dispose of any
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (except to employees pursuant to the 1996
Employee Stock Purchase Plan or the employee stock purchase plan to be
established for Bioscot Limited), or grant any options or warrants to
purchase Common Stock (except to employees and directors pursuant to employee
benefit plans disclosed in the Prospectus), for a period of 90 days after the
date of the Prospectus, without the prior written consent of Smith Barney
Inc.
(n) The Company has furnished or will furnish to you "lock-up"
letters, in form and substance satisfactory to you, signed by each of its
current officers and directors and each of the Selling Stockholders.
(o) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not taken, nor will it take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of the Shares.
6. Agreements of the Selling Stockholders. Each of the Selling
Stockholders agrees with the several Underwriters as follows:
(a) Such Selling Stockholder will cooperate to the extent
reasonably necessary to cause the registration statement, any Abbreviated
Registration Statement and any post-effective amendment thereto to become
effective at the earliest possible time.
(b) Such Selling Stockholder will pay all federal and other
taxes, if any, on the transfer or sale of any Shares that are sold by such
Selling Stockholder to the Underwriters.
(c) Such Selling Stockholder will do or perform all things
required to be done or performed by such Selling Stockholder prior to the
Closing Date to satisfy all conditions precedent to the delivery of the
Shares by such Selling Stockholder pursuant to this Agreement.
(d) Such Selling Stockholder will not offer, sell, contract to
sell or otherwise dispose of, or grant any option to purchase, any shares of
Common Stock (or any securities convertible into or exercisable or
exchangeable for Common Stock) owned by such Selling Stockholder, except for
the sale of Shares to the Underwriters pursuant to this Agreement, without
the prior written consent of Smith Barney Inc. for a period of 90 days after
the date of the Prospectus. Notwithstanding the foregoing, the undersigned
shall be free to dispose of shares of Common Stock by delivering such shares
to the Company as payment for some or all of (i) the exercise price of any
option to purchase Common Stock granted by the Company to the undersigned and
(ii) the undersigned's income tax withholding obligation in connection with
any such option.
(e) Except as stated in this Agreement and in the Prepricing
Prospectus and the Prospectus, such Selling Stockholder will not take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of the Shares.
(f) Such Selling Stockholder will advise you promptly, and if
requested by you, will confirm such advice in writing, within the period of
time referred to in Section 5(f) hereof, of any change in information
relating to such Selling Stockholder and of any change in the Company's
condition (financial or other), business, prospects, properties, net worth or
results of operations or any other information relating to the Company or
relating to any matter stated in the Prospectus or any amendment or
supplement thereto that comes to the attention of such Selling Stockholder
that suggests that any statement made in the Registration Statement or the
Prospectus (as then amended or supplemented, if amended or supplemented) is
or may be untrue in any material respect or that the Registration Statement
or Prospectus (as then amended or supplemented, if amended or supplemented)
omits or may omit to state a material fact necessary to be stated therein in
order to make the statements therein not misleading in any material respect.
(g) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982, as amended, with respect to the transactions
herein contemplated, such Selling Stockholder agrees to deliver to you prior
to or on the Closing Date (in the case of the Principal Selling Stockholders)
or any Option Closing Date (in the case of the Additional Selling
Stockholders) a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
7. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the
registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Act, complied
when so filed in all material respects with the provisions of the Act. The
Commission has not issued any order preventing or suspending the use of any
Prepricing Prospectus.
(b) The registration statement in the form in which it became
or becomes effective and also in such form as it may be when any
post-effective amendment thereto or Abbreviated Registration Statement shall
become effective and the Prospectus and any supplement or amendment thereto
when filed with the Commission under Rule 424(b) under the Act, complied or
will comply in all material respects with the provisions of the Act and did
not or will not at any such times contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein (i) in the case of the Registration
Statement not misleading and (ii) in the case of the Prospectus in light of
the circumstances under which they were made, not misleading, except that
this representation and warranty does not apply to statements in or omissions
from the Registration Statement or the Prospectus made in reliance upon and
in conformity with information relating to any Underwriter furnished to the
Company in writing by or on behalf of any Underwriter through you expressly
for use therein.
(c) All the outstanding shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and
nonassessable and are free of any preemptive or similar rights; the Shares
have been duly authorized and, when issued and delivered to the Underwriters
against payment therefor in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable and free of any preemptive or similar
rights; and the capital stock of the Company conforms to the description
thereof in the Registration Statement and the Prospectus.
(d) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus, and is duly registered and qualified to conduct its business and
is in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does not
have a material adverse effect on the condition (financial or other),
business, properties, net worth or results of operations of the Company and
the Subsidiaries (as hereinafter defined) taken as a whole (a "Material
Adverse Effect").
(e) All the Company's subsidiaries (as defined in the Act),
are listed in an exhibit to the Registration Statement, and are referred to
herein individually as a "Subsidiary" and collectively as the "Subsidiaries."
Each Subsidiary is a corporation duly organized, validly existing and in
good standing in the jurisdiction of its incorporation, with full corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Registration Statement and the Prospectus,
and is duly registered and qualified to conduct its business and is in good
standing in each jurisdiction or place where the nature of its properties or
the conduct of its business requires such registration or qualification,
except where the failure so to register or qualify does not have a Material
Adverse Effect. All the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable, and are wholly owned by the Company directly or indirectly
through one of the other Subsidiaries, free and clear of any lien, adverse
claim, security interest, equity or other encumbrance, except as disclosed in
the Registration Statement and the Prospectus (or any amendment or supplement
thereto).
(f) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened, against the Company or any of
the Subsidiaries, or to which the Company or any of the Subsidiaries, or to
which any of their respective properties, is subject, that are required to be
described in the Registration Statement or the Prospectus but are not
described as required, and there are no agreements, contracts, indentures,
leases or other instruments that are required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement that are not described or filed as required by the
Act. Neither the Company nor any Subsidiary is involved in any strike, job
action or labor dispute with any group of employees, and no such action or
dispute is threatened.
(g) Neither the Company nor any of the Subsidiaries is (i) in
violation of its certificate of incorporation or by-laws, or of any law,
ordinance, administrative or governmental rule or regulation applicable to
the Company or any of the Subsidiaries or of any decree of any court or
governmental agency or body having jurisdiction over the Company or any of
the Subsidiaries, which violation would have a Material Adverse Effect, or
(ii) in default in any material respect in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any material agreement, indenture, lease or
other instrument to which the Company or any of the Subsidiaries is a party
or by which it or any of them or any of their respective properties may be
bound.
(h) Neither the issuance and sale of the Shares, the
execution, delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby
(i) requires any consent, approval, authorization or other order of or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official (except such as may be
required for the registration of the Shares under the Act and the Exchange
Act and compliance with the securities or Blue Sky laws of various
jurisdictions and approval by the National Association of Securities Dealers,
Inc. of the underwriting terms and arrangements, all of which have been or
will be effected in accordance with this Agreement) or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, the certificate of incorporation or bylaws of the Company or any of
the Subsidiaries or (ii) conflicts or will conflict with or constitutes or
will constitute a breach of, or a default under, any agreement, indenture,
lease or other instrument to which the Company or any of the Subsidiaries is
a party or by which any of them or any of their respective properties may be
bound, which conflict, breach or default would have a Material Adverse
Effect, or violates or will violate any statute, law, regulation or filing or
judgment, injunction, order or decree applicable to the Company or any of the
Subsidiaries or any of their respective properties, or will result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of the Subsidiaries pursuant to the terms of
any material agreement or instrument to which any of them is a party or by
which any of them may be bound or to which any of the property or assets of
any of them is subject.
(i) The accountants, Arthur Andersen LLP, who have certified
or shall certify the financial statements included in the Registration
Statement and the Prospectus (or any amendment or supplement thereto) are
independent public accountants as required by the Act.
(j) The historical financial statements, together with related
schedules and notes forming part of the Registration Statement and the
Prospectus (and any amendment or supplement thereto), present fairly the
consolidated financial position, results of operations and cash flow of the
Company and the Subsidiaries on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which they
apply, and such statements and related schedules and notes have been prepared
in accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as disclosed therein; the pro
forma financial information, and the related notes thereto, included in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) has been prepared in accordance with the applicable published rules
and regulations of the Commission with respect to pro forma financial
information and the assumptions used in preparing such information are
reasonable; and the other financial and statistical information and data
relating to the Company included in the Registration Statement and the
Prospectus (and any amendment or supplement thereto) present fairly the
information shown therein and have been prepared on a basis consistent with
the books and records of the Company.
(k) The execution and delivery of, and the performance by the
Company of its obligations under, this Agreement have been duly and validly
authorized by the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding
agreement of the Company, enforceable against the Company in accordance with
its terms, except as rights to indemnity and contribution hereunder may be
limited by federal or state securities laws or principles of public policy
and subject to the qualification that the enforceability of the Company's
obligations hereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and by general equitable principles.
(l) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto),
neither the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not in the
ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, and there has not been any change in the
capital stock, or material increase in the short-term debt or long-term debt
of the Company or any of the Subsidiaries, or any material adverse change, or
any development involving or which may reasonably be expected to involve a
prospective material adverse change, in the condition (financial or other),
business, properties, net worth or results of operations of the Company and
the Subsidiaries taken as a whole.
(m) Each of the Company and the Subsidiaries has good and
valid title to all property (real and personal) described in the Prospectus
as being owned by it, free and clear of all liens, claims, security interests
or other encumbrances except such as (i) are described in the Registration
Statement and the Prospectus or in a document filed as an exhibit to the
Registration Statement and (ii) are neither material in amount nor materially
significant in relation to the business of the Company and the Subsidiaries
taken as a whole, and all the property described in the Prospectus as being
held under lease by each of the Company and the Subsidiaries is held by it
under valid, subsisting and enforceable leases.
(n) The Company has not distributed and, prior to the later to
occur of (i) the Closing Date and (ii) completion of the distribution of the
Shares, will not distribute any offering material in connection with the
offering and sale of the Shares other than the Registration Statement, the
Prepricing Prospectus, the Prospectus or other materials, if any, permitted
by the Act.
(o) Each of the Company and the Subsidiaries has such permits,
licenses, franchises, certificates of need and other approvals or
authorizations ("Permits") of governmental or regulatory authorities,
including, without limitation, the Food and Drug Administration ("FDA") of
the U.S. Department of Health and Human Services ("HHS") and the Health Care
Financing Administration ("HCFA") of HHS, as are necessary to own, lease or
operate their respective properties and to conduct their respective
businesses in the manner described in the Prospectus, including, without
limitation, such Permits as are required under such federal, state and
foreign drug manufacturing and distribution and other health care laws as are
applicable to the Company and the Subsidiaries and their respective
businesses, subject to such qualifications as may be set forth in the
Prospectus and except to the extent that the failure to have any such Permit
will not have a Material Adverse Effect. The Company and each of the
Subsidiaries have fulfilled and performed all their respective material
obligations with respect to the Permits, and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the rights
of the holder of any such Permit, subject to such qualifications as may be
set forth in the Prospectus. Except as described in the Prospectus, none of
the Permits contain any restriction that is materially burdensome to either
the Company or any of the Subsidiaries.
(p) Each of the Company and the Subsidiaries owns or has
obtained licenses for the patents, patent applications and other proprietary
intellectual property used by the Company or any of the Subsidiaries in the
conduct of business (collectively, the "Intellectual Property"). Except as
set forth in the Prospectus, (i) to the Company's best knowledge there are no
rights of third parties to any Intellectual Property except as set forth in
the applicable licensing agreement; (ii) to the Company's best knowledge
there is no infringement by third parties of any Intellectual Property; (iii)
there is no pending or, to the Company's best knowledge, threatened action,
suit, proceeding or claim by others challenging any of the Company's or the
Subsidiaries' license or ownership rights in or to any Intellectual Property,
and the Company is unaware of any facts which would form a reasonable basis
for any such claim which could result in a Material Adverse Effect; (iv)
there is no pending or, to the Company's best knowledge, threatened action,
suit, proceeding or claim by others challenging the validity or scope of any
Intellectual Property; and (v) there is no pending or, to the Company's best
knowledge, threatened action, suit, proceeding or claim by others that the
Company or any of the Subsidiaries infringes or otherwise violates any
patent, trademark, copyright, trade secret or other proprietary rights of
others, and, except as so set forth, the Company is unaware of any facts
which would form a reasonable basis for any such claim which could result in
a Material Adverse Effect.
(q) The property, assets and operations of each of the Company
and the Subsidiaries comply in all material respects with all applicable
federal, state or local laws, rules, orders, decrees, judgments, injunctions,
licenses, permits or regulations relating to environmental matters (the
"Environmental Laws"), except to the extent that failure to comply with such
Environmental Laws would not have a Material Adverse Effect. None of the
Company's nor any of the Subsidiaries' property, assets or operations is the
subject of any federal, state or local investigation evaluating whether any
remedial action is needed to respond to a release of any substance regulated
by or form the basis of liability under any Environmental Laws (a "Hazardous
Material") into the environment or is in contravention of any federal, state,
local or foreign law, order or regulation that would have a Material Adverse
Effect. Neither the Company nor any of the Subsidiaries has received any
notice or claim, nor are there pending threatened or reasonably anticipated
lawsuits against it with respect to violations of an Environmental Law or in
connection with the release of any Hazardous Material into the environment.
Neither the Company nor any of the Subsidiaries has any material contingent
liability in connection with any release of Hazardous Material into the
environment.
(r) The Company and the Subsidiaries maintain insurance of the
types and in amounts generally deemed adequate for its business and
consistent with insurance coverage maintained by similar companies and
businesses, all of which insurance is in full force and effect.
(s) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions
are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(t) Neither the Company nor any of the Subsidiaries, nor any
employee or agent of the Company or any of the Subsidiaries has made any
payment of funds of the Company or received or retained any funds in
violation of any law, rule or regulation, which payment, receipt or retention
of funds is of a character required to be disclosed in the Prospectus.
(u) Each of the Company and the Subsidiaries have filed all
tax returns required to be filed by it, which returns are complete and
correct, and neither the Company nor any Subsidiary is in default in the
payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto.
(v) No holder of any security of the Company has any right to
require registration of shares of Common Stock or any other security of the
Company because of the filing of the registration statement or consummation
of the transactions contemplated by this Agreement, or otherwise, except as
disclosed in the Prospectus; and, except as disclosed in the Prospectus, no
person has the right to require registration under the Act of any shares of
Common Stock or other securities of the Company. Except as described in or
contemplated by the Prospectus, there are no outstanding options, warrants or
other rights calling for the issuance of, and there are no commitments, plans
or arrangements to issue, any shares of capital stock of the Company or any
security convertible into or exchangeable or exercisable for capital stock of
the Company. No person has the right, contractual or otherwise, to cause the
Company to permit such person to underwrite the sale of any of the Shares.
(w) Neither the Company nor any of the Subsidiaries is, nor will
the Company or any of the Subsidiaries become, upon sale of the Shares to be
issued and sold in accordance herewith and upon application of the net proceeds
to the Company from such sale as described in the Prospectus under the caption
"Use of Proceeds" an "investment company" or a person "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(x) The Company has complied and will continue to comply with
all provisions of Florida Statutes, Section 517.075, relating to issuers doing
business with Cuba.
8. Representations and Warranties of the Selling Stockholders. Each
Selling Stockholder represents and warrants to each Underwriter that:
(a) Such Selling Stockholder now has, and on the Closing Date
(as to each Selling Stockholder) and any Option Closing Date (as to each
Additional Selling Stockholder) will have, valid and unencumbered title to
the Shares to be sold by such Selling Stockholder, free and clear of any
lien, claim, security interest or other encumbrance, including, without
limitation, any restriction on transfer or other defect in title except for
any lien, claim, security interest, encumbrance or restriction on transfer
created pursuant hereto.
(b) Such Selling Stockholder now has, and on the Closing Date
(as to each Selling Stockholder) and any Option Closing Date (as to each
Additional Selling Stockholder) will have, full legal right, power and
authorization to sell, assign, transfer and deliver such Shares in the manner
provided in this Agreement, and upon delivery of and payment for such Shares
hereunder, the several Underwriters will acquire valid and marketable title
to such Shares, free and clear of any lien, claim, security interest, or
other encumbrance, restriction on transfer or other defect in title except
for any lien, claim, security interest, encumbrance or restriction on
transfer created pursuant hereto.
(c) This Agreement and the Custody Agreement have been duly
authorized, and in the case of this Agreement, when executed and delivered on
behalf of such Selling Stockholder in accordance with the Custody Agreement,
have been duly executed and delivered by or on behalf of such Selling
Stockholder and are the valid and binding agreements of such Selling
Stockholder enforceable against such Selling Stockholder in accordance with
their respective terms, except as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws or principles of
public policy and except as enforcement hereof and thereof may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and by
general equitable principles.
(d) Neither the execution and delivery of this Agreement or
the Custody Agreement by or on behalf of such Selling Stockholder nor the
consummation of the transactions herein or therein contemplated by or on
behalf of such Selling Stockholder requires any consent, approval,
authorization or order of, or filing or registration with, any court,
regulatory body, administrative agency or other governmental body, agency or
official (except such as may be required under the Act or state securities or
Blue Sky laws governing the purchase and distribution of the Shares or by the
NASD for clearance of the offering pursuant to the Corporate Financing Rule)
or any other approval or conflicts or will conflict with or constitutes or
will constitute a breach of, or default under, or violates or will violate,
any agreement, indenture or other instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder is or may be
bound or to which any of such Selling Stockholder's property or assets is
subject, or any statute, law, rule, regulation, ruling, judgment, injunction,
order or decree applicable to such Selling Stockholder or to any property or
assets of such Selling Stockholder, except in each case as would not
materially adversely affect the ability of such Selling Stockholder to
consummate the transactions contemplated by this Agreement.
(e) Such Selling Stockholder has reviewed the Registration
Statement and the Prospectus. The Registration Statement does not contain an
untrue statement of a material fact with respect to such Selling Stockholder
or omit to state a material fact with respect to such Selling Stockholder
required to be stated therein or necessary to make the statements therein
with respect to such Selling Stockholder not misleading and the Prospectus
does not contain an untrue statement of a material fact with respect to such
Selling Stockholder or omit to state a material fact with respect to such
Selling Stockholder necessary to make the statements therein with respect to
such Selling Stockholder, in light of the circumstances under which they were
made, not misleading and, except as disclosed in the Registration Statement
and the Prospectus, such Selling Stockholder knows of no material adverse
information concerning the current or prospective operations of the Company.
(f) The representations and warranties of such Selling
Stockholder in the Custody Agreement are, and on the Closing Date and (as to
each Additional Selling Stockholder) any Option Closing Date will be, true
and correct.
(g) Such Selling Stockholder has not taken, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares, except for the lock-up
arrangements described in the Prospectus.
9. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each of you and each other Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act from and against any and all
losses, claims, damages, liabilities and expenses (including reasonable costs
of investigation) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Prepricing
Prospectus or in the Registration Statement or the Prospectus or in any
amendment or supplement thereto, or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses arise out of
or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to such
Underwriter furnished in writing to the Company by or on behalf of any
Underwriter through you expressly for use in connection therewith; provided,
however, that the indemnification contained in this paragraph (a) with
respect to any Prepricing Prospectus shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) on
account of any such loss, claim, damage, liability or expense arising from
the sale of the Shares by such Underwriter to any person if a copy of the
Prospectus shall not have been delivered or sent to such person within the time
required by the Act and the regulations thereunder, and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such Prepricing Prospectus was corrected in the
Prospectus, provided that the Company has delivered the Prospectus to the
several Underwriters in requisite quantity on a timely basis to permit such
delivery or sending. The foregoing indemnity agreement shall be in addition
to any liability which the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against
any Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the Company, and the Company shall
assume the defense thereof, including the employment of counsel and payment
of all fees and expenses. Such Underwriter or any such controlling person
shall have the right to employ separate counsel in any such action, suit or
proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless (i) the Company has agreed in writing to pay such
fees and expenses, (ii) the Company has failed to assume the defense and
employ counsel within a reasonable time after notice of such action, suit or
proceeding, or (iii) the named parties to any such action, suit or proceeding
(including any impleaded parties) include both such Underwriter or such
controlling person and the Company and such Underwriter or such controlling
person shall have reasonably concluded based on the advice of its counsel
that representation of such indemnified party and the Company by the same
counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in
which case the Company shall not have the right to assume the defense of such
action, suit or proceeding on behalf of such Underwriter or such controlling
person). It is understood, however, that the Company shall, in connection
with any one such action, suit or proceeding or separate but substantially
similar or related actions, suits or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for
the reasonable fees and expenses of only one separate firm of attorneys (in
addition to any local counsel) at any time for all such Underwriters and
controlling persons not having actual or potential differing interests with
you or among themselves, which firm shall be designated in writing by Smith
Barney Inc., and that all such fees and expenses shall be reimbursed as they
are incurred. The Company shall not be liable for any settlement of any such
action, suit or proceeding effected without its written consent, but if
settled with such written consent, or if there be a final judgment for the
plaintiff in any such action, suit or proceeding, the Company agrees to
indemnify and hold harmless any Underwriter, to the extent provided in the
preceding paragraph, and any such controlling person from and against any
loss, claim, damage, liability or expense by reason of such settlement or
judgment.
(c) Each of Harold J. Tenoso, Ph.D., Samuel A. Penninger, Jr.,
Russell H. Plumb, Timm M. Hurst, James F. Sowinski, Gary A. Kress and George
M. Shaw (each an "Inside Selling Stockholder"), agrees, severally and not
jointly, to indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act to the same extent as the indemnity from
the Company to each Underwriter set forth in Section 9(a) hereof (but subject
to Section 9(g) hereof). Each of the Selling Stockholders other than the
Inside Selling Stockholders (each an "Other Selling Stockholder") agrees,
severally and not jointly, to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act to the same extent as
the indemnity from the Company to each Underwriter set forth in Section 9(a)
hereof (but only with respect to information relating to such Other Selling
Stockholder contained in any Prepricing Prospectus or in the Registration
Statement or the Prospectus or any amendment or supplement thereto and
subject to Section 9(g) hereof; provided, however, that the indemnification
contained in this paragraph (a) with respect to any Prepricing Prospectus
shall not inure to the benefit of any Underwriter (or to the benefit of any
person controlling such Underwriter) on account of any such loss, claim,
damage, liability or expense arising from the sale of the Shares by such
Underwriter to any person if a copy of the Prospectus shall not have been
delivered or sent to such person within the time required by the Act and the
regulations thereunder, and the untrue statement or alleged untrue statement
or omission or alleged omission of a material fact contained in such
Prepricing Prospectus was corrected in the Prospectus, provided that the
Company has delivered the Prospectus to the several Underwriters in requisite
quantity on a timely basis to permit such delivery or sending). In case any
action or claim shall be brought or asserted against any Underwriter or any
such controlling person in respect of which indemnity may be sought against
any Selling Stockholder pursuant to this paragraph (c), such Selling
Stockholder shall have the rights and duties given to the Company, and each
Underwriter and any such controlling person shall have the rights and duties
given to the Underwriters, under paragraph (b) above. The foregoing
indemnity agreement shall be in addition to any liability which each of the
Selling Stockholders may otherwise have.
(d) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, the Selling Stockholders and any person who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, to the same extent as the foregoing indemnity from
the Company to each Underwriter, but only with respect to information
relating to such Underwriter furnished in writing by or on behalf of such
Underwriter through you expressly for use in the Registration Statement, the
Prospectus or any Prepricing Prospectus, or any amendment or supplement
thereto. If any action, suit or proceeding shall be brought against the
Company, any of its directors, any such officer, the Selling Stockholders or
any such controlling person based on the Registration Statement, the Prospectus
or any Prepricing Prospectus, or any amendment or supplement
thereto, and in respect of which indemnity may be sought against any
Underwriter pursuant to this paragraph (c), such Underwriter shall have the
rights and duties given to the Company by paragraph (b) above (except that if
the Company shall have assumed the defense thereof such Underwriter shall not
be required to do so, but may employ separate counsel therein and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
such Underwriter's expense), and the Company, its directors, any such
officer, the Selling Stockholders and any such controlling person shall have
the rights and duties given to the Underwriters by paragraph (b) above. The
foregoing indemnity agreement shall be in addition to any liability which the
Underwriters may otherwise have.
(e) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under paragraphs (a), (c) or (d) hereof
in respect of any losses, claims, damages, liabilities or expenses referred
to therein because it is found to be unenforceable, then an indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, Inside
Selling Stockholders and Other Selling Stockholders on the one hand and the
Underwriters on the other hand from the offering of the Shares, or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company, Inside Selling Stockholders and Other Selling Stockholders on the
one hand and the Underwriters on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, the Inside
Selling Stockholders and the Other Selling Stockholders on the one hand and
the Underwriters on the other hand shall be deemed to be in the same
proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the
Sellers bear to the total underwriting discounts and commissions received by
the Underwriters, in each case as set forth in the table on the cover page of
the Prospectus; provided that, in the event that the Underwriters shall have
purchased any Additional Shares hereunder, any determination of the relative
benefits received by a Seller and the Underwriters from the offering of the
Shares shall include the proceeds (net of underwriting discounts and
commissions but before deducting expenses) received by each Seller and the
underwriting discounts and commissions attributable to the sale of the shares
of Common Stock by such Seller received by the Underwriters, from the sale of
such Additional Shares, in each case computed on the basis of the respective
amounts set forth in the notes to the table on the cover page of the
Prospectus. The relative fault of the Sellers on the one hand and the
Underwriters on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, Inside Selling Stockholders and Other
Selling Stockholders on the one hand or by the Underwriters on the other hand
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(f) The Sellers and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 9 were
determined by a pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (e)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in paragraph
(e) above shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating any claim or defending any such
action, suit or proceeding. Notwithstanding the provisions of this Section
9, no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price of the Shares underwritten by it and
distributed to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 9 are several in proportion to the
respective numbers of Firm Shares set forth opposite their names in Schedule
III hereto (or such numbers of Firm Shares increased as set forth in Section
12 hereof) and not joint.
(g) Notwithstanding any other provision of this Section 9, the
liability of any Selling Stockholder for indemnification or contribution
under this Section 9 shall not exceed an amount equal to the number of Shares
sold by such Selling Stockholder hereunder multiplied by the purchase price
per share set forth in Section 2 hereof. Furthermore, it shall be a
condition to the obligations of the Selling Stockholders to indemnify the
Underwriters that the Underwriters have previously delivered a claim for
indemnification to the Company for the losses, claims, damages, liabilities
or expenses that the Underwriters have incurred or to which the Underwriters
have become subject as to which the Underwriters are entitled to
indemnification, which claim for indemnification has not been fully satisfied
by payment within 90 days following delivery of the claim for indemnification
and the exercise of reasonable diligence by the Underwriters in seeking
payment from the Company; provided, however, that the condition precedent
referred to above shall be of no force and effect and each Selling
Stockholder will immediately be required to pay and perform in full its
obligations under this Section 9 if (i) the Company files a petition for
relief under the United States Bankruptcy Code (the "Bankruptcy Code"), (ii)
an order for relief is entered against the Company in an involuntary case
under the Bankruptcy Code, (iii) the Company makes an assignment for the
benefit of its creditors, or (iv) any court orders or approves the
appointment of a receiver or custodian for the Company or a substantial
portion of its assets.
(h) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding.
(i) Any losses, damages, liabilities or expenses for which an
idemnified party is entitled to indemnification or contribution under this
Section 9 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 9 and the
representations and warranties of the Sellers set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers, the
Selling Stockholders or any person controlling the Company, (ii) acceptance
of any Shares and payment therefor hereunder, and (iii) any termination of
this Agreement. A successor to any Underwriter or any person controlling any
Underwriter, or to the Company, any successor, its directors or officers, the
Selling Stockholders or any person controlling the Company, shall be entitled
to the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 9.
10. Conditions of Underwriters' Obligations. The several obligations
of the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and delivered,
it is necessary for the registration statement or a post-effective amendment
thereto or an Abbreviated Registration Statement to be declared effective
before the offering of the Shares may commence, the registration statement or
such post-effective amendment shall have become effective not later than 5:30
P.M., New York City time, on the date hereof, or at such later date and time
as shall be consented to in writing by you, and all filings, if any, required
by Rules 424 and 430A under the Act shall have been timely made; no stop order
suspending the effectiveness of the registration statement shall have been
issued and no proceeding for that purpose shall Commission, and any request
of the Commission for additional information (to be included in the
registration statement or the prospectus or otherwise) shall have been
complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the Company or
the Subsidiaries not contemplated by the Prospectus, which in your opinion,
as Representatives of the several Underwriters, would materially, adversely
affect the market for the Shares, or (ii) any event or development relating
to or involving the Company or any of the Subsidiaries, or any officer or
director of the Company or any of the Subsidiaries, or any Selling
Stockholder which makes any material statement made in the Prospectus untrue
or which, in the opinion of the Company and its counsel or the Underwriters
and their counsel, requires the making of any addition to or change in the
Prospectus in order to state a material fact required by the Act or any other
law to be stated therein or necessary in order to make the statements therein
not misleading, if in either circumstance amending or supplementing the
Prospectus to reflect such event or development would, in your opinion, as
Representatives of the several Underwriters, materially, adversely affect the
market for the Shares.
(c) You shall have received on the Closing Date an opinion of
Shereff, Friedman, Hoffman & Goodman, LLP, counsel for the Company and the
Selling Stockholders, dated the Closing Date and addressed to you, as
Representatives of the several Underwriters, to the effect that:
(i) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
with full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure to so register or
qualify would not have a Material Adverse Effect;
(ii) Each Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, with full corporate power and authority to own, lease, and
operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto); and all the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable, and are wholly owned by the Company directly, or indirectly
through one of the other Subsidiaries, free and clear of any security
interest, lien, adverse claim, equity or other encumbrance, except as
disclosed in the Registration Statement and the Prospectus (or any amendment
or supplement thereto);
(iii) Each Subsidiary is duly registered and qualified to
conduct its business and is in good standing as a foreign corporation in each
jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify or to be in good standing would not have a
Material Adverse Effect;
(iv) The authorized and outstanding capital stock of the
Company is as set forth under the caption "Capitalization" in the Prospectus;
and the authorized capital stock of the Company conforms in all material
respects as to legal matters to the description thereof contained in the
Prospectus under the caption "Description of Capital Stock";
(v) All the shares of capital stock of the Company
outstanding prior to the issuance of the Shares to be sold by the Company
have been duly authorized and validly issued and are fully paid and
nonassessable;
(vi) The Shares to be issued and sold by the Company have
been duly authorized and, when issued and delivered to the Underwriters
against payment therefor in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable and free of any (A) preemptive rights
under the Delaware General Corporation Law or the Company's certificate of
incorporation or (B) to the knowledge of such counsel, similar rights that
entitle or will entitle any person to acquire any Shares upon the issuance
thereof by the Company;
(vii) The form of certificates for the Shares conforms to
the requirements of the Delaware General Corporation Law;
(viii) The Registration Statement and all post-effective
amendments, if any, have become effective under the Act and, to the knowledge
of such counsel, no stop order suspending the effectiveness of the Regis
tration Statement has been issued and no proceedings for that purpose are
pending before or contemplated by the Commission; and any required filing of
the Prospectus pursuant to Rule 424(b) has been made in accordance with Rule
424(b);
(ix) The Company has the corporate power and authority to
enter into this Agreement and to issue, sell and deliver the Shares to be
sold by the Company to the Underwriters as provided herein, and this
Agreement has been duly authorized, executed and delivered by the Company
and is a legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as enforcement of
rights to indemnity and contribution hereunder may be limited by federal or
state securities laws or principles of public policy and subject to the
qualification that the enforceability of the Company's obligations hereunder
may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equitable principles;
(x) To the knowledge of such counsel, neither the Company
nor any of the Subsidiaries is in violation of its certificate of
incorporation or bylaws or is in default in the performance of any
obligation, agreement or condition contained in any bond, debenture, note or
other evidence of indebtedness, except where such default would not have a
Material Adverse Effect;
(xi) Neither the offer, sale or delivery of the Shares,
nor the execution, delivery or performance of this Agreement, nor compliance
by the Company with the provisions hereof, nor consummation by the Company of
the transactions contemplated hereby conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the
certificate of incorporation or bylaws of the Company or any of the
Subsidiaries or any agreement, indenture, lease or other instrument to which
the Company or any of the Subsidiaries is a party or by which any of them or
any of their respective properties is bound that is made an exhibit to the
Registration Statement, or will result in the creation or imposition of any
material lien, charge or encumbrance upon any property or assets of the
Company or any of the Subsidiaries, nor will any such action result in any
violation of any existing law, regulation, ruling (assuming compliance with
all applicable state securities and Blue Sky laws), judgment, injunction,
order or decree known to such counsel and applicable to the Company , the
Subsidiaries, or any of their respective properties, which conflict, breach,
default, creation or imposition of a lien, or violation would have a Material
Adverse Effect;
(xii) No consent, approval, authorization or other order
of, or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency, or official is required on the part
of the Company (except as have been obtained under the Act, the Exchange Act
and the regulations of the NASD relating to the quotation of the Common Stock
on the Nasdaq National Market or such as may be required under state securities
or Blue Sky laws governing the purchase and distribution of the Shares and
under other regulations promulgated by the NASD) for the valid issuance and
sale of the Shares to the Underwriters as contemplated by this Agreement;
(xiii) The Registration Statement and the Prospectus and
any supplements or amendments thereto (except for the financial statements
and notes thereto and the schedules and other financial and statistical data
included therein, as to which such counsel need not express any opinion)
comply as to form in all material respects with the requirements of the Act;
(xiv) To the knowledge of such counsel, (A) other than as
described or contemplated in the Prospectus (or any supplement thereto),
there are no legal or governmental proceedings pending or threatened against
the Company or any of the Subsidiaries, or to which the Company or any of the
Subsidiaries, or any of their respective properties, is subject, which are
required to be described in the Registration Statement or the Prospectus
(or any amendment or supplement thereto) and (B) there are no agreements,
contracts, indentures, leases or other instruments that are required to be
described in the Registration Statement or the Prospectus (or any amendment
or supplement thereto) or to be filed as an exhibit to the Registration
Statement that are not described or filed as required, as the case may be;
(xv) The Company and each Subsidiary has full corporate
power and authority and all Permits as are necessary under applicable law to
own, lease and operate their respective properties and to conduct their
respective businesses as now being conducted, and in the manner described in
the Prospectus, except where the failure to so possess any such Permits would
not, singularly or in the aggregate, have a Material Adverse Effect,
including, without limitation, such Permits of governmental or regulatory
authorities;
(xvi) To the knowledge of such counsel, neither the
Company nor any of the Subsidiaries is in violation in any respect of any
law, ordinance, administrative or governmental rule or regulation applicable
to them, respectively, or of any decree of any court or governmental agency
or body having jurisdiction over them, respectively, which violation would
have a Material Adverse Effect;
(xvii) The statements in the Registration Statement and
Prospectus, insofar as they are descriptions of contracts, agreements or
other legal documents, or refer to statements of law or legal conclusions,
are accurate and present fairly the information required to be shown;
(xviii) Except as described in the Prospectus, such
counsel does not know of any outstanding option, warrant or other right calling
for the issuance of, and such counsel does not know of any commitment, plan or
arrangement (except that such counsel may have been advised that the Company
intends to establish an employee stock purchase plan for Bioscot Limited
employees) to issue, any shares of capital stock of the Company or any
securities convertible into or exchangeable or exercisable for
capital stock of the Company; and except as set forth in the Prospectus, such
counsel does not know of any holder of any security of the Company or any
other person who has the right, contractual or otherwise, to cause the
Company to sell or otherwise issue to them, or permit them to underwrite the
sale of, any of the Shares or the right to have any Common Stock or other
securities of the Company included in the Registration Statement or the
right, as a result of the filing of the Registration Statement or otherwise,
to require registration under the Act of any shares of Common Stock or other
securities of the Company;
(xix) To the knowledge of such counsel, the Company is
not an "investment company" or a person "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended;
(xx) This Agreement and the Custody Agreement have each
been duly executed and delivered by or on behalf of each of the Selling
Stockholders and are valid and binding agreements of each Selling Stockholder
enforceable against each Selling Stockholder in accordance with their
respective terms, except (A) as enforcement of rights to indemnity and
contribution hereunder and thereunder may be limited by federal or state
securities laws or principles of public policy and (B) subject to the
qualification that the enforceability of each of their obligations hereunder
and thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and by general equitable principles;
(xxi) To the knowledge of such counsel, each Selling
Stockholder has full legal right, power and authorization to sell, assign,
transfer and deliver valid and unencumbered title to the Shares such Selling
Stockholder has agreed to sell pursuant to this Agreement; and upon delivery
of such Shares pursuant to this Agreement and payment therefor as
contemplated herein and assuming that the several Underwriters are bona fide
purchasers within the meaning of the Uniform Commercial Code as in effect in
the State of New York (the "UCC"), the Underwriters will acquire valid and
unencumbered title to such Shares free and clear of any adverse claim (within
the meaning of Section 8-302 of the U.C.C.); and
(xxii) To the knowledge of such counsel, the execution
and delivery of this Agreement and the Custody Agreement by the Selling
Stockholders and the consummation of the transactions contemplated hereby and
thereby will not conflict with, violate, result in a breach of or constitute
a default under the terms or provisions of any material agreement, indenture,
mortgage or other instrument to which any Selling Stockholder is a party or
by which any of them or any of their respective assets or property is bound,
or any court order or decree or any law, rule, or regulation known to such
counsel applicable to any Selling Stockholder or to any of the respective
material property or assets of any Selling Stockholder.
In addition, such counsel shall state that in the course of the
preparation of the Registration Statement and Prospectus, such counsel has
participated in discussions and conferences with officers of the Company and
with representatives of its independent public accountants, as well as the
Representatives' counsel, during which successive proofs of the Registration
Statement and Prospectus were reviewed, and that such counsel has also
reviewed and discussed with various of such persons material submitted for
use in the Registration Statement and Prospectus and certain other data and
information furnished in support of the statements made therein, and that
while such counsel is not passing upon and assumes no responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement and Prospectus, such counsel advises you, relying to
the extent such counsel deems reasonable, as to the accuracy, completeness,
relevance and significance of factual matters to a large extent upon
discussions and conferences with the above mentioned Company officers, that
nothing has come to the attention of such counsel that leads such counsel to
believe that (A) the Registration Statement (except as to the financial
statements, notes thereto and other financial and statistical data contained
therein, as to which such counsel expresses no view), at the time the Regis
tration Statement became effective, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements made therein not misleading, or
that (B) the Prospectus (except as to the financial statements, notes thereto
and other financial and statistical data contained therein, as to which such
counsel expresses no view), as of its date and on the date of such counsel's
opinion, contained or contains any untrue statement of a material fact or
omitted or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading or that any amendment or supplement to the Prospectus,
as of its date, and as of the Closing Date or the Option Closing Date, as the
case may be, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading (it being understood that such counsel need express no opinion
with respect to the financial statements and the notes thereto and the
schedules and other financial and statistical data included in the
Registration Statement or the Prospectus).
In rendering their opinion as aforesaid, counsel may rely upon an
opinion or opinions, each dated the Closing Date or the Option Closing Date,
as the case may be, of other counsel retained by them or the Company
(including regulatory counsel) as to the laws of any jurisdiction other than
the United States or the State of New York or the corporation laws of the
State of Delaware, provided that (1) each such local counsel is acceptable to
the Representatives and (2) such reliance is expressly authorized by each
opinion so relied upon and a copy of each such opinion is delivered to the
Representatives and is, in form and substance satisfactory to them and their
counsel, and (3) counsel shall state in their opinion that they believe that
the Underwriters are justified in relying thereon. In addition, in rendering
such opinion, counsel may rely, to the extent they deem proper, as to matters
of fact, upon representations of the Selling Stockholders contained herein
and upon certificates of officers of the Company and of government officials.
Such counsel also may exclude from its opinions rendered Bioscot Limited,
Allegheny Biologicals, Inc., Southeastern Biologics, Inc., Plasma Management,
Inc., Cenla Plasma, Inc., Austin Plasma Company, Inc., Northeast Plasma,
Inc., Twin City Plasma Centers, Inc., University Plasma Centers Incorporated
and Serologicals Barbados, Inc.
(d) You shall have received on the Closing Date an opinion of
Hyman Phelps & McNamara, special FDA (Food and Drug Administration)
regulatory counsel for the Company, dated the Closing Date and addressed to
you, as Representatives of the several Underwriters, to the effect that:
(i) Neither the offer, sale or delivery of the Shares,
nor the execution, delivery or performance of the Agreement, nor compliance
by the Company with the provisions thereof, nor consummation by the Company
of the transactions contemplated thereby will result in any violation of any
existing law, regulation, ruling, judgment, injunction, order or decree known
to such counsel, and applicable to the Company, the Subsidiaries, or any of
their respective properties, which violation would have a Material Adverse
Effect;
(ii) No consent, approval, authorization or other order
of, or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency, or official is
required on the part of the Company for the valid issuance and sale of the
Shares by the Company to the Underwriters as contemplated by the Agreement;
(iii) To the knowledge of such counsel, other than as
described or contemplated in the Prospectus (or any supplement thereto),
there are no legal or governmental proceedings pending or threatened against
the Company or any of the Subsidiaries, or to which the Company or any of the
Subsidiaries, or any of their respective properties, is subject, which are
required to be described in the Registration Statement or the Prospectus (or
any amendment or supplement thereto);
(iv) The Company and each Subsidiary has all Permits as
are necessary under applicable law to own, lease and operate their respective
properties and to conduct their respective businesses as now being conducted,
and in the manner described in the Prospectus, except where the failure to so
possess any such Permits would not, singularly or in the aggregate, have a
Material Adverse Effect, including, without limitation, such Permits of
governmental or regulatory authorities;
(v) To the knowledge of such counsel, neither the Company
nor any of the Subsidiaries is in violation in any material respect of any
law, ordinance, administrative or governmental rule or regulation applicable
to them, respectively, or of any decree of any court or governmental agency
or body having jurisdiction over them, respectively;
(vi) The statements in the Registration Statement and
Prospectus, insofar as they are descriptions of contracts, agreements or
other legal documents, or refer to statements of law or legal conclusions,
are accurate and present fairly the information required to be shown; and
(vii) The statements in the Registration Statement and
Prospectus under the captions "Risk Factors -- Stringent Regulation" and
"Business -- Government and Industry Regulation" and other references therein
to antibody collection or other food and drug regulatory matters and clinical
testing regulatory matters, insofar as such statements constitute
descriptions or summaries of applicable federal statutes, laws, regulations,
requirements or procedures, are accurate in all material respects and fairly
represent the information purported to be shown in light of the circumstances
under which they were made.
(e) You shall have received on the Closing Date an opinion of
Dundas & Wilson, legal advisers to the Company in Scotland, dated the Closing
Date and addressed to you, as Representatives of the several Underwriters, to
the effect that:
(i) Bioscot is a private company limited by shares duly
incorporated and validly existing under the laws of Scotland, with full
corporate power and authority to own, lease, and operate its properties and
to conduct its business as now being conducted and as described in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto). Bioscot has an authorized share capital of L1,500,000 comprising
1,500,000 ordinary shares of L1 each, of which 500,000 of such ordinary
shares are validly issued and are fully paid or credited as fully paid, and
499,999 such shares are registered in the name of Serologicals, Inc., and one
such share is registered in the name of Samuel Penninger as nominee for
Serologicals, Inc.;
(ii) To the knowledge of such counsel, Bioscot is not in
violation of its memorandum or articles of association or in default in the
performance of any material obligation, agreement or condition contained in
any of certain specific Bioscot documents included as exhibits to the
Registration Statement and listed by such counsel in their opinion (the
"Documents");
(iii) Neither the offer, sale or delivery of the Shares,
nor the execution, delivery or performance of the Agreement, nor compliance
by the Company with the provisions thereof, nor consummation by the Company
of the transactions contemplated thereby conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the
memorandum or articles of association of Bioscot or any of the Documents or,
to the knowledge of such counsel, will result in the creation or imposition
of any material lien, charge or encumbrance upon any property or assets of
Bioscot, nor will any such action result in any violation of any existing
law, regulation, ruling, judgment, injunction, order or decree known to such
counsel and applicable to Bioscot, or any of its properties, in the UK, which
violation would have a Material Adverse Effect;
(iv) To the knowledge of such counsel, other than as
described or contemplated in the Registration Statement or Prospectus (and
any amendment or supplement thereto), there are no legal or governmental
proceedings pending or threatened against Bioscot, or to which Bioscot, or
any of its properties, is subject, which are required to be described in the
Registration Statement or the Prospectus (and any amendment or supplement
thereto);
(v) To the knowledge of such counsel, Bioscot is not in
violation in any material respect of any Scottish law, ordinance,
administrative or governmental rule or regulation applicable in the UK to it,
or of any decree of any court or governmental agency or body having
jurisdiction over it; and
(vi) The statements in the Registration Statement and
Prospectus under the captions "Business -- Product and Service Development"
and "-- Government and Industry Regulation" relating to the agreement with
the Scottish National Blood Transfusion Service ("SNBTS") and the UK Health
and Safety at Work Act are accurate in all material respects and, to the
knowledge of such counsel, do not omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(f) You shall have received on the Closing Date an opinion of
Dewey Ballantine, counsel for the Underwriters, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, with
respect to the matters referred to in clauses (vi) (other than subclause (B)
thereof), (viii), (ix), (xiii) and the paragraph immediately following clause
(xxii) of the foregoing paragraph (c) and such other related matters as you
may request.
(g) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and
the Closing Date from Arthur Andersen LLP, independent certified public
accountants, substantially in the forms heretofore approved by you.
(h) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there
shall not have been any change in the capital stock of the Company nor any
material increase in the short-term or long-term debt of the Company (other
than in the ordinary course of business) from that set forth or contemplated
in the Registration Statement or the Prospectus (or any amendment or
supplement thereto); (iii) there shall not have been, since the respective
dates as of which information is given in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), except as may otherwise
be stated in the Registration Statement and Prospectus (or any amendment or
supplement thereto), any material adverse change in the condition (financial
or other), business, prospects, properties, net worth or results of
operations of the Company; (iv) the Company shall not have any liabilities or
obligations, direct or contingent (whether or not in the ordinary course of
business), that are material to it, other than those reflected in or
contemplated by the Registration Statement or the Prospectus (or any
amendment or supplement thereto); and (v) all the representations and
warranties of the Company contained in this Agreement shall be true and
correct on and as of the date hereof and on and as of the Closing Date as if
made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief financial officer of the Company (or such other officers as are
acceptable to you), to the effect set forth in this Section 10(h) and in
Section 10(i) hereof.
(i) The Company shall not have failed at or prior to the
Closing Date to have performed or complied in any material respect with any
of its agreements herein contained and required to be performed or complied
with by it hereunder at or prior to the Closing Date.
(j) You shall have received a certificate dated the Closing
Date signed by the chief accounting officer of the Company substantially in
the form heretofore approved by you, respecting the Company's compliance with
the financial covenants contained in agreements to which the Company is a
party.
(k) All the representations and warranties of the Selling
Stockholders contained in this Agreement shall be true and correct on and as
of the date hereof and on and as of the Closing Date as if made on and as of
the Closing Date, and you shall have received a certificate, dated the
Closing Date and signed by or on behalf of the Selling Stockholders as to the
matters set forth in this Section 10(k) and in Section 10(l) hereof.
(l) The Selling Stockholders shall not have failed at or prior
to the Closing Date to have performed or complied in any material respect
with any of their agreements herein contained and required to be performed or
complied with by them hereunder at or prior to the Closing Date.
(m) The Sellers shall have furnished or caused to be furnished
to you such further certificates and documents as you shall have reasonably
requested.
All such opinions, certificates, letters and other documents will
be in compliance with the provisions hereof only if they are satisfactory in
form and substance to you and your counsel.
Any certificate or document signed by any officer of the Company or
any Attorney-in-Fact or any Selling Stockholder and delivered to you, as
Representatives of the several Underwriters, or to counsel for the
Underwriters, shall be deemed a representation and warranty by the Company or
such Selling Stockholder, as the case may be, to each Underwriter as to the
statements made therein.
The several obligations of the Underwriters to purchase Additional
shares hereunder are subject to the satisfaction on and as of any Option
Closing Date of the conditions set forth in this Section 10, except that, if
any Option Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (h) and paragraphs
(j) and (l) shall be dated the Option Closing Date in question and the
opinions or letters called for by paragraphs (c) through (g) shall be revised
to reflect the sale of Additional Shares.
11. Expenses. The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it
of its obligations hereunder: (i) the preparation, printing or reproduction,
and filing with the Commission of the registration statement (including
financial statements and exhibits thereto), each Prepricing Prospectus, the
Prospectus, and each amendment or supplement to any of them; (ii) the
printing (or reproduction) and delivery (including postage, air freight
charges and charges for counting and packaging) of such copies of the
registration statement, each Prepricing Prospectus, the Prospectus, and all
amendments or supplements to any of them as may be reasonably requested for
use in connection with the offering and sale of the Shares; (iii) the
preparation, printing, authentication, issuance and delivery of certificates
for the Shares, including any stamp taxes in connection with the offering of
the Shares; (iv) the printing (or reproduction) and delivery of this
Agreement, the preliminary and supplemental Blue Sky Memoranda and all other
agreements or documents printed (or reproduced) and delivered in connection
with the offering of the Shares; (v) the registration of the Common Stock
under the Exchange Act and the listing of the Shares on the Nasdaq National
Market; (vi) the registration or qualification of the Shares for offer and
sale under the securities or Blue Sky laws of the several states as provided
in Section 5(g) hereof (including the reasonable fees, expenses and
disbursements of counsel for the Underwriters relating to the preparation,
printing or reproduction, and delivery of the preliminary and supplemental
Blue Sky Memoranda and such registration and qualification); (vii) the filing
fees and the reasonable fees and expenses of counsel for the Underwriters in
connection with any filings required to be made with the National Association
of Securities Dealers, Inc. (the "NASD") in connection with the offering,
provided, however, that the payment of the reasonable fees and expenses of
Dewey Ballantine shall not exceed $1,750 in connection with such NASD
filings; (viii) the transportation and other expenses incurred by or on
behalf of representatives of the Company in connection with presentations to
prospective purchasers of the Shares, provided however that these shall not
include the transportation and other expenses of the Underwriters; (ix) the
fees and expenses of the Company's accountants and the fees and expenses of
counsel (including local and special counsel) for the Company and the Selling
Stockholders; and (x) the performance by the Company of its other obligations
under this Agreement.
12. Effective Date of Agreement. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto;
or (ii) if, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment
thereto or an Abbreviated Registration Statement to be declared effective
before the offering of the Shares may commence, when notification of the
effectiveness of the registration statement or such post-effective amendment
or Abbreviated Registration Statement has been released by the Commission.
Until such time as this Agreement shall have become effective, it may be
terminated by the Company, by notifying you and the Attorneys-in-Fact, or by
you, as Representatives of the several Underwriters, by notifying the Company
and the Attorneys-in-Fact.
If any one or more of the Underwriters shall fail or refuse to
purchase Firm Shares which it or they have agreed to purchase hereunder, and
the aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than
one-tenth of the aggregate number of Firm Shares, each non-defaulting
Underwriter shall be obligated, severally, in the proportion which the number
of Firm Shares set forth opposite its name in Schedule III hereto bears to
the aggregate number of Firm Shares set forth opposite the names of all
non-defaulting Underwriters or in such other proportion as you may specify in
accordance with Section 20 of the Master Agreement Among Underwriters of
Smith Barney, Harris Upham & Co. Incorporated (predecessor of Smith Barney
Inc.), to purchase the Shares which such defaulting Underwriter or
Underwriters agreed, but failed or refused, to purchase. If any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the
aggregate number of Firm Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Firm Shares and arrangements
satisfactory to you and the Company for the purchase of such Firm Shares by
one or more non-defaulting Underwriters or other party or parties approved by
you and the Company are not made within 36 hours after such default, this
Agreement will terminate without liability on the part of any non-defaulting
Underwriter or the Company. In any such case which does not result in
termination of this Agreement, either you or the Company shall have the right
to postpone the Closing Date, but in no event for longer than seven days, in
order that the required changes, if any, in the Registration Statement and
the Prospectus or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed
in Schedule III hereto who, with your approval and the approval of the
Company, purchases Firm Shares which a defaulting Underwriter agreed, but
failed or refused, to purchase.
Any notice under this Section 12 may be given by telegram, telecopy
or telephone but shall be subsequently confirmed by letter.
13. Termination of Agreement. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Sellers, by notice to the Company and the Attorneys-in-
Fact, if prior to the Closing Date or any Option Closing Date (if different
from the Closing Date and then only as to the Additional Shares), as the case
may be, (i) trading in securities generally on the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market shall have been
suspended or materially limited, (ii) a general moratorium on commercial
banking activities in New York shall have been declared by either federal or
state authorities, or (iii) there shall have occurred any outbreak or
escalation of hostilities or other international or domestic calamity, crisis
or change in political, financial or economic conditions, the effect of which
on the financial markets of the United States is such as to make it, in your
reasonable judgment, impracticable or inadvisable to commence or continue the
offering of the Shares at the offering price to the public set forth on the
cover page of the Prospectus or to enforce contracts for the resale of the
Shares by the Underwriters. Notice of such termination may be given by
telegram, telecopy or telephone and shall be subsequently confirmed by
letter.
14. Information Furnished by the Underwriters. The statements set
forth in the last paragraph on the cover page, the stabilization and passive
market making legends on the inside front cover page, and the statements in
the first, third and seventh paragraphs and the list of Underwriters under
the caption "Underwriting" in any Prepricing Prospectus and in the Prospectus
constitute the only information furnished by or on behalf of the Underwriters
through you as such information is referred to in Sections 7(b) and 9 hereof.
15. Miscellaneous. Except as otherwise provided in Sections 5, 12 and
13 hereof, notice given pursuant to any provision of this Agreement shall be
in writing and shall be delivered (i) if to the Company, at the office of the
Company at 780 Park North Blvd., Suite 110, Clarkston, Georgia 30021,
Attention: Harold J. Tenoso, Ph.D., President and Chief Executive Officer;
(ii) if to the Selling Stockholders, c/o Serologicals Corporation, 780 Park
North Blvd., Suite 110, Clarkston, Georgia 30021, Attention: Dr. Harold J.
Tenoso or Russell H. Plumb; or (iii) if to you, as Representatives of the
several Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New
York, New York 10013, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, the Selling
Stockholders and the other controlling persons referred to in Section 9
hereof and their respective successors and assigns, to the extent provided
herein, and no other person shall acquire or have any right under or by
virtue of this Agreement. Neither the term "successor" nor the term
"successors and assigns" as used in this Agreement shall include a purchaser
from any Underwriter of any of the Shares in his status as such purchaser.
16. Applicable Law; Counterparts. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable
to contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
SEROLOGICALS CORPORATION
By: /s/ Harold J. Tenoso, Ph.D.
Harold J. Tenoso, Ph.D.
President and Chief
Executive Officer
EACH OF THE SELLING STOCKHOLDERS
NAMED IN SCHEDULES I AND II HERETO
By: /s/ Russell H. Plumb
On his own behalf and as
Attorney-in-Fact
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule III
hereto.
Smith Barney Inc.
Lehman Brothers Inc.
Volpe, Welty & Company
As Representatives of the Several Underwriters
By: Smith Barney Inc.
By: /s/ Benjamin D. Lorello
Managing Director
SCHEDULE I
Number of
Principal Selling Stockholders Firm Shares
BancBoston Ventures, Inc. 400,000
Samuel A. Penninger, Jr. 150,000
Samuel A. Penninger, Jr., Trustee of The Penninger
1996 Charitable Remainder Trust dtd. 5-23-96 100,000
Harold J. Tenoso, Ph.D. 50,000
Gary A. Kress 55,000
Timm M. Hurst 80,000
James F. Sowinski 50,000
George M. Shaw 5,000
Essex Venture Partners 145,000
NationsBank Capital Corp. 100,000
Theodore L. Gail 55,000
Russell H. Plumb 10,000
_________
Total 1,200,000
=========
SCHEDULE II
Number of
Additional Selling Stockholders Additional Shares
Samuel A. Penninger, Jr. 40,000
Harold J. Tenoso, Ph.D. 50,000
Gary A. Kress 25,000
Timm M. Hurst 20,000
James F. Sowinski 15,000
Theodore L. Gail 15,000
-------
Total 165,000
=======
SCHEDULE III
SEROLOGICALS CORPORATION
Underwriter Number of
Firm Shares
Smith Barney Inc. 560,000
Lehman Brothers Inc. 560,000
Volpe, Welty & Company 560,000
Alex. Brown & Sons Incorporated 60,000
Dean Witter Reynolds Inc. 60,000
A.G. Edwards & Sons, Inc. 60,000
Legg Mason Wood Walker, Incorporated 30,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 60,000
Morgan Keegan & Company, Inc. 30,000
PaineWebber Incorporated 60,000
The Robinson-Humphrey Company, Inc. 30,000
Southeast Research Partners, Inc. 30,000
---------
Total 2,100,000
=========
SUBSIDIARIES
Jurisdiction of
Name Incorporation
============================================================
+ Serologicals, Inc. Georgia
* Allegheny Biologicals, Inc. Pennsylvania
* Am Rho Laboratories, Inc. Delaware
* Bioscot, Ltd. Scotland
+ Seramune, Inc. Delaware
* Acadiana Plasma Center, Inc. Delaware
* Bay Plasma, Inc. Delaware
* Canton Plasma, Inc. Delaware
* Carolina BioCenter, Inc. Delaware
* Colorado Plasma Company Delaware
* Desert Plasma, Inc. Delaware
* Eugene Plasma Corporation Delaware
* Flint Plasma Co. Delaware
* Illinois Plasma Systems, Inc. Delaware
* Lynchburg Plasma Company, Inc. Delaware
* Marion Plasma Company, Inc. Delaware
* Normandale Plasma Co., Inc. Delaware
* Reno Plasma, Inc. Delaware
* Roanoke Plasma Company Delaware
* Rocky Mountain Plasma, Inc. Delaware
* Siouxland Plasma, Inc. Delaware
* Southern Plasma Corp. Delaware
* Southeastern Biologics, Inc. Louisiana
* University Plasma Centers, Incorporated Louisiana
* Twin Cities Plasma Center, Inc. Iowa
* Plasma Management, Inc. Louisiana
* Austin Plasma, Inc. Texas
* Northeast Plasma, Inc. Louisiana
* Cenla Plasma, Inc. Louisiana
* Concho Biologics, Inc. Delaware
+ Serologicals Barbados, Inc.
(Foreign Sales Corporation) Barbados
- ---------------------------------------------------------
+ Sub of Serologicals Corporation
* Sub of Sub
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED
IN IT'S ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 17,194,307
<SECURITIES> 0
<RECEIVABLES> 6,834,463
<ALLOWANCES> 188,800
<INVENTORY> 4,989,982
<CURRENT-ASSETS> 30,086,441
<PP&E> 12,978,403
<DEPRECIATION> 5,457,202
<TOTAL-ASSETS> 73,383,879
<CURRENT-LIABILITIES> 6,822,694
<BONDS> 0
0
0
<COMMON> 94,034
<OTHER-SE> 62,203,845
<TOTAL-LIABILITY-AND-EQUITY> 73,383,879
<SALES> 31,440,175
<TOTAL-REVENUES> 31,440,175
<CGS> 18,509,084
<TOTAL-COSTS> 18,509,084
<OTHER-EXPENSES> 6,643,817
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 372,608
<INCOME-PRETAX> 5,914,666
<INCOME-TAX> 2,140,799
<INCOME-CONTINUING> 3,773,867
<DISCONTINUED> 0
<EXTRAORDINARY> (14,206)
<CHANGES> 0
<NET-INCOME> 3,759,661
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0<F1>
<FN>
<F1>Fully diluted EPS is anti-dilutive.
</FN>
</TABLE>
