SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999
Commission File No. 1-11182
BIO-IMAGING TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 11-2872047
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(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
830 Bear Tavern Road, West Trenton, New Jersey 08628-1020
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(Address of Principal Executive Offices) (Zip Code)
(609) 883-2000
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(Registrant's Telephone Number,
Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $.00025 par Boston Stock Exchange
value per share
Securities registered under Section 12(g) of the Exchange Act:
None
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Check whether the Registrant: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act during the past 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: No: X
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State Registrant's revenues for fiscal year ended September 30, 1999:
$4,349,079
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant: $1,565,328 at November 30, 1999 based on the average bid and
asked prices on that date.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of November 30, 1999:
Class Number of Shares
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Common Stock, $.00025 par value 7,773,878
Transitional Small Business Disclosure Format
Yes: No: X
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The following documents are incorporated by reference into the Annual
Report on Form 10-KSB: Portions of the Registrant's definitive Proxy Statement
for its 2000 Annual Meeting of Stockholders are incorporated by reference into
Part III of this Report.
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TABLE OF CONTENTS
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Item Page
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PART I 1. Business.....................................................1
2. Properties...................................................9
3. Legal Proceedings............................................9
4. Submission of Matters to a Vote of Security Holders..........9
PART II 5. Market for the Company's Common Equity and Related
Stockholder Matters.........................................10
6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................12
7. Financial Statements........................................19
8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.........................19
PART III 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16 (a) of the
Exchange Act................................................20
10. Executive Compensation......................................20
11. Security Ownership of Certain Beneficial Owners
and Management..............................................20
12. Certain Relationships and Related Transactions..............20
13. Exhibits, List and Reports on Form 8-K......................20
SIGNATURES.................................................................21
EXHIBIT INDEX..............................................................23
FINANCIAL STATEMENTS......................................................F-1
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PART I
ITEM 1. BUSINESS.
GENERAL
Bio-Imaging Technologies, Inc. ("Bio-Imaging" or "the Company") is a
pharmaceutical contract service organization, providing services that support
the product development process of the pharmaceutical, biotechnology and medical
device industries. The Company specializes in assisting its clients in the
design and management of the medical-imaging component of clinical trials for
all modalities which consist of computerized tomography ("CT"), magnetic
resonance imaging ("MRI"), x-rays, dual energy x-ray absorptiometry ("DEXA"),
position emission tomography single photon emission computerized tomography
("PET SPECT") and ultrasound. The Company provides services which include the
processing and analysis of medical images and the data-basing and regulatory
submission of medical images, quantitative data and text.
The Company utilizes proprietary processes and software applications in
providing its services to pharmaceutical companies conducting clinical studies
in which medical imaging modalities are used to evaluate the efficacy and safety
of pharmaceuticals, biologics or medical devices. The Company's digital image
processing and computer analysis techniques enable it to make highly precise
measurements and biostatistical inferences about drug or device effects. The
resulting data enable the Company's clients, and their regulatory reviewers
(primarily the U.S. Food and Drug Administration, the "FDA" and European
Agencies) to evaluate product efficacy and safety. In addition, the Company has
developed specialized computer services and software applications that enable
independent radiologists and other medical specialists involved in clinical
trials to review medical image data in an entirely digital format.
The Company continues to believe that it is at an early stage of market
penetration and is directing its marketing and sales efforts towards those
clinical development areas that heavily depend upon medical imaging. These areas
include therapeutic and diagnostic anti-inflammatory, oncology, central nervous
system, osteoporosis and cardiovascular.
In February 1997, the Company opened a European facility in Leiden, the
Netherlands to provide centralized image processing services for European
clients. The Company manages its services for European based clinical trials
from this facility. The Company's European facility has the same capabilities as
the Company's U.S. headquarters.
In May 1999, the Company acquired the operations of Bona Fide, Ltd. ("Bona
Fide"). Bona Fide provides DEXA quality assurance and quality control ("QA/QC")
to the pharmaceutical and medical device industry for studies requiring bone
densitometry and body composition measurements.
The Company was incorporated in Delaware in 1987 under the name Wise
Ventures, Inc. The Company's name was changed to Bio-Imaging Technologies, Inc.
in 1991. The address of the Company's principal executive offices is 830 Bear
Tavern Road, West Trenton, New Jersey, 08628, and its telephone number is
609-883-2000.
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BUSINESS SERVICES
Core Laboratory Services
Bio-Imaging is a leading provider of medical imaging management services
for clinical development purposes. The Company's imaging core laboratory
facilities in the U.S.A. and Europe provide centralized image data collection,
processing, analysis and archival services for clinical trials conducted
worldwide. The facilities are designed for high-volume efficient processing of
analog (film) and digital image data in a secure environment that complies with
regulatory guidelines for clinical data management.
Medical image data are received by Bio-Imaging facilities from clinical
trial sites, typically academic or community hospitals. The Company has
developed procedures for data tracking and quality control that it believes to
be of significant value to its clients. The Company's facilities contain
specialized hardware and software for the digitization of films and translation
of digital data, enabling data to be standardized, regardless of its source. The
Company believes its ability to handle most commercially available image file
formats is a valuable technical asset and an important competitive advantage in
gaining new business for large global multi-center clinical trials.
The Company performs image analyses on client data using internally
developed or specially configured software. The Company measures key indicators
of drug efficacy in different organs and disease states. The results from image
analysis derived in Bio-Imaging facilities are transferred to databases that can
be transmitted electronically to the Company's clients, or integrated directly
into the Company's Bio/ImageBase(R) package for regulatory submission on the
client's behalf.
Information Management Services
Bio-Imaging's information management services focus on providing
specialized solutions for improving the quality, speed and flexibility of image
data management for clinical trials. The Company's Computer Assisted Masked
Reading ("CAMR(TM)") systems offer numerous advantages over conventional
film-based medical image reading scenarios, including increased reading speed,
greater standardization of image reading, and reduced error in the capture of
reader interpretations.
Using the Company's CAMR(TM) systems, independent medical specialists can
review medical image data from clinical trials in a digital format. The CAMR(TM)
systems can display all modalities of medical image data, regardless of source
equipment. In addition, the systems can display either translated digital data
or digitized films. Such image reviews are often required during clinical trials
to evaluate patients' responses to therapy, or to determine if patients qualify
for studies. By using the CAMR(TM) systems to read and evaluate image data,
medical specialists can achieve greater reading speed than is possible with
film, and can perform evaluations in a more objective, reproducible manner.
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The Company has also developed remote CAMR(TM) ("rCAMR(TM)") systems which
are located on the premises of the individual medical specialists who are
engaged by the sponsor to perform the analysis of the medical image data. More
recently, clients are requesting Bio-Imaging to provide "real-time" reads for
inclusion/exclusion criteria, or safety reads. The Company believes that the
rCAMR(TM) system is the optimal tool for this type of work because it allows
Bio-Imaging, at the client's discretion, to provide the images to an expert in
the field to facilitate the review of the images from the expert's office or
home.
The Company has developed a proprietary image database software
application, Bio/ImageBase(R), that enables the Company's clients to submit
their medical images and related clinical data to the FDA in a digital format.
Using data stored on CD-ROM disks, Bio/ImageBase(R) allows clients and their FDA
medical reviewers to review medical images and related clinical data. The
Company believes that Bio/ImageBase(R) offers the potential to decrease review
time, resulting in faster regulatory approvals and reduced time-to-market for
new drugs, biologics and medical devices.
The Company's Bio/ImageBase(R) software has been installed at client sites
and on certain computer systems at the FDA. The Company has been using its
Bio/ImageBase(R) software to submit medical images and related data to the FDA
since mid-1993. In March 1996, Bio/ImageBase(R) was cited in the FDA's 1996
Computer-Assisted Product License Application Guidance Manual as an acceptable
database for submission of imaging data.
Other Services
The Company provides technical consulting in the evaluation of the sites
that may participate in clinical trials. The Company also consults with clients
regarding regulatory issues involved in the design, execution, analysis and
submission of medical image data in clinical trials.
TARGET MARKETS
The Company's primary target market is comprised of pharmaceutical,
biotechnology and medical device companies whose clinical development pipelines
include drugs, biologics or devices that are typically evaluated by medical
imaging methods. This target market includes leading international
pharmaceutical companies and biotechnology companies with products currently in
the clinical development pipeline.
Bio-Imaging focuses its marketing on the following stages of clinical
development:
Phase II Clinical Trials
Phase II clinical trials are generally conducted over six months to two
years and involve basic efficacy (effectiveness), safety and dose-range testing
in approximately 50 to 400 patients suffering from the disease or condition
under study. Such trials help determine the best effective dose, confirm that
the drug works as expected and provide initial safety data.
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Phase III Clinical Trials
Phase III clinical trials are generally conducted over one to four years
and involve efficacy and safety studies in broader populations of hundreds or
thousands of patients and many investigational sites (hospitals and clinics).
These are sometimes referred to as pivotal studies for submission to the
regulatory agencies. Generally, Phase III studies are intended to provide
additional information on drug safety and efficacy, an evaluation of the
risk-benefit of the drug and information for the adequate labeling of the
product.
Bio-Imaging focuses its marketing efforts further on clinical trials for
the following classes of drugs:
Anti-Inflammatory Therapeutics
Anti-inflammatory clinical trials, such as those focused on arthritis,
include radiologic evaluation of the bones and joints to determine drug
efficacy. The Company believes that demand among drug developers for its
services will increase as new classes of biotechnology-derived drugs enter and
progress through the clinical development pipeline.
Cancer Therapeutics
Many pharmaceutical companies are currently developing new therapies for
the treatment of cancer. For solid tumor studies, medical imaging modalities are
used to determine the response of treated and untreated tumors. These medical
images are evaluated by medical specialists during the course of oncology
clinical trials to determine the extent of disease and changes in tumor size
over time.
The FDA's guidelines aimed at accelerating access to new drugs for the
review and approval of new cancer therapies place greater emphasis on shrinkage
of tumors as an early indicator of anti-tumor efficacy. Bio-Imaging believes
that these FDA guidelines may have a favorable impact on its business as
pharmaceutical and biotechnology companies may have an increased need for
regulatory compliant medical imaging services to conduct their oncology clinical
trials.
Central Nervous System Therapeutics
Various pharmaceutical companies are currently developing drugs for
treatment of diseases and conditions of the central nervous system, most of
which are evaluated with the aid of medical imaging. Most later-stage clinical
trials for these serious and costly conditions involve the evaluation of medical
image data. The Company believes that its central nervous system clinical trials
business may increase as more therapies progress through the research pipeline.
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Osteoporosis
Osteoporosis is the disease of "thinning bones" which leads to fractures in
the elderly. The FDA guidance document for developing treatments for this
disease recognized DEXA as one of the primary efficacy and safety measurement
tools available. Furthermore, all data needs to go through a quality assurance
laboratory. This is now standard practice in all studies using DEXA instruments
whether for osteoporosis oncology or antiobesity or muscle wasting asssessment.
Diagnostic Imaging Agents
Bio-Imaging provides its services to clients developing diagnostic imaging
agents which are designed to diagnose disease conditions more quickly and
accurately in their development in order to facilitate earlier and more accurate
treatment.
Cardiovascular Therapeutics
Various pharmaceutical companies are currently developing drugs for the
diagnosis and treatment of cardiovascular diseases and conditions which are
evaluated with the aid of medical imaging. The Company provides its services to
clients developing diagnostic agents for the detection and treatment of these
conditions.
MARKET TRENDS
The Company believes that demand for its services should grow because of a
variety of favorable regulatory, technological and market trends:
o The FDA initiatives to streamline the regulatory submission and
review process which are being implemented should have a beneficial
impact on the Company. The FDA is investing in new information
technology and has begun the process of formulating and disseminating
guidelines for standardizing the submission of electronic data,
including medical images. The Company expects submission of image
data to be a requirement in key therapeutic and diagnostic areas for
evaluating the effectiveness of a drug or imaging agent.
o Consolidation, restructuring and downsizing in the pharmaceutical
industry in response to downward pressure on certain pharmaceutical
and biotechnology companies' drug prices has resulted in increased
outsourcing of certain research and development activities.
Currently, over $4 billion in research services are outsourced to
contract clinical research organizations. Industry estimates place
growth of outsourcing between 20% to 30% per year for at least the
next three years.
o Growth in pharmaceutical and biotechnology research and development
spending is fairly non-cyclical. As a result, the Company believes
that outsourcing of development activities should continue to remain
steady.
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o New classes of drugs to treat conditions traditionally evaluated by
imaging are entering or progressing through the clinical development
pipeline, leading to increased demand for medical imaging-related
services. In addition, digital technologies for data acquisition and
management are rapidly penetrating the radiology community.
o As pharmaceutical and biotechnology companies increasingly attempt to
expand the market for new drugs by conducting clinical trials and
pursuing regulatory approval in multiple countries simultaneously,
contract service organizations with an international presence and
expertise will continue to benefit. The Company believes it is
well-positioned to take advantage of these trends due to its U.S. and
European operations.
o The Company also believes that, because its development services are
specialized, it is often able to perform these services with a higher
level of expertise or specialization more quickly and efficiently
than a pharmaceutical or biotechnology company could perform
internally.
INTELLECTUAL PROPERTY
Proprietary protection for the Company's computer-imaging programs,
processes and know-how is important to its business. Bio-Imaging has developed
certain technically derived procedures and computer software applications that
are intended to increase the effectiveness and quality of its services. The
Company relies upon trademarks, copyrights, trade secrets, know-how and
continuing technological innovation to develop and maintain its competitive
position. The Company has obtained registered trademark protection for the
Bio/ImageBase(R) and has claimed trademark protection for the CAMR(TM) and
rCAMR(TM). The Company also has applied for patent protection for the two DEXA
phantoms it sells to trial sites. Furthermore, Bio-Imaging requires all
employees, consultants and contractors to execute confidential disclosure
agreements as a condition of employment or engagement by the Company. There can
be no assurance, however, that the Company can limit unauthorized or wrongful
disclosures of trade secret information. In addition, to the extent the Company
relies on trade secrets and know-how to maintain its competitive technological
position, there can be no assurance that others may not develop independently
the same or similar techniques. Although the Company's intellectual property
rights are important to the results of its operations, the Company believes that
other factors such as independence, process knowledge, technical expertise and
experience are more important, and that, overall, these technological
capabilities offer significant benefits to its clients.
GOVERNMENT REGULATION
The research and development, manufacture and marketing of drugs and
medical devices are subject to stringent regulation by the FDA in the United
States and by comparable authorities in other countries. In addition,
regulations imposed by other federal agencies, as well as state and local
authorities, may impact such research and development, manufacturing and
marketing.
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The FDA has established mandatory procedures and safety standards which
apply to the clinical testing, manufacturing and marketing of drugs and medical
devices. These procedures and safety standards include, among other things, the
completion of adequate and well-controlled human clinical trials to establish
the safety and efficacy of the drug or device for its recommended conditions or
use. The Company advises its clients in the execution of clinical trials and
other drug and device developmental tasks. The Company does not administer drugs
to or utilize medical devices on patients.
The success of the Company's business is dependent upon the continued
acceptance by the FDA and other regulatory authorities which review the data and
analyses generated by the Company's services in the evaluation of the safety and
efficacy of new drugs and devices. The FDA has formal guidelines which encourage
the use of "surrogate measures," through submission of digital image data, for
evaluation of drugs to treat life-threatening or debilitating conditions. There
can be no assurance, however, that the FDA or other regulatory authorities will
accept the data or analyses generated by the Company in the future and, even
assuming acceptance, there can be no assurance that the FDA or other regulatory
authorities will require the application of imaging techniques to numbers of
patients and over time periods substantially similar to those required of
traditional safety and efficacy techniques.
Changes in the FDA's policy for the evaluation of therapeutic oncology
agents may have a positive impact on the time to market of such therapeutics.
According to the guidelines announced in March 1996, approval times for new
cancer therapies can be shortened if evidence of tumor shrinkage is verifiable
and demonstrable through the use of objective measurement techniques. These
guidelines place much greater reliance on the use of medical image data to
demonstrate objective tumor shrinkage. In addition, in March 1997, the FDA
announced new guidelines aimed at accelerating all therapeutic categories
through the use of surrogate markers such as imaging endpoints. The Company
believes the FDA's initiatives to streamline and accelerate the submission and
review process of therapeutic agents may have a favorable impact on the
Company's business.
In October 1998, the FDA released a draft guidance for industry relating to
how medical imaging should be defined, handled and evaluated in clinical trials.
The Company believes that the guidance document comports with the methodologies
and processes utilized by the Company in providing medical information
management services for its clients.
The Company believes that its ability to achieve continued and sustainable
growth will be materially dependent upon, among other factors, the continued
stringent enforcement of the comprehensive regulatory framework by various
government agencies. Any significant change in these regulatory requirements or
the enforcement thereof, especially relaxation of standards, could adversely
affect the Company's prospects.
The current European market regulation is more fragmented than in the
U.S.A., therefore, such European agencies have a tendency to follow FDA
guidelines.
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COMPETITION
As a sign of growth in the clinical trials-related medical imaging services
business, the Company continues to experience an increase in competition from
commercial competitors and academic research centers. Over the past two years,
several conventional contract research organizations have either started or
acquired divisions to address the need for medical imaging services as it
relates to clinical trials. As competition increases, Bio-Imaging will look to
provide value-added services and undertake marketing and sales programs to
differentiate its services based on its expertise and experience in specific
therapeutic and diagnostic areas, its technological expertise and regulatory and
clinical development experience, its quality performance and its international
capabilities. Competition in the Company's industry has resulted in additional
pressure being placed on price, service and quality. Although the Company
believes that it is well positioned against its competitors due to its
experience in clinical trials and regulatory compliance along with its
international presence, there can be no assurance that the Company's competitors
or clients will not provide or develop services similar or superior to those
provided by the Company. Any such competition could have a material adverse
impact on the Company. The Company's competitive position also depends upon its
ability to attract and retain qualified personnel and develop and preserve
proprietary technology, processes and know-how.
MARKETING AND SALES
Bio-Imaging provides and markets its services on an international basis
primarily to pharmaceutical and biotechnology companies. The Company's sales and
marketing activities are performed by a Vice President, Business Development, a
Director of Client Technical Services, three Regional Managers of Client
Technical Services, a Director of Clinical Services-Europe, a Manager, Business
Development and a Business Development Associate.
The Company's selling efforts are focused on North America and Western
Europe. Sales efforts are directed from both of the Company's headquarters in
New Jersey and Leiden, the Netherlands. The Company's marketing activities
include exhibiting at major trade shows, advertising in trade journals and the
sponsoring of industry associations. The Company continues to evaluate
appropriate co-marketing activities and strategic alliances, in particular with
contract research organizations, to augment its own business development
efforts.
SIGNIFICANT CLIENTS
During fiscal 1999, three clients, including two European-based clients,
accounted for approximately 39% of the Company's project revenues. These
contracts are terminable by the Company's clients at any time and for any
reason. Subsequent to fiscal 1999, the Company completed its work on such
projects for the two European based clients. Loss of the one U.S. client or a
reduction in services provided to that client would have a material adverse
effect on the Company's business, financial condition and results of operations.
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EMPLOYEES
As of September 30, 1999, the Company had 44 employees, three of whom are
officers of the Company.
Of the Company's employees as of September 30, 1999, eight were engaged in
sales and marketing, 31 were engaged in client related projects and five were
engaged in administration and management. A significant number of the Company's
management and professional employees have prior industry experience.
Bio-Imaging believes that it has been successful in attracting skilled and
experienced personnel, however, competition for such personnel is intensifying.
All of the Company's employees are covered by confidentiality and
non-competition agreements. The Company cannot provide assurances as to the
enforceability of such agreements. Bio-Imaging has entered into an employment
contract with one of its officers. See "Item 10. Executive Compensation."
Bio-Imaging considers relations with its employees to be good.
ITEM 2. PROPERTIES.
On September 22, 1999, the Company executed a lease agreement for
approximately 17,000 square feet of office space located in Newtown,
Pennsylvania. The lease is for an initial term of five years and two months and
provides for a fixed base rent of approximately $26,000 per month with an annual
inflation increase. The lease for the Company's current office space in West
Trenton, New Jersey expired on November 30, 1999 and was not renewed by the
Company. The Company will occupy it's current office through December 1999. The
Company also leases approximately 4,000 square feet of office space in Leiden,
the Netherlands. This lease, denominated in Netherland guilders, expires
February 14, 2003 and provides for a base rent of approximately $7,200 per month
with an annual inflation increase. The Company believes that these facilities
will be adequate for its needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
From June 18, 1992 through March 4, 1999, the Company's common stock,
$0.00025 par value, (the "Common Stock") had been traded on the Nasdaq SmallCap
Market under the symbol BITI. On March 4, 1999, the Company's Common Stock
ceased to be listed on the Nasdaq SmallCap Market and became listed on the NASD
OTC Bulletin Board under the symbol BITI.
The following table sets forth the high ask and low bid quotations for the
Common Stock as reported on the Nasdaq SmallCap Market for each of the quarters
ended December 31, 1997 through December 31, 1998 and the high ask and low bid
quotations as reported on the NASD OTC Bulletin Board for each of the quarters
ended March 31, 1999 through September 30, 1999. Such quotations reflect
interdealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
Quarter Common
Ended Stock
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High Low
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December 31, 1997 1.844 0.50
March 31, 1998 0.781 0.531
June 30, 1998 1.938 0.50
September 30, 1998 1.00 0.438
December 31, 1998 0.9375 0.2813
March 31, 1999 0.6563 0.3125
June 30, 1999 0.6875 0.3125
September 30, 1999 0.5938 0.2813
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Since June 18, 1992, the Common Stock also has been listed on the Boston
Stock Exchange ("BSE") under the symbol BIT.
The following table sets forth the high ask and low bid quotations for the
Common Stock as reported on the BSE for each of the quarters from the quarter
ended December 31, 1997 through September 30, 1999.
Quarter Common
Ended Stock
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High Low
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December 31, 1997 1.719 0.3125
March 31, 1998 0.75 0.375
June 30, 1998 1.625 0.375
September 30, 1998 1.00 0.375
December 31, 1998 0.875 0.4375
March 31, 1999 0.625 0.4688
June 30, 1999 0.875 0.5625
September 30, 1999 0.781 0.4375
As of November 30, 1999, the approximate number of holders of record of the
Common Stock was 112 and the approximate number of beneficial holders of the
Common Stock was 1389.
The Company has 416,667 shares of Series A Preferred Stock (the "Preferred
Stock") outstanding. The Preferred Stock provides for (i) voting rights on an
as-converted to Common Stock basis, with standard protective provisions; (ii) a
liquidation preference of $1.20 per share; (iii) anti-dilution protection and
price protection provisions; (iv) cumulative dividends of $0.096 per share per
annum, payable out of funds legally available for the payment of dividends and
only upon declaration of dividends by the Board of Directors of the Company; and
(v) registration rights with respect to the shares of Common Stock issuable upon
conversion of the Preferred Stock. Dividends are payable in cash or in the
Company's Common Stock at the Company's discretion.
The Company has neither paid nor declared dividends on its Common Stock
since its inception and does not plan to pay dividends on its Common Stock in
the foreseeable future. The Company expects that any earnings which the Company
may realize and which are not paid as dividends to holders of Preferred Stock
will be retained to finance the growth of the Company.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Bio-Imaging is a pharmaceutical contract service organization, providing
services that support the product development process of the pharmaceutical,
biotechnology and medical device industries. The Company specializes in
assisting its clients in the design and management of the medical-imaging
component of clinical trials for all modalities which consist of CT, MRI,
x-rays, DEXA, PET SPECT and ultrasound. The Company provides services which
include the processing and analysis of medical images and the data-basing and
regulatory submission of medical images, quantitative data and text.
The Company's sales cycle (the period from the presentation by the Company
to a potential client to the engagement of the Company by such client) is
generally twelve months. In addition, the contracts under which the Company is
engaged to perform services typically cover a period of 12 to 36 months and the
volume and type of services performed by the Company generally vary during the
course of a project. In an effort to expand its client base, obtain additional
contracts and generate additional revenues, the Company increased its sales and
marketing efforts during the fiscal year ended September 30, 1998. As of
September 30, 1999, the Company believes that these efforts are beginning to
yield positive results. No assurance can be made that the Company's project
revenues will increase to levels required to achieve profitability. Although the
Company experienced a loss for 1999, the Company's project revenues increased as
compared to 1998. Project revenues were generated from 34 clients encompassing
67 projects for 1999 as compared to 25 clients encompassing 46 projects for
1998. Three clients represented approximately 16%, 13% and 11% of the Company's
project revenues for 1999. Two clients represented approximately 26% and 24% of
the Company's project revenues for 1998.
The Company believes that demand for its services and technologies will
grow during the longer term as the use of digital technologies for data
acquisition and management increases in the radiology and drug development
communities. The Company also believes that there is a growing recognition
within the bio-pharmaceutical industry regarding the use of an independent
centralized core laboratory for analysis of medical imaging data that is derived
from clinical trials and the rigorous regulatory requirements relating to the
submission of this data. In addition, the FDA is gaining experience with
electronic submissions and is continuing to develop guidelines for computerized
submission of data, including medical images. Furthermore, the increased use of
digital medical images in clinical trials, especially for important drug classes
such as anti-inflammatory, neurologic and oncologic therapeutics and diagnostic
image agents, generate large amounts of image data that will require processing,
analysis, data management and submission services. Due to several factors,
including, without limitation, an increase in competition, there can be no
assurance that demand for the Company's services and technologies will grow,
sustain growth, or that additional revenue generating opportunities will be
realized by the Company.
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Certain matters discussed in this Form 10-KSB are "forward-looking
statements" intended to qualify for the safe harbors from liability established
by the Private Securities Litigation Reform Act of 1995. In particular, the
Company's statements regarding the demand for the Company's services and
technologies, growing recognition for the use of independent centralized core
laboratories, trends toward the outsourcing of imaging services in clinical
trials, realized return from the Company's marketing efforts and increased use
of digital medical images in clinical trials are examples of such
forward-looking statements. The forward-looking statements include risks and
uncertainties, including, but not limited to, the timing of revenues due to the
variability in size, scope and duration of projects, regulatory delays, clinical
study results which lead to reductions or cancellations of projects, and other
factors, including general economic conditions and regulatory developments, not
within the Company's control. The factors discussed herein and expressed from
time to time in the Company's filings with the Securities and Exchange
Commission could cause actual results and developments to be materially
different from those expressed in or implied by such statements. The
forward-looking statements are made only as of the date of this filing and the
Company undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances.
RESULTS OF OPERATIONS
Fiscal Years Ended September 30, 1999 and 1998
----------------------------------------------
Project revenues for 1999 and 1998 were approximately $4,349,000 and
$3,599,000, respectively, an increase of approximately $750,000, or 20.8%. The
increase in project revenues is primarily a result of the increase in the number
of clients and projects for which the Company was engaged to perform services.
This increase resulted primarily from the increase in the Company's sales and
marketing efforts over the past year. The Company's scope of work in both
periods included medical imaging core laboratory services and image-based
information management services. In May 1999, the Company acquired the
operations of Bona Fide in a transaction accounted for as a purchase. In
addition to the amount paid at closing of $2,535, additional payments for the
acquisition may be made based on certain revenues being achieved for the
twelve-month period ending on the first anniversary of the closing date. Such
amount may not exceed $50,000. The acquisition was not material to the Company's
consolidated financial position or results of operations. The acquisition of
Bona Fide in May 1999 subsequently contributed approximately $143,000 in project
revenues in 1999.
Cost of revenues for 1999 and 1998 were comprised of professional salaries
and benefits and allocated overhead. Cost of revenues were approximately
$2,661,000 for 1999 and approximately $2,026,000 for 1998, an increase of
approximately $635,000, or 31.3%. This increase is primarily attributable to an
increase in staffing levels required for project related tasks for 1999 as
compared to 1998.
The difference between project revenues and cost of revenues may fluctuate
as a percentage to project revenues based on the utilization of staff and the
mix of services provided by the Company to its clients during the comparable
periods. The decrease in this difference in 1999 from 1998 resulted primarily
from an increase in staffing levels in 1999 to support the
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<PAGE>
Company's existing contracts and in anticipation of future business along with
the mix of services provided by the Company in 1999 as compared to 1998.
General and administrative expenses for 1999 and 1998 consisted primarily
of professional salaries and benefits, depreciation and amortization,
professional and consulting services, office rent and corporate insurance.
General and administrative expenses were approximately $1,199,000 for 1999 and
approximately $1,531,000 for 1998. The decrease for 1999, of approximately
$332,000, or 21.7%, from 1998, resulted primarily from the elimination of
expenditures in support of the former Marketing Information Services Division
(the "MISD") and Data Management and Information Systems Division (the "DMISD")
and personnel costs associated with former executive officers who resigned in
December 1997. Such personnel costs were independent of the expenditures that
supported the former MISD and DMISD divisions. This decrease was offset, in
part, by personnel costs associated with the appointment of a new President and
Chief Executive Officer in December 1997.
Sales and marketing expenses for 1999 and 1998 were comprised of direct
sales and marketing costs, professional salaries and benefits and allocated
overhead. Sales and marketing expenses were approximately $974,000 for 1999 and
approximately $1,004,000 for 1998. The decrease for 1999, of approximately
$30,000, or 3.0%, from 1998, resulted primarily from the decrease in personnel
costs incurred in the three months ended December 30, 1997 which was associated
with the promotion of the Senior Vice President of Sales and Marketing to the
position of President and Chief Executive Officer, which occurred in December
1997. These personnel costs are reflected in general and administrative expenses
in 1999.
Research and development expenses for 1999 and 1998 consisted of
professional salaries and benefits and overhead charged to research and
development projects. Research and development expenses were approximately
$229,000 during 1999 and approximately $255,000 for 1998. The decrease in 1999
of approximately $26,000, or 10.2%, from 1998, resulted primarily from a
decrease in resources dedicated to research and development projects. Research
and development expenses in 1999 and 1998 primarily focused on the formulation,
design and testing of product and process alternatives.
In 1998, the Company recorded non-recurring charges of approximately
$597,000 consisting of (i) costs of approximately $320,000 associated with a
proxy contest and related litigation and (ii) restructuring and severance
expenses of $277,000 related to the elimination of two former business divisions
and the resignation in December 1997 of a former executive officer.
In February 1998, the Company and a shareholder group engaged in a proxy
contest in an effort to, among other things, elect members of the Company's
Board of Directors at the Annual Meeting of Stockholders held on February 27,
1998. In connection with such proxy contest and the related litigation, the
Company expended approximately $320,000 in 1998.
In 1998, the Company recorded restructuring and severance expenses of
$277,000. This amount consisted of restructuring expenses of $105,000 and
severance expenses of $172,000.
-14-
<PAGE>
In December 1997, the Company terminated two business divisions, the MISD
and the DMISD, which were established in October 1996. These divisions did not
meet the Company's expectations and the Company believed that its resources were
better focused on its core clinical trials service business. The Company
incurred restructuring charges of approximately $105,000 which consisted of (i)
$38,000 of severance costs paid to the former Senior Vice President and General
Manager of the MISD and (ii) $67,000 related to the write-off of assets and
costs associated with the termination of the MISD and DMISD. Each of these
charges has been reflected in non-recurring charges for 1998.
In a separate matter, two executive officers of the Company resigned in
December 1997. The Company entered into a separation agreement with one such
former executive officer. The Company agreed to pay such former executive
officer $127,000 in connection with the separation agreement. As a result of
these resignations, the Company recorded severance expenses of approximately
$172,000. Such expenses have been reflected in non-recurring charges for 1998.
Total costs and expenses during 1999 and 1998 consisted primarily of cost
of revenues, general and administrative expenses, sales and marketing expenses
and research and development expenses. The Company's cost and expenses were
approximately $5,063,000 in 1999 and $4,816,000 (excluding non-recurring charges
of $597,000) in 1998. Such increase of approximately $247,000, or 5.1%, is
primarily attributable to an increase in staffing levels for project related
tasks offset by the elimination of expenditures in support of the former MISD
and DMISD divisions and personnel costs associated with former executive
officers who resigned in December 1997. Such personnel costs were independent of
the expenditures that supported the former MISD and DMISD divisions.
Net interest income of approximately $9,000 during 1999 resulted from
interest earned on cash balances offset in part by interest expense incurred in
conjunction with equipment lease obligations and notes payable. The Company
earned less interest income in 1999 than in 1998 due to lower cash balances
maintained during 1999. Net interest income was approximately $88,000 in 1998.
The Company's net loss for 1999 was approximately $705,000 while the
Company had net loss of approximately $1,726,000 for 1998. The Company's net
loss for 1999 was attributable primarily to insufficient project revenue to
support the infrastructure of the Company.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had cash and cash equivalents of
approximately $413,000. Working capital at September 30, 1999 was approximately
$788,000.
Net cash used in operating activities for 1999 was approximately $981,000.
Such use of cash reflects the net loss for 1999 and changes in certain of the
Company's operating assets and liabilities. Accounts receivable increased by
approximately $611,000 during 1999 primarily as a result of an increase in
unbilled receivables during such period. Unbilled receivables are recorded as
revenue recognized to date that has not been billed. Certain amounts become
billable upon the achievement of milestones or in accordance with predetermined
payment schedules.
-15-
<PAGE>
For the year ended September 30, 1999, the Company invested approximately
$166,000 in capital and leasehold improvements. The Company currently
anticipates that capital expenditures for the next fiscal year will approximate
$200,000. These expenditures represent additional upgrades in the Company's
networking, data storage and core laboratory capabilities along with similar
capital requirements for its European operations.
In December 1998, the Company paid to the holders of its Preferred Stock an
aggregate amount of $20,000, which amount represented accrued cumulative
dividends for the period from July 1, 1998 through and including December 31,
1998. In June 1999, the Company paid to the holders of its Preferred Stock an
aggregate amount of $20,000, which amount represented accrued cumulative
dividends for the period from January 1, 1999 through and including June 30,
1999.
In 1999, the Company received aggregate financing of $145,924 secured by
certain equipment. The loans are payable in 36 monthly installments, commencing
April 1999 and July 1999, including interest of 10.24% and 10.61%, respectively.
In August 1999, the Company entered into an agreement with a bank for a
revolving line of credit of up to $500,000 collaterized by the Company's assets.
Interest is payable at 1.50% over the bank's prime rate of interest. The
agreement requires the Company, among other things, to maintain minimum levels
of tangible net worth and certain minimum financial ratios. At September 30,
1999, the Company had no borrowings under the line of credit and was in
compliance with the covenants of the agreement. In October 1999, the bank
notified the Company that it would not make any advances under the existing line
of credit until the Company provides sufficient evidence satisfactory to the
bank of an improvement in the Company's operating, financial and liquidity
position. At such time, the bank may consider permitting further advances
pursuant to the loan agreement. In December 1999, the Company entered into an
accounts receivable purchase agreement with the same bank, whereby, the Company
may assign up to $500,000 of eligible accounts receivable to the bank. The bank,
in turn, would advance the Company up to 80% of the assigned accounts receivable
amount. Upon collection by the bank, the balance of the assigned accounts
receivable would be remitted to the Company net of the bank's finance charges
and administration fees.
Also, in December 1999, the Company entered into an equipment lease
obligation consisting of monthly installments of $4,961, which includes interest
at a rate of 10.53%, through November 2002. The debt is collateralized by the
related equipment.
The Company anticipates that its cash and cash equivalents as at September
30, 1999, together with anticipated cash from operations, will be sufficient to
fund current working capital needs and capital requirements for at least the
next twelve months. There can be no assurance, however, that the Company's
operating results will achieve profitability on an annual basis in the near
future. The continuation of operating losses, the Company's ability to gain new
client contracts, the variability of the timing of milestone payments on
existing client contracts and other changes in the Company's operating assets
and liabilities may have a material adverse affect on the Company's future
liquidity. In connection therewith, the Company may need to raise additional
capital in the foreseeable future from equity or debt sources in order to
-16-
<PAGE>
implement its business, sales or marketing plans, take advantage of
unanticipated opportunities (such as more rapid expansion, acquisitions of
complementary businesses or the development of new services), to react to
unforeseen difficulties (such as the decrease in the demand for the Company's
services or the timing of revenues due to a variety of factors previously
discussed) or to otherwise respond to unanticipated competitive pressures. There
can be no assurance that additional financing will be available, if at all, on
terms acceptable to the Company.
The Company's 2000 operating plan contains assumptions regarding revenue
and expenses. The achievement of the operating plan depends heavily on the
timing of work performed by the Company on existing projects and the ability of
the Company to gain and perform work on new projects. Delays in the timing of
work performed by the Company on existing projects or the inability of the
Company to gain and perform work on new projects could have an adverse impact on
the Company's ability to execute its operating plan and maintain adequate cash
flow. In the event actual results do not meet the operating plan, management
believes it could execute contingency plans to mitigate such effects. Such plans
include additional financing, to the extent available, through the revolving
line of credit agreement and accounts receivable purchase agreement discussed
above. In addition, in December 1999, the members of the Board of Directors of
the Company, in their individual capacities, committed up to an aggregate amount
totaling $100,000 in the form of a short-term loan, through October 1, 2000, if
needed by the Company. Considering the cash on hand and based on the achievement
of the operating plan and management's actions taken to date, management
believes it has the ability to continue to generate sufficient cash to satisfy
its operating requirements in the normal course of business. However, no
assurance can be given that sufficient cash will be generated from operations.
As of November 30, 1999, the Company's cash balance was approximately $357,000.
NEW ACCOUNTING REQUIREMENTS
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP 98-1), "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 requires that computer
software costs that are incurred in the preliminary project stage be expensed as
incurred and that criteria be met before capitalization of costs to develop or
obtain computer software for internal use. Adoption of SOP 98-1 is required for
fiscal years beginning after December 15, 1998. The Company does not believe
that the new standard will have a material impact on the Company's consolidated
financial statements. In April 1998, the Accounting Standards Executive
Committee issued SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP
98-5 requires all costs incurred as start-up costs or organization costs be
expensed as incurred. Adoption of SOP 98-5 is required for fiscal years
beginning after December 15, 1998. The Company does not believe that the new
standard will have a material impact on the Company's consolidated financial
statements.
EXISTING CONTRACTS
During fiscal 1999, the Company signed approximately $6,564,000 in new
project contracts. As of September 30, 1999, the Company had entered into
agreements with 24 companies to provide services in the aggregate amount of
approximately $11,853,000 through December 2004, of which services valued at
approximately $7,054,000 remain to be completed.
-17-
<PAGE>
Such contracts are subject to termination by the Company or its clients at any
time or for any reason. In addition, client's clinical trials or other projects
are subject to timing and scope changes. Therefore, future revenue generated by
the Company may not equal initial contract values.
EUROPEAN MONETARY UNION
On January 1, 1999, eleven of the fifteen member countries of the European
Union set fixed conversion rates between their existing legacy currencies and
the euro. As such, these participating countries have agreed to adopt the euro
as their common legal currency. The eleven participating countries will issue
sovereign debt exclusively in euro and will redenominate outstanding sovereign
debt. The legal currencies will continue to be used as legal tender through
January 1, 2002, at which point the legacy currencies will be canceled and euro
bills and coins will be used for cash transactions in the participating
countries. There can be no assurance, however, that such euro conversion will
not adversely affect the Company's business, financial condition, results of
operations or cash flows.
YEAR 2000 COMPLIANCE
The "Year 2000" issue concerns the potential exposures related to the
automated generation of business and financial misinformation resulting from the
application of computer programs which have been written using two digits,
rather than four, to define the applicable year of business transactions. The
Company has completed its review of the potential impact of Year 2000 issues and
does not anticipate any significant costs, problems or uncertainties associated
with potential issues relating to Year 2000 compliance.
The Company's management information systems department has reviewed and
tested the Company's internal business systems, including operating systems and
internal software, for Year 2000 compliance. The Company believes that, based on
the results of such review and testing, the Company's internal business systems,
including its computer systems, are Year 2000 compliant.
The supplier of the Company's current financial and accounting software has
informed the Company that such software is Year 2000 compliant. Further, the
Company relies upon various vendors, financial institutions, utility companies,
telecommunications service companies, delivery service companies and other
service providers who are outside of the Company's control. While the Company
has surveyed all of its major vendors, and all of the Company's major vendors
represented that they are Year 2000 compliant, there is no assurance that such
parties will not suffer a Year 2000 business disruption, which could have a
material adverse effect on the Company's financial condition and results of
operations.
To date, the Company has not incurred any material expenditures in
connection with identifying or evaluating Year 2000 compliance issues. Most of
its expenses have related to the opportunity cost of time spent by employees of
the Company evaluating its systems and Year 2000 compliance matters generally.
-18-
<PAGE>
The Company has not developed a Year 2000-specific contingency plan. If
Year 2000 compliance issues are discovered, the Company then will evaluate the
need for contingency plans relating to such issues.
The Year 2000 disclosures discussed above are based on numerous
expectations which are subject to uncertainties. Certain risk factors which
could have a material adverse effect on the Company's results of operations and
financial condition include but are not limited to: failure to identify critical
systems which will experience failures, errors in the remediation efforts,
inability to obtain new replacements for non-compliant systems or equipment,
general economic downturn relating to Year 2000 failures in the U.S. and in
other countries, failures in global banking systems and capital markets, or
extended failures by public and private utility companies or common carriers
supplying services to the Company.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements required to be filed pursuant to this Item 7 are
included in this Annual Report on Form 10-KSB. A list of the financial
statements filed herewith is found at "Item 13. Exhibits, List, and Reports on
Form 8-K."
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On January 12, 1998, the Company selected Arthur Andersen LLP to act as
independent accountants for the Company and informed the prior auditors,
Goldstein, Golub, Kessler & Compnay, P.C., of its decision. In connection with
its audits for each of the two years in the period ended September 30, 1997 and
thereafter, there were no disagreements with the prior auditors on any matters
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures. The prior auditor's report on the Company's
financial statements for each of the two years in the period ended September 30,
1997 contained no adverse opinion or disclaimer of opinion and was not modified
or qualified as to uncertainty, audit scope, or accounting principles. The
decision to change accountants was approved by the Board of Directors of the
Company. The prior auditors have furnished the Company with a letter addressed
to the Securities and Exchange Commission stating their agreement with the above
statements.
-19-
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The information relating to the Company's directors, nominees for election
as directors and executive officers under the headings "Election of Directors"
and "Executive Officers" in the Company's definitive proxy statement for the
2000 Annual Meeting of Stockholders is incorporated herein by reference to such
proxy statement.
ITEM 10. EXECUTIVE COMPENSATION.
The discussion under the heading "Executive Compensation" in the Company's
definitive proxy statement for the 2000 Annual Meeting of Stockholders is
incorporated herein by reference to such proxy statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The discussion under the heading "Security Ownership of Certain Beneficial
Owners and Management" in the Company's definitive proxy statement for the 2000
Annual Meeting of Stockholders is incorporated herein by reference to such proxy
statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The discussion under the heading "Certain Relationships and Related
Transactions" in the Company's definitive proxy statement for the 2000 Annual
Meeting of Stockholders is incorporated herein by reference to such proxy
statement.
ITEM 13. EXHIBITS, LIST, AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements.
Reference is made to the Index to Financial Statements on Page F-1.
(a) (2) Financial Statement Schedules.
None.
(a) (3) Exhibits.
Reference is made to the Index to Exhibits on Page 23.
(b) Reports on Form 8-K.
None.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 this 29th day of
December, 1999.
BIO-IMAGING TECHNOLOGIES, INC.
By: /s/Mark L. Weinstein
----------------------------------
Mark L. Weinstein, President and Chief
Executive Officer
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<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Mark L. Weinstein President and Chief December 29, 1999
- -------------------------
Mark L. Weinstein Executive Officer and Director
(principal executive
officer)
/s/Robert J. Phillips Vice President and Chief December 29, 1999
- -------------------------
Robert J. Phillips Financial Officer
(principal financial and
accounting officer)
/s/Jeffrey H. Berg, Ph.D. Director December 29, 1999
- -------------------------
Jeffrey H. Berg, Ph.D.
/s/Marc Berger Director December 29, 1999
- -------------------------
Marc Berger
/s/David E. Nowicki, DMD Director December 29, 1999
- -------------------------
David E. Nowicki, DMD
/s/James A. Taylor, Ph.D. Director December 29, 1999
- -------------------------
James A. Taylor, Ph.D.
-22-
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- ------- ----------------------
3.1 Restated Certificate of Incorporation of the Company. (Incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on
Form S-1 (File Number 33-47471) which became effective on June 18,
1992.) (Amendments incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1993 and to Exhibit 3.1 to the Company's Quarterly Report on Form
10-QSB for the quarter ended March 31, 1995.)
3.2 By-Laws of the Company. (Incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on Form S-1 (File Number
33-47471) which became effective on June 18, 1992.)
4.1 Specimen Common Stock Certificate. (Incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form S-1 (File
Number 33-47471) which became effective on June 18, 1992.)
4.2 Registration Agreement dated October 13, 1994 between the Company and
Corning Pharmaceuticals Services Inc., now Covance, Inc. ("Covance").
(Incorporated by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K dated October 13, 1994.)
4.3 Purchase Agreement for Units of Convertible Preferred Stock and
Warrants dated December 8, 1995 between Investment Partners of
America, L.P., as Purchaser, and the Company, including material
exhibits (including the Certificate of Designation for the Convertible
Preferred Stock). (Incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated December 22, 1995.)
10.1 Lease between Mountain View Office Park and the Company. (Incorporated
by reference to (i) Exhibit 10.1 to the Company's Registration
Statement on Form S-1 (File Number 33-47471) which became effective on
June 18, 1992, (ii) Exhibit 10.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1992, (iii) Exhibit
10.1 to the Company's Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1994, (iv) Exhibit 10.1 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended September 30, 1995),
as amended effective September 5, 1996 (Incorporated by Reference to
Exhibit 10.1 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended September 30, 1996) (v) as amended effective June
22, 1998 (Incorporated by Reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-KSB for the fiscal year ended September 30,
1998).
-23-
<PAGE>
Exhibit
No. Description of Exhibit
- ------- ----------------------
10.2* 1991 Stock Option Plan. (Incorporated by reference to Exhibit 10.6 to
the Company's Registration Statement on Form S-1 (File Number
33-47471) which became effective on June 18, 1992.)
10.3* 401(k) Plan. (Incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form S-1 (File Number 33-47471)
which became effective on June 18, 1992.)
10.4 Form of Employee's Invention Assignment, Confidential Information and
Non-Competition Agreement. (Incorporated by reference to Exhibit 10.9
to the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1992.)
10.5 Stock Purchase Agreement dated October 13, 1994 between the Company
and Covance. (Incorporated by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K dated October 13, 1994.)
10.6 Master Lease Agreement dated April 25, 1994 by and between the Company
and Wasco Funding Corp. and schedules thereto dated May 9, 1995 and
August 31, 1995. (Incorporated by reference to Exhibit 10.24 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1995.)
10.7* Employment Agreement including Invention Assignment and Confidential
Information Agreement dated April 15, 1998, by and between the Company
and Mark L. Weinstein. (Incorporated by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1998.)
10.8 Purchase Agreement for Units of Convertible Preferred Stock and
Warrants dated December 8, 1995 between Investment Partners of
America, L.P., as Purchaser and the Company, including material
exhibits. (Incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K dated December 22, 1995.)
10.9 Office Space Lease dated September 22, 1999 between Yardley Road
Associates, L.P. and the Company.
10.10 Revolving Promissory Note and Loan and Security Agreement dated August
10, 1999 between Silicon Valley Bank and the Company.
10.11 Accounts Receivable Purchase Agreement dated December 22, 1999 between
Silicon Valley Bank and the Company.
16 Letter re: Change in Certifying Accountants. (Incorporated by
reference to Exhibit 16 to the Company's Annual Report on Form 10-KSB
for the fiscal year ended September 30, 1998.)
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<PAGE>
Exhibit
No. Description of Exhibit
- ------- ----------------------
21 List of Subsidiaries of Registrant. (Incorporated by reference to
Exhibit 21.1 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended September 30, 1997.)
23.1 Consent of Arthur Andersen LLP.
27 Financial Data Schedule for the year ended September 30, 1999.
- ----------------
* A management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 13(a) of Form 10-KSB.
(b) Financial Statement Schedules
None.
-25-
<PAGE>
Bio-Imaging Technologies, Inc. and Subsidiaries
CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Public Accountants F-2
Consolidated Financial Statements:
Balance Sheets F-3
Statements of Operations F-4
Statements of Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Bio-Imaging Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Bio-Imaging
Technologies, Inc. (a Delaware corporation) and subsidiaries as of September 30,
1999 and 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bio-Imaging Technologies, Inc.
and subsidiaries as of September 30, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
December 22, 1999
F-2
<PAGE>
Bio-Imaging Technologies, Inc. and Subsidiaries
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
SEPTEMBER 30, 1999 1998
- -------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 412,903 $ 1,527,330
Accounts receivable, net of allowance for doubtful
accounts of $65,000 in 1999 and 1998 1,237,746 626,376
Prepaid expenses and other current assets 138,127 84,747
- -------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,788,776 2,238,453
Property and equipment, net 1,180,254 1,543,434
Other assets 179,624 32,235
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 3,148,654 $ 3,814,122
=======================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 134,685 $ 142,071
Accrued expenses and other current liabilities 254,565 261,063
Deferred revenue 541,933 522,605
Current maturities of long-term debt 69,800 49,956
- -------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,000,983 975,695
Long-term debt 81,511 26,808
- -------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,082,494 1,002,503
- -------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Convertible cumulative preferred stock - $.00025 par value;
authorized 3,000,000 shares, issued and outstanding 416,667 shares
($500,000 liquidation preference) 104 104
Common stock - $.00025 par value; authorized 18,000,000 shares,
issued and outstanding 7,773,878 shares in 1999 and 1998 1,944 1,944
Additional paid-in capital 9,231,497 9,231,497
Accumulated deficit (7,167,385) (6,421,926)
- -------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY 2,066,160 2,811,619
- -------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,148,654 $3,814,122
=======================================================================================================
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
Bio-Imaging Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Project revenues $ 4,349,079 $ 3,599,313
- -------------------------------------------------------------------------------------------------------
Cost and expenses:
Cost of revenues 2,660,659 2,025,868
General and administrative expenses 1,199,137 1,531,380
Sales and marketing expenses 974,264 1,003,523
Research and development expenses 229,238 255,321
Non-recurring charges - 597,000
- -------------------------------------------------------------------------------------------------------
Total cost and expenses 5,063,298 5,413,092
- -------------------------------------------------------------------------------------------------------
Loss from operations (714,219) (1,813,779)
Interest income, net 8,760 88,223
- -------------------------------------------------------------------------------------------------------
Net loss (705,459) (1,725,556)
Dividends on preferred stock 40,000 50,285
- -------------------------------------------------------------------------------------------------------
Net loss applicable to common stock $ (745,459) $(1,775,841)
=======================================================================================================
Basic and diluted loss per common share $ (0.10) $ (0.23)
=======================================================================================================
Weighted average number of common shares and dilutive
common equivalent shares 7,773,878 7,772,230
=======================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
Bio-Imaging Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
September 30, 1997 416,667 $ 104 7,753,878 $ 1,939 $ 9,215,603 $(4,646,085) $ 4,571,561
Stock options exercised - - 20,000 5 15,894 - 15,899
Dividends on preferred
stock - - - - - (50,285) (50,285)
Net loss - - - - - (1,725,556) (1,725,556)
- -------------------------------------------------------------------------------------------------------------------------
Balance at
September 30, 1998 416,667 104 7,773,878 1,944 9,231,497 (6,421,926) 2,811,619
Dividends on preferred
stock - - - - - (40,000) (40,000)
Net loss - - - - - (705,459) (705,459)
- -------------------------------------------------------------------------------------------------------------------------
Balance at
September 30, 1999 416,667 $ 104 7,773,878 $ 1,944 $ 9,231,497 $(7,167,385) $ 2,066,160
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
Bio-Imaging Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (705,459) $(1,725,556)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 551,038 559,301
Provision for losses on accounts receivable - 45,000
Write-off of assets - 52,154
Changes in operating assets and liabilities, net of assets and
liabilities acquired in a business combination:
(Increase) decrease in accounts receivable (611,370) 542,676
Increase in prepaid expenses and other current assets (53,380) (5,977)
Decrease in other assets 20,611 12,435
(Decrease) increase in accounts payable (7,386) 60,239
(Decrease) increase in accrued expenses and other current
liabilities (71,498) 11,711
(Decrease) increase in deferred revenue (103,137) 108,245
- -------------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (980,581) (339,772)
- -------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (165,858) (377,462)
Cash paid for business acquisition (2,535) -
- -------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (168,393) (377,462)
- -------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments of long term debt (71,377) (98,708)
Dividends paid to preferred stockholders (40,000) (40,285)
Proceeds from long-term debt 145,924 -
Proceeds from exercise of stock options - 15,899
- -------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 34,547 (123,094)
- -------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (1,114,427) (840,328)
Cash and cash equivalents at beginning of year 1,527,330 2,367,658
=========================================================================================================================
Cash and cash equivalents at end of year $ 412,903 $ 1,527,330
=========================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 12,412 $ 3,775
=========================================================================================================================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Equipment purchased under capital lease obligations $ - $ 75,595
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bio-Imaging Technologies, Inc. and Subsidiaries
1. PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND FUTURE OPERATIONS
Bio-Imaging Technologies, Inc. and Subsidiaries ("Bio-Imaging" or "the Company")
is a pharmaceutical contract service organization, operating in one business
segment, providing services that support the product development process of the
pharmaceutical, biotechnology and medical device industries. The Company
specializes in assisting its clients in the design and management of the
medical-imaging component of clinical trials for all modalities which consist of
computerized tomography ("CT"), magnetic resonance imaging ("MRI"), x-rays, dual
energy x-ray absorptiometry ("DEXA"), position emission tomography single photon
emission computerized tomography ("PET SPECT") and ultrasound. The Company
provides services which include the processing and analysis of medical images
and the data-basing and regulatory submission of medical images, quantitative
data and text.
The Company's 2000 operating plan contains assumptions regarding revenue and
expenses. The achievement of the operating plan depends heavily on the timing of
work performed by the Company on existing projects and the ability of the
Company to gain and perform work on new projects. Delays in the timing of work
performed by the Company on existing projects or the inability of the Company to
gain and perform work on new projects could have an adverse impact on the
Company's ability to execute its operating plan and maintain adequate cash flow.
In the event actual results do not meet the operating plan, management believes
it could execute contingency plans to mitigate such effects. Such plans include
additional financing, to the extent available, through the revolving line of
credit agreement and accounts receivable purchase agreement. In addition, in
December 1999, the members of the Board of Directors of the Company, in their
individual capacities, committed up to an aggregate amount totaling $100,000 in
the form of a short-term loan, through October 1, 2000, if needed by the
Company. Considering the cash on hand and based on the achievement of the
operating plan and management's actions taken to date, management believes it
has the ability to continue to generate sufficient cash to satisfy its operating
requirements in the normal course of business. However, no assurance can be
given that sufficient cash will be generated from operations. As of November 30,
1999, the Company's cash balance was approximately $357,000.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Oxford Bio-Imaging Research, Inc. and
Bio-Imaging Technologies Holding B.V. All significant intercompany transactions
and balances have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bio-Imaging Technologies, Inc. and Subsidiaries
CASH AND CASH EQUIVALENTS
The Company maintains substantially all of its cash in one financial
institution. The Company has defined cash equivalents as highly liquid
investments with an original maturity at the time of purchase of three months or
less.
REVENUE RECOGNITION
Project revenues are recognized primarily using the percentage-of-completion
method of accounting for services rendered in connection with contractual
arrangements, which generally range from a few months to two years. Provisions
for losses to be incurred on contracts are recognized in full in the period in
which it is determined that a loss will result from performance of the
contractual arrangement. Unbilled services are recorded for revenue recognized
to date that is currently unbillable to the client pursuant to contractual
terms. In general, amounts become billable upon the achievement of contractual
milestones or in accordance with predetermined payment schedules. Unbilled
services are generally billable within one year from the respective balance
sheet date. Accounts receivable include approximately $806,000 and $493,000 of
unbilled receivables at September 30, 1999 and 1998, respectively. Deferred
revenue is recorded for cash received from clients for which revenue has not
been recognized at the respective balance sheet date. Revenue from other
activities is recognized as services are performed.
PROPERTY AND EQUIPMENT
Depreciation of property and equipment is provided for using the straight-line
method over the estimated useful lives of the respective assets. Amortization of
leasehold improvements is provided for over the related lease term.
CAPITALIZED SOFTWARE DEVELOPMENT
The Company capitalizes software development costs after technological
feasibility has been determined and ceases capitalization at such time as the
end product is available for general release to the public. The establishment of
technological feasibility and the ongoing assessment of recoverability of
capitalized software development costs require considerable judgment by
management with respect to certain external factors including, but not limited
to, anticipated future revenue, estimated economic life and changes in software
and hardware technologies. At September 30, 1999, management has estimated an
economic useful life of 30 months and is amortizing these costs on a
straight-line basis over this period. The amortization period is reviewed
annually by management. During 1999 and 1998, the Company had no costs of
software development that were capitalized.
LONG LIVED ASSETS
The Company continually reviews its long lived assets to evaluate whether
changes have occurred to suggest whether or not long lived assets may be
impaired based on estimated undiscounted cash flows. If this review indicates
that long lived assets are impaired, the carrying amounts of these assets would
be reduced based on the estimated shortfall of cash flows on a discounted basis.
Management does not believe that there is any such impairment of long lived
assets as of September 30, 1999.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bio-Imaging Technologies, Inc. and Subsidiaries
BUSINESS ACQUISITION
In May 1999, the Company acquired the operations of Bona Fide, Ltd. in a
transaction accounted for as a purchase. Tangible assets acquired were $10,000
and liabilities assumed were approximately $190,000, resulting in goodwill of
$180,000. The liabilities assumed primarily represent deferred revenue of
$122,000 which the Company expects to recognize as project revenues over the
duration of the client contracts which were assumed by the Company in the
acquisition. Goodwill is being amortized using a straight-line method over five
years. In addition to the amount paid at closing, additional payments for the
acquisition may be made based on certain revenues being achieved for the
twelve-month period ending on the anniversary of the closing date. Such amount
may not exceed $50,000. The acquisition was not material to the Company's
consolidated financial position or results of operations.
FOREIGN CURRENCY TRANSLATION
The U.S. Dollar is the functional currency for the Company's foreign
subsidiaries.
EARNINGS PER SHARE
The Company follows SFAS No. 128 - "Earnings per Share. " SFAS No. 128 requires
the presentation of basic earnings per share and diluted earnings per share.
Basic loss per common share was calculated based upon the net loss available to
common stockholders divided by the weighted average number of shares of common
stock outstanding during the period. Diluted loss per common share for the year
ended September 30, 1999 and 1998 excludes the impact of options (1,192,370 as
of September 30, 1999) and warrants (66,667 as of September 30, 1999) as they
are antidilutive.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1998, the Accounting Standards Executive Committee issued Statement of
Position (SOP 98-1), "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." SOP 98-1 requires that computer software costs that
are incurred in the preliminary project stage be expensed as incurred and that
criteria be met before capitalization of costs to develop or obtain computer
software for internal use. Adoption of SOP 98-1 is required for fiscal years
beginning after December 15, 1998. The Company does not believe that the new
standard will have a material impact on the Company's consolidated financial
statements. In April 1998, the Accounting Standards Executive Committee issued
SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 requires all
costs incurred as start-up costs or organization costs be expensed as incurred.
Adoption of SOP 98-5 is required for fiscal years beginning after December 15,
1998. The Company does not believe that the new standard will have a material
impact on the Company's consolidated financial statements.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bio-Imaging Technologies, Inc. and Subsidiaries
2. PROPERTY AND EQUIPMENT
<TABLE>
Property and equipment, at cost, consists of the following:
<CAPTION>
Estimated
September 30, 1999 1998 Useful Life
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equipment $ 3,496,440 $ 3,340,764 5 years
Equipment under capital leases 640,914 640,914 5 years
Furniture and fixtures 266,554 246,371 7 years
Leasehold improvements 84,060 84,060 Term of lease
Computer software costs 123,436 123,436 30 months
- ------------------------------------------------------------------------------------------
4,611,404 4,435,545
Less accumulated depreciation
and amortization (3,431,150) (2,892,111)
- ------------------------------------------------------------------------------------------
$ 1,180,254 $ 1,543,434
==========================================================================================
</TABLE>
Accumulated depreciation related to equipment acquired under capital leases
amounted to approximately $537,000 and $465,000 at September 30, 1999 and 1998,
respectively.
Accumulated amortization related to computer software costs amounted to
approximately $123,000 and $111,000 at September 30, 1999 and 1998,
respectively.
3. LONG-TERM DEBT
Long-term debt consists of an equipment lease obligation and notes payable. The
equipment lease obligation and notes payable are payable in monthly installments
ranging from $1,170 to $3,562, including interest at rates ranging from 9.53% to
10.61%, through June 2002. The debt is collateralized by the related equipment.
Aggregate maturities of long-term debt at September 30, 1999 are as follows:
2000 $ 69,800
2001 50,706
2002 30,805
- --------------------------------------------------------------
$151,311
==============================================================
In August 1999, the Company entered into an agreement with a bank for a
revolving line of credit of up to $500,000 collaterized by the Company's assets.
Interest is payable at 1.50% over the bank's prime rate of interest. The
agreement requires the Company, among other things, to maintain minimum levels
of tangible net worth and certain minimum financial ratios. At September 30,
1999 the Company had no
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bio-Imaging Technologies, Inc. and Subsidiaries
borrowings under the line of credit and was in compliance with the covenants of
the agreement. In October 1999, the bank notified the Company that it would not
make any advances under the existing line of credit until the Company provides
sufficient evidence satisfactory to the bank of an improvement in the Company's
operating, financial and liquidity position. At such time, the bank may consider
permitting further advances pursuant to the loan agreement. In December 1999,
the Company entered into an accounts receivable purchase agreement with the same
bank, whereby, the Company may assign up to $500,000 of eligible accounts
receivable to the bank. The bank, in turn, would advance the Company up to 80%
of the assigned accounts receivable amount. Upon collection by the bank, the
balance of the assigned accounts receivable would be remitted to the Company net
of the bank's finance charges and administration fees.
In December 1999, the Company entered into an equipment lease obligation
consisting of monthly installments of $4,961, which include interest at a rate
of 10.53%, through November 2002. The debt is collateralized by the related
equipment.
4. STOCKHOLDERS' EQUITY
In December 1991 and June 1992, the Company's Board of Directors and
stockholders, respectively, approved the adoption of the Bio-Imaging
Technologies, Inc. Stock Option Plan. In January 1995 and 1997, the Company
amended this plan to provide for the granting of options to key employees,
directors and consultants to purchase an aggregate of not more than 1,800,000
and 2,400,000 shares, respectively, of the Company's common stock. Each option
is exercisable into one share of common stock. Options granted pursuant to the
plan, to be granted at prices not less than fair value at the date of grant,
consist of qualified incentive stock options, as defined in the Internal Revenue
Code, and nonqualified options. Such stock options have terms not exceeding ten
years and vesting terms vary from immediate vesting on date of grant to five
years.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bio-Imaging Technologies, Inc. and Subsidiaries
The following table summarizes the transactions pursuant to the Company's stock
option plan for the two-year period ended September 30, 1999:
Number of Weighted Average
Options Exercise Price
- -----------------------------------------------------------------------------
Unexercised options outstanding at
September 30, 1997 1,485,000 $ 1.40
Options granted 317,250 0.67
Options canceled (513,500) 0.93
Options exercised (20,000) 0.80
- -----------------------------------------------------------------------------
Unexercised options outstanding at
September 30, 1998 1,268,750 1.41
Options granted 267,620 0.63
Options canceled (344,000) 1.05
- -----------------------------------------------------------------------------
Unexercised options outstanding at
September 30, 1999 1,192,370 $ 1.34
=============================================================================
Approximately 765,000 and 882,000 options are exercisable at September 30, 1999
and 1998, respectively, at a weighted average exercise price of $1.66 and $1.62,
respectively.
The Company has elected, in accordance with the provisions of SFAS No. 123,
Accounting for Stock-Based Compensation ("SFAS 123"), to apply the accounting
rules under APB Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations in accounting for its stock options and, accordingly,
has presented the disclosure-only information as required by SFAS 123. If the
Company had elected to recognize compensation cost based on the fair value
method of SFAS 123, the Company's net loss applicable to common stock and net
loss per common share for the years ended September 30, 1999 and 1998 would have
been the pro forma amounts indicated in the following table:
<TABLE>
<CAPTION>
Year ended September 30, 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Net loss applicable to common stock - as reported $ (745,459) $(1,775,841)
Net loss applicable to common stock - pro forma $ (842,614) $(1,890,395)
Net loss per common share - basic and diluted - as reported $ (0.10) $ (0.23)
Net loss per common share - basic and diluted- pro forma $ (0.11) $ (0.24)
</TABLE>
At September 30, 1999, by range of exercise prices, the number of shares
represented by outstanding options with their weighted average exercise price
and weighted average remaining contractual life, in years, and the number of
shares represented by exercisable options with their weighted average exercise
price are as follows:
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bio-Imaging Technologies, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------- -----------------------------
Range of Weighted Average Weighted Weighted
Exercise Number Remaining Average Number Average
Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ----------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
$0.63 - $1.44 1,040,370 7.72 years $0.87 613,166 $0.93
$4.13 - $4.69 152,000 2.67 years $4.66 152,000 $4.60
- ----------------------------------------------------------------------- -----------------------------
$0.63 - $4.69 1,192,370 7.08 years $1.34 765,166 $1.66
======================================================================= =============================
</TABLE>
The weighted average fair value of options granted in 1999 and 1998 was $0.38
and $0.53 respectively. The fair value of each option granted is estimated on
the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions:
Grants for the year ended September 30, 1999 1998
- ---------------------------------------------------------------------------
Risk-free interest rate 4.7% 4.5%
Expected dividend yield 0.0% 0.0%
Expected volatility 117% 107%
Expected life in years 6.00 6.00
On October 13, 1994, the Company and Covance Inc., formerly Corning
Pharmaceutical Services, Inc., consummated the purchase by Covance Inc. of (i)
2,355,000 shares of the Company's common stock, $.00025 par value (ii) a warrant
to purchase 250,000 shares of common stock with an initial exercise price of
$1.25 per share and (iii) a warrant to purchase 250,000 shares of common stock
with an initial price of $1.50 per share (the "Warrants") for an aggregate
purchase price of $1,819,500. The Warrants expired on October 13, 1998 without
being exercised.
On December 14, 1995, the Company reserved 3,850,000 shares of the Company's
common stock for issuance upon conversion of the preferred stock and exercise of
the warrants issued to Investment Partners of America, L.P. ("IPA") (see below).
On December 21, 1995, IPA purchased (i) 416,667 shares of the Company's
convertible preferred stock, (ii) one five year warrant to purchase 416,667
shares of the Company's common stock at an initial exercise price of $1.50 per
share and (iii) one five year warrant to purchase 416,667 shares of the
Company's common stock at an initial exercise price of $2.50 per share for an
aggregate purchase price of $500,000 pursuant to a purchase agreement dated
December 8, 1995 ("Purchase Agreement"). The preferred stock provides for (i)
voting rights on an as-converted to common stock basis, with standard protective
provisions; (ii) a liquidation preference of $1.20 per share; (iii)
anti-dilution protection and price protection provisions; (iv) cumulative
dividends of $0.096 per share per annum, payable out of funds legally available
for the payment of dividends and only upon declaration of dividends by the Board
of Directors of the Company; and (v) registration rights with respect to the
shares of common stock issuable upon conversion of the preferred stock.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bio-Imaging Technologies, Inc. and Subsidiaries
On June 26, 1996, the Company issued to IPA, one five-year warrant to purchase
66,667 shares of the Company's common stock at an initial exercise price of
$1.05 per share, the fair market value of the Company's common stock at date of
issuance. The exercise price of this warrant issued to IPA is subject to
adjustment to protect against dilution in the event of certain transactions and
has certain piggyback registration rights. As of September 30, 1999, the
adjusted exercise price of the warrant is $0.63.
The 8% convertible cumulative preferred stock is convertible into common stock
of the Company on a one-for-one share basis subject to adjustment to protect
against dilution in the event of certain transactions. Conversion may occur in
whole or in part during the first five-year period from the date of issuance,
December 21, 1995, at the option of the holder. The Company may require a full
conversion at any time after five years from date of issuance. The preferred
stock has certain piggyback registration rights.
The Company is required to pay semiannual dividends on preferred stock at the
rate of approximately $0.096 per share per annum, and as when declared by the
Board of Directors. Dividends are payable either in cash or in the Company's
common stock at the discretion of the Company. At September 30, 1999, accrued
preferred dividends aggregated approximately $10,000 or $0.02 per share of the
preferred stock.
The preferred stockholders are entitled to vote on all matters submitted to the
vote of the common stockholders and are included in determining quorums and
voting results.
5. COMMITMENTS
The Company has entered into noncancelable operating leases for office
facilities which expire through January 2005.
Future minimum aggregate rental payments on the noncancelable portion of the
lease are as follows:
Year ending September 30,
2000 $ 260,475
2001 317,924
2002 326,368
2003 334,808
2004 343,244
2005 115,352
==============================================================
$ 1,698,171
==============================================================
Rent expense charged to operations for the years ended September 30, 1999 and
1998 approximated $249,000 and $247,000, respectively.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bio-Imaging Technologies, Inc. and Subsidiaries
The Company has an employment contract with an officer which expires April 2000.
The amount due under this contract is approximately $105,000. Additionally, the
contract provided for the granting of options to purchase 150,000 shares of the
Company's common stock at $0.63 which was greater than the fair market value of
the Company's common stock at the date of grant (see note 4). Options to
purchase 50,000 shares of the Company's common stock vested immediately, and
25,000 on each of the first, second, third and fourth anniversary of the date of
grant.
6. EMPLOYEE BENEFIT PLAN
On December 17, 1991, the Company adopted the Bio-Imaging Technologies, Inc.
Employees' Savings Plan (the "401(k) Plan"), a defined contribution plan with a
cash or deferred arrangement. Under the terms of the 401(k) Plan, eligible
employees may elect to reduce their annual compensation up to 15%, subject to an
annual limit prescribed by the Internal Revenue Service. The Company may make
discretionary matching contributions either in common stock or in cash, subject
to plan limits. The Company did not make a matching contribution to this account
for the years ended September 30, 1999 and 1998.
7. MAJOR CUSTOMERS
Two customers accounted for approximately 17% and 14% of accounts receivable at
September 30, 1999 and three customers accounted for approximately 20%, 19% and
13% of accounts receivable at September 30, 1998.
Revenue from three major customers accounted for approximately 16%, 13% and 11%
of project revenues for the year ended September 30, 1999 and revenue from two
major customers accounted for approximately 26% and 24% of project revenues for
the year ended September 30, 1998.
8. INCOME TAXES
The Company has net operating loss carryforwards of approximately $6,541,000
which expire in various years through 2018. The deferred income tax assets at
September 30, 1999 and 1998 of approximately $2,600,000 and $2,400,000,
respectively, represent the tax effect of the net operating loss carryforwards.
Due to the uncertainty regarding the ultimate amount of income tax benefits to
be derived from the net operating loss carryforwards, the Company has recorded
valuation allowances against the entire deferred tax asset. The Company may not
be able to utilize the New Jersey net operating loss carryforwards as a result
of moving the corporate headquarters to Pennsylvania.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bio-Imaging Technologies, Inc. and Subsidiaries
9. FOREIGN OPERATIONS
Foreign customers accounted for approximately 32% of project revenues for the
years ended September 30, 1999 and 1998.
10. NON-RECURRING CHARGES
In February 1998, the Company engaged in a proxy contest in an effort to, among
other things, elect the members of the Company's Board of Directors at the
Annual Meeting of Stockholders held on February 27, 1998. Costs associated with
the proxy contest and related litigation were $320,000 for the year ended
September 30, 1998. In addition, the Company incurred expenses of $277,000
consisting of restructuring costs of $105,000 and severance costs of $172,000
during the year ended September 30, 1998.
The restructuring costs were associated with the termination of two business
divisions, the Marketing Information Services Division and the Data Management
and Information Systems Division, by the Company in December 1997. These costs
consisted of $38,000 of severance costs and $67,000 related to the write-off of
assets and costs associated with the termination of the divisions.
In a separate matter, two executive officers of the Company resigned in December
1997. The Company entered into a separation agreement with one such former
executive officer requiring the Company to pay him $127,000 of which $0 and
$30,000 remains payable at September 30, 1999 and 1998, respectively. As a
result of these resignations, the Company recorded severance expenses of
approximately $172,000 during the year ended September 30, 1998.
F-16
OFFICE SPACE LEASE
for
826 NEWTOWN-YARDLEY ROAD
by and between
YARDLEY ROAD ASSOCIATES, L.P.
(as Landlord)
and
BIO-IMAGING TECHNOLOGIES, INC.
(as Tenant)
Date: September 22, 1999
<PAGE>
THIS LEASE (the "Lease") is made the 22 day of September, 1999 between
Yardley Road Associates, L.P. (herein referred to as "Landlord") whose address
is 1101 West DeKalb Pike, Suite 200, Wayne, PA 19087 and Bio-Imaging
Technologies, Inc. (herein referred to as "Tenant") whose address is ----------
PREAMBLE
--------
BASIC LEASE PROVISIONS AND DEFINITIONS
In addition to other terms elsewhere defined in this Lease, the following
terms whenever used in this Lease shall have only the meanings set forth in this
section, unless such meanings are expressly modified, limited or expanded
elsewhere herein.
1. ADDITIONAL RENT shall mean all sums in addition to Fixed Basic Rent payable
---------------
by Tenant to Landlord or to third parties pursuant to the provisions of the
Lease.
2. BROKER(S) shall mean Kelley & Associates, Inc. and Insignia/ESG, Inc.
---------
3. BUILDING shall mean 826 Newtown Yardley Road, Newtown, Pennsylvania as
--------
described on Exhibit A hereto.
4. BUILDING HOLIDAYS shall be those shown on Exhibit D.
-----------------
5. DEMISED PREMISES OR PREMISES shall be approximately sixteen thousand eight
----------------------------
hundred and eighty one (16,881) gross rentable square feet on the ground level
of the Building which includes an allocable share of the Common Facilities as
defined in Section 2, which measurement shall be subject to final measurement
and agreement.
6. EXHIBITS shall be the following, attached to this Lease and incorporated
--------
herein and made a part hereof:
Rider A Renewal Options
Exhibit A Location of Premises
Exhibit A-1 Office Building Area
Exhibit B Rules and Regulations
Exhibit C Landlord's Work
Exhibit D Building Holidays
Exhibit E Tenant Estoppel Certificate
7. EXPIRATION DATE shall be the last day of the month which is sixty two (62)
----------------
consecutive calendar months following the Commencement Date (as defined in
Section 4 of the Lease).
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8. FIXED BASIC RENT shall be calculated and payable as follows:
----------------
Rentable Rate Per Yearly Monthly
Months Sq. Ft. Rentable Rate Installment
Sq. Foot
1-2 16,881 $ 0 n/a n/a
3-14 16,881 $ 18.50 $ 312,298.50 $ 26,024.88
15-26 16,881 $ 19.00 $ 320,739.00 $ 26,728.25
27-38 16,881 $ 19.50 $ 329,179.50 $ 27,431.63
39-50 16,881 $ 20.00 $ 337,620.00 $ 28,135.00
51-62 16,881 $ 20.50 $ 346,060.50 $ 28,838.38
9. OFFICE BUILDING AREA is as set forth on Exhibit A-1
-------------------
10. PERMITTED USE shall be general office use and for no other purpose.
-------------
11. PROPORTIONATE SHARE shall mean 14.19 percent which is 16,881, the number of
-------------------
rentable square feet contained in the Premises divided by 119,000, the number of
rentable square feet contained within the Building.
12. SECURITY DEPOSIT shall be two (2) months Fixed Basic Rent which may be in
-----------------
the form of an irrevocable evergreen letter of credit in a form reasonably
acceptable to Landlord.
13. TARGET DATE shall be December 1, 1999.
-----------
14. TERM shall mean five (5) years and two (2) months from the Commencement
----
Date (as defined in Section 4 of the Lease) unless terminated or extended
pursuant to any option or provision contained herein.
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TABLE OF CONTENTS
Section Page
1. Definitions.........................................................1
2. Premises............................................................1
3. Completion of Premises..............................................1
4. Term................................................................2
5. Use of Premises.....................................................2
6. Rent................................................................2
7. Insurance...........................................................5
8. Repairs and Maintenance.............................................6
9. Utilities and Services..............................................7
10. Governmental Regulations............................................9
11. Signs...............................................................9
12. Alterations, Additions and Fixtures................................10
13. Mechanic's Liens...................................................10
14. Landlord's Right of Entry..........................................11
15. Damage by Fire or Other Casualty...................................12
16. Non-Abatement of Rent..............................................13
17. Indemnification....................................................13
18. Condemnation.......................................................14
19. Quiet Enjoyment....................................................15
20. Rules and Regulations..............................................15
21. Assignment and Sublease............................................15
22. Tenant's Relocation................................................18
23. Subordination......................................................19
24. Curing Tenant's Defaults...........................................20
25. Surrender..........................................................20
26. Defaults-Remedies..................................................20
27. Condition of Premises..............................................23
28. Hazardous Substances...............................................24
29. Recording..........................................................24
30. Broker's Commission................................................24
31. Notices............................................................25
32. Irrevocable Offer, No Option.......................................26
33. Landlord Inability to Perform......................................26
34. Survival...........................................................26
35. Corporate Tenants..................................................26
36. Tenant Representations and Warranties..............................26
37. Waiver of Invalidity of Lease......................................26
38. Security Deposit...................................................26
39. Estoppel Certificate...............................................27
40. Rights Reserved by Landlord........................................27
41. Miscellaneous......................................................29
42. Additional Definitions.............................................30
43. Tenant's Right of First Offer .....................................31
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For and in consideration of the covenants herein contained, and upon the
terms and conditions herein set forth, Landlord and Tenant, intending to be
legally bound, agree as follows:
1. DEFINITIONS. The definitions set forth in the preceding Preamble shall
apply to the same capitalized terms appearing in this Lease Agreement.
Additional definitions are contained in Section 42 and throughout this Lease.
2. PREMISES. Landlord hereby demises and leases the Premises to Tenant and
Tenant hereby leases and takes the Premises from Landlord for the Term (as
defined in Section 4) and upon the terms, covenants, conditions, and provisions
set forth in this Lease Agreement, including the Preamble (this "Lease"). The
Tenant's interest in the Premises as tenant shall include the right, in common
with Landlord and other occupants of the Building, to use driveways, sidewalks,
loading and parking areas (which parking areas provide unreserved parking spaces
at the ratio of four (4) parking spaces for every one thousand rentable square
feet of space within the Building), lobbies, hallways and other facilities which
are located within the Property (defined in Section 6) and which are designated
by Landlord from time to time for the use of all of the tenants of the Building
(the "Common Facilities").
3. COMPLETION OF PREMISES. The Premises shall be completed in accordance
with the plans and specifications attached hereto as Exhibit C (herein called
the "Plans") at Landlord's expense. All necessary construction shall be
commenced promptly following Landlord's execution and acceptance of this Lease
and Tenant's delivery of the first month's Fixed Basic Rent and the Security
Deposit to Landlord and shall be substantially completed ready for use and
occupancy by Tenant on the Target Date set forth in the Preamble; provided,
however, that the time for substantial completion of the Premises shall be
extended for additional periods of time equal to the time lost by Landlord or
Landlord's contractors, subcontractors or suppliers due to strikes or other
labor troubles; delays in Tenant's selection of materials, plans or
specifications; governmental restrictions and limitations; unavailability or
delays in obtaining fuel, labor or materials; war or other national emergency;
accidents; floods; defective materials; fire damage or other casualties; adverse
weather conditions; the inability to obtain building or use and occupancy
permits; or any cause similar or dissimilar to the foregoing which is beyond the
reasonable control of Landlord or Landlord's contractors, subcontractors or
suppliers. The Premises shall be deemed substantially completed when Tenant is
in receipt of a Certificate of Occupancy or Temporary Certificate of Occupancy
(punchlist items excepted). All construction shall be done in a good and
workmanlike manner and shall comply at the time of completion with all
applicable and lawful laws, ordinances, regulations and orders of the federal,
state, county or other governmental authorities having jurisdiction thereof,
including the Americans With Disabilities Act. Tenant and its authorized agents,
employees and contractors shall have the right, at Tenant's own risk, expense
and responsibility, at all reasonable times prior to the Target Date as
hereinafter defined, to enter the Premises for the purpose of taking
measurements and installing its furnishings and equipment; provided that Tenant,
in so doing, shall not interfere with or delay the work to be performed
hereunder by Landlord, and Tenant shall use contractors
<PAGE>
and workmen compatible with the contractors and workmen engaged in the work to
be performed hereunder by Landlord, and Tenant shall have obtained Landlord's
written consent to installing any furnishings or equipment. If Landlord shall
fail to deliver possession of the Premises by the Target Date for any reason,
whether or not within Landlord's control, Landlord shall not be subject to any
liability to Tenant. No failure to deliver the Premises by the Target Date or
any other date shall in any respect affect the validity or continuance of this
Lease of any obligation of Tenant hereunder or extend the Term of the Lease.
Notwithstanding the foregoing, in the event Landlord fails to substantially
complete the Premises as set forth above on or before December 31, 1999, then
commencing on January 1, 2000 and terminating on the Commencement Date, Landlord
shall reimburse Tenant for Tenant's increased rental obligations under its
current lease arising solely as a result of Landlord's delay in delivering the
Premises to Tenant as provided herein. Tenant shall be responsible for all such
increased rental obligations for any period prior to January 1, 2000 and shall
use its good faith efforts to negotiate a reduction in such obligations. In
addition to the foregoing, if Landlord fails to substantially complete the
Premises as set forth above prior to February 29, 2000, (the "Outside Date"),
then Tenant may terminate this Lease upon thirty (30) days prior written notice
to Landlord and upon such termination, Landlord shall refund to Tenant all sums
Tenant paid to Landlord on account of Rent and neither party shall have any
further obligations hereunder. Tenant's notice may be given at anytime prior to
the Outside Date, but shall only be effective as of the Outside Date or such
later date as specified in Tenant's notice. If Landlord substantially completes
the Premises prior to the date of termination as set forth in Tenant's notice,
then such notice shall be deemed revoked and the parties hereto shall continue
to be bound to the terms of this Lease. Notwithstanding the foregoing, if Tenant
fails to deliver to Landlord final approved Plans (as defined above) which are
acceptable to Landlord on or before September 17, 1999, then each of the dates
set forth in this Section 3 shall be extended by one (1) day for each one (1)
day of delay beyond September 17, 1999 until such Plans are delivered to
Landlord.
4. TERM. The Term of this Lease shall commence on the date (the
"Commencement Date") which is the first to occur of (a) the date the Premises
are deemed substantially completed as provided in Section 3 above and (b) the
date on which the Premises are actually occupied by Tenant. Following the
Commencement Date, the Term of this Lease, unless sooner terminated as expressly
provided in this Lease, shall continue until the date of expiration of the term
specified as the Term of Lease in the Preamble plus the number of days which
remain in the calendar month in which such term expires (the "Term"). Upon
request of Landlord, Tenant shall enter into a memorandum agreement stipulating
the actual Commencement Date of the Term.
5. USE OF PREMISES. Tenant shall occupy the Premises throughout the Term
and shall use the same for, and only for, the Permitted Use specified in the
Preamble. The Building is designed to normal building standards for
floor-loading capacity. Tenant shall not use the Premises in such ways which, in
Landlord's judgment, exceed such load limits.
6. RENT. Unless otherwise specifically requested by Landlord at any time,
Fixed
2
<PAGE>
Basic Rent, Additional Rent and any other rent or other sums due under this
Lease (hereunder collectively referred to as Rent) shall be paid and delivered
to Landlord's property manager, if any, as agent for Landlord, in the amounts,
time and manner more particularly provided in this Lease.
a. FIXED BASIC RENT. Commencing on the Commencement Date, Tenant shall
pay, throughout the Term, Fixed Basic Rent in the amount specified in the
Preamble, without notice or demand and without setoff or deduction, in equal
monthly installments equal to one-twelfth of the Fixed Basic Rent (specified as
Monthly Installments in the Preamble), in advance, on the first day of each
calendar month during the Term. If the Commencement Date falls on a day other
than the first day of a calendar month, the Fixed Basic Rent shall be
apportioned on a per diem basis for the period between the Commencement Date and
the first day of the first full calendar month in the Term and such apportioned
sum shall be paid on the Commencement Date.
b. ADDITIONAL RENT. Commencing on the Commencement Date, Tenant shall
pay to Landlord, as Additional Rent, in the manner more particularly set forth
below, Tenant's Proportionate Share of Annual Operating Costs (as defined below)
for the Property to the extent same exceeds the sum of Four Dollars ($4.00) (the
"Expense Stop") per rentable square foot of the Premises:
i) ANNUAL OPERATING COSTS. The term "Annual Operating Costs"
shall mean all costs Landlord incurs from owning, operating and maintaining the
Building and the lot or tract of land on which it is situated (the "Property").
Annual Operating Costs shall include, by way of example rather than limitation:
insurance costs, including premiums; fees; Impositions (defined below); costs
for repairs, maintenance and service contracts; management fees; landscaping;
snow removal; governmental permits fees; costs of compliance with governmental
orders and regulations; administrative and overhead expenses; costs of
furnishing water, sewer, electricity, gas, fuel, and other utility services, for
use in Common Facilities of the Building and Property; and the cost of
janitorial service and trash removal; excluding, however, from Annual Operating
Costs the following: costs which are treated as capital expenditures (except as
provided in Sections 9(d) and10(b)) under generally accepted accounting
principles; mortgage debt or ground rents incurred by Landlord as owner of the
Property; income, excess profits, corporate capital stock or franchise tax
imposed or assessed upon Landlord, unless such tax or any similar tax is levied
or assessed, in lieu of all or any part of any currently existing Imposition or
an increase in any currently existing Imposition; leasing commissions,
accountants', consultants' or attorneys' fees, costs and disbursement and other
expenses incurred in connection with negotiations or disputes with tenants or
prospective tenants or associated with the enforcement of any leases or the
defense of Landlord's title to or interest in the Building in connection with
any proceedings involving real property taxes other than disputes regarding tax
assessment and reduction of real property taxes; costs of construction of the
Building and related facilities and correction of defects in construction of the
Building (including permit, license and inspection fees); costs of any items or
services sold or provided to tenants (including Tenant) for which Landlord is
entitled to be reimbursed by such tenants or which are not
3
<PAGE>
generally provided to all tenants of the Building; fees and higher interest
charges caused by Landlord's refinancing the Building; all repairs to the
interior of the Building of a structural nature (not made necessary by unusual
use by Tenant); costs incurred due to violation by Landlord or any tenant of the
terms and conditions of any lease; overhead and profit increment paid to
subsidiaries or affiliates of Landlord, or to any party as a result of a
noncompetitive selection process, for management or other services on or to the
Building or for supplies or other materials, to the extent that the costs of
such services, supplies or materials exceed the costs that would have been paid
had the services, supplies or materials been provided by unaffiliated parties on
a competitive basis; general overhead and administrative expenses except
salaries of on-site property manager, management secretary and maintenance man;
any compensation paid to clerks, attendants or other persons in commercial
concessions operated by Landlord, rentals and other related expenses incurred in
leasing air conditioning systems, elevators or other equipment ordinarily
considered to be for a capital nature, except equipment which is used in
providing janitorial services and which is not affixed to the Building; all
items and services for which Tenant reimburses Landlord or pays third persons or
which Landlord provides selectively to one or more tenants or occupants of the
Building (other than Tenant) without reimbursement; commissions, advertising,
and promotional expenditures. "Impositions" shall mean all levies, taxes,
assessments, charges, imposts, and burdens, of whatever kind and nature,
ordinary and extraordinary, which are assessed or imposed during the Term by any
federal, state or municipal government or public authority or under any law,
ordinance or regulation thereof or pursuant to any recorded covenants or
agreements upon or with respect to the Property or any part thereof, any
improvements thereto, any personal property necessary to the operation thereof
and owned by Landlord or this Lease.
ii) ESTIMATED PAYMENTS - EXPENSE STATEMENT AND RECONCILIATION.
(1) Landlord shall submit to Tenant as soon as reasonably
possible after the beginning of each calendar year of the Term, the following:
(a) a statement setting forth (i) the Annual Operating Costs
for the previous calendar year of the Term and (ii) a calculation of Tenant's
Proportionate Share of the increase in the Annual Operating Costs over the
Expense Stop for the previous calendar year (the "Expense Statement"); and
(b) a statement of Landlord's good faith estimate of the
Annual Operating Costs for the current calendar year and a calculation of
Tenant's Proportionate Share of the increase in the Annual Operating Costs over
the Expense Stop for the current calendar year ("Tenant's Estimated Share").
(2) Beginning with the next installment of Fixed Basic Rent due
after the delivery of the aforesaid statements to Tenant, Tenant shall pay to
Landlord, on account of its Proportionate Share of the increase in the Annual
Operating Costs over the Expense Stop, the following:
4
<PAGE>
(a) a sum equal to the product of one-twelfth (1/12) of
Tenant's Estimated Share and the number of calendar months elapsed during the
current calendar year up to and including the month payment is made, plus any
amounts due from Tenant to Landlord on account of Annual Operating Costs for any
prior period(s) of time, less
(b) a sum equal to the amount, if any, by which the sum of
all payments made by Tenant to Landlord on account of Annual Operating Costs for
the previous calendar year exceed those actually specified in the Expense
Statement.
(3) On the first day of each succeeding calendar month until such
time as Tenant receives a new Expense Statement and statement of Tenant's
Estimated Share, Tenant shall pay to Landlord, on account of its Proportionate
Share of Annual Operating Costs, one-twelfth (1/12) of the then current Tenant's
Estimated Share. Any payment due from Tenant to Landlord, or any refund due from
Landlord to Tenant, on account of Annual Operating Costs not yet determined as
of the expiration of the Term shall be made within thirty (30) days after
submission to Tenant of the next Expense Statement.
c) DISPUTES. Unless Tenant, within ninety (90) days after any
statement of Additional Rent is furnished, shall give notice to Landlord that
Tenant disputes said statement, specifying in detail the basis for such dispute,
each statement furnished to Tenant by Landlord under any provision of this
Section shall be conclusively binding upon Tenant as to the particular
Additional Rent due from Tenant for the period represented thereby; provided,
however, that additional amounts due may be required to be paid by any
supplemental statement furnished by Landlord. Tenant shall have the right at
reasonable times to examine the records used in making the aforestated
determinations, upon written notice in advance; provided, however, such disputed
amount shall have been paid by Tenant to Landlord. In the event any such
examination shall reveal an adverse variance in excess of 10% of the total
operating expenses of which Tenant is required to pay their Proportionate Share,
Landlord shall reimburse Tenant for the reasonable cost of such examination
within thirty (30) days after demand. Tenant shall make all payments of
Additional Rent without delay and regardless of any pending dispute over the
amount of Additional Rent that is due in accordance with the statements
furnished by Landlord. Landlord shall have the right to retain Tenant's security
deposit until all Additional Rent payable by Tenant is determined and paid.
7. INSURANCE.
a) LIABILITY. Tenant, at Tenant's sole cost and expense, shall
maintain and keep insurance in effect throughout the Term against liability for
bodily injury (including death) and property damage in or about the Premises or
the Property under a policy of comprehensive general public liability insurance,
with such limits as to each as may be reasonably required by Landlord from time
to time, but not less than $2,000,000.00 for each person and $5,000,000.00 in
the aggregate for bodily injury (including death) to more than one (1) person
and $2,000,000.00 for property damage. The policies of
5
<PAGE>
comprehensive general public liability insurance shall name Landlord and Tenant
(and if requested, any mortgagee of Landlord) as the insured parties. Each such
policy shall provide that it shall not be cancelable without at least thirty
(30) days prior written notice to Landlord and to any mortgagee named in an
endorsement thereto and shall be issued by an insurer and in a form satisfactory
to Landlord. At least ten (10) days prior to the Commencement Date, and
thereafter upon Landlord's request, a certificate of insurance shall be
delivered to Landlord proving compliance with the foregoing requirements. If
Tenant shall fail, refuse or neglect to obtain or to maintain any insurance that
it is required to provide or to furnish Landlord with satisfactory evidence of
coverage on any such policy upon demand, Landlord shall have the right to
purchase such insurance. All payments made by Landlord for such insurance shall
be recoverable by Landlord from Tenant, together with interest thereon, as
Additional Rent promptly upon demand. Notwithstanding anything contained herein
to the contrary, Tenant may self-insure all of its personal property situated
within the Premises against property damage and destruction.
b) WAIVER OF SUBROGATION. The parties to this Lease each release the
other, to the extent of the releasing party's insurance coverage, from any and
all liability for any loss or damage covered by such insurance which may be
inflicted upon the property of such party even if such loss or damage shall be
brought about by the fault or negligence of the other party, its agents or
employees. If any policy does not permit such a release of liability and a
waiver of subrogation, and if the party to benefit therefrom requests that such
a waiver be obtained, the other party agrees to obtain an endorsement to its
insurance policies permitting such waiver of subrogation if it is available. If
an additional premium is charged for such waiver, the party benefiting therefrom
agrees to pay the amount of such additional premium promptly upon demand. In the
event a party is unable to obtain such a waiver, it shall immediately notify the
other party of its inability. In the absence of such notifications, each party
shall be deemed to have obtained such waiver of subrogation.
c) INCREASE OF PREMIUMS. Tenant will not do anything or fail to do
anything or permit anything to be done which will cause the cost of Landlord's
insurance to increase or which will prevent Landlord from procuring insurance
(including but not limited to public liability insurance) from companies, and in
a form, satisfactory to Landlord. If any breach of this subsection (c) by Tenant
shall cause the rate of fire or other insurance to be increased, Tenant shall
pay the amount of such increase as Additional Rent promptly upon demand. If
Tenant does anything or fails to do anything or permits anything to be done for
which insurance cannot be obtained, Landlord may terminate this Lease upon
written notice to Tenant.
8. REPAIRS AND MAINTENANCE.
a) Tenant shall, throughout the Term and at Tenant's sole cost and
expense, keep and maintain the Premises in a neat and orderly condition; and,
upon expiration of the Term, Tenant shall leave the Premises in good order and
condition, ordinary wear and tear, damage by fire or other casualty (which fire
or other casualty has
6
<PAGE>
not occurred through the negligence of Tenant or those claiming under Tenant or
their agents, employees or invitees, respectively) alone excepted, and for that
purpose and except as stated, Tenant will make all necessary repairs and
replacements. Tenant shall not permit any waste, damage or injury to the
Premises. Tenant shall not use or permit the use of any portion of the Common
Facilities for other than their intended use as specified by the Landlord from
time to time.
b) Landlord shall, throughout the Term, make all necessary repairs
(including replacements) to the structural elements of the Premises and other
improvements located on the Property, including the roof and exterior walls of
the Building as well as the mechanical, HVAC, electrical and plumbing systems of
the Building not solely serving the Premises; provided, however, that Landlord
shall have no responsibility to make any repairs unless and until Landlord
receives written notice of the need for such repair. Landlord shall keep and
maintain all Common Facilities of the Property and any sidewalks, parking areas,
curbs and access ways adjoining the Property in a clean and orderly condition,
free of accumulation of dirt and rubbish and shall keep and maintain all
landscaped areas within the Property in a neat and orderly condition.
c) Notwithstanding the foregoing, repairs and replacements to the
Premises and the Property arising out of or caused by Tenant's use, manner of
use or occupancy of the Premises, by Tenant's installation of alterations,
additions, improvements, trade fixtures or equipment in or upon the Premises or
by any act or omission of Tenant or any employee, agent, contractor or invitee
of Tenant shall be made at Tenant's sole cost and expense and Tenant shall pay
Landlord the cost of any such repair or replacement, as Additional Rent, upon
demand.
9. UTILITIES AND SERVICES.
a) Landlord shall furnish the Premises with electricity, heating and
air conditioning for the normal use and occupancy of the Premises as general
offices between 8:00 a.m. and 6:00 p.m., Monday through Friday, of each week
during the Term (Building Holidays excepted). Tenant agrees to pay as Additional
Rent all charges for electricity, light, heat or other utility used by Tenant at
the Premises. If a separate meter is installed, Tenant shall pay for the
consumption of such utilities based upon its metered usage. A separate meter or
submeter shall be installed (as set forth in Exhibit C) to meter Tenant's
consumption of electricity. If no meter is installed, Tenant shall pay its
Proportionate Share of any utility charges covering the Demised Premises and the
remainder of the Building. Tenant shall pay all bills for separately metered
utility usage within ten (10) days after receipt thereof, and any non-payment or
late payment of such utility bills shall be deemed a default under the terms of
this Lease. All charges for installation and repairs of any meters servicing the
Premises shall be payable by Tenant as Additional Rent and shall be paid when
the same shall become due. If Tenant shall require electricity or install
electrical equipment using current in excess of 110 volts or which will in any
way increase the amount of electricity furnished by Landlord for general office
use (including but not limited to electrical heating or refrigeration equipment
or electronic data processing machines) or if Tenant shall attempt to use the
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<PAGE>
Premises in such a manner that the services to be furnished by Landlord are
required during periods other than the business hours specified above, Tenant
will obtain prior written approval from Landlord and will pay, as Additional
Rent, for the resulting additional direct expense to Landlord, including the
expense resulting from the installation of any equipment and meters, promptly
upon receipt of an invoice from Landlord.
b) Within the Common Facilities of the Building, Landlord shall
furnish reasonably: (i) adequate electricity, (ii) hot and cold water, (iii)
lavatory supplies, (iv) automatically operated elevator service, (v) normal and
customary cleaning services (on a five-day a week basis) after business hours,
(vi) heat and air conditioning in season, (vii) landscaping, (viii) parking lot
maintenance, (ix) common area maintenance and (x) snow and ice removal. Tenant
shall be responsible for its Proportionate Share of such services in accordance
with Section 6(b) hereof. Landlord shall provide janitorial service to the
Premises, five days per week, after regular business hours, and the costs of
such service will be passed through to Tenant as set forth in Section 6.
c) Landlord shall not be liable for any damages to Tenant resulting
from the quality, quantity, failure, unavailability or disruption of any
services beyond the reasonable control of Landlord and the same shall not
constitute a termination of this Lease or an actual or constructive eviction or
entitle Tenant to an abatement of rent. Landlord shall not be responsible for
providing any services not specifically provided for in this Lease.
Notwithstanding anything to the contrary contained in this Lease, if (i)
Landlord ceases to furnish any service in the Building, and Tenant notifies
Landlord of such cessation in writing (the "Interruption Notice"), (ii) such
cessation does not arise as a result of the gross negligence of Tenant (iii)
such cessation is not caused by a fire or other casualty (in which case Section
15 shall control), (iv) the repair or restoration of such service is reasonably
within the control of Landlord, and (v) as a result of such cessation, the
Premises or material portion thereof, is rendered untenatable (meaning that
Tenant is unable to use the Premises or a substantial portion thereof in the
normal course of its business) and Tenant, in fact ceases to use the Premises,
or material portion thereof, then, commencing on the fifth (5th) Business Day
after the later to occur of the date the Premises (or material portion thereof)
becomes untenatable, the date Tenant ceases to use such space and the date
Tenant provides Landlord with an Interruption Notice, all rent hereunder shall
be abated on a per diem basis for each day of such interruption based upon the
percentage of the Premises so rendered untenantable and not used by Tenant and
such abatement shall continue until the date the Premises becomes tenantable
again.
d) Tenant shall pay capital improvements which Landlord shall install
or construct for energy saving devices. Tenant's Proportionate Share shall be
determined based upon the estimated life of the capital investment item,
determined by Landlord in accordance with generally accepted accounting
principles, and shall include a cost of capital funds adjustment equal to twelve
percent (12%) per year on the unamortized portion of all such costs. Tenant
shall only have to pay for the portion of the useful life of the capital
improvement which falls within the Term. Tenant shall thus make payments in
equal annual installments for such capital improvements until the Term expires
or until
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<PAGE>
the cost of the improvement has been fully paid for, whichever first occurs;
such payments shall be computed by Landlord at the time of installation of the
capital improvement in the same manner as Landlord makes computations of
Tenant's share of the annual operating costs pursuant to Section 6(b)(ii).
10. GOVERNMENTAL REGULATIONS.
a) Landlord and Tenant shall comply with all laws, ordinances,
notices, orders, rules, regulations and requirements of all federal, state and
municipal government or any department, commission, board of officer thereof, or
of the National Board of Fire Underwriters or any other body exercising similar
functions, relating to the Premises or to the use or manner of use of the
Property. Tenant shall not knowingly do or commit, or suffer to be done or
committed anywhere in the Building, any act or thing contrary to any of the
laws, ordinances, regulations and requirements referred to in this Section.
Tenant shall give Landlord prompt written notice of any accident in the Premises
and of any breakage, defect or failure in any of the systems or equipment
servicing the Premises or any portion of the Premises.
b) Tenant shall pay its Proportionate Share of the cost of capital
improvements which Landlord shall install or construct in compliance with
governmental requirements which take effect after the commencement of the Term
hereof or as energy saving devices. Tenant's Proportionate Share shall be
determined based upon the estimated life of the capital investment item,
determined by Landlord in accordance with generally accepted accounting
principles, and shall include a cost of capital funds adjustment equal to twelve
percent (12%) per year on the unamortized portion of all such costs. Tenant
shall only have to pay for the portion of the useful life of the capital
improvement which falls within the Term. Tenant shall thus make payments in
equal annual installments for such capital improvements until the Term expires
or until the cost of the improvement has been fully paid for, whichever first
occurs; such payments shall be computed by Landlord at the time of installation
of the capital improvement in the same manner as Landlord makes computations of
Tenant's share of the annual operating costs pursuant to Section 6(b)(ii).
c) Tenant shall pay all taxes imposed upon Tenant's furnishings, trade
fixtures, equipment or other personal property.
11. SIGNS. Except for signs which are located wholly within the interior of
the Premises and which are not visible from the exterior of the Premises, Tenant
shall not place, erect, maintain or paint any signs upon the Premises or the
Property unless the design of such signs are approved by Landlord in writing and
comply with all applicable governmental rules, regulating ordinances or other
statutes. Tenant shall be solely responsible for all costs and expenses
associated with the erection of any signs upon the Premises and shall be
obligated to obtain and provide to Landlord any and all necessary permits prior
to the placement or erection of such signs. Notwithstanding the foregoing,
Tenant shall be permitted to place its name on the Building directory.
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12. ALTERATIONS, ADDITIONS AND FIXTURES.
a) Tenant shall have the right to install in the Premises any trade
fixtures; provided, however, that no such installation and no removal thereof
shall be permitted which affects any structural component of the Building or
Premises and that Tenant shall repair and restore any damage or injury to the
Premises or the Property caused by installation or removal.
b) Tenant shall not make or permit to be made any alterations,
improvements or additions to the Premises or Property without on each occasion
first presenting plans and specifications to Landlord and obtaining Landlord's
prior written consent, which shall not be unreasonably withheld or delayed, but
may be conditioned upon compliance with reasonable requirements of Landlord
including, without limitation, the filing of mechanics' lien waivers by Tenant's
contractors and the submission of written evidence of adequate insurance
coverage naming Landlord as an additional insured thereunder. If Landlord
consents to any proposed alterations, improvements or additions or Tenant's
contractor performs any of the work identified in Section 3 of this Lease
Agreement, then Tenant shall make the proposed alterations, improvements and
additions at Tenant's sole cost and expense provided that: (i) Tenant supplies
any necessary permits; (ii) such alterations and improvements do not, in
Landlord's judgment, impair the structural strength of the Building or any other
improvements or reduce the value of the Property; (iii) Tenant takes or causes
to be taken all steps that are otherwise required by Section 13 of this Lease
and that are required or permitted by law in order to avoid the imposition of
any mechanic's, laborer's or materialman's lien upon the Premises or the
Property; (iv) Tenant uses a contractor reasonably approved by Landlord; (v) the
occupants of the Building and of any adjoining real estate owned by Landlord are
not unreasonbly annoyed or disturbed by such work such that the conduct of their
business is interefered with ; (vi) the alterations, improvements or additions
shall be installed in accordance with the approved plans and specifications and
completed according to a construction schedule approved by Landlord; and (vii)
Tenant provides insurance of the types and coverage amounts required by
Landlord. Any and all alterations, improvements and additions to the Premises
which are constructed, installed or otherwise made by Tenant shall be the
property of Tenant until the expiration or sooner termination of this Lease; at
that time all such alterations and additions shall remain on the Premises and
become the property of Landlord without payment by Landlord unless, upon the
termination of this Lease, Landlord instructs Tenant in writing to remove the
same in which event Tenant will remove such alterations, improvements and
additions, and repair and restore any damage to the Property caused by the
installation or removal. Notwithstanding anything to the contrary contained in
this Lease, Landlord may withhold its approval to any proposed alterations,
additions or improvements to the Premises in its absolute and sole discretion
with respect to any such alteration, addition or improvement which Landlord
determines involves any modification to the Building's exterior or its
structural, electrical, mechanical or plumbing systems, or any components
thereof.
13. MECHANIC'S LIENS. Tenant shall promptly pay any contractors and
materialmen who supply labor, work or materials to Tenant at the Premises or the
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Property so as to minimize the possibility of a lien attaching to the Premises
or the Property. Tenant shall take all steps permitted by law in order to avoid
the imposition of any mechanic's, laborer's or materialman's lien upon the
Premises or the Property. Should any such lien or notice of lien be filed for
work performed for Tenant other than by Landlord, Tenant shall cause such lien
or notice of lien to be discharged of record by payment, deposit, bond or
otherwise within thirty (30) days after the filing thereof or after Tenant's
receipt of notice thereof, whichever is earlier, regardless of the validity of
such lien or claim. If Tenant shall fail to cause such lien or claim to be
discharged and removed from record within such thirty (30) day period, then,
without obligation to investigate the validity thereof and in addition to any
other right or remedy Landlord may have, Landlord may, but shall not be
obligated to, contest the lien or claim or discharge it by payment, deposit,
bond or otherwise; and Landlord shall be entitled to compel the prosecution of
an action for the foreclosure of such lien by the lienor and to pay the amount
of the judgment in favor of the lienor with interest and costs. Any amounts so
paid by Landlord and all costs and expenses including, without limitation,
attorneys' fees incurred by Landlord in connection therewith, together with
interest at a rate of twelve percent (12%) per annum from the respective dates
of Landlord's making such payment or incurring such cost or expense, which shall
constitute Additional Rent payable hereunder promptly upon demand therefor.
Nothing in this Lease is intended to authorize Tenant to do or cause any work or
labor to be done or any materials to be supplied for the account of Landlord,
all of the same to be solely for Tenant's account and at Tenant's risk and
expense. Further, notwithstanding anything to the contrary contained in this
Lease, nothing contained in or contemplated by this Lease shall be deemed or
construed in any way to constitute the consent or request by Landlord for the
performance of any work or services or the furnishing of any materials for which
any lien could be filed against the Premises or the Building or the Property or
any part of any thereof, nor as giving Tenant any right, power or authority to
contract or permit the performance of any work or services or the furnishing of
any materials for which any lien could be filed against the Premises, the
Building, the Property or any part of any thereof. Throughout this Lease the
term "mechanic's lien" is used to include any lien, encumbrance or charge levied
or imposed upon the Premises or the Property or any interest therein or income
therefrom on account of any mechanic's, laborer's or materialman's lien or
arising out of any debt or liability to or any claim or demand of any
contractor, mechanic, supplier, materialman or laborer and shall include without
limitation any mechanic's notice of intention given to Landlord or Tenant, any
stop order given to Landlord or Tenant, any notice of refusal to pay naming
Landlord or Tenant and any injunctive or equitable action brought by any person
entitled to any mechanic's lien.
14. LANDLORD'S RIGHT OF ENTRY.
a) Tenant shall permit Landlord and the authorized representatives of
Landlord and of any mortgagee or any prospective mortgagee to enter the Premises
at all reasonable times, with prior notice to Tenant, for the purpose of (i)
inspecting the Premises or (ii) making any necessary repairs to the Premises or
to the Building and performing any work therein. During the progress of any work
on the Premises or the Building, Landlord will attempt not to inconvenience
Tenant, but shall not be liable for
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inconvenience, annoyance, disturbance, loss of business or other damage to
Tenant by reason of making any repair or by bringing or storing materials,
supplies, tools and equipment in the Premises during the performance of any
work, and the obligations of Tenant under this Lease shall not be thereby
affected in any manner whatsoever unless caused by the negligence or willful
misconduct of the Landlord, its agents, contractors, or employees.
b) Landlord shall have the right at all reasonable times to, with
prior notice to Tenant, enter and to exhibit the Premises for the purpose of
inspection or showing the Premises in connection with a sale or mortgage and,
during the last twelve (12) months of the Term, to enter upon and to exhibit the
Premises to any prospective tenant.
15. DAMAGE BY FIRE OR OTHER CASUALTY.
a) If the Premises or Building is damaged or destroyed by fire or
other casualty, Tenant shall promptly notify Landlord whereupon Landlord shall,
subject to the consent of Landlord's present or future mortgagee and to the
conditions set forth in this Section 15, repair, rebuild or replace such damage
and restore the Premises to substantially the same condition as the Premises
were in immediately prior to such damage or destruction; provided, however, that
Landlord shall only be obligated to restore such damage or destruction to the
extent of the proceeds of fire and other extended coverage insurance policies.
Notwithstanding the foregoing, if the Premises is destroyed or damaged to the
extent that in Landlord's sole judgment the Premises cannot be repaired or
restored within one hundred twenty (120) days after such casualty, Landlord may,
subject to the rights of Landlord's mortgagee, terminate this Lease by written
notice to Tenant within ninety (90) days after the date of such casualty.
b) The repair, rebuilding or replacement work shall be commenced
promptly and completed with due diligence, taking into account the time required
by Landlord to effect a settlement with, and procure insurance proceeds from,
the insurer, and for delays beyond Landlord's reasonable control.
c) The net amount of any insurance proceeds recovered by reason of the
damage or destruction of the Building (meaning the gross insurance proceeds
excluding proceeds received pursuant to a rental coverage endorsement and the
cost of adjusting the insurance claim and collecting the insurance proceeds)
shall be applied towards the cost of restoration. Notwithstanding anything to
the contrary in this Lease Agreement, if in Landlord's sole opinion the net
insurance proceeds will not be adequate to complete such restoration, Landlord
shall have the right to terminate this Lease and all the unaccrued obligations
of the parties hereto by sending a written notice of such termination to Tenant
specifying a termination date no less than ten (10) days after its transmission;
provided, however, that Tenant may require Landlord, except during the last two
(2) years of the Term, to withdraw the notice of termination by agreeing to pay
the cost of restoration in excess of the net insurance proceeds and by giving
Landlord adequate security for such payment prior to the termination date
specified in Landlord's notice of termination. If the
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net insurance proceeds are more than adequate, the amount by which the net
insurance proceeds exceed the cost of restoration will be retained by Landlord
or applied to repayment of any mortgage secured by the Premises.
d) Landlord's obligation or election to restore the Premises under
this Section shall be subject to the terms of any present or future mortgage
affecting the Premises and to the mortgagee's consent if required in the
mortgage and shall not, in any event, include the repair, restoration or
replacement of the fixtures, improvements, alterations, furniture or any other
property owned, installed, made by, or in the possession of Tenant.
e) Landlord shall maintain insurance against loss or damage to the
Building by fire and such other casualties as may be included within fire and
extended coverage insurance or all-risk insurance, together with a rental
coverage endorsement or other comparable form of coverage. If Tenant is
dispossessed of the Premises due to fire or other casualty, Tenant will receive
an abatement of its Rent during the period Tenant is dispossessed.
16. NON-ABATEMENT OF RENT. Except as otherwise expressly provided in this
Lease there shall be no abatement or reduction of the Fixed Basic Rent,
Additional Rent or other sums payable hereunder for any cause whatsoever and
this Lease shall not terminate, nor shall Tenant be entitled to surrender the
Premises, in the event of fire, casualty or condemnation or any default by
Landlord under this Lease.
17. INDEMNIFICATION
a) Unless such loss, costs or damages were caused by negligence of
Landlord, its employees, agents or contractors, Tenant hereby agrees to
indemnify, defend and hold the Landlord and its employees, agents and
contractors harmless from any loss, costs and damages (including reasonable
attorney's fees and costs) suffered by Landlord, its agents, employees or
contractors, as a result of any claim by a third party, its agents, employees or
contractors arising from Tenant's occupancy of the Premises. Tenant shall only
be liable for actual and direct losses, costs and damages and shall not be
liable for special, consequential, indirect or punitive damages. Tenant shall
have the right to designate counsel acceptable to Landlord, such approval not be
unreasonably withheld, to assume the defense of any such third party claim on
behalf of itself and Landlord. Landlord shall not have the right to settle any
claim without the consent of Tenant. This indemnity shall survive the expiration
or termination of this Lease.
b) Unless such loss, costs or damages were caused by negligence of
Tenant, its employees, agents or contractors, Landlord hereby agrees to
indemnify, defend and hold the Tenant and its employees, agents and contractors
harmless from any loss, costs and damages (including reasonable attorney's fees
and costs) suffered by Tenant, its agents, employees or contractors, as a result
of any claim by a third party, its agents, employees or contractors arising from
Landlord's operation of the Premises. Landlord shall only be liable for actual
and direct losses, costs and damages and shall not be liable
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for special, consequential, indirect or punitive damages. Landlord shall have
the right to designate counsel acceptable to Tenant, such approval not be
unreasonably withheld, to assume the defense of any such third party claim on
behalf of itself and Tenant. Tenant shall not have the right to settle any claim
without the consent of Landlord. This indemnity shall survive the expiration or
termination of this Lease.
c) If Landlord brings any action under this Lease Agreement, Tenant
agrees in each case to pay Landlord's reasonable attorney's fees and other costs
and expenses incurred by Landlord in connection therewith; provided, however,
the Landlord prevails in such action.
18. CONDEMNATION.
a) TERMINATION. If (i) all of the Premises are covered by a
condemnation; or (ii) any of the Premises is covered by a condemnation and the
remaining part is insufficient for the reasonable operation therein of Tenant's
business; or (iii) subject to the provisions of subsection 18(b)(i) hereof, any
of the Property is covered by a condemnation and, in Landlord's sole opinion, it
would be impractical or the condemnation proceeds are insufficient to restore
the remainder of the Property; then, in any such event, this Lease shall
terminate and all obligations hereunder shall cease as of the date upon which
possession is taken by the condemnor. Upon such termination the Fixed Basic Rent
and all Additional Rent herein reserved shall be apportioned and paid in full by
Tenant to Landlord to that date and all such rent prepaid for periods beyond
that date shall forthwith be repaid by Landlord to Tenant.
b) PARTIAL CONDEMNATION.
i) If there is a partial condemnation and Landlord decides to
terminate pursuant to subsection 18(a)(iii) hereof then Tenant may require
Landlord, except during the last two (2) years of the Term, to withdraw its
notice of termination by: [A] giving Landlord written notice thereof within ten
(10) days from transmission of Landlord's notice to Tenant of Landlord's
intention to terminate, [B] agreeing to pay the cost of restoration in excess of
the condemnation proceeds reduced by those sums expended by Landlord in
collecting the condemnation proceeds, and [C] giving Landlord adequate security
for such payment within such ten (10) day period.
ii) If there is a partial condemnation and this Lease has not
been terminated pursuant to subsection (a) hereof, Landlord shall restore the
Building and the improvements which are part of the Premises to a condition and
size as nearly comparable as reasonably possible to the condition and size
thereof immediately prior to the date upon which possession shall have been
taken by the condemnor; provided, however, that Landlord shall only be obligated
to restore such damage from condemnation to the extent possible with the award
damage. If the condemnation proceeds are more than adequate to cover the cost of
restoration and the Landlord's expenses in collecting the condemnation proceeds,
any excess proceeds shall be retained by Landlord or applied to repayment of any
mortgage secured by the Premises.
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iii) If there is a partial condemnation and this Lease has not
been terminated by the date upon which the condemnor obtains possession, the
obligations of Landlord and Tenant under this Lease shall be unaffected by such
condemnation except that there shall be an equitable abatement for the balance
of the Term of the Fixed Basic Rent according to the value of the Premises
before and after the date upon which the condemnor takes possession. In the
event that the parties are unable to agree upon the amount of such abatement,
either party may submit the issue to arbitration.
c) AWARD. In the event of a condemnation affecting Tenant, Tenant
shall have the right to make a claim against the condemnor for removal expenses
and moving expenses, loss of business and any other claims Tenant may have;
provided and to the extent, however, that such claims or payments do not reduce
the sums otherwise payable by the condemnor to Landlord. Except as aforesaid,
Tenant hereby waives all claims against Landlord and against the condemnor, and
Tenant hereby assigns to Landlord all claims against the condemnor including,
without limitation, all claims for leasehold damages and diminution in value of
Tenant's leasehold interest.
19. QUIET ENJOYMENT. Tenant, upon paying the Fixed Basic Rent, Additional
Rent and other charges herein required and observing and keeping all covenants,
agreements and conditions of this Lease, shall quietly have and enjoy the
Premises during the Term without hindrance or molestation by anyone claiming by
or through Landlord, subject, however, to the exceptions, reservations and
conditions of this Lease.
20. RULES AND REGULATIONS. The Landlord hereby reserves the right to
prescribe, from time to time, at its sole discretion, reasonable rules and
regulations (herein called the "Rules and Regulations") attached hereto as
Exhibit B governing the use and enjoyment of the Premises and the remainder of
the Property. The Rules and Regulations shall not materially interfere with the
Tenant's use and enjoyment of the Premises in accordance with the provisions of
this Lease for the Permitted Use and shall not increase or modify Tenant's
obligations under this Lease. In the event of a conflict between the Lease
Agreement and such rules and regulations, the Lease Agreement shall control. The
Tenant shall comply at all times with the Rules and Regulations and shall cause
its agents, employees, invitees, visitors, and guests to do so.
21. ASSIGNMENT AND SUBLEASE. Tenant may assign or sublease the within Lease
to any party subject to the following:
a) In the event Tenant desires to assign this Lease or sublease
seventy percent (70%) or more of the Premises to any other party, Tenant shall
provide written notice of the terms and conditions of such assignment or
sublease to Landlord prior to the effective date of any such sublease or
assignment, and, prior to such effective date, the Landlord shall have the
option, exercisable by written notice to Tenant within ten (10) business days of
Landlord's receipt of written notice from Tenant, to: (i) sublease such space
from Tenant at the lower rate of (a) the rental rate per rentable square foot of
Fixed Basic Rent and Additional Rent then payable pursuant to this Lease or (b)
the terms set
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forth in the proposed sublease, (ii) recapture (in the case of subletting) that
portion of the Premises to be sublet or all of the Premises (in the case of an
assignment) ("Recapture Space") so that such prospective subtenant or assignee
shall then become the sole Tenant of Landlord hereunder, or (iii) recapture the
Recapture Space for Landlord's own use, whereupon Tenant shall be fully released
from any and all obligations hereunder with respect to the Recapture Space.
b) In the event that the Landlord elects not to recapture the Lease as
hereinabove provided, the Tenant may nevertheless assign this Lease or sublet
the whole or any portion of the Premises, subject to the Landlord's prior
written consent not to be unreasonably withheld, conditioned or delayed , on the
basis of the following terms and conditions:
i) The Tenant shall provide to the Landlord the name and address
of the assignee or subtenant.
ii) The assignee or subtenant shall assume, by written
instrument, all of the obligations of this Lease, and a copy of such assumption
agreement shall be furnished to the Landlord within ten (10) days of its
execution. Any sublease shall expressly acknowledge that said subtenant's rights
against Landlord shall be no greater than those of Tenant.
iii) The Tenant and each assignee shall be and remain liable for
the observance of all the covenants and provisions of this Lease, including, but
not limited to, the payment of Fixed Basic Rent and Additional Rent reserved
herein, through the entire Term of this Lease, as the same may be renewed,
extended or otherwise modified.
iv) The Tenant and any assignee shall promptly pay to Landlord
fifty percent (50%) of the net profit received from such subleasing or
assignment. Net profit will be calculated after deducting the Tenant's direct
costs of implementing the sublease or assignment.
v) In any event, the acceptance by the Landlord of any rent from
the assignee or from any of the subtenants or the failure of the Landlord to
insist upon a strict performance of any of the terms, conditions and covenants
herein shall not release the Tenant herein, nor any assignee assuming this
Lease, from any and all of the obligations herein during and for the entire Term
of this Lease.
vi) Landlord shall require a Five Hundred Dollars ($500.00)
payment to cover its handling charges for each request for consent to any sublet
or assignment prior to its consideration of the same. Tenant acknowledges that
its sole remedy with respect to any assertion that Landlord's failure to consent
to any sublet or assignment is unreasonable shall be the remedy of specific
performance and Tenant shall have no other claim or cause of action against
Landlord as a result of Landlord's actions in refusing to consent thereto.
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c) If Tenant is a corporation other than a corporation whose stock is
listed and traded on a nationally recognized stock exchange, the provisions of
subsection a hereof shall apply to a transfer (however accomplished, whether in
a single transaction or in a series of related or unrelated transactions) of
stock (or any other mechanism such as, by way of example, the issuance of
additional stock, a stock voting agreement or change in class(es) of stock)
which results in a change of control of Tenant as if such transfer of stock (or
other mechanism) which results in a change of control of Tenant were an
assignment of this Lease, and if Tenant is a partnership or joint venture, said
provisions shall apply with respect to a transfer (by one or more transfers) of
an interest in the distributions of profits and losses of such partnership or
joint venture (or other mechanism, such as, by way of example, the creation of
additional general partnership or limited partnership interests) which results
in a change of control of such a partnership or joint venture, as if such
transfer of an interest in the distributions of profits and losses of such
partnership or joint venture which results in a change of control of such
partnership or joint venture were an assignment of this Lease; but subsections
(a) and (b) hereof shall not apply to transactions with a corporation or other
entity into or with which Tenant is merged or consolidated or to which all or
substantially all of Tenant's assets, stock, or membership units are transferred
or to any corporation, or other entity which controls or is controlled by Tenant
or is under common control with Tenant, provided that in the event of such
merger, consolidation or transfer of all or substantially all of Tenant's
assets, stock or membership units (i) the successor to Tenant has a net worth
computed in accordance with generally accepted accounting principles at least
equal to the greater of (1) the net worth of Tenant immediately prior to such
merger, consolidation or transfer, or (2) the net worth of Tenant herein named
on the date of this Lease, and (ii) proof satisfactory to Landlord of such net
worth shall have been delivered to Landlord at least ten (10) days prior to the
effective date of any such transaction.
d) In the event that any or all of Tenant's interest in the Premises
and/or this Lease is transferred by operation of law to any trustee, receiver,
or other representative or agent of Tenant, or to Tenant as a debtor in
possession, and subsequently any or all of Tenant's interest in the Premises
and/or this Lease is offered or to be offered by Tenant or any trustee,
receiver, or other representative or agent of Tenant as to its estate or
property (such person, firm or entity being hereinafter referred to as the
"Grantor", for assignment, conveyance, lease, or other disposition to a person,
firm or entity other than Landlord (each such transaction being hereinafter
referred to as a "Disposition"), it is agreed that Landlord has and shall have a
right of first refusal to purchase, take, or otherwise acquire, the same upon
the same terms and conditions as the Grantor thereof shall accept upon such
Disposition to such other person, firm, or entity; and as to each such
Disposition the Grantor shall give written notice to Landlord in reasonable
detail of all of the terms and conditions of such Disposition within twenty (20)
days next following its determination to accept the same but prior to accepting
the same, and Grantor shall not make the Disposition until and unless Landlord
has failed or refused to accept such right of first refusal as to the
Disposition, as set forth herein. Landlord shall have sixty (60) days next
following its receipt of the written notice as to such Disposition in which to
exercise the option to acquire Tenant's interest by such Disposition, and the
exercise of the option by Landlord shall be effected by notice to that effect
sent to the Grantor; but nothing herein shall require
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Landlord to accept a particular Disposition or any Disposition, nor does the
rejection of any one such offer of first refusal constitute a waiver or release
of the obligation of the Grantor to submit other offers hereunder to Landlord.
In the event Landlord accept such offer of first refusal, the transaction shall
be consummated pursuant to the terms and conditions of the Disposition described
in the notice to Landlord. In the event Landlord rejects such offer of first
refusal, Grantor may consummate the Disposition with such other person, firm, or
entity; but any decrease in price of more than two percent (2%) of the price
sought from Landlord or any change in the terms of payment for such Disposition
shall constitute a new transaction requiring a further option of first refusal
to be given to Landlord hereunder.
e) Without limiting any of the provisions of this Section 21, if
pursuant to the Federal Bankruptcy Code (herein referred to as the "Code"), or
any similar law hereafter enacted having the same general purpose, Tenant is
permitted to assign this Lease notwithstanding the restrictions contained in
this Lease, adequate assurance of future performance by an assignee expressly
permitted under such Code shall be deemed to mean the deposit of cash security
in an amount equal to the sum of one year's Fixed Basic Rent plus an amount
equal to the Additional Rent for the calendar year preceding the year in which
such assignment is intended to become effective, which deposit shall be held by
Landlord for the balance of the Term, without interest, as security for the full
performance of all of Tenant's obligations under this Lease, to be held and
applied in the manner specified for any security deposit required hereunder.
f) Except as specifically set forth above, no portion of the Premises
or of Tenant's interest in this Lease may be acquired by any other person or
entity, whether by assignment, mortgage, sublease, transfer, operation of law or
act of the Tenant, nor shall Tenant pledge its interest in this Lease or in any
security deposit required hereunder.
22. TENANT'S RELOCATION. The Landlord, in its sole discretion, shall have
the right from time to time to change the location of the Premises to other
space (the "Substituted Leased Premises") within the Building, subject to the
terms and conditions set forth below.
a) The Substituted Leased Premises shall contain a minimum floor area
of approximately the same number of square feet as are contained in the
Premises; and the square footage of any Common Facilities attributable to the
Substituted Leased Premises shall be approximately the same as that of the
Common Facilities attributable to the Premises.
b) If the total square footage comprised by the Substituted Leased
Premises and its attributable Common Facilities exceed the total of the Premises
and its attributable Common Facilities, the Tenant shall not be required to pay
any increase in the Fixed Basic Rent and Tenant's Percentage shall not be
increased. If, however, such total square footage shall be less, Tenant's Fixed
Basic Rent and Tenant's Percentage shall be decreased proportionately.
c) The Landlord shall give the Tenant not less than forty-five (45)
days prior notice of Landlord's decision to relocate the Tenant; and the Tenant
agrees that no later than
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forty-five (45) days from the date of its receipt of such notice it shall
relocate to the Substituted Leased Premises.
d) The Landlord shall bear and pay for the cost and expense of any
such relocation; provided, however, that the Tenant shall not be entitled to any
compensation for damages for any interference with or interruption of its
business during or resulting from such relocation. The Landlord shall make
reasonable efforts to minimize such interference. Tenant shall cooperate with
Landlord so as to facilitate the prompt completion by Landlord of its
obligations under this Section. Without limiting the generality of the
foregoing, Tenant agrees to provide to Landlord promptly such approvals,
instructions, plans, specifications or other information as may be reasonably
requested by Landlord.
e) In connection with any such relocation, the Landlord shall, at its
own cost and expense, furnish and install in (or, if practicable, relocate to)
the Substituted Leased Premises all walls, partitions, floors, floor coverings,
ceilings, fixtures, wiring and plumbing, if any, (as distinguished from trade
fixtures, equipment, furniture, furnishings and other personal property
belonging to Tenant) required for the Tenant's proper use and occupancy thereof,
all of which items shall be comparable in quality, quantity and designto those
situated in the Premises as originally constructed by Landlord at the
commencement of the Term.
f) The payments of new Fixed Basic Rent shall commence on the earlier
of ten (10) days after Landlord has completed the physical relocation and
installation of permanent improvements in the Substituted Leased Premises or the
date that Tenant first opens for business in the Substituted Leased Premises.
g) Landlord and Tenant shall promptly execute an amendment to this
Lease reciting the relocation of the Premises and any changes in the Fixed Basic
Rent payable hereunder.
23. SUBORDINATION. This Lease and Tenant's rights hereunder shall be
subject and subordinate at all times in lien and priority to any first mortgage
or other primary encumbrance now or hereafter placed upon or affecting the
Property or the Premises, and to any second mortgage or encumbrance with the
consent of the first mortgagee, and to all renewals, modifications,
consolidations and extensions thereof, without the necessity of any further
instrument or act on the part of Tenant. Tenant shall execute and deliver upon
demand any further instrument or instruments confirming the subordination of
this Lease to the lien of any such first mortgage or to the lien of any other
mortgage, if requested to do so by Landlord with the consent of the first
mortgagee, and any further instrument or instruments of attornment that may be
desired by any such mortgagee or Landlord, provided, however, that any holder of
such lien or mortgage agrees not to disturb the use and occupancy of the
Premises in accordance with the terms of this Lease Agreement upon any
foreclosure. Notwithstanding the foregoing, any mortgagee may at any time
subordinate its mortgage to this Lease, without Tenant's consent, by giving
notice in writing to Tenant and thereupon this Lease shall be deemed prior to
such mortgage without regard to their respective dates of execution and
delivery. In that event such
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mortgagee shall have the same rights with respect to this Lease as though this
Lease had been executed prior to the execution and delivery of the mortgage and
had been assigned to such mortgagee. Landlord agrees that it will use best
efforts to obtain and deliver to Tenant a subordination, non-disturbance and
attornment agreement from the holder(s) of any mortgage or other security
interest affecting the Premises of Building.
24. CURING TENANT'S DEFAULTS. If Tenant defaults in the performance of any
of its obligations hereunder, Landlord may, without any obligation to do so and
in addition to any other rights it may have in law or equity, elect to cure such
default on behalf of Tenant after written notice (except in the case of
emergency) to Tenant. Tenant shall reimburse Landlord upon demand for any sums
paid or costs incurred by Landlord in curing such default, including interest
thereon from the respective dates of Landlord's making the payments and
incurring such costs, which sums and costs together with interest thereon shall
be deemed Additional Rent payable within ten (10) days of demand.
25. SURRENDER.
a) At the expiration or earlier termination of the Term Tenant shall
promptly yield up the Premises and all improvements, alterations and additions
thereto, and all fixtures and equipment servicing the Premises in a condition
which is clean of garbage and debris and broom clean and in the same condition,
order and repair in which they are required to be kept throughout the Term,
ordinary wear and tear excepted.
b) If Tenant, or any person claiming through Tenant, continues to
occupy the Premises after the expiration or earlier termination of the Term or
any renewal thereof without prior written consent of Landlord, the tenancy under
this Lease shall become, at the option of Landlord, expressed in a written
notice to Tenant and not otherwise, either from month-to-month or for a period
of one (1) year, terminable by Landlord on thirty (30) days prior notice, under
the same terms and conditions set forth in this Lease; except, however, that the
Fixed Basic Rent during such continued occupancy shall be 150% of the amount set
forth in subsection 6(a). Anything to the contrary notwithstanding, any holding
over by Tenant without Landlord's prior written consent shall constitute a
default hereunder and shall be subject to all the remedies set forth in
subsection 26(b) hereof.
26. DEFAULTS-REMEDIES.
a) Defaults. It shall be an event of default under this Lease if any
one or more of the following events occurs:
i) Tenant fails to pay in full, within five (5) days of notice
from Landlord , any and all installments of Fixed Basic Rent or Additional Rent
or any other charges or payments due and payable under this Lease whether or not
herein included as rent.
ii) Tenant violates or fails to perform or otherwise breaches any
agreement, term, covenant or condition contained in this Lease and such
violation or
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failure continues for a period of fifteen (15) days after notice from Landlord,
or such longer period, not to exceed thirty (30) days, provided such breach is
not reasonably capable of cure within fifteen (15) days and Tenant is diligently
pursuing such cure.
iii) Tenant becomes insolvent or bankrupt in any sense or makes
an assignment for the benefit of creditors or if a petition in bankruptcy or for
reorganization or for an arrangement with creditors under any federal or state
law is filed by or against Tenant, or a bill in equity or other proceeding for
the appointment of a receiver or similar official for any of Tenant's assets is
commenced, or if any of the real or personal property of Tenant shall be levied
upon by any sheriff, marshal or constable; provided, however, that any
proceeding brought by anyone other than the parties to this Lease under any
bankruptcy, reorganization arrangement, insolvency, readjustment, receivership
or similar law shall not constitute an event of default until such proceeding,
decree, judgment or order has continued unstayed for more than sixty (60)
consecutive days.
b) REMEDIES. Upon the occurrence of an event of default under this
Lease, Landlord shall have all of the following rights:
i) Landlord may charge a late payment charge of five (5%) percent
of any amount owed to Landlord pursuant to this Lease which is not paid within
five (5) days of the due date which is set forth in the Lease or, if a due date
is not specified in this Lease, within thirty (30) days of the mailing of a bill
therefor by Landlord. If Landlord incurs a late charge in connection with any
payment which Tenant has failed to make within the times required in this Lease,
Tenant shall pay Landlord, in addition to such payment due, the full amount of
such late charge incurred by Landlord. Nothing in this Lease shall be construed
as waiving any rights of Landlord arising out of any default of Tenant, by
reason of Landlord's imposing or accepting any such late charge(s) and/or
interest; the right to collect such late charge(s) and/or interest is separate
and apart from any rights relating to remedies of Landlord after default by
Tenant including, without limitation, the rights and remedies of Landlord
provided herein.
ii) Landlord may accelerate the whole or any part of the Fixed
Basic Rent and all Additional Rent for the entire unexpired balance of the Term
of this Lease, as well as all other charges, payments, costs and expenses herein
agreed to be paid by Tenant, and any Fixed Basic Rent or other charges,
payments, costs and expenses so accelerated shall, in addition to any and all
installments of rent already due and payable and in arrears and any other charge
or payment herein reserved, included or agreed to be treated or collected as
rent and any other charge, expense or cost herein agreed to be paid by Tenant
which may be due and payable and in arrears, be deemed due and payable as if, by
the terms and provisions of this Lease, such accelerated rent and other charges,
payments, costs and expenses were on that date payable in advance.
iii) Landlord may re-enter the Premises and, at the option of
Landlord, remove all persons and all or any property therefrom, either by
summary dispossess proceedings or by any suitable action or proceeding at law or
by force or otherwise, without being liable for prosecution or damages therefor,
and Landlord may
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repossess and enjoy the Premises. Upon recovering possession of the Premises by
reason of or based upon or arising out of a default on the part of Tenant,
Landlord may, at Landlord's option, either terminate this Lease or make such
alterations and repairs as may be necessary in order to relet the Premises and
may relet the Premises or any part or parts thereof, either in Landlord's name
or otherwise, for a term or terms which may, at Landlord's option, be less than
or exceed the period which would otherwise have constituted the balance of the
Term of this Lease and at such rent or rents and upon such other terms and
conditions as in Landlord's sole discretion may seem advisable and to such
person or persons as may in Landlord's discretion seem best; upon each such
reletting all rents received by Landlord from such reletting shall be applied as
follows: first, to the payment of any costs and expenses of such reletting,
including all costs of alterations and repairs; second, to the payment of any
indebtedness other than Fixed Basic Rent, Additional Rent or other charges due
hereunder from Tenant to Landlord; third, to the payment of Fixed Basic Rent,
Additional Rent and other charges due and unpaid hereunder; and the residue, if
any, shall be held by Landlord and applied in payment of future rent as it may
become due and payable hereunder. If rentals received from reletting during any
month are less than that to be paid during that month by Tenant, Tenant shall
pay any such deficiency to Landlord. Such deficiency shall be calculated and
paid monthly. No such re-entry or taking possession of the Premises or the
making of alterations or improvements thereto or the reletting thereof shall be
construed as an election on the part of Landlord to terminate this Lease unless
written notice of termination is given to Tenant. Landlord shall in no event be
liable in any way whatsoever for failure to relet the Premises or, in the event
that the Premises or any part or parts thereof are relet, for failure to collect
the rent thereof under such reletting. Notwithstanding any such reletting
without termination, Landlord may at any time thereafter elect to terminate this
Lease for such previous breach.
iv) Landlord may terminate this Lease and the Term without any
right on the part of Tenant to waive the forfeiture by payment of any sum due or
by other performance of any condition, term or covenant broken. Upon such
termination, Landlord shall be entitled to recover, in addition to any and all
sums and damages for violation of Tenant's obligations hereunder in existence at
the time of such termination, damages for Tenant's default in an amount equal to
the amount of the Fixed Basic Rent and Additional Rent reserved for the balance
of the Term, as well as all other charges, payments, costs and expenses herein
agreed to be paid by Tenant all of which amount shall be immediately due and
payable from Tenant to Landlord upon demand therefor.
v) WHEN THIS LEASE AND THE TERM OR ANY EXTENSION OR RENEWAL
THEREOF SHALL HAVE BEEN TERMINATED ON ACCOUNT OF ANY DEFAULT BY TENANT, OR WHEN
THE TERM HAS EXPIRED, UPON FIVE (5) BUSINESS DAYS PRIOR WRITTEN NOTICE TO
TENANT, IT SHALL BE LAWFUL FOR ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR AS
ATTORNEY FOR TENANT AS WELL AS FOR ALL PERSONS CLAIMING BY, THROUGH OR UNDER
TENANT, AND TO FILE AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN ACTION
FOR JUDGMENT IN EJECTMENT AGAINST TENANT AND ALL PERSONS CLAIMING
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BY, THROUGH OR UNDER TENANT FOR THE RECOVERY BY LANDLORD OF POSSESSION OF THE
PREMISES, FOR WHICH THIS LEASE SHALL BE A SUFFICIENT WARRANT; WHEREUPON, IF
LANDLORD SO DESIRES, AN APPROPRIATE WRIT OF POSSESSION MAY ISSUE FORTHWITH,
WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER, AND PROVIDED THAT IS FOR ANY
REASON AFTER SUCH ACTION SHALL HAVE BEEN COMMENCED IT SHALL BE DETERMINED AND
POSSESSION OF THE PREMISES REMAIN IN OR BE RESTORED TO TENANT, LANDLORD SHALL
HAVE THE RIGHT FOR THE SAME DEFAULT AND UPON ANY SUBSEQUENT DEFAULT OR DEFAULTS,
OR UPON THE TERMINATION OF THIS LEASE OR TENANT'S RIGHT OF POSSESSION AS
HEREINBEFORE SET FORTH, TO BRING ONE OR MORE FURTHER ACTIONS IN EJECTMENT AS
HEREINBEFORE SET FORTH TO CONFESS JUDGMENT FOR THE RECOVERY OF POSSESSION OF THE
PREMISES.
c) WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND BETWEEN LANDLORD
AND TENANT THAT (A) THEY HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTER-CLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER ON ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OF OCCUPANCY OF THE PREMISES
OR CLAIM OF INJURY OR DAMAGE, AND (B) IN ANY ACTION AGAINST LANDLORD BY TENANT,
THE LEGAL FEES OF THE PREVAILING PARTY WILL BE PAID BY THE OTHER PARTY TO THE
ACTION.
d) NON-WAIVER. No waiver by Landlord of any breach by Tenant of any of
Tenant's obligations, agreements or covenants herein shall be a waiver of any
subsequent breach or of any other obligation, agreement or covenant, nor shall
any forbearance by Landlord to seek a remedy for any event of default by Tenant
be a waiver by Landlord of any rights and remedies with respect to such or any
subsequent event of default.
e) RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred
upon or reserved to Landlord is intended to be exclusive of any other right or
remedy provided herein or by law, but each shall be cumulative and in addition
to every other right or remedy given herein or now or hereafter existing at law
or in equity or by statute.
27. CONDITION OF PREMISES. Tenant's occupancy of the Premises shall
constitute acceptance of the Work performed by Landlord pursuant to Section 3,
subject to any punchlist items agreed to by the parties within thirty (30) days
after the Commencement Date and any latent or structural defects in the Premises
constructed in accordance with the Plans.
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28. HAZARDOUS SUBSTANCES.
a) Landlord and Tenant shall not cause or allow the generation,
treatment, storage or disposal of Hazardous Substances on or near the Premises
or Property. "Hazardous Substances" shall mean (i) any hazardous substance as
that term is defined in the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., as amended, (ii) any
hazardous waste or hazardous substance as those terms are defined in any local,
state or Federal law, regulation or ordinance not inapplicable to the Premises
and Property, or (iii) petroleum including crude oil or any fraction thereof. In
the event Landlord or Tenant uses any Hazardous Substances, Landlord or Tenant
shall dispose of such substances in accordance with all applicable Federal,
state and local laws, regulations and ordinances.
b) Landlord and Tenant agree to indemnify, defend and hold harmless
the other, its employees, agents, successors, and assigns, from and against any
and all damage, claim, liability, or loss, including reasonable attorneys' and
other fees, arising out of or in any way connected to the generation, treatment,
storage or disposal of Hazardous Substances by Landlord or Tenant, its
employees, agents, contractors, or invitees, on or near the Premises or
Property. Such duty of indemnification shall include, but not be limited to
damage, liability, or loss pursuant to all Federal, state and local
environmental laws, rules and ordinances, strict liability and common law.
c) Landlord and Tenant agree to notify each other immediately of any
disposal of Hazardous Substances in the Premises or Property, of any discovery
of Hazardous Substances in the Premises, or of any notice by a governmental
authority or private party alleging or suggesting that a disposal of Hazardous
Substances on or near the Premises or Property may have occurred. Furthermore,
Landlord and Tenant agree to provide the other with full and complete access to
any documents or information in its possession or control relevant to the
question of the generation, treatment, storage, or disposal of Hazardous
Substances on or near the Premises.
d) Except as disclosed in that certain Phase 1 - Environmental Site
Assessment of the Solarex/Peco Energy Facility, Newtown, PA, Job No. OPG97001
prepared by OXFORD Engineers & Consultants, Inc, dated May, 1997, Landlord
represents and warrants that, to the best of its knowledge, there are no
Hazardous Substances in, under or about the Property. Landlord acknowledges that
Tenant and its employees, agents, successors and assigns shall not be liable for
any claims, costs, damages or liabilities associated with the environmental
conditions existing at the Property as of the Commencement Date as disclosed in
the foregoing Phase 1 Environmental Site Assessment unless such conditions are
exacerbated by the Tenant, its employees, agents, successors or assigns.
29. RECORDING. Neither this Lease nor a memorandum of this Lease shall be
recorded in any public records without the written consent of Landlord.
30. BROKERS' COMMISSION. Tenant represents and warrants to Landlord that
the
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Brokers (as defined in the Preamble) are the sole brokers with whom Tenant has
negotiated in bringing about this Lease and Tenant agrees to indemnify and hold
Landlord and its mortgagee(s) harmless from any and all claims of other brokers
and expenses in connection therewith arising out of or in connection with the
negotiation of or the entering into this Lease by Landlord and Tenant. Provided
the transactions contemplated hereby are consummated, Landlord shall pay Brokers
a commission in accordance with a written agreement between such Brokers and
Landlord. In no event shall Landlord's mortgagee(s) have any obligation to any
broker involved in this transaction. In the event that no broker was involved as
aforesaid, then Tenant represents and warrants to the Landlord that no broker
brought about this transaction, and Tenant agrees to indemnify and hold Landlord
harmless from any and all claims of any broker arising out of or in connection
with the negotiations of, or entering into of, this Lease by Tenant and
Landlord.
31. NOTICES. All notices, demands, requests, consents, certificates, and
waivers required or permitted hereunder from either party to the other shall be
in writing and sent by United States certified mail, return receipt requested,
postage prepaid, or by recognized overnight courier, addressed as follows:
If to Tenant:
Bio-Imaging Technologies, Inc.
Atten: Mark L. Weinstein,
Chief Executive Officer
with a copy to:
Buchanan Ingersoll, Professional Corporation
500 College Road East
Princeton, NJ 08540
Atten: Stuart B. Dember, Esquire
If to Landlord:
Yardley Road Associates, L.P.
c/o O'Neill Properties Group, L.P.
1101 West DeKalb Pike, Suite 200
Wayne, PA 19087
Attn: President
with a copy to:
Kevin W. Walsh, Esquire
Adelman Lavine Gold and Levin
1101 West DeKalb Pike, Suite 201
Philadelphia, PA 19102-1799
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Either party may at any time, in the manner set forth for giving notices to the
other, specify a different address to which notices to it shall thereafter be
sent.
32. IRREVOCABLE OFFER: NO OPTION. This Lease shall become effective only
upon execution thereof by J. Brian O'Neill, or other authorized officer of
Landlord and by an authorized officer of Tenant.
33. INABILITY TO PERFORM. If Landlord is delayed or prevented from
performing any of its obligations under this Lease by reason of strike, labor
troubles, or any cause whatsoever beyond Landlord's control, the period of such
delay or such prevention shall be deemed added to the time herein provided for
the performance of any such obligation by Landlord. The provisions of this
Section 33 shall not delay the Outside Date.
34. SURVIVAL. Notwithstanding anything to the contrary contained in this
Lease, the expiration of the Term of this Lease, whether by lapse of time or
otherwise, shall not relieve Tenant or Landlord from their respective
obligations accruing prior to the expiration of the Term.
35. CORPORATE TENANTS. If Tenant is a corporation, the person(s) executing
this Lease on behalf of Tenant hereby covenant(s) and warrant(s) that: Tenant is
a duly formed corporation qualified to do business in the state in which the
Property is located; Tenant will remain qualified to do business in said state
throughout the Term and any renewals thereof; and such persons are duly
authorized by such corporation to execute and deliver this Lease on behalf of
the corporation.
36. TENANT REPRESENTATIONS AND WARRANTIES. [Intentionally Deleted].
37. WAIVER OF INVALIDITY OF LEASE. Each party agrees that it will not raise
or assert as a defense to any obligation under the Lease or make any claim that
the Lease is invalid or unenforceable due to any failure of this document to
comply with ministerial requirements including, without limitation, requirements
for corporate seals, attestations, witnesses, notarizations or other similar
requirements and each party hereby waives the right to assert any such defenses
or make any claim of invalidity or unenforceability due to any of the foregoing.
38. SECURITY DEPOSIT. As security for the full and prompt performance by
Tenant of the terms and covenants of this Lease, Tenant has deposited with
Landlord the Security Deposit, as set forth in the Preamble. The Security
Deposit shall not constitute rent for any month (unless so applied by Landlord
on account of Tenant's default hereunder). Tenant shall, upon demand, restore
any portion of the Security Deposit which may be applied by Landlord to cure any
default by Tenant hereunder. To the extent that Landlord has not applied the
Security Deposit or any portion thereof on account of a default, the Security
Deposit, or such remaining portion of the Security Deposit, shall be returned to
Tenant, without interest, promptly following the termination of this Lease.
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39. Estoppel Certificate.
a) Each of Landlord and Tenant shall from time to time, within fifteen
(15) days after request, execute, acknowledge and deliver to the other party a
written instrument in recordable form, substantially in the form attached hereto
as Exhibit E (a "Estoppel Certificate"), certifying (i) that this Lease is in
full force and effect and has not been modified, supplemented or amended (or, if
there have been modifications, supplements or amendments, that it is in full
force and effect as modified, supplemented or amended, and stating such
modifications, supplements and amendments); (ii) the dates to which Fixed Basic
Rent and Additional Rent and any other charges arising hereunder have been paid;
(iii) the amount of any prepaid rents or credits due Tenant, if any; (iv) if
applicable, that Tenant has accepted possession and has entered into occupancy
of the Premises, and certifying the Commencement Date and the Termination Date;
(v) whether or not, to the best of such party's knowledge, all conditions under
the Lease to be performed by the other party prior thereto have been satisfied
and whether or not such party is then in default in the performance of any
covenant, agreement or condition contained in this Lease and specifying each, if
any, unsatisfied condition and each, if any, default of which such party may
have knowledge; and (vi) any other fact or condition related to the Lease, the
Tenant or Landlord reasonably requested. Any certification delivered pursuant to
the provisions of this Article shall be intended to be relied upon by Landlord,
Tenant and any mortgagee or prospective mortgagee or purchaser of the Property
or of any interest therein. Notwithstanding the foregoing, Tenant's or
Landlord's failure to furnish a Estoppel Certificate within said fifteen (15)
day period shall constitute a default under this Lease.
40. RIGHTS RESERVED BY LANDLORD. Landlord waives no rights, except those
that may be specifically waived herein, and explicitly retains all other rights
including, without limitation, the following rights, each of which Landlord may
exercise without notice to Tenant and without liability to Tenant for damage or
injury to property, person or business on account of the exercise thereof, and
the exercise of any such rights shall not be deemed to constitute an eviction or
disturbance of Tenant's use or possession of the Premises and shall not give
rise to any claim for set-off or abatement of Rent or any other claim:
a) To change the name or street address of the Building.
b) To install, affix and maintain any and all signs on the exterior
and on the interior of the Building.
c) To decorate or to make repairs, alterations, additions, or
improvements, whether structural or otherwise, in and about the Building, or any
part thereof, and for such purposes to enter upon the Premises and during the
continuance of any of such work, to temporarily close doors, entry ways, public
space and corridors in the Building and to interrupt or temporarily suspend
services or use of facilities, all without affecting any of Tenant's obligations
hereunder, so long as the Premises are reasonably accessible and Tenant's
conduct of its business is not unreasonably interfered with.
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d) To furnish door keys for the entry door(s) in the Premises on the
Commencement Date and to retain at all times, and to use in appropriate
instances, keys to all doors within and into the Premises. Tenant agrees to
purchase only from Landlord additional duplicate keys as required, to change no
locks, and not to affix locks on doors without the prior written consent of the
Landlord. Upon the expiration of the Term or Tenant's right to possession,
Tenant shall return all keys to Landlord and shall disclose to Landlord the
combination of any safes, cabinets or vaults left in the Premises.
e) To designate and approve all window coverings used in the Building.
f) To approve the weight, size and location of safes, vaults and other
heavy equipment and articles in and about the Premises and the Building so as
not to exceed the legal load per square foot designated by the structural
engineers for the Building, and to require all such items and furniture and
similar items to be moved into or out of the Building and Premises only at such
times and in such manner as Landlord shall direct in writing. Tenant shall not
install or operate machinery or any mechanical devices of a nature not directly
related to Tenant's ordinary use, as limited by the Permitted Use, of the
Premises without the prior written consent of Landlord. The movement of Tenant's
property into or out of the Building or the Premises and within the Building are
entirely at the risk and responsibility of Tenant, and Landlord reserves the
right to require written authorization from Tenant, in form and content
satisfactory to Landlord, before allowing any property to be moved into or out
of the Building or Premises.
g) To regulate delivery of supplies and the usage of the loading
docks, receiving areas and freight elevators.
h) To enter the Premises in accordance with Section 14, and, if
vacated or abandoned, to show the Premises at any time and to prepare the
Premises for re-occupancy.
i) To erect, use and maintain pipes, ducts, wiring and conduits, and
appurtenances thereto, in and through the Premises provided Tenant's conduct of
its business is not unreasonably interfered with.
j) To grant to any person or to reserve unto itself the exclusive
right to conduct any business or render any service in the Building. If Landlord
elects to make available to tenants in the Building any services or supplies, or
arranges a master contract therefor, Tenant agrees to obtain its requirements,
if any, therefor from Landlord or under any such contract, provided that the
charges therefor are reasonably consistent with market rates.
k) To alter the layout, design and/or use of the Building in such
manner as Landlord, in its sole discretion, deems appropriate, so long as the
character of the Building as a first class office building is maintained and
provided Tenant's conduct of its business is not unreasonably interfered with.
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41. MISCELLANEOUS.
a) ENTIRE AGREEMENT. This Lease represents the entire agreement
between the parties hereto and there are no collateral or oral agreements or
understandings between Landlord and Tenant with respect to the Premises or the
Property. No rights, easements or licenses are acquired in the Property or any
land adjacent to the Property by Tenant by implication or otherwise except as
expressly set forth in the provisions of this Lease.
b) MODIFICATION. This Lease shall not be modified in any manner except
by an instrument in writing executed by the parties. In addition, Tenant agrees
to make such changes to this Lease as are required by any mortgagee, provided
such changes do not substantially affect Tenant's rights and obligation
hereunder.
c) INTERPRETATION. The masculine (or neuter) pronoun, singular number,
shall include the masculine, feminine and neuter genders and the singular and
plural number.
d) EXHIBITS. Each writing or plan referred to herein as being attached
as an Exhibit or otherwise designated herein as an Exhibit hereto is hereby made
a part hereof.
e) CAPTIONS AND HEADINGS. The captions and headings of sections,
subsections and the table of contents herein are for convenience only and are
not intended to indicate all of the subject matter in the text and they shall
not be deemed to limit, construe, affect or alter the meaning of any provisions
of this Lease and are not to be used in interpreting this Lease or for any other
purpose in the event of any controversy.
f) INTEREST. Wherever interest is required to be paid hereunder, such
interest shall be at the highest rate permitted under law but not in excess of
twelve percent (12%).
g) SEVERABILITY. If any term or provision of this Lease, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
h) JOINT AND SEVERAL LIABILITY. If two or more individuals,
corporations, partnerships or other persons (or any combination of two or more
thereof) shall sign this Lease as Tenant, the liability of each such individual,
corporation, partnership or other persons to pay the Rent and perform all other
obligations hereunder shall be deemed to be joint and several, and all notices,
payments and agreements given or made by, with or to any one of such
individuals, corporations, partnerships or other persons shall be deemed
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to have been given or made by, with or to all of them. In like manner, if Tenant
shall be a partnership or other legal entity, the members of which are, by
virtue of any applicable law or regulation, subject to personal liability, the
liability of each such member shall be joint and several.
i) NO REPRESENTATIONS BY LANDLORD. Landlord and Landlord's agents have
made no representations, agreements, conditions, warranties, understandings or
promises, either oral or written, other than as expressly set forth herein, with
respect to this Lease, the Premises and/or the Building.
j) RELATIONSHIP OF PARTIES. This Lease shall not create any
relationship between the parties other than that of Landlord and Tenant.
k) CHOICE OF LAW. The terms of this Lease shall be construed under the
laws of the Commonwealth of Pennsylvania, and that exclusive jurisdiction and
venue shall be in the Court of Common Pleas of the County in which the Property
is located.
42. ADDITIONAL DEFINITIONS.
a) "Date of this Lease" or "date of this Lease" shall mean the date of
acceptance of this Lease by the Landlord, following execution and delivery
thereof to Landlord by Tenant and that date shall be inserted in the space
provided in the Preamble.
b) "Landlord" as used herein includes the Landlord named above as well
as its successors and assigns, each of whom shall have the same rights,
remedies, powers, authorities and privileges as it would have had it originally
signed this lease as Landlord. Any such person, whether or not named herein,
shall have no liability hereunder after ceasing to hold title to the Premises.
Neither Landlord nor any principal of Landlord nor any owner of the Building or
the Lot, whether disclosed or undisclosed, shall have any personal liability
with respect to any of the provisions of this Lease or the Premises, and if
Landlord is in breach or default with respect to Landlord's obligations under
this Lease or otherwise, Tenant shall look solely to the equity of Landlord in
the Property for the satisfaction of Tenant's remedies.
c) "Tenant" as used herein includes the Tenant named above as well as
its heirs, successors and assigns, each of which shall be under the same
obligations, liabilities and disabilities and each of which shall have the same
rights, privileges and powers as it would have possessed had it originally
signed this Lease as Tenant. Each and every person named above as Tenant shall
be bound formally and severally by the terms, covenants and agreements contained
herein. However, no such rights, privileges or powers shall inure to the benefit
of any assignee of Tenant, immediate or remote, unless the assignment to such
assignee is permitted or has been approved in writing by Landlord. Any notice
required or permitted by the terms of this Lease may be given by or to any one
of the persons named above as Tenant, and shall have the same force and effect
as if given by or to all of them.
30
<PAGE>
d) "Mortgage" and "Mortgagee" as used herein includes any lien or
encumbrance on the Premises or the Property or on any part of or interest in or
appurtenance to any of the foregoing, including without limitation any ground
rent or ground lease if Landlord's interest is or becomes a leasehold estate.
The word "mortgagee" is used herein to include the holder of any mortgage,
including any ground Landlord if Landlord's interest is or becomes a leasehold
estate. Wherever any right is given to a mortgagee, that right may be exercised
on behalf of such mortgagee by any representative or servicing agent of such
mortgagee.
e) "Person" as used herein includes a natural person, a partnership, a
corporation, an association, and any other form of business association or
entity.
f) "Property" as used herein shall mean the Building and the lot,
tract or parcel of land on which the Building is situated.
g) "Rent" or "rent" as used herein shall mean all Fixed Basic Rent and
Additional Rent reserved under this Lease.
43. TENANT'S RIGHT OF FIRST OFFER.
a) Tenant shall have a right of first offer ("Right of Offer") with
respect to the leasing of any space in the Building ("Offer Space") as such
space becomes available for leasing by the Landlord, provided that there is not
an event of default continuing in accordance with the terms and conditions of
the Lease, Tenant is in possession of the Premises pursuant to this Lease and
subject to the following conditions:
i) Landlord shall offer such Offer Space to Tenant in writing
(the "Landlord Notification") on the terms set forth in Section 43(a)(ii),
before entering into a lease with another tenant for the Offer Space. Tenant may
accept the Offer Space only by delivering to Landlord written notice of such
acceptance of the entire Offer Space within ten (10) Business Days of the
Landlord Notification. If Tenant fails to accept the Offer Space within such ten
(10) Business Day period, Tenant will be deemed to have irrevocably waived its
Right of Offer for that particular Offer Space and Landlord may enter into a
lease for the Offer Space at any rental rate (within ten percent (10%) of the
rental rate offered to Tenant) with other persons or entities. If Landlord fails
to lease the Offer Space within ninety (90) days, then it must be offered to
Tenant again in accordance with this Section 43. Tenant must accept the Offer
Space offered pursuant to this provision in whole and not in part. Once Tenant
exercises its Right of Offer with respect to the Offer Space, the exercise will
be irrevocable.
ii) All of the terms and conditions of this Lease will apply to
any Offer Space leased by Tenant, effective as of the date of delivery to Tenant
of such Offer Space. The term of the lease with respect to the Offer Space shall
be coterminous with the Term applicable to the original Premises. The Fixed
Basic Rent rate for the Offer Space will be the Fixed Basic Rent set forth in
the Landlord Notification and
31
<PAGE>
Tenant's Proportionate Share shall be increased in proportion to the square
footage of any Offer Space leased by Tenant.
b) Landlord will have no liability to Tenant if any Tenant of the
Offer Space wrongfully holds over. In the event such Tenant wrongfully holds
over, Landlord will attempt in good faith to cause such Tenant to vacate the
Offer Space.
SECTION 26(b) HEREOF SETS FORTH A WARRANT OR AUTHORITY FOR AS ATTORNEY TO
CONFESS JUDGMENT FOR EJECTMENT AGAINST TENANT. IN GRANTING THIS WARRANT OF
ATTORNEY TO CONFESS JUDGMENT AGAINST TENANT, TENANT HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, AND (ON THE ADVICE OF THE SEPARATE COUNSEL OF
TENANT, IF TENANT HAS USED COUNSEL IN REGARD TO ENTERING INTO THIS LEASE)
UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TENANT HAS OR MAY HAVE TO PRIOR NOTICE
AND AN OPPORTUNITY FOR HEARING UNDER THE CONSTITUTIONS AND LAWS OF THE UNITED
STATES AND THE COMMONWEALTH OF PENNSYLVANIA.
IN WITNESS WHEREOF, and in consideration of the mutual entry into this
Lease and for other good and valuable consideration, and intending to be legally
bound, each party hereto has caused this agreement to be duly executed under
seal.
Landlord:
- ---------
Date Signed: 10/1/99 YARDLEY ROAD ASSOCIATES, L.P.
------- By: YARDLEY ROAD ASSOCIATES
ACQUISITION CORPORATION
By: /s/Stephen Starden
--------------------------
Name: Stephen Starden
Title: Vice President
Attest: /s/John P. Jade
----------------------
Tenant:
Date Signed: 9/22/99 BIO-IMAGING TECHNOLOGIES, INC.
-------
By: /s/Mark L. Weinstein
------------------------
Name: Mark L. Weinstein
------------------
Title:President & CEO
------------------
Attest: /s/ Robert J. Phillips
----------------------
Title: Vice President, Chief
Financial Officer
---------------------
32
<PAGE>
RIDER A
RENEWAL OPTION: Tenant is hereby granted two (2) options to renew this Lease
- ---------------
upon the following terms and conditions:
At the time of the exercise of each option to renew and at the time of each
renewal, Tenant shall not be in default in accordance with the terms and
provisions of this Lease, and shall be in possession of the Premises pursuant to
this Lease.
Notice of the exercise of the option shall be sent to the Landlord in writing at
least six (6) months but not more than twelve (12) months before the expiration
of the term of this Lease.
Each renewal term shall be for a period of five (5) years, to commence at the
expiration of the Term of this Lease or the expiration of the first renewal
term, as applicable, and all of the terms and conditions of this Lease, other
than the Fixed Basic Rent, shall apply during any such renewal term.
The annual fixed basic rent to be paid during the each renewal term shall be
ninety five percent (95%) of the fair rental value per square foot of the
Premises at the commencement of each renewal term. In determining the fair
rental value, the Landlord shall notify Tenant of the fair rental value as
established by Landlord. Should Tenant dispute Landlord's determination, then
the Tenant shall be free to, at the Tenant's sole cost and expense, employ the
services of an appraiser familiar with office buildings located within the
Newtown, Bucks County, Pennsylvania area comparable to the Building, who shall
be a member of MAI and who shall render an appraisal. If the Landlord and the
Tenant's appraiser cannot agree on the fair rental value, or in such case, on an
independent appraiser acceptable to both, either party may request the American
Arbitration Association to appoint such independent appraiser who shall be a
member of MAI familiar with office buildings in the area of the Building who
shall render an appraisal, and in such event the judgment of a majority of the
three appraisers shall be final and binding upon the parties. The parties shall
share equally in the cost of any such independent appraiser. Pending resolution
of the issue of fair rental value, the Tenant shall pay the Landlord as of
commencement of the renewal term, the Fixed Basic Rent as established by
Landlord, subject to retroactive adjustment upon final determination of this
issue.
<PAGE>
EXHIBIT A
LOCATION OF PREMISES
<PAGE>
EXHIBIT A-1
-----------
OFFICE BUILDING AREA
<PAGE>
EXHIBIT B
---------
RULES AND REGULATIONS
1. OBSTRUCTION OF PASSAGEWAYS: The sidewalks, entrance, passages, courts,
---------------------------
elevators, vestibules, stairways, corridors and public parts of the Building
shall not be obstructed or encumbered by Tenant or used by Tenant for any
purpose other than ingress and egress. If the Premises are situated on the
ground floor with direct access to the street, then Landlord shall, at
Landlord's expense, keep the sidewalks and curbs directly in front of the
Premises clean and free from ice, snow and refuse.
2. WINDOWS: Windows in the Premises shall not be covered or obstructed by
-------
Tenant. No bottles, parcels or other articles shall be placed on the window
sills, in the halls, or in any other part of the Building other than the
Premises. No article shall be thrown out of the doors or windows of the
Premises.
3. PROJECTIONS FROM BUILDING: No awnings, air-conditioning units, or other
--------------------------
fixtures shall be attached to the outside walls or the window sills of the
Building or otherwise affixed so as to project from the Building, without prior
written consent of Landlord.
4. SIGNS: No sign or lettering shall be affixed by Tenant to any part of the
-----
outside of the Premises, or any part of the inside of the Premises so as to be
clearly visible from the outside of the Premises, without the prior written
consent of Landlord. However, Tenant shall have the right to place its name on
any door leading into the Premises the size, color and style thereof to be
subject to the Landlord's approval. Tenant shall not have the right to have
additional names placed on the Building directory without Landlord's prior
written consent.
5. FLOOR COVERING: Tenant shall not lay linoleum or other similar floor covering
--------------
so that the same shall come in direct contact with the floor of the Premises. If
linoleum or other similar floor covering is desired to be used, an interlining
of builder's deadening felt shall first be fixed to the floor by a paste or
other material that may easily be removed with water, the use of cement or other
similar adhesive material being expressly prohibited.
6. INTERFERENCE WITH OCCUPANTS OF BUILDING: Tenant shall not make, or permit to
---------------------------------------
be made, any unseemly or disturbing noises or odors and shall not interfere with
other tenants or those having business with them. Tenant will keep all
mechanical apparatus in the Premises free of vibration and noise which may be
transmitted beyond the limits of the Premises.
7. LOCK KEYS: No additional locks or bolts of any kind shall be placed on any of
---------
the doors or windows by Tenant. Tenant shall, on the termination of Tenant's
tenancy, deliver to Landlord all keys to any space within the Building either
furnished to or otherwise
<PAGE>
procured by Tenant, and in the event of the loss of any keys furnished, Tenant
shall pay to Landlord the cost thereof. Tenant, before closing and leaving the
Premises, shall ensure that all windows are closed and entrance doors locked.
Nothing in this Paragraph 7 shall be deemed to prohibit Tenant from installing a
burglar alarm within the Premises, provided: (1) Tenant obtains Landlord's
consent which will not be unreasonably withheld or delayed; (2) Tenant supplies
Landlord with copies of the plans and specifications of the system; (3) such
installation shall not damage the Building; and (4) all costs of installation
shall be borne solely by Tenant.
8. CONTRACTORS: No contract of any kind with any supplier of towels, water,
-----------
toilet articles, waxing, rug shampooing, venetian blind washing, furniture
polishing, lamp servicing, cleaning of electrical fixtures, removal of waste
paper, rubbish, garbage, or other like service shall be entered into by Tenant,
nor shall any machine of any kind be installed in the Building or the Office
Building Area without the prior written consent of the Landlord. Tenant shall
not employ any persons other than Landlord's janitors for the purpose of
cleaning the Premises without prior written consent of Landlord. Landlord shall
not be responsible to Tenant for any loss of property from the Premises however
occurring, or for any damage to the effects of Tenant by such janitors or any of
its employees, or by any other person or any other cause.
9. PROHIBITED ON PREMISES: Tenant shall not conduct, or permit any other person
----------------------
to conduct, any auction upon the Premises, manufacture or store goods, wares or
merchandise upon the Premises without the prior written approval of Landlord,
except the storage of usual supplies and inventory to be used by Tenant in the
conduct of his business, permit the Premises to be used for gambling, make any
unusual noises in the Building, permit to be played musical instrument on the
Premises, permit any radio to be played, or television, recorded or wired music
in such loud manner as to disturb or annoy other tenants, or permit any unusual
odors to be produced on the Premises. Tenant shall not permit any portion of the
Premises to be occupied as an office for a public stenographer or typewriter, or
for the storage, manufacture, or sale of intoxicating beverages, narcotics,
tobacco in any form or as a barber or manicure shop. Canvassing, soliciting and
peddling in the Building and the Office Building Area are prohibited and Tenant
shall cooperate to prevent the same. No bicycles, vehicles or animals of any
kind shall be brought into or kept in or about the Premises.
10. PLUMBING, ELECTRIC AND TELEPHONE WORK: Plumbing facilities shall not be used
-------------------------------------
for any purpose other than those for which they were constructed; and no
sweepings, rubbish, ashes, newspaper or other substances of any kind shall be
thrown into them. Waste and excessive or unusual amounts of electricity or water
is prohibited. When electric wiring of any kind is introduced, it must be
connected as directed by Landlord, and no stringing or cutting of wires will be
allowed, except by prior written consent of Landlord, and shall be done by
contractors approved by Landlord. The number and locations of telephones,
telegraph instruments, electrical appliances, call boxes, etc. shall be subject
to Landlord's approval.
11. MOVEMENT OF FURNITURE, FREIGHT OR BULKY MATTER: The
-----------------------------------------------
2
<PAGE>
carrying in or out of freight, furniture or bulky matter of any description must
take place during such hours as Landlord may from time to time reasonably
determine and only after advance notice to the superintendent of the Building.
The persons employed by Tenant for such work must be reasonably acceptable to
the Landlord. Tenant may, subject to these provisions, move freight, furniture,
bulky matter, and other material into or out of the Premises on Saturdays
between the hours of 9:00 a.m. and 1:00 p.m., provided Tenant pays additional
costs, if any, incurred by Landlord for elevator operators or security guards,
and for any other expenses occasioned by such activity of Tenant. If, at least
three (3) days prior to such activity, Landlord requests that Tenant deposit
with Landlord, as security of Tenant's obligations to pay such additional costs,
a sum of which Landlord reasonably estimates to be the amount of such additional
cost, the Tenant shall deposit such sum with Landlord as security of such cost.
There shall not be used in the Building or Premises, either by Tenant or by
others in the delivery or receipt of merchandise, any hand trucks except those
equipped with rubber tires and side guards, and no hand trucks will be allowed
in the elevators without the consent of the superintendent of the Building.
12. SAFES AND OTHER HEAVY EQUIPMENT: Landlord reserves the right to prescribe
--------------------------------
the weight and position of all safes and other heavy equipment so as to
distribute properly the weight thereof and to prevent any unsafe condition from
arising.
13. ADVERTISING: Landlord shall have the right to prohibit any advertising by
-----------
Tenant which in Landlord's reasonable opinion tends to impair the reputation of
the Building or its desirability as a building for offices, and upon written
notice from Landlord, Tenant shall refrain from or discontinue such advertising.
14. NON-OBSERVANCE OR VIOLATION OF RULES BY OTHER TENANTS: Landlord shall not be
-----------------------------------------------------
responsible to Tenant for non-observance or violation of any of these rules and
regulations by any other tenant.
15. AFTER HOURS USE: Landlord reserves the right to exclude from the Building
---------------
between the hours of 6:00 p.m. and 8:00 a.m. and at all hours on Saturdays,
Sundays and Building Holidays, all persons who do not present a pass to the
Building signed by the Tenant. Each Tenant shall be responsible for all persons
for whom such a pass is issued and shall be liable to the Landlord for the acts
of such persons.
16. PARKING: Tenant and its employees shall park their cars only in those
-------
portions of the parking area designated by Landlord.
17. RESERVATION OF RIGHTS: Landlord hereby reserves to itself any and all rights
---------------------
not granted to Tenant hereunder, including, but not limited to, the following
rights which are reserved to Landlord for its purposes in operating the
Building:
a. the exclusive right to the use of the name of the Building for all
purposes, except that Tenant may use the name as its business address and for no
other purposes; and
b. the right to change the name or address of the Building, without
incurring any
3
<PAGE>
liability to Tenant for doing so; and
c. the right to install and maintain a sign on the exterior of the
Building; and
d. the exclusive right to use or dispose of the use of the roof of the
Building; and
e. the right to limit the space on the directory of the Building to be
allotted to Tenant; and
f. the right to grant to anyone the right to conduct any particular
business or undertaking in the Building.
18. HEALTH AND SAFETY: The Tenant shall be responsible for initiating,
-------------------
maintaining and supervising all health and safety precautions and/or programs
required by Law in connection with the Tenant's use and occupancy of the
Premises.
19. HAZARDOUS MATERIALS: The Tenant shall not store, introduce or otherwise
--------------------
permit any material known to be hazardous within the Premises. Any material
within the Premises which is determined to be hazardous shall be removed and
properly disposed of by the Tenant at the Tenant's sole expense.
-- END --
4
<PAGE>
EXHIBIT C
---------
LANDLORD'S WORK
<PAGE>
EXHIBIT D
---------
BUILDING HOLIDAYS
BUILDING CLOSED ON:
* NEW YEAR'S DAY *
* MEMORIAL DAY *
* INDEPENDENCE DAY *
* LABOR DAY *
* THANKSGIVING DAY *
* CHRISTMAS DAY *
<PAGE>
EXHIBIT E
---------
TENANT ESTOPPEL CERTIFICATE
TO: (" ") pursuant to that certain
---------------------- ------- ---------
Agreement (the "Agreement") dated , 199 , by and between and
--------- - ---------
("Lessor").
- --------------------------------------------
1. The undersigned ("Lessee") is the lessee under that certain Lease
dated , 19 , by and between as
---------- -- -------------------------------------
lessor, and , as lessee (the "Lease"),
------------------------------------
covering a portion of those certain premises commonly known and designated as
, Pennsylvania, consisting of
- ---------------------------------------------
approximately square feet (the "Premises"). A true, complete and
--------
correct copy of the Lease is attached hereto as Exhibit "A".
2. The Lease has not been modified, changed, altered or amended in any
respect (except as indicated following this sentence) and is the only lease or
agreement between the undersigned and the Lessor affecting the Premises. If
none, state "none".
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. The undersigned has made no agreements with Lessor or its agents or
employees, which are not described in the Lease concerning free rent, partial
rent, rebate of rental payments or any other type of rental concession with
respect to the Lease (except as indicated following this sentence). If none,
state "none".
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. The undersigned accepted possession of the Premises on ,
---------
19 , currently occupies the Premises and has been open for business since
--
, 19 . The current term of the Lease began on , 19 . The
- ---------- -- ---------- --
current term of the Lease will expire on , 19 , and Lessee has no
---------- --
present right to cancel or terminate the Lease under the terms thereof, or
otherwise. No rent payable pursuant to the Lease has been prepaid for more than
two (2) months, and no monies otherwise payable to Lessor under the Lease have
been paid in advance of the due date therefor as set forth in the Lease. The
fixed minimum rent currently being paid under the Lease is $ per
----------
month. Future changes to the fixed minimum rental are as set forth in the Lease.
The undersigned also pays amounts for percentage rent, insurance and property
tax escalations based upon the square footage of the Premises subject to the
Lease, as set forth in the Lease, which amounts have been paid to and including
, 199 .
- --------- -
5. The Lease is fully valid and enforceable and is currently in full
force and effect. Neither Lessor or Lessee is in default thereunder, and all
conditions and obligations on the part of Lessor to be fulfilled under the terms
of the Lease have been
<PAGE>
satisfied or fully performed including, without limitation, all required tenant
improvements, allowances, alterations, installations and construction, and
payment therefor has been made in full. Lessee has no offset, claim, defense or
counterclaim against any rent or other sum payable by Lessee under the Lease or
against any other obligation of Lessee under the Lease. No condition exists
which with the giving of notice or the passage of time, or both, would
constitute a default under the Lease.
6. Lessee has not suffered any assignment of the Lease or sublet the
Premises or any portion thereof, and no person or entity, other than Lessee, has
any possessory interest in the Premises or right to occupy the Premises or any
portion thereof, except as permitted under the Lease.
7. Lessee claims no right, title or interest in or to the Premises or
right to possession of the Premises, except as lessee under the terms of the
Lease. The Lease does not contain and the undersigned does not have any
outstanding options or rights of first refusal to purchase the Premises or any
portion thereof or the real property of which the Premises are a part, except as
otherwise set forth below. If none, state "none".
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. No actions, whether voluntary or otherwise, are pending against the
undersigned under the bankruptcy laws of the United States or any state thereof,
and Lessee knows of no fact or pending or threatened claim or litigation that
might result in the insolvency or bankruptcy of Lessee.
9. Lessee is a [corporation][limited partnership][general partnership]
duly organized and validly existing and in good standing under the laws of the
State of [and qualified to do business in the State where the Premises
---------
is located]. [ , a , owns and holds all of the issued and
---------- ----------
outstanding stock in and of Lessee, and is a separate and distinct entity from
Lessee].
10. Lessee's occupancy of the Premises complies fully with all local,
state and federal laws, ordinances, codes, rules, regulations and orders
including, without limitation, those concerning hazardous wastes, hazardous
materials, asbestos, oil and underground storage tanks. In addition, no such
hazardous wastes, hazardous materials, asbestos, oil or underground storage
tanks have been or are incorporated in, stored on or under, released from,
treated on, transported to or from or disposed of, on or from the Premises or
any portion thereof.
11. All inspections, licenses, permits, consents, permissions,
approvals and certificates required, whether by law, regulation or insurance
standards, to be made or issued with respect to the conduct of Lessee's
business, the Premises and the use and occupancy of the Premises by Lessee have
been made by or issued by all necessary private parties, the appropriate
governmental or quasi-governmental authorities or other authorities having
jurisdiction over the Premises and/or Lessee's business, are in full force and
effect, and Lessee has not received notification from any such authority that
2
<PAGE>
Lessee or the Premises is in material noncompliance with such laws, regulations
or standards, that the Premises is being used, operated or occupied unlawfully
or that Lessee has failed to obtain such inspections, permits, consents,
permissions, approvals, licenses or certificates, as the case may be. Lessee has
not received notice of any violation or failure to conform with any such law,
ordinance, regulation, standard, license, permit, consent, permission, approval
or certificate.
12. All insurance policies required to be maintained by Lessee under
the Lease have been maintained, are in full force and effect and all premiums
with respect thereto have been paid in full.
13. Upon receipt of notice of the closing of the purchase and sale of
the Premises as set forth in the Agreement, Lessee shall recognize as
-----
lessor under the Lease, and all payments of rent and other sums due to Lessor
under the Lease and all communications permitted or required under the Lease
shall be directed to c/o , and all
---------- -----------------------------
communications permitted or required under the Lease shall be directed to Lessee
at the address for Lessee set forth in the Lease (except as otherwise indicated
following this sentence), unless and until otherwise specified in written notice
by the party to whom notice is to be given at such address. If none, state
"none".
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
14. This certification is made to induce [to
--------------------
enter into the Agreement] [to provide financing to Lessor] knowing that
is relying upon the truth of this Tenant Estoppel
- ----------------------
Certificate in [entering into the Agreement,] [providing such financing] and
that [the acquisition of the Premises by pursuant to
--------------------------
the Agreement] [the financing provided to Lessor] shall be deemed good and
valuable consideration to Lessee for the foregoing representations made by
Lessee.
Dated this day of , 199 .
------ -------- -
LESSEE:
------------------------------,
a ----------------------------
BY:---------------------------
Name:----------------------
Title:---------------------
3
LOAN AND SECURITY AGREEMENT
by and between
BIO-IMAGING TECHNOLOGIES, INC.
a Delaware corporation,
as the BORROWER
and
SILICON VALLEY BANK,
a California chartered bank,
as the LENDER
August 10, 1999
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
This LOAN AND SECURITY AGREEMENT (this "Agreement") dated August 10,
1999,between SILICON VALLEY BANK, a California chartered bank having an address
at 5 Radnor Corporate Center, Suite 555, 100 Matsonford, Radnor, Pennsylvania
19087 ("Bank") and BIO-IMAGING TECHNOLOGIES, INC., a Delaware corporation having
an address at 830 Bear Tavern Road, West Trenton, New Jersey 08628 ("Borrower"),
provides the terms on which Bank will lend to Borrower and Borrower will repay
Bank. The parties agree as follows:
1. ACCOUNTING AND OTHER TERMS
--------------------------
1.1 Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules, if any. The terms
"including" and "includes" always mean "including (or includes) without
limitation" in this or any Loan Document. Capitalized terms in this Agreement
shall have the meanings set forth in Section 13. This Agreement shall be
construed to impart upon Bank a duty to act reasonably at all times.
2. LOAN AND TERMS OF PAYMENT
-------------------------
2.1 Advances. Borrower will pay Bank the unpaid principal amount of all
--------
Advances and interest on the unpaid principal amount of the Advances.
2.2 Revolving Advances.
------------------
(a) Bank will make Advances not exceeding (i) the Committed Revolving
Line or (ii) the Borrowing Base, whichever is less. Amounts borrowed under this
Section 2.2 may be repaid and reborrowed during the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Eastern time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as EXHIBIT B. Bank will credit Advances to
---------
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to that reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
2.3 Overadvances. If Borrower's Obligations under Section 2.1 exceed the
------------
lesser of either (i) the Committed Revolving Line or (ii) the Borrowing Base,
Borrower must immediately pay in cash to Bank the excess.
1
<PAGE>
2.4 Interest Rate; Payments.
-----------------------
(a) Interest Rate. Advances accrue interest on the outstanding
--------------
principal balance at a per annum rate one and one half (1.5%) percentage points
above the Prime Rate. After an Event of Default, Obligations accrue interest at
five percent (5%) above the rate effective immediately before the Event of
Default. The interest rate increases or decreases when the Prime Rate changes.
Interest is computed on a 360-day year for the actual number of days elapsed.
(b) Payments. Interest is payable on the fifth day of each month. Bank
--------
may debit any of Borrower's deposit accounts including Account Number
-----------
for principal and interest payments or any amounts Borrower owes Bank. Bank will
notify Borrower when it debits Borrower's accounts. These debits are not a
set-off. Payments received after 3:00 p.m. Eastern time are considered received
at the opening of business on the next Business Day. When a payment is due on a
day that is not a Business Day, the payment is due the next Business Day and
additional fees or interest accrue.
2.5 Fees. Borrower will pay to Bank:
----
(a) Facility Fee. A fully earned, non-refundable facility fee of
-------------
ONE THOUSAND and 00/100 DOLLARS ($1,000.00) due on the Closing Date; and
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys'
-------------
fees and expenses for documentation and negotiation of this Agreement) incurred
through and after the Closing Date when due.
3. CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Advance. Bank's obligation to make the
---------------------------------------
initial Advance is subject to the condition precedent that it receive the
agreements, documents and fees it requires and the receipt of the results of a
satisfactory audit of the Borrower's Books and Records and the Collateral.
3.2 Conditions Precedent to all Advances. Bank's obligations to make each
------------------------------------
Advance, including the initial Advance, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of
each Advance and no Event of Default may have occurred and be continuing,
or result from the Advance. Each Advance is Borrower's representation and
warranty on that date that the representations and warranties in Section 5
remain true.
4. CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest. Borrower grants Bank a continuing security
--------------------------
interest in all presently existing and later acquired Collateral to secure all
Obligations and performance of each of Borrower's duties under the Loan
Documents. Except for Permitted Liens, any security interest will be a first
priority security interest in the Collateral. Bank may place a "hold"
2
<PAGE>
on any deposit account pledged as Collateral. If the Agreement is terminated,
Bank's lien and security interest in the Collateral will continue until Borrower
fully satisfies its Obligations.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Authorization. Borrower and each Subsidiary is
------------------------------------
duly existing and in good standing in its state of formation and qualified and
licensed to do business in, and in good standing in, any state in which the
conduct of its business or its ownership of property requires that it be
qualified.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could cause a Material Adverse Change.
5.2 Collateral. Borrower has good title to the Collateral, free of Liens
----------
except Permitted Liens. The Eligible Accounts are bona fide, existing
obligations, and the service or property has been performed or delivered to the
account debtor or its agent for immediate shipment to and unconditional
acceptance by the account debtor. Borrower has no notice of any actual or
imminent Insolvency Proceeding of any account debtor whose accounts are an
Eligible Account in any Borrowing Base Certificate. All Inventory is in all
material respects of good and marketable quality, free from material defects.
Borrower is the sole owner of the Intellectual Property, except for
non-exclusive licenses granted to its customers in the ordinary course of
business. Each Patent is valid and enforceable and no part of the Intellectual
Property has been judged invalid or unenforceable, in whole or in part, and no
claim has been made that any part of the Intellectual Property violates the
rights of any third party.
5.3 Litigation. There are no actions or proceedings pending or, to
----------
Borrower's knowledge, threatened by or against Borrower or any Subsidiary in
which an adverse decision could cause a Material Adverse Change.
5.4 No Material Adverse Change in Financial Statements. All consolidated
---------------------------------------------------
financial statements for Borrower and any Subsidiary delivered to Bank fairly
present in all material respects Borrower's consolidated financial condition and
Borrower's consolidated results of operations. There has not been any material
deterioration in Borrower's consolidated financial condition since the date of
the most recent financial statements submitted to Bank.
5.5 Solvency. The fair salable value of Borrower's assets (including
--------
goodwill minus disposition costs) exceeds the fair value of its liabilities; the
Borrower is not left with unreasonably small capital after the transactions in
this Agreement; and Borrower is able to pay its debts (including trade debts) as
they mature.
5.6 Regulatory Compliance. Borrower is not an "investment company" or a
----------------------
company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrower has complied with the Federal Fair Labor Standards Act.
Borrower has not violated any laws,
3
<PAGE>
ordinances or rules, the violation of which could cause a Material Adverse
Change. None of Borrower's or any Subsidiary's properties or assets has been
used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by
previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each Subsidiary has
timely filed all required tax returns and paid, or made adequate provision to
pay, all material taxes. Borrower and each Subsidiary has obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all government authorities that are necessary to continue
its business as currently conducted, except where the failure to do so could not
reasonably be expected to cause a Material Adverse Change.
5.7 Subsidiaries. Borrower does not own any stock, partnership interest or
------------
other equity securities except for Permitted Investments.
5.8 Full Disclosure. No representation, warranty or other statement of
---------------
Borrower in any certificate or written statement given to Bank contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the certificates or statements not
misleading.
6. AFFIRMATIVE COVENANTS
---------------------
Borrower will do all of the following:
6.1 Government Compliance. Borrower will maintain its and all Subsidiaries'
---------------------
corporate existence and good standing in its jurisdiction of incorporation and
maintain qualification in each jurisdiction in which the failure to so qualify
could have a material adverse effect on Borrower's business or operations.
Borrower will comply, and have each Subsidiary comply, with all laws, ordinances
and regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower's business or operations or cause a Material
Adverse Change.
6.2 Financial Statements, Reports, Certificates.
-------------------------------------------
(a) Borrower will deliver to Bank: (i) as soon as available, but no
later than thirty (30) days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period, in a form acceptable to Bank and certified by a
Responsible Officer; (ii) as soon as available, but no later than ninety (90)
days after the end of Borrower's fiscal year, audited, consolidated financial
statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm acceptable to Bank; (iii) within five (5) days of filing,
copies of all statements, reports and notices made available to Borrower's
security holders or to any holders of Subordinated Debt and all reports on Form
10-K, 10-Q and 8-K filed with the Securities and Exchange Commission; (iv) a
prompt report of any legal actions pending or threatened against Borrower or any
Subsidiary that could result in damages or costs to Borrower or any Subsidiary
of ONE HUNDRED THOUSAND and 00/100 DOLLARS ($100,000.00) or more; and (v)
budgets, sales projections, operating plans or other financial information Bank
reasonably requests.
(b) At such times as no Advances are outstanding, within twenty (20)
days after the last day of each month and at all other times, within ten (10)
days after the last day of
4
<PAGE>
each month, Borrower will deliver to Bank a Borrowing Base Certificate signed by
a Responsible Officer in the form of EXHIBIT C, with aged listings of accounts
---------
receivable and accounts payable.
(c) Within thirty (30) days after the last day of each month, Borrower
will deliver to Bank with the monthly financial statements required under
Section 6.2 (a)(i) above, a Compliance Certificate signed by a Responsible
Officer in the form of EXHIBIT D.
---------
(d) Bank has the right to audit Borrower's Accounts at Borrower's
expense, but the audits will be conducted no more often than once every twelve
(12) months if no Advances are outstanding under the Committed Revolving Line,
once every six (6) months at all other times, unless an Event of Default has
occurred and is continuing.
6.3 Inventory; Returns. Borrower will keep all Inventory in good and
-------------------
marketable condition, free from material defects. Returns and allowances between
Borrower and its account debtors will follow Borrower's customary practices as
they exist at the Closing Date. Borrower must promptly notify Bank of all
returns, recoveries, disputes and claims that involve more than FIFTY THOUSAND
and 00/100 DOLLARS ($50,000.00).
6.4 Taxes. Borrower will make, and cause each Subsidiary to make, timely
-----
payment of all material federal, state, and local taxes or assessments and will
deliver to Bank, on demand, appropriate certificates attesting to the payment.
6.5 Insurance. Borrower will keep its business and the Collateral insured
---------
for risks and in amounts, as Bank requests. Insurance policies will be in a
form, with companies, and in amounts that are satisfactory to Bank. All property
policies will have a lender's loss payable endorsement showing Bank as a loss
payee and all liability policies will show the Bank as an additional insured and
provide that the insurer must give Bank at least twenty (20) days notice before
canceling its policy. At Bank's request, Borrower will deliver certified copies
of policies and evidence of all premium payments. Proceeds payable under any
policy will, at Bank's option, be payable to Bank on account of the Obligations.
6.6 Primary Accounts. Borrower will maintain its primary depository and
----------------
operating accounts with Bank.
6.7 Financial Covenants.
-------------------
Borrower will maintain as of the last day of each month, unless otherwise
noted:
(a) Quick Ratio. A ratio of Quick Assets to Current Liabilities minus
-----------
deferred revenues of at least 2.0 to 1.0.
(b) Tangible Net Worth. A Tangible Net Worth plus Subordinated Debt of
------------------
at least $1,750,000.
6.8 Further Assurances. Borrower will execute any further instruments and
------------------
take further action as Bank requests to perfect or continue Bank's security
interest in the Collateral or to effect the purposes of this Agreement.
5
<PAGE>
7. NEGATIVE COVENANTS
------------------
Borrower will not do any of the following without the Bank's written
consent, which will not be unreasonably withheld:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
------------
(collectively a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than a Transfer (i) of Inventory
in the ordinary course of business; (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; or (iii) of worn-out or obsolete Equipment.
7.2 Changes in Business, Ownership, Management or Business Locations.
----------------------------------------------------------------------
Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower or have a material change in its
ownership (other than the sale of Borrower's equity securities in a private or
public offering or if there is a change in the Borrower's chief financial
officer or chief executive officer and the Borrower fails to replace such person
with an officer acceptable to Bank in its reasonable discretion within ninety
(90) days. Borrower will not, without at least thirty (30) days prior written
notice to Bank, relocate its principal executive office or add any new offices
or business locations.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
-----------------------
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person except where (i) such transactions
do not in the aggregate exceed One Hundred Thousand Dollars ($100,000) and (ii)
no Event of Default has occurred and is continuing or would exist after giving
effect to the transactions. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness,
------------
or permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance. Create, incur, or allow any Lien on any of its property,
-----------
or assign or convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit Bank's first priority security interest in the Collateral to
change.
7.6 Investments; Distributions. (i) Directly or indirectly acquire or own
---------------------------
any Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so; or (ii) pay any
dividends or make any distribution or payment or redeem, retire or purchase any
capital stock, except to existing holders of preferred stock and for repurchases
of stock from former employees or directors of Borrower under the terms of
applicable repurchase agreements in an aggregate amount not to exceed FIFTY
THOUSAND DOLLARS ($50,000) in the aggregate in any fiscal year, provided that no
Event of Default has occurred, is continuing or would exist after giving effect
to the repurchases.
7.7 Transactions with Affiliates. Directly or indirectly enter or permit
------------------------------
any material transaction with any Affiliate, except transactions that are in the
ordinary course of Borrower's business, on terms less favorable to Borrower than
would be obtained in an arm's length transaction with a non-affiliated Person.
6
<PAGE>
7.8 Subordinated Debt. Make or permit any payment on any Subordinated Debt,
-----------------
except under the terms of the Subordinated Debt, or amend any provision in any
document relating to the Subordinated Debt, without Bank's prior written
consent.
7.9 Compliance. Undertake as one of its important activities extending
----------
credit to purchase or carry margin stock, or use the proceeds of any Advance for
that purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could have a material adverse effect on Borrower's
business or operations or cause a Material Adverse Change, or permit any of its
Subsidiaries to do so.
8. EVENTS OF DEFAULT
-----------------
Any one of the following is an Event of Default:
8.1 Payment Default. Borrower fails to pay any of the Obligations within
----------------
three (3) days after their due date. During the additional period the failure to
cure the default is not an Event of Default (but no Advances will be made during
the cure period);
8.2 Covenant Default. Borrower does not perform any obligation in Section 6
----------------
or violates any covenant in Article 7 or does not perform or observe any other
material term, condition or covenant in this Agreement, any Loan Documents, or
in any agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within ten
(10) days after it occurs, or if the default cannot be cured within ten (10)
days or cannot be cured after Borrower's attempts in the ten (10) day period,
and the default may be cured within a reasonable time, then Borrower has an
additional time, (of not more than thirty (30) days) to attempt to cure the
default. During the additional period the failure to cure the default is not an
Event of Default (but no Credit Extensions will be made during the cure period);
8.3 Material Adverse Change. A material impairment in the perfection or
-------------------------
priority of Bank's security interest in the Collateral or in the value of such
Collateral which is not covered by adequate insurance occurs; or Bank
determines, based upon information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrower will fail to
comply with one or more of the financial covenants in Section 6 during the next
succeeding financial reporting period;
8.4 Attachment. (i) Any material portion of Borrower's assets is attached,
----------
seized, levied on, or comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in ten (10) days; (ii) Borrower is
enjoined, restrained, or prevented by court order from conducting a material
part of its business; (iii) a judgment or other claim becomes a Lien on a
material portion of Borrower's assets; or (iv) a notice of lien, levy, or
assessment is filed against any of Borrower's assets by any government agency
and not paid within ten (10) days after Borrower receives notice. These are not
Events of Default if stayed or if a bond is posted pending contest by Borrower
(but no Advances will be made during the cure period);
7
<PAGE>
8.5 Insolvency. (i) Borrower becomes insolvent; (ii) Borrower begins an
----------
Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against
Borrower and not dismissed or stayed within sixty (60) days (but no Credit
Extensions will be made before any Insolvency Proceeding is dismissed);
8.6 Misrepresentations. If Borrower or any Person acting for Borrower makes
------------------
any material misrepresentation or material misstatement now or later in any
warranty or representation in this Agreement or in any communication delivered
to Bank or to induce Bank to enter this Agreement or any Loan Document.
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies. When an Event of Default occurs and continues Bank
-------------------
may, without notice or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requests and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral; and
(g) Dispose of the Collateral according to the Code.
9.2 Power of Attorney. When an Event of Default occurs and continues,
------------------
Borrower irrevocably appoints Bank as its lawful attorney to: (i) endorse
Borrower's name on any checks or other forms of payment or security; (ii) sign
Borrower's name on any invoice or bill of lading for any Account or drafts
against account debtors, (iii) make, settle, and adjust all claims under
Borrower's insurance policies; (iv) settle and adjust disputes and claims about
the Accounts directly with account debtors, for amounts and on terms Bank
determines reasonable; and (v) transfer the Collateral into the name of Bank or
a third party as the Code permits. Bank may exercise the power of attorney to
sign Borrower's name on any documents necessary to perfect
8
<PAGE>
or continue the perfection of any security interest regardless of whether an
Event of Default has occurred. Bank's appointment as Borrower's attorney in
fact, and all of Bank's rights and powers, coupled with an interest, are
irrevocable until all Obligations have been fully repaid and performed and
Bank's obligation to provide Credit Extensions terminates.
9.3 Accounts Collection. When an Event of Default occurs and continues,
--------------------
Bank may notify any Person owing Borrower money of Bank's security interest in
the funds and verify the amount of the Account. Borrower must collect all
payments in trust for Bank and, if requested by Bank, immediately deliver the
payments to Bank in the form received from the account debtor, with proper
endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amount or furnish any
--------------
required proof of payment to third persons Bank may make all or part of the
payment or obtain insurance policies required in Section 6.5, and take any
action under the policies Bank deems prudent. Any amounts paid by Bank are Bank
Expenses and immediately due and payable, bearing interest at the then
applicable rate and secured by the Collateral. No payments by Bank are deemed an
agreement to make similar payments in the future or Bank's waiver of any Event
of Default.
9.5 Bank's Liability for Collateral. If Bank complies with reasonable
---------------------------------
banking practices, it is not liable or responsible for: (a) the safekeeping of
the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in
the value of the Collateral; or (d) any act or default of any carrier,
warehouseman, bailee, or other person. Borrower bears all risk of loss, damage
or destruction of the Collateral.
9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement,
--------------------
the Loan Documents, and all other agreements are cumulative. Bank has all rights
and remedies provided under the Code, by law, or in equity. Bank's exercise of
one right or remedy is not an election, and Bank's waiver of any Event of
Default is not a continuing waiver. Bank's delay is not a waiver, election, or
acquiescence. No waiver is effective unless signed by Bank and then is only
effective for the specific instance and purpose for which it was given.
9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor,
-------------
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guaranties held by Bank on which Borrower is
liable.
10. NOTICES
-------
All notices or demands by any party to this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile at the addresses listed at the beginning of this Agreement.
A party may change its notice address by giving the other party written notice.
9
<PAGE>
11. CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER
-------------------------------------------
Pennsylvania law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Pennsylvania, provided, however that if for any
reason Bank cannot avail itself of the courts of Pennsylvania, Borrower accepts
jurisdiction of the courts and venue in Santa Clara County, California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE
LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT,
TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL
INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12. GENERAL PROVISIONS
------------------
12.1 Successors and Assigns. This Agreement binds and is for the benefit of
----------------------
the successors and permitted assigns of each party. Borrower may not assign this
Agreement or any rights or Obligations under it without Bank's prior written
consent which may be granted or withheld in Bank's discretion. Bank has the
right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits under this Agreement, the Loan Documents
or any related agreement.
12.2 Indemnification. Borrower will indemnify, defend and hold harmless
---------------
Bank and its officers, employees and agents against: (a) all obligations,
demands, claims, and liabilities asserted by any other party in connection with
the transactions contemplated by the Loan Documents; and (b) all losses or Bank
Expenses incurred, or paid by Bank from, following, or consequential to
transactions between Bank and Borrower (including reasonable attorneys' fees and
expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
12.3 Time of Essence. Time is of the essence for the performance of all
---------------
Obligations in this Agreement.
12.4 Severability of Provision. Each provision of this Agreement is
---------------------------
severable from every other provision in determining the enforceability of any
provision.
12.5 Amendments in Writing, Integration. All amendments to this Agreement
----------------------------------
must be in writing signed by both Bank and Borrower. This Agreement and the Loan
Documents represent the entire agreement about this subject matter, and
supersedes prior or contemporaneous negotiations or agreements. All prior or
contemporaneous agreements, understandings, representations, warranties, and
negotiations between the parties about the subject matter of this Agreement and
the Loan Documents merge into this Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, are one
Agreement.
10
<PAGE>
12.7 Survival. All covenants, representations and warranties made in this
--------
Agreement continue in full force while any Obligations remain outstanding. The
obligations of Borrower in Section 12.2 to indemnify Bank will survive until all
statutes of limitations for actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information, Bank will
---------------
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank's
subsidiaries or affiliates in connection with their present or prospective
business relations with Borrower; (ii) to prospective transferees or purchasers
of any interest in the Loans; (iii) as required by law, regulation, subpoena, or
other order, (iv) as required in connection with Bank's examination or audit;
and (v) as Bank considers appropriate in exercising remedies under this
Agreement. Confidential information does not include information that either:
(a) is in the public domain or in Bank's possession when disclosed to Bank, or
becomes part of the public domain after disclosure to Bank; or (b) is disclosed
to Bank by a third party, if Bank does not know that the third party is
prohibited from disclosing the information.
12.9 Attorneys' Fees, Costs and Expenses. In any action or proceeding
-------------------------------------
between Borrower and Bank arising out of the Loan Documents, the prevailing
party will be entitled to recover its reasonable attorneys' fees and other costs
and expenses incurred, in addition to any other relief to which it may be
entitled, whether or not a lawsuit is filed.
13. DEFINITIONS
-----------
13.1 Definitions.
-----------
"Accounts" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" is a loan advance (or advances) under the Committed
Revolving Line.
"Affiliate" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"Bank Expenses" are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"Borrower's Books" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.
11
<PAGE>
"Borrowing Base" is seventy five percent (75%) of Eligible Accounts, as
determined by Bank from Borrower's most recent Borrowing Base Certificate.
"Business Day" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"Closing Date" is the date of this Agreement.
"Code" is the Pennsylvania Uniform Commercial Code.
"Collateral" is the property described on Exhibit A.
---------
"Committed Revolving Line" is a Credit Extension of $250,000, provided,
however, from and after such times as Borrower achieves EBITDA exceeding $75,000
for two (2) consecutive fiscal quarters and at all times thereafter, the
Committed Revolving Line shall mean a Credit Extension of up to $500,000.
"Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"Copyrights" are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"Credit Extension" is each Advance or any other extension of credit by Bank
for Borrower's benefit.
"Current Assets" are amounts that under GAAP should be included on that
date as current assets on Borrower's consolidated balance sheet.
"Current Liabilities" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
12
<PAGE>
"EBITDA" means as to the Borrower for any period of determination thereof,
the sum of (a) the net profit (or loss) determined in accordance with GAAP
consistently applied, plus (b) interest expense and tax expense for such period,
plus (c) depreciation and amortization of assets for such period, minus, all
dividends, withdrawals and non cash income.
"Eligible Accounts" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5.2;
but Bank may change eligibility standards by giving Borrower thirty (30) days
prior written notice. Unless Bank agrees otherwise in writing, Eligible Accounts
will not include:
(a) Accounts that the account debtor has not paid within ninety (90)
days of invoice date;
(b) Accounts for an account debtor, fifty percent (50%) or more of
whose Accounts have not been paid within ninety (90) days of invoice date;
(c) Credit balances over ninety (90) days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed twenty-five percent (25%) of all Accounts, for
the amounts that exceed that percentage, unless Bank approves in writing;
(e) Accounts for which the account debtor does not have its principal
place of business in the United States;
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality;
(g) Accounts for which Borrower owes the account debtor, but only up
to the amount owed (sometimes called "contra" accounts, accounts payable,
customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on approval, bill
and hold, or other terms if account debtor's payment may be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes
any claim and Bank believes there may be a basis for dispute (but only up to the
disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
"Equipment" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
13
<PAGE>
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"GAAP" is generally accepted accounting principles.
"Indebtedness" is (a) indebtedness for borrowed money or the deferred price
of property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"Insolvency Proceeding" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Intellectual Property" is:
(a) Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;
(b) Any trade secrets and any Intellectual Property Rights in computer
software and computer software products now or later existing, created, acquired
or held;
(c) All design rights which may be available to Borrower now or later
created, acquired or held;
(d) Any claims for damages (past, present or future) for infringement
of any of the rights above, with the right, but not the obligation, to sue and
collect damages for use or infringement of the intellectual property rights
above;
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
"Inventory" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"Investment" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" are, collectively, this Agreement, the Note, any note, or
notes or guaranties executed by Borrower, and any other present or future
agreement between
14
<PAGE>
Borrower and/or for the benefit of Bank in connection with this Agreement, all
as amended, extended or restated.
"Material Adverse Change" has been defined in Section 8.3 hereof.
"Maturity Date" is the Revolving Maturity Date.
"Note" means that certain Revolving Promissory Note of even date herewith
from the Borrower in favor of the Bank as the same may be amended, supplemented,
restated or modified from time to time.
"Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit and foreign
exchange contracts, if any, and including interest accruing after Insolvency
Proceedings begin and debts, liabilities, or obligations of Borrower assigned to
Bank.
"Patents" are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
"Permitted Indebtedness" is:
(a) Borrower's indebtedness to Bank under this Agreement or the Loan
Documents;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course
of business; and
(e) Indebtedness secured by Permitted Liens;
(f) Indebtedness of Borrower to any Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of Borrower (provided
that the primary obligations are not prohibited hereby), and Indebtedness of any
Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary
with respect to obligations of any other Subsidiary (provided that the primary
obligations are not prohibited hereby);
(g) Other Indebtedness not otherwise permitted by Section 7.4 not
exceeding FIFTY THOUSAND and 00/100 DOLLARS ($50,000.00) in the aggregate
outstanding at any time; and
(h) Extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (f) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
15
<PAGE>
"Permitted Investments" are:
(a) Investments shown on the Schedule and existing on the Closing
Date; and
(b) marketable direct obligations issued or unconditionally guaranteed
by the United States or its agency or any State maturing within one (1) year
from its acquisition, (ii) commercial paper maturing no more than one (1) year
after its creation and having the highest rating from either Standard & Poor's
Corporation or Moody's Investors Service, Inc., and (iii) Bank's certificates of
deposit issued maturing no more than one (1) year after issue, and (iv) any
Investments permitted by Borrower's investment policy, as amended from time to
time, provided that such investment policy (and any such amendment thereto) has
been approved by Bank;
(c) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of Borrower;
(d) Investments accepted in connection with Transfers permitted by
Section 7.1;
(e) Investments of Subsidiaries in or to other Subsidiaries or
Borrower and Investments by Borrower in Subsidiaries not to exceed FIFTY
THOUSAND and 00/100 DOLLARS ($50,000.00) in the aggregate in any fiscal year
(f) Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower's Board of
Directors
(g) Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business;
(h) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business; provided that this paragraph (h)
shall not apply to Investments of Borrower in any Subsidiary;
(i) Joint ventures or strategic alliances consisting of the licensing
of technology, the development of technology or the providing of technical
support, provided that any cash investments by Borrower do not exceed FIFTY
THOUSAND and 00/100 DOLLARS ($50,000.00) in the aggregate in any fiscal year;
and
(j) Other Investments not otherwise permitted by Section 7.7 not
exceeding FIFTY THOUSAND and 00/100 DOLLARS ($50,000.00) in the aggregate
outstanding at any time.
16
<PAGE>
"Permitted Liens" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;
(d) Leases or subleases and licenses or sublicenses granted in the
ordinary course of Borrower's business, if the leases, subleases, licenses and
sublicenses permit granting Bank a security interest;
(e) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;
(f) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.4 or 8.7;
(g) Liens in favor of other financial institutions arising in
connection with Borrower's deposit accounts held at such institutions, provided
that Bank has a perfected security interest in the amounts held in such deposit
accounts; and
(h) Other Liens not described above arising in the ordinary course of
business and not having or not reasonably likely to have a material adverse
effect on Borrower and its Subsidiaries taken as a whole.
"Person" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"Prime Rate" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.
"Quick Assets" is, on any date, the Borrower's consolidated, unrestricted
cash, cash equivalents, total trade accounts receivable and investments with
maturities of less than twelve (12) months determined according to GAAP.
"Responsible Officer" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" is August 5, 2000.
17
<PAGE>
"Schedule" is any attached schedule of exceptions.
"Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's
debt to Bank (and identified as subordinated by Borrower and Bank).
"Subsidiary" is for any Person, joint venture, or any other business entity
of which more than fifty percent (50%) of the voting stock or other equity
interests is owned or controlled, directly or indirectly, by the Person or one
or more Affiliates of the Person.
"Tangible Net Worth" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
-----
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities plus Subordinated Debt.
---
"Total Liabilities" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
"Trademarks" are trademark and service mark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Borrower connected with the trademarks.
[SIGNATURES BEGIN ON NEXT PAGE]
18
<PAGE>
BORROWER: BANK:
BIO-IMAGING TECHNOLOGIES, INC., SILICON VALLEY BANK,
a Delaware corporation a California chartered bank
--------
By: /s/ Robert J. Phillips By: /s/ Ash R. Lilani
------------------------------------ -------------------------------
Print Name: Robert J. Phillips Ash R. Lilani
Title: Vice President & Chief Financial Senior Vice President
Officer
SILICON VALLEY BANK
By:
--------------------------------
Name:
Title:
19
<PAGE>
EXHIBIT A
---------
DESCRIPTION OF COLLATERAL
-------------------------
The Collateral consists of all of Borrower's right, title and interest in
and to the following:
All goods and equipment now owned or hereafter acquired, including, without
limitation, all machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
20
<PAGE>
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
21
<PAGE>
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
-------------------------------------------
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., E.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
-----------------
FAX#: ( ) - TIME:
--- --- ---- -----------------
- --------------------------------------------------------------------------------
FROM:
---------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
-------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
-----------------------------------------------------------
PHONE NUMBER:
-------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
------------------------- -------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
- -------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $
-------------------------------------
PRINCIPAL PAYMENT (ONLY) $
-------------------------------------
INTEREST PAYMENT (ONLY) $
-------------------------------------
PRINCIPAL AND INTEREST (PAYMENT) $
-------------------------------------
OTHER INSTRUCTIONS:
-------------------------------------------------------------
- --------------------------------------------------------------------------------
All Borrower's representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone request for and Advance confirmed by this Borrowing Certificate; but
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of that date.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
- ------------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
- -------------------------------------- ------------------------------
Authorized Requester Phone #
- -------------------------------------- ------------------------------
Received By (Bank) Phone #
----------------------------------------
Authorized Signature (Bank)
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT C
---------
BORROWING BASE CERTIFICATE
--------------------------
================================================================================
Borrower: BIO-IMAGING TECHNOLOGIES, INC. Lender: Silicon Valley Bank
Commitment Amount: up to $500,000
================================================================================
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $
-------- -------------------
2. Additions (please explain on reverse) $
-------------------
3. TOTAL ACCOUNTS RECEIVABLE $
-------------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
-------------------
5. Balance of 50% over 90 day accounts $
-------------------
6. Credit balances over 90 days $
-------------------
7. Concentration Limits $
-------------------
8. Foreign Accounts $
-------------------
9. Governmental Accounts $
-------------------
10. Contra Accounts $
-------------------
11. Promotion or Demo Accounts $
-------------------
12. Intercompany/Employee Accounts $
-------------------
13. Other (please explain on reverse) $
-------------------
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
-------------------
15. Eligible Accounts (#3 minus #14) $
-------------------
16. LOAN VALUE OF ACCOUNTS ( 75% of #15) $
-------------------
BALANCES
17. Maximum Loan Amount ($500,000 or $250,000) $
-------------------
18. Total Funds Available [Lesser of #17 or #16] $
-------------------
19. Present balance owing on Line of Credit $
-------------------
20. Outstanding under Sublimits ( ) $
-------------------
21. RESERVE POSITION (#17 minus #19 and #20) $
-------------------
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
COMMENTS:
By:
-------------------------------
Authorized Signer
<PAGE>
EXHIBIT D
---------
COMPLIANCE CERTIFICATE
----------------------
TO: SILICON VALLEY BANK
FROM: BIO-IMAGING TECHNOLOGIES, INC.
The undersigned authorized officer of BIO-IMAGING TECHNOLOGIES, INC.
certifies that under the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the "Agreement"), (i) Borrower is in complete
compliance for the period ending with all required covenants
-----------------
except as noted below and (ii) all representations and warranties in the
Agreement are true and correct in all material respects on this date. Attached
are the required documents supporting the certification. The Officer certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) consistently applied from one period to the next except as
explained in an accompanying letter or footnotes. The Officer acknowledges that
no borrowings may be requested at any time or date of determination that
Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R Agings Monthly within 30 days Yes No
10k and 10Q Within 5 days Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio 2.00:1.0 :1.0 Yes No
-----
Minimum Tangible Net Worth $1,750,000 $ Yes No
--------
---------------------------------
Comments Regarding Exceptions: See Attached. BANK USE ONLY
Received by:
---------------------
Sincerely, AUTHORIZED SIGNER
Date:
========================================== ----------------------------
SIGNATURE
Verified:
------------------------
========================================== AUTHORIZED SIGNER
TITLE
Date:
----------------------------
==========================================
DATE Compliance Status: Yes No
---------------------------------
<PAGE>
REVOLVING PROMISSORY NOTE
-------------------------
$500,000 Radnor, Pennsylvania
August 10, 1999
FOR VALUE RECEIVED, the undersigned, BIO-IMAGING TECHNOLOGIES, INC., a
Delware corporation ("Borrower") promises to pay to the order of SILICON VALLEY
BANK, a California-chartered bank ("Bank"), at such place as the holder hereof
may designate, in lawful money of the United States of America, the aggregate
unpaid principal amount of all advances ("Advances") made by Bank to Borrower in
accordance with the terms and conditions of the Loan and Security Agreement
between Borrower and Bank of even date herewith, as amended from time to time
(the "Loan Agreement"), up to a maximum principal amount of Five Hundred
Thousand Dollars ($500,000) ("Principal Sum"), or so much thereof as may be
advanced or readvanced and remains unpaid. Borrower shall also pay interest on
the aggregate unpaid principal amount of such Advances, as follows:
Commencing as of the date hereof and continuing until repayment in full of
all sums due hereunder, the unpaid Principal Sum shall bear interest at the
variable rate of interest, per annum, most recently announced by Bank as its
"prime rate," whether or not such announced rate is the lowest rate available
from Bank (the "Prime Rate"), plus one and one half percent (1.50%) per annum.
The rate of interest charged under this Note shall change immediately and
contemporaneously with any change in the Prime Rate. All interest payable under
the terms of this Note shall be calculated on the basis of a 360-day year and
the actual number of days elapsed.
The unpaid Principal Sum, together with interest thereon at the rate or
rates provided above, shall be payable as follows:
(a) Interest only on the unpaid principal amount shall be due and
payable monthly in arrears, commencing September 5, 1999, and continuing on the
same day of each calendar month thereafter to maturity; and
(b) Unless sooner paid, the unpaid Principal Sum, together with
interest accrued and unpaid thereon, shall be due and payable in full on August
5, 2000.
The fact that the balance hereunder may be reduced to zero from time to
time pursuant to the Loan Agreement will not affect the continuing validity of
this Note or the Loan Agreement, and the balance may be increased to the
Principal Sum after any such reduction to zero.
This Note is the "Note" described in the Loan Agreement, to which reference
is hereby made for a more complete statement of the terms and conditions under
which the loans and advances evidenced hereby are made. This Note is secured as
provided in the Loan Agreement.
<PAGE>
All capitalized terms used herein and not otherwise defined shall have the
meanings given to such terms in the Loan Agreement.
Borrower irrevocably waives the right to direct the application of any and
all payments at any time hereafter received by Bank from or on behalf of
Borrower and Borrower irrevocably agrees that Bank shall have the continuing
exclusive right to apply any and all such payments against the then due and
owing obligations of Borrower as Bank may deem advisable. In the absence of a
specific determination by Bank with respect thereto, all payments shall be
applied in the following order: (a) then due and payable fees and expenses; (b)
then due and payable interest payments and mandatory prepayments; and (c) then
due and payable principal payments and optional prepayments.
Bank is hereby authorized by Borrower to endorse on Bank's books and
records each Advance made by Bank under this Note and the amount of each payment
or prepayment of principal of each such Advance received by Bank; it being
understood, however, that failure to make any such endorsement (or any error in
notation) shall not affect the obligations of Borrower with respect to Advances
made hereunder, and payments of principal by Borrower shall be credited to
Borrower notwithstanding the failure to make a notation (or any errors in
notation) thereof on such books and records.
The occurrence of any one or more of the following events shall constitute
an event of default (individually, an "Event of Default" and collectively, the
"Events of Default") under the terms of this Note:
(a) The failure of Borrower to pay to Bank when due any and all
amounts payable by Borrower to Bank under the terms of this Note, which failure
continues for three (3) days; or
(b) The occurrence of an event of default (as defined therein) under
the terms and conditions of any of the other Loan Documents.
Upon the occurrence of an Event of Default, at the option of Bank, all
amounts payable by Borrower to Bank under the terms of this Note shall
immediately become due and payable by Borrower to Bank without notice to
Borrower or any other person, and Bank shall have all of the rights, powers, and
remedies available under the terms of this Note, any of the other Loan Documents
and all applicable laws. Borrower and all endorsers, guarantors, and other
parties who may now or in the future be primarily or secondarily liable for the
payment of the indebtedness evidenced by this Note hereby severally waive
presentment, protest and demand, notice of protest, notice of demand and of
dishonor and non-payment of this Note and expressly agree that this Note or any
payment hereunder may be extended from time to time without in any way affecting
the liability of Borrower, guarantors and endorsers.
2
<PAGE>
Borrower promises to pay all costs and expense of collection of this Note
and to pay all reasonable attorneys' fees incurred in such collection, whether
or not there is a suit or action, or in any suit or action to collect this Note
or in any appeal thereof. Borrower waives presentment, demand, protest, notice
of protest, notice of dishonor, notice of nonpayment, and any and all other
notices and demands in connection with the delivery, acceptance, performance
default or enforcement of this Note, as well as any applicable statutes of
limitations. No delay by Bank in exercising any power or right hereunder shall
operate as a waiver of any power or right. Time is of the essence as to all
obligations hereunder.
This Note is issued pursuant to the Loan Agreement, which shall govern the
rights and obligations of Borrower with respect to all obligations hereunder.
Borrower acknowledges and agrees that this Note shall be governed by the
laws of the Commonwealth of Pennsylvania, excluding conflicts of laws
principles, even though for the convenience and at the request of Borrower, this
Note may be executed elsewhere.
BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF PENNSYLVANIA IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND, AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF PENNSYLVANIA, BORROWER ACCEPTS JURISDICTION OF THE COURTS AND
VENUE IN SANTA CLARA COUNTY, CALIFORNIA. BORROWER AND BANK EACH HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND
AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO
ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
3
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be executed under seal
by its duly authorized officers as of the date first written above.
WITNESS/ATTEST: BIO-IMAGING TECHNOLOGIES, INC.
/s/ William J. Thomas By: /s/ Robert J. Phillips (SEAL)
- ------------------------------ -----------------------------
Name: Robert J. Phillips
Title: Vice President & Chief Financial
Officer
4
SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, Ca. 95054
(408) 654-1000 - Fax (408) 980-6410
ACCOUNTS RECEIVABLE PURCHASE AGREEMENT
This Accounts Receivable Purchase Agreement (the "Agreement") is made on
this TWENTY SECOND day of DECEMBER 1999, by and between Silicon Valley Bank
("Buyer") having a place of business at the address specified above and
BIO-IMAGING TECHNOLOGIES, INC., a DELAWARE corporation, ("Seller") having its
principal place of business and chief executive office at 830 Bear Tavern Road,
West Trenton, New Jersey 08628.
1. DEFINITIONS. When used herein, the following terms shall have the
following meanings.
1.1. "Account Balance" shall mean, on any given day, the gross amount of
all Purchased Receivables unpaid on that day.
1.2. "Account Debtor" shall have the meaning set forth in the California
Uniform Commercial Code and shall include any person liable on any Purchased
Receivable, including without limitation, any guarantor of the Purchased
Receivable and any issuer of a letter of credit or banker's acceptance.
1.3. "Adjustments" shall mean all discounts, allowances, returns, disputes,
counterclaims, offsets, defenses, rights of recoupment, rights of return,
warranty claims, or short payments, asserted by or on behalf of any Account
Debtor with respect to any Purchased Receivable.
1.4. "Administrative Fee" shall have the meaning as set forth in
Section 3.3 hereof.
1.5. "Advance" shall have the meaning set forth in Section 2.2 hereof.
1.6. "Collateral" shall have the meaning set forth in Section 8 hereof
1.7. "Collections" shall mean all good funds received by Buyer from or on
behalf of an Account Debtor with respect to Purchased Receivables.
1.8 "Compliance Certificate" shall mean a certificate, in a form provided
by Buyer to Seller, which contains the certification of the chief financial
officer of Seller that, among other things, the representations and warranties
set forth in this Agreement are true and correct as of the date such certificate
is delivered.
1.9 "Current Assets" are amounts that under GAAP should be included on that
date as current assets on Seller's consolidated balance sheet.
1.10 "Deferred Maintenance Revenue" is all amounts received in advance of
performance under maintenance contracts and not yet recognized as revenue.
1.11. "Event of Default" shall have the meaning set forth in Section 9
hereof.
1.12. "Finance Charges" shall have the meaning set forth in Section 3.2
hereof.
1.13. "Invoice Transmittal" shall mean a writing signed by an authorized
representative of Seller which accurately identifies the receivables which
Buyer, at its election, may purchase, and includes for each such receivable the
correct amount owed by the Account Debtor, the name and address of the Account
Debtor, the invoice number, the invoice date and the account code.
1.14. "Obligations" shall mean all advances, financial accommodations,
liabilities, obligations, covenants and duties owing, arising, due or payable by
Seller to Buyer of any kind or nature, present or future, arising under or in
connection with this Agreement or under any other document, instrument or
agreement, whether or not evidenced by any note, guarantee or other instrument,
whether arising on account or by overdraft, whether direct or indirect
(including those acquired by assignment) absolute or contingent, primary or
secondary, due or to become due, now owing or hereafter arising, and however
acquired; including, without limitation, all Advances, Finance Charges,
Administrative Fees, interest, Repurchase Amounts, fees, expenses, professional
fees and attorneys' fees and any other sums chargeable to Seller hereunder or
otherwise.
1.15. "Purchased Receivables" shall mean all those accounts, receivables,
chattel paper, instruments, contract rights, documents, general intangibles,
letters of credit, drafts, bankers acceptances, and rights to payment, and all
proceeds thereof (all of the foregoing being referred to as "receivables"),
arising out of the invoices and other agreements identified on or delivered with
any Invoice Transmittal delivered by Seller to Buyer which Buyer elects to
purchase and for which Buyer makes an Advance.
1.16. "Refund" shall have the meaning set forth in Section 3.5 hereof.
1.17. "Reserve" shall have the meaning set forth in Section 2.4 hereof.
1.18. "Repurchase Amount" shall have the meaning set forth in Section 4.2
hereof.
1.19. "Reconciliation Date" shall mean the last calendar day of each
Reconciliation Period.
1.20 "Reconciliation Period" shall mean each calendar month of every year.
1.21 "Subordinated Debt" is debt occurred by Seller subordinated to
Seller's debt to Buyer (and identified as subordinated by Seller and Buyer .
1.22 "Total Liabilities" is on any day, obligations that should, under
GAAP, be classified as liabilities on Seller's consolidated balance sheet,
including all indebtedness, and current portion Subordinated Debt allowed to be
paid, but excluding all other Subordinated Debt.
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2. PURCHASE AND SALE OF RECEIVABLES.
2.1. OFFER TO SELL RECEIVABLES. During the term hereof, and provided that
there does not then exist any Event of Default or any event that with notice,
lapse of time or otherwise would constitute an Event of Default, Seller may
request that Buyer purchase receivables and Buyer may, in its sole discretion,
elect to purchase receivables. Seller shall deliver to Buyer an Invoice
Transmittal with respect to any receivable for which a request for purchase is
made. An authorized representative of Seller shall sign each Invoice Transmittal
delivered to Buyer. Buyer shall be entitled to rely on all the information
provided by Seller to Buyer on or with the Invoice Transmittal and to rely on
the signature on any Invoice Transmittal as an authorized signature of Seller.
2.2. ACCEPTANCE OF RECEIVABLES. Buyer shall have no obligation to purchase
any receivable listed on an Invoice Transmittal. Buyer may exercise its sole
discretion in approving the credit of each Account Debtor before buying any
receivable. Upon acceptance by Buyer of all or any of the receivables described
on any Invoice Transmittal, Buyer shall pay to Seller 80 (%) percent of the face
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amount of each receivable Buyer desires to purchase. Buyer will not net out
deferred revenue related to each specific Account Debtor, if Seller maintains as
of the last day of each quarter an adjusted Quick Ratio of at least 1.25 to 1.0.
Such payment shall be the "Advance" with respect to such receivable. Buyer may,
from time to time, in its sole discretion, change the percentage of the Advance.
Upon Buyer's acceptance of the receivable and payment to Seller of the Advance,
the receivable shall become a "Purchased Receivable." It shall be a condition to
each Advance that (i) all of the representations and warranties set forth in
Section 6 of this Agreement be true and correct on and as of the date of the
related Invoice Transmittal and on and as of the date of such Advance as though
made at and as of each such date, and (ii) no Event of Default or any event or
condition that with notice, lapse of time or otherwise would constitute an Event
of Default shall have occurred and be continuing, or would result from such
Advance. Notwithstanding the foregoing, in no event shall the aggregate amount
of all Purchased Receivables outstanding at any time exceed FIVE HUNDRED
THOUSAND DOLLARS ($500,000.00).
2.3. EFFECTIVENESS OF SALE TO BUYER. Effective upon Buyer's payment of an
Advance, and for and in consideration therefor and in consideration of the
covenants of this Agreement, Seller hereby absolutely sells, transfers and
assigns to Buyer, all of Seller's right, title and interest in and to each
Purchased Receivable and all monies due or which may become due on or with
respect to such Purchased Receivable. Buyer shall be the absolute owner of each
Purchased Receivable. Buyer shall have, with respect to any goods related to the
Purchased Receivable, all the rights and remedies of an unpaid seller under the
California Uniform Commercial Code and other applicable law, including the
rights of replevin, claim and delivery, reclamation and stoppage in transit.
2.4. ESTABLISHMENT OF A RESERVE. Upon the purchase by Buyer of each
Purchased Receivable, Buyer shall establish a reserve. The reserve shall be the
amount by which the face amount of the Purchased Receivable exceeds the Advance
on that Purchased Receivable (the "Reserve"); provided, the Reserve with respect
to all Purchased Receivables outstanding at any one time shall be an amount not
less than 20 (%) percent of the Account Balance at that time and may be set at a
------
higher percentage at Buyer's sole discretion. The reserve shall be a book
balance maintained on the records of Buyer and shall not be a segregated fund.
3. COLLECTIONS, CHARGES AND REMITTANCES.
3.1. COLLECTIONS. Upon receipt by Buyer of Collections, Buyer shall
promptly credit such Collections to Seller's Account Balance on a daily basis;
provided, that if Seller is in default under this Agreement, Buyer shall apply
all Collections to Seller's Obligations hereunder in such order and manner as
Buyer may determine. If an item of collection is not honored or Buyer does not
receive good funds for any reason, the amount shall be included in the Account
Balance as if the Collections had not been received and Finance Charges under
Section 3.2 shall accrue thereon.
3.2. FINANCE CHARGES. On each Reconciliation Date Seller shall pay to Buyer
a finance charge in an amount equal to 1.75 (%) percent per month of the average
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daily Account Balance outstanding during the applicable Reconciliation Period
(the "Finance Charges"). Buyer shall deduct the accrued Finance Charges from the
Reserve as set forth in Section 3.5 below.
3.3. ADMINISTRATIVE FEE. On each Reconciliation Date Seller shall pay to
Buyer an Administrative Fee equal to 1.00 (%) percent of the face amount of each
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Purchased Receivable first purchased during that Reconciliation Period (the
"Administrative Fee"). Buyer shall deduct the Administrative Fee from the
Reserve as set forth in Section 3.5 below.
3.4. ACCOUNTING. Buyer shall prepare and send to Seller after the close of
business for each Reconciliation Period, an accounting of the transactions for
that Reconciliation Period, including the amount of all Purchased Receivables,
all Collections, Adjustments, Finance Charges, and the Administrative Fee. The
accounting shall be deemed correct and conclusive unless Seller makes written
objection to Buyer within thirty (30) days after the Buyer mails the accounting
to Seller.
3.5. REFUND TO SELLER. Provided that there does not then exist an Event of
Default or any event or condition that with notice, lapse of time or otherwise
would constitute an Event of Default, Buyer shall refund to Seller by check
after the Reconciliation Date, the amount, if any, which Buyer owes to Seller at
the end of the Reconciliation Period according to the accounting prepared by
Buyer for that Reconciliation Period (the "Refund"). The Refund shall be an
amount equal to:
(A) (1) The Reserve as of the beginning of that Reconciliation
Period, PLUS
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(2) the Reserve created for each Purchased Receivable purchased
during that Reconciliation Period, MINUS
(B) The total for that Reconciliation Period of:
(1) the Administrative Fee;
(2) Finance Charges;
(3) Adjustments;
(4) Repurchase Amounts, to the extent Buyer has agreed to accept
payment thereof by deduction from the Refund;
(5) the Reserve for the Account Balance as of the first day of
the following Reconciliation Period in the minimum
percentage set forth in Section 2.4 hereof; and
(6) all amounts due, including professional fees and expenses,
as set forth in Section 12 for which oral or written demand
has been made by Buyer to Seller during that Reconciliation
Period to the extent Buyer has agreed to accept payment
thereof by deduction from the Refund.
In the event the formula set forth in this Section 3.5 results in an amount due
to Buyer from Seller, Seller shall make such payment in the same manner as set
forth in Section 4.3 hereof for repurchases. If the formula set forth in this
Section 3.5 results in an amount due to Seller from Buyer, Buyer shall make such
payment by check, subject to Buyer's rights under Section 4.3 and Buyer's rights
of offset and recoupment.
3.6 FACILITY FEE. A fully earned, non-refundable fee of $5,000.00 is due
upon the execution of this Agreement.
4. RECOURSE AND REPURCHASE OBLIGATIONS.
4.1. RECOURSE. Buyer's acquisition of Purchased Receivables from Seller
shall be with full recourse against Seller. In the event the Obligations exceed
the amount of Purchased Receivables and Collateral, Seller shall be liable for
any deficiency.
4.2. SELLER'S AGREEMENT TO REPURCHASE. Seller agrees to pay to Buyer on
demand, the full face amount, or any unpaid portion, of any Purchased
Receivable:
(A) which remains unpaid ninety (90) calendar days after the invoice
date; or
(B) which is owed by any Account Debtor who has filed, or has had
filed against it, any bankruptcy case, assignment for the benefit
of creditors, receivership, or insolvency proceeding or who has
become insolvent (as defined in the United States Bankruptcy
Code) or who is generally not paying its debts as such debts
become due; or
(C) with respect to which there has been any breach of warranty or
representation set forth in Section 6 hereof or any breach of any
covenant contained in this Agreement; or
(D) with respect to which the Account Debtor asserts any discount,
allowance, return, dispute, counterclaim, offset, defense, right
of recoupment, right of return, warranty claim, or short payment;
together with all reasonable attorneys' and professional fees and
expenses and all court costs incurred by Buyer in collecting such
Purchased Receivable and/or enforcing its rights under, or
collecting amounts owed by Seller in connection with, this
Agreement (collectively, the "Repurchase Amount").
4.3. SELLER'S PAYMENT OF THE REPURCHASE AMOUNT OR OTHER AMOUNTS DUE BUYER.
When any Repurchase Amount or other amount owing to Buyer becomes due, Buyer
shall inform Seller of the manner of payment which may be any one or more of the
following in Buyer's sole discretion: (a) in cash immediately upon demand
therefor; (b) by delivery of substitute invoices and an Invoice Transmittal
acceptable to Buyer which shall thereupon become Purchased Receivables; (c) by
adjustment to the Reserve pursuant to Section 3.5 hereof; (d) by deduction from
or offset against the Refund that would otherwise be due and payable to Seller;
(e) by deduction from or offset against the amount that otherwise would be
forwarded to Seller in respect of any further Advances that may be made by
Buyer; or (f) by any combination of the foregoing as Buyer may from time to time
choose.
4.4. SELLER'S AGREEMENT TO REPURCHASE ALL PURCHASED RECEIVABLES. Upon and
after the occurrence of an Event of Default, Seller shall, upon Buyer's demand
(or, in the case of an Event of Default under Section 9(B), immediately without
notice or demand from Buyer) repurchase all the Purchased Receivables then
outstanding, or such portion thereof as Buyer may demand. Such demand may, at
Buyer's option, include and Seller shall pay to Buyer immediately upon demand,
cash in an amount equal to the Advance with respect to each Purchased Receivable
then outstanding together with all accrued Finance Charges, Adjustments,
Administrative Fees, attorney's and professional fees, court costs and expenses
as provided for herein, and any other Obligations. Upon receipt of payment in
full of the Obligations, Buyer shall immediately instruct Account Debtors to pay
Seller directly, and return to Seller any Refund due to Seller. For the purpose
of calculating any Refund due under this Section only, the Reconciliation Date
shall be deemed to be the date Buyer receives payment in good funds of all the
Obligations as provided in this Section 4.4.
5. POWER OF ATTORNEY. Seller does hereby irrevocably appoint Buyer and its
successors and assigns as Seller's true and lawful attorney in fact, and hereby
authorizes Buyer, regardless of whether there has been an Event of Default, (a)
to sell, assign, transfer, pledge, compromise, or discharge the whole or any
part of the Purchased Receivables; (b) to demand, collect, receive, sue, and
give releases to any Account Debtor for the monies due or which may become due
upon or with respect to the Purchased Receivables and to compromise, prosecute,
or defend any action, claim, case or proceeding relating to the Purchased
Receivables, including the filing of a claim or the voting of such claims in any
bankruptcy case, all in Buyer's name or Seller's name, as Buyer may choose; (c)
to prepare, file and sign Seller's name on any notice, claim, assignment,
demand,
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draft, or notice of or satisfaction of lien or mechanics' lien or similar
document with respect to Purchased Receivables; (d) to notify all Account
Debtors with respect to the Purchased Receivables to pay Buyer directly; (e) to
receive, open, and dispose of all mail addressed to Seller for the purpose of
collecting the Purchased Receivables; (f) to endorse Seller's name on any checks
or other forms of payment on the Purchased Receivables; (g) to execute on behalf
of Seller any and all instruments, documents, financing statements and the like
to perfect Buyer's interests in the Purchased Receivables and Collateral; and
(h) to do all acts and things necessary or expedient, in furtherance of any such
purposes. If Buyer receives a check or item which is payment for both a
Purchased Receivable and another receivable, the funds shall first be applied to
the Purchased Receivable and, so long as there does not exist an Event of
Default or an event that with notice, lapse of time or otherwise would
constitute an Event of Default, the excess shall be remitted to Seller. Upon the
occurrence and continuation of an Event of Default, all of the power of attorney
rights granted by Seller to Buyer hereunder shall be applicable with respect to
all Purchased Receivables and all Collateral.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS.
6.1. RECEIVABLES' WARRANTIES, REPRESENTATIONS AND COVENANTS. To induce
Buyer to buy receivables and to renders its services to Seller, and with full
knowledge that the truth and accuracy of the following are being relied upon by
the Buyer in determining whether to accept receivables as Purchased Receivables,
Seller represents, warrants, covenants and agrees, with respect to each Invoice
Transmittal delivered to Buyer and each receivable described therein, that:
(A) Seller is the absolute owner of each receivable set forth in the
Invoice Transmittal and has full legal right to sell, transfer and
assign such receivables;
(B) The correct amount of each receivable is as set forth in the
Invoice Transmittal and is not in dispute;
(C) The payment of each receivable is not contingent upon the
fulfillment of any obligation or contract, past or future and any and
all obligations required of the Seller have been fulfilled as of the
date of the Invoice Transmittal;
(D) Each receivable set forth on the Invoice Transmittal is based on
an actual sale and delivery of goods and/or services actually
rendered, is presently due and owing to Seller, is not past due or in
default, has not been previously sold, assigned, transferred, or
pledged, and is free of any and all liens, security interests and
encumbrances other than liens, security interests or encumbrances in
favor of Buyer or any other division or affiliate of Silicon Valley
Bank;
(E) There are no defenses, offsets, or counterclaims against any of
the receivables, and no agreement has been made under which the
Account Debtor may claim any deduction or discount, except as
otherwise stated in the Invoice Transmittal;
(F) Each Purchased Receivable shall be the property of the Buyer and
shall be collected by Buyer, but if for any reason it should be paid
to Seller, Seller shall promptly notify Buyer of such payment, shall
hold any checks, drafts, or monies so received in trust for the
benefit of Buyer, and shall promptly transfer and deliver the same to
the Buyer;
(G) Buyer shall have the right of endorsement, and also the right to
require endorsement by Seller, on all payments received in connection
with each Purchased Receivable and any proceeds of Collateral;
(H) Seller, and to Seller's best knowledge, each Account Debtor set
forth in the Invoice Transmittal, are and shall remain solvent as that
term is defined in the United States Bankruptcy Code and the
California Uniform Commercial Code, and no such Account Debtor has
filed or had filed against it a voluntary or involuntary petition for
relief under the United States Bankruptcy Code;
(I) Each Account Debtor named on the Invoice Transmittal will not
object to the payment for, or the quality or the quantity of the
subject matter of, the receivable and is liable for the amount set
forth on the Invoice Transmittal;
(J) Each Account Debtor shall promptly be notified, after acceptance
by Buyer, that the Purchased Receivable has been transferred to and is
payable to Buyer, and Seller shall not take or permit any action to
countermand such notification; and
(K) All receivables forwarded to and accepted by Buyer after the date
hereof, and thereby becoming Purchased Receivables, shall comply with
each and every one of the foregoing representations, warranties,
covenants and agreements referred to above in this Section 6.1.
6.2. ADDITIONAL WARRANTIES, REPRESENTATIONS AND COVENANTS. In addition to
the foregoing warranties, representations and covenants, to induce Buyer to buy
receivables and to render its services to Seller, Seller hereby represents,
warrants, covenants and agrees that:
(A) Seller will not assign, transfer, sell, or grant , or permit any
lien or security interest in any Purchased Receivables or Collateral
to or in favor of any other party, without Buyer's prior written
consent;
(B) The Seller's name, form of organization, chief executive office,
and the place where the records concerning all Purchased Receivables
and Collateral are kept is set forth at the beginning of this
Agreement, Collateral is located only at the location set forth in the
beginning of this Agreement, or, if located at any additional
location, as set forth on a schedule attached to this Agreement, and
Seller will give Buyer at least thirty (30) days prior written notice
if such name, organization, chief executive office or other locations
of Collateral or records concerning Purchased Receivables or
Collateral is changed or added and shall execute any documents
necessary to perfect Buyer's interest in the Purchased Receivables and
the Collateral;
(C) Seller shall (i) pay all of its normal gross payroll for
employees, and all federal and state taxes, as and when due, including
without limitation all payroll and withholding taxes and state sales
taxes; (ii) deliver at any time and from time to time at Buyer's
request, evidence satisfactory to Buyer that all such amounts have
been paid to the proper taxing authorities; and (iii) if requested by
Buyer, pay its payroll and related taxes through a bank or an
independent payroll service acceptable to Buyer.
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(D) Seller has not, as of the time Seller delivers to Buyer an Invoice
Transmittal, or as of the time Seller accepts any Advance from Buyer,
filed a voluntary petition for relief under the United States
Bankruptcy Code or had filed against it an involuntary petition for
relief;
(E) If Seller owns, holds or has any interest in, any copyrights
(whether registered, or unregistered), patents or trademarks, and
licenses of any of the foregoing, such interest has been disclosed to
Buyer and is specifically listed and identified on a schedule to this
Agreement, and Seller shall immediately notify Buyer if Seller
hereafter obtains any interest in any additional copyrights, patents,
trademarks or licenses that are significant in value or are material
to the conduct of its business;
(F) Seller shall provide Buyer with a Compliance Certificate (I) on a
quarterly basis to be received by Buyer no later than the fifth
calendar day following each calendar quarter, and; (ii) on a more
frequent or other basis if and as requested by Buyer; and
(G) Seller shall provide Buyer with a deferred revenue listing upon
request.
7. ADJUSTMENTS. In the event of a breach of any of the representations,
warranties, or covenants set forth in Section 6.1, or in the event any
Adjustment or dispute is asserted by any Account Debtor, Seller shall promptly
advise Buyer and shall, subject to the Buyer's approval, resolve such disputes
and advise Buyer of any adjustments. Unless the disputed Purchased Receivable is
repurchased by Seller and the full Repurchase Amount is paid, Buyer shall remain
the absolute owner of any Purchased Receivable which is subject to Adjustment or
repurchase under Section 4.2 hereof, and any rejected, returned, or recovered
personal property, with the right to take possession thereof at any time. If
such possession is not taken by Buyer, Seller is to resell it for Buyer's
account at Seller's expense with the proceeds made payable to Buyer. While
Seller retains possession of said returned goods, Seller shall segregate said
goods and mark them "property of Silicon Valley Bank."
8. SECURITY INTEREST. To secure the prompt payment and performance to Buyer of
all of the Obligations, Seller hereby grants to Buyer a continuing lien upon and
security interest in all of Seller's now existing or hereafter arising rights
and interest in the following, whether now owned or existing or hereafter
created, acquired, or arising, and wherever located (collectively, the
"Collateral"):
(A) All accounts, receivables, contract rights, chattel paper,
instruments, documents, letters of credit, bankers acceptances,
drafts, checks, cash, securities, and general intangibles (including,
without limitation, all claims, causes of action, deposit accounts,
guaranties, rights in and claims under insurance policies (including
rights to premium refunds), rights to tax refunds, copyrights,
patents, trademarks, rights in and under license agreements, and all
other intellectual property);
(B) All inventory, including Seller's rights to any returned or
rejected goods, with respect to which Buyer shall have all the rights
of any unpaid seller, including the rights of replevin, claim and
delivery, reclamation, and stoppage in transit;
(C ) All monies, refunds and other amounts due Seller, including,
without limitation, amounts due Seller under this Agreement (including
Seller's right of offset and recoupment);
(D) All equipment, machinery, furniture, furnishings, fixtures, tools,
supplies and motor vehicles;
(E) All farm products, crops, timber, minerals and the like (including
oil and gas);
(F) All accessions to, substitutions for, and replacements of, all of
the foregoing;
(G) All books and records pertaining to all of the foregoing; and
(H) All proceeds of the foregoing, whether due to voluntary or
involuntary disposition, including insurance proceeds.
Seller is not authorized to sell, assign, transfer or otherwise convey
any Collateral without Buyer's prior written consent, except for the sale of
finished inventory in the Seller's usual course of business. Seller agrees to
sign UCC financing statements, in a form acceptable to Buyer, and any other
instruments and documents requested by Buyer to evidence, perfect, or protect
the interests of Buyer in the Collateral. Seller agrees to deliver to Buyer the
originals of all instruments, chattel paper and documents evidencing or related
to Purchased Receivables and Collateral.
9. DEFAULT. The occurrence of any one or more of the following shall constitute
an Event of Default hereunder.
(A) Seller fails to pay any amount owed to Buyer as and when due;
(B) There shall be commenced by or against Seller any voluntary or
involuntary case under the United States Bankruptcy Code, or any
assignment for the benefit of creditors, or appointment of a receiver
or custodian for any of its assets;
(C) Seller shall become insolvent in that its debts are greater than
the fair value of its assets, or Seller is generally not paying its
debts as they become due;
(D) Any involuntary lien, garnishment, attachment or the like is
issued against or attaches to the Purchased Receivables or any
Collateral;
(E) Seller shall breach any covenant, agreement, warranty, or
representation set forth herein, and the same is not cured to Buyer's
satisfaction within ten (10) days after Buyer has given Seller oral or
written notice thereof; provided, that if such breach is incapable of
being cured it shall constitute an immediate default hereunder;
(F) Seller is not in compliance with, or otherwise is in default
under, any term of any document, instrument or agreement evidencing a
debt, obligation or liability of any kind or character of Seller, now
or hereafter existing, in favor of Buyer or any division or affiliate
of Silicon Valley Bank, regardless of whether such debt, obligation or
liability is direct or indirect, primary or secondary, joint, several
or joint and several, or fixed or contingent, together with any and
all renewals and extensions of such debts, obligations and
liabilities, or any part thereof;
(G) An event of default shall occur under any guaranty executed by any
guarantor of the Obligations of Seller to Buyer under this Agreement,
or any material provision of any such guaranty shall for any reason
cease to be valid or enforceable or any such guaranty shall be
repudiated or terminated, including by operation of law;
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(H) A default or event of default shall occur under any agreement
between Seller and any creditor of Seller that has entered into a
subordination agreement with Buyer; or
(I) Any creditor that has entered into a subordination agreement with
Buyer shall breach any of the terms of or not comply with such
subordination agreement.
10. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default, (1)
without implying any obligation to buy receivables, Buyer may cease buying
receivables or extending any financial accommodations to Seller; (2) all or a
portion of the Obligations shall be, at the option of and upon demand by Buyer,
or with respect to an Event of Default described in Section 9(B), automatically
and without notice or demand, due and payable in full; and (3) Buyer shall have
and may exercise all the rights and remedies under this Agreement and under
applicable law, including the rights and remedies of a secured party under the
California Uniform Commercial Code, all the power of attorney rights described
in Section 5 with respect to all Collateral, and the right to collect, dispose
of, sell, lease, use, and realize upon all Purchased Receivables and all
Collateral in any commercial reasonable manner. Seller and Buyer agree that any
notice of sale required to be given to Seller shall be deemed to be reasonable
if given five (5) days prior to the date on or after which the sale may be held.
In the event that the Obligations are accelerated hereunder, Seller shall
repurchase all of the Purchased Receivables as set forth in Section 4.4.
11. ACCRUAL OF INTEREST. If any amount owed by Seller hereunder is not paid when
due, including, without limitation, amounts due under Section 3.5, Repurchase
Amounts, amounts due under Section 12, and any other Obligations, such amounts
shall bear interest at a per annum rate equal to the per annum rate of the
Finance Charges until the earlier of (i) payment in good funds or (ii) entry of
a final judgment thereof, at which time the principal amount of any money
judgment remaining unsatisfied shall accrue interest at the highest rate allowed
by applicable law.
12. FEES, COSTS AND EXPENSES; INDEMNIFICATION. The Seller will pay to Buyer
immediately upon demand all fees, costs and expenses (including fees of
attorneys and professionals and their costs and expenses) that Buyer incurs or
may from time to time impose in connection with any of the following: (a)
preparing, negotiating, administering, and enforcing this Agreement or any other
agreement executed in connection herewith, including any amendments, waivers or
consents in connection with any of the foregoing, (b) any litigation or dispute
(whether instituted by Buyer, Seller or any other person) in any way relating to
the Purchased Receivables, the Collateral, this Agreement or any other agreement
executed in connection herewith or therewith, (d) enforcing any rights against
Seller or any guarantor, or any Account Debtor, (e) protecting or enforcing its
interest in the Purchased Receivables or the Collateral, (f) collecting the
Purchased Receivables and the Obligations, and (g) the representation of Buyer
in connection with any bankruptcy case or insolvency proceeding involving
Seller, any Purchased Receivable, the Collateral, any Account Debtor, or any
guarantor. Seller shall indemnify and hold Buyer harmless from and against any
and all claims, actions, damages, costs, expenses, and liabilities of any nature
whatsoever arising in connection with any of the foregoing.
13. SEVERABILITY, WAIVER, AND CHOICE OF LAW. In the event that any provision of
this Agreement is deemed invalid by reason of law, this Agreement will be
construed as not containing such provision and the remainder of the Agreement
shall remain in full force and effect. Buyer retains all of its rights, even if
it makes an Advance after an Event of Default. If Buyer waives an Event of
Default, it may enforce a later Event of Default. Any consent or waiver under,
or amendment of, this Agreement must be in writing. Nothing contained herein, or
any action taken or not taken by Buyer at any time, shall be construed at any
time to be indicative of any obligation or willingness on the part of Buyer to
amend this Agreement or to grant to Seller any waivers or consents. This
Agreement has been transmitted by Seller to Buyer at Buyer's office in the State
of California and has been executed and accepted by Buyer in the State of
California. This Agreement shall be governed by and interpreted in accordance
with the internal laws of the State of California.
14. ACCOUNT COLLECTION SERVICES. Certain Account Debtors may require or prefer
that all of Seller's receivables be paid to the same address and/or party, or
Seller and Buyer may agree that all receivables with respect to certain Account
Debtors be paid to one party. In such event Buyer and Seller may agree that
Buyer shall collect all receivables whether owned by Seller or Buyer and
(provided that there does not then exist an Event of Default or event that with
notice, lapse or time or otherwise would constitute an Event of Default, and
subject to Buyer's rights in the Collateral) Buyer agrees to remit to Seller the
amount of the receivables collections it receives with respect to receivables
other than Purchased Receivables. It is understood and agreed by Seller that
this Section does not impose any affirmative duty on Buyer to do any act other
than to turn over such amounts. All such receivables and collections are
Collateral and in the event of Seller's default hereunder, Buyer shall have no
duty to remit collections of Collateral and may apply such collections to the
obligations hereunder and Buyer shall have the rights of a secured party under
the California Uniform Commercial Code.
15. NOTICES. All notices shall be given to Buyer and Seller at the addresses or
faxes set forth on the first page of this Agreement and shall be deemed to have
been delivered and received: (a) if mailed, three (3) calendar days after
deposited in the United States mail, first class, postage pre-paid, (b) one (1)
calendar day after deposit with an overnight mail or messenger service; or (c)
on the same date of confirmed transmission if sent by hand delivery, telecopy,
telefax or telex.
16. JURY TRIAL. SELLER AND BUYER EACH HEREBY (a) WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL ON ANY CLAIM OR ACTION ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, ANY RELATED AGREEMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY; (b) RECOGNIZE AND AGREE THAT THE FOREGOING WAIVER CONSTITUTES
A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT; AND (c) REPRESENT AND
WARRANT THAT IT HAS REVIEWED THIS WAIVER, HAS DETERMINED FOR ITSELF THE
NECESSITY
Page 6 of 7
<PAGE>
TO REVIEW THE SAME WITH ITS LEGAL COUNSEL, AND KNOWINGLY AND VOLUNTARILY WAIVES
ALL RIGHTS TO A JURY TRIAL.
17. TERM AND TERMINATION. The term of this Agreement shall be for one (1) year
from the date hereof, and from year to year thereafter unless terminated in
writing by Buyer or Seller. Seller and Buyer shall each have the right to
terminate this Agreement at any time. Notwithstanding the foregoing, any
termination of this Agreement shall not affect Buyer's security interest in the
Collateral and Buyer's ownership of the Purchased Receivables, and this
Agreement shall continue to be effective, and Buyer's rights and remedies
hereunder shall survive such termination, until all transactions entered into
and Obligations incurred hereunder or in connection herewith have been completed
and satisfied in full.
18. TITLES AND SECTION HEADINGS. The titles and section headings used herein are
for convenience only and shall not be used in interpreting this Agreement.
Page 7 of 7
<PAGE>
19. OTHER AGREEMENTS. The terms and provisions of this Agreement shall not
adversely affect the rights of Buyer or any other division or affiliate of
Silicon Valley Bank under any other document, instrument or agreement. The terms
of such other documents, instruments and agreements shall remain in full force
and effect notwithstanding the execution of this Agreement. In the event of a
conflict between any provision of this Agreement and any provision of any other
document, instrument or agreement between Seller on the one hand, and Buyer or
any other division or affiliate of Silicon Valley Bank on the other hand, Buyer
shall determine in its sole discretion which provision shall apply. Seller
acknowledges specifically that any security agreements, liens and/or security
interests currently securing payment of any obligations of Seller owing to Buyer
or any other division or affiliate of Silicon Valley Bank also secure Seller's
obligations under this Agreement, and are valid and subsisting and are not
adversely affected by execution of this Agreement. Seller further acknowledges
that (a) any collateral under other outstanding security agreements or other
documents between Seller and Buyer or any other division or affiliate of Silicon
Valley Bank secures the obligations of Seller under this Agreement and (b) a
default by Seller under this Agreement constitutes a default under other
outstanding agreements between Seller and Buyer or any other division or
affiliate of Silicon Valley Bank.
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement on the
day and year above written.
SELLER: BIO-IMAGING TECHNOLOGIES, INC.
By Robert J. Phillips
------------------
Title Vice President and Chief Financial Officer
------------------------------------------
BUYER: SILICON VALLEY BANK
By David Reich
------------------
Title Vice President
---------------
<PAGE>
EXHIBIT "A"
TO FINANCING STATEMENT AND SECURITY AGREEMENT
This FINANCING STATEMENT and SECURITY AGREEMENT covers the following types or
items of property (in addition to, and without limiting the types of property
set forth on page 1 hereof):
A) All accounts, receivables, contract rights, chattel paper, instruments,
documents, letters of credit, bankers acceptances, drafts, checks, cash,
securities, deposit accounts, and general intangibles (including, without
limitation, all claims, causes of action, guaranties, rights in and claims
under insurance policies (including rights to premium refunds), rights to
tax refunds, copyrights, patents, trademarks, rights in and under license
agreements, and all other intellectual property);
B) All inventory, including Seller's rights to any returned or rejected goods,
with respect to which Buyer shall have all the rights of any unpaid seller,
including the rights of replevin, claim and delivery, reclamation, and
stoppage in transit;
C) All monies, refunds and other amounts due Seller, including, without
limitation, amounts due Seller under this Agreement (including Seller's
right of offset and recoupment);
D) All equipment, machinery, furniture, furnishings, fixtures, tools, supplies
and motor vehicles;
E) All farm products, crops, timber, minerals and the like (including oil and
gas);
F) All accessions to, substitutions for, and replacements of, all of the
foregoing;
G) All books and records pertaining to all of the foregoing; and
H) All proceeds of the foregoing, whether due to voluntary or involuntary
disposition, including insurance proceeds.
INTITALS
--------------
<PAGE>
SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, California 95054
(408) 654-1000 - Fax (408) 980-6410
CERTIFICATION of OFFICERS
The undersigned, being all the officers of Bio-Imaging Technologies, Inc.,
a Delaware corporation (the "Corporation"), hereby certify to Silicon Valley
Bank ("SVB") that:
1. The correct name of the Corporation is Bio-Imaging Technologies, Inc.,
as set forth in the Articles of Incorporation.
2. The Corporation was incorporated on , under the
------------------------
laws of the State of Delaware, and is in good standing under such laws.
3. The Corporation's place of business and chief executive office being
the place at which the Corporation maintains its books and records pertaining to
accounts, accounts receivables, contract rights, chattel paper, general
intangibles, instruments, documents, inventory, and equipment, is located at:
830 BEAR TAVERN ROAD
WEST TRENTON, NEW JERSEY 08628
4. The Corporation has other places of business at the following
addressees:
None
5. There is no provision in the Certificate of Incorporation, Articles of
Incorporation, or Bylaws of the Corporation, or in the laws of the State of its
incorporation, requiring any vote or consent of shareholders to authorize the
sale of receivables or the grant of a security interest in any assets of the
Corporation. Such power is vested exclusively in the Corporation's Board of
Directors.
6. The officers of the Corporation, and their respective titles and
signatures are as follows:
PRESIDENT:
--------------------------------------------------------------------
(Signature)
VICE PRESIDENT:
--------------------------------------------------------------------
(Signature)
SECRETARY:
--------------------------------------------------------------------
(Signature)
TREASURER:
--------------------------------------------------------------------
(Signature)
OTHER OFFICER:
TITLE:
--------------------------------------------------------------------
(Signature)
<PAGE>
7. Except as indicated in this paragraph 7, each of the officers listed in
paragraph 6 has signatory powers with respect to all the Corporation's
transactions with SVB. Explanation of exceptions:
8. The undersigned shall give SVB prompt written notice of any change or
amendment with respect to any of the foregoing. Until such written notice is
received by SVB, SVB shall be entitled to rely upon the foregoing in all
respects.
IN WITNESS WHEREOF, the undersigned have executed this Certification of
Officers on 12/22/1999.
----------
PRESIDENT:
---------------------------------------------------------------
VICE PRESIDENT:
---------------------------------------------------------------
SECRETARY:
---------------------------------------------------------------
TREASURER:
---------------------------------------------------------------
<PAGE>
SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, California 95054
(408) 654-1000 - Fax (408) 980-6410
SECRETARY'S CERTIFICATE OF RESOLUTION
The undersigned, as Secretary of Bio-Imaging Technologies, Inc., a
Delaware corporation (the "Corporation"), hereby certifies to Silicon Valley
Bank that at a meeting duly convened at which a quorum was present the following
resolutions were adopted by the Board of Directors of the Corporation and that
such resolutions have not been modified, amended, or rescinded in any respect
and are in full force and effect as of today's date.
RESOLVED, that this corporation be and hereby is authorized to sell this
corporation's accounts receivable to Silicon Valley Bank, and to grant Silicon
Valley Bank a security interest in this corporation's assets, including, without
limitation, accounts, accounts receivable, contract rights, chattel paper,
general intangibles, instruments, documents, letters of credit, drafts,
inventory and equipment, presently owned or hereafter acquired and proceeds and
products of the foregoing (the " Collateral," as defined in the Accounts
Receivable Purchase Agreement).
RESOLVED, that this corporation be and hereby is authorized and directed
to execute and deliver certain agreements in connection with the sale of
receivables, and granting of security interests in the Collateral to Silicon
Valley Bank including, without limitations, a Accounts Receivable Purchase
Agreement and UCC-1 financing statement.
RESOLVED, that the following named officers of this corporation
("Authorized Officers") be, and any of them hereby are, authorized, empowered,
and directed to execute and deliver to Silicon Valley Bank on behalf of this
corporation all such further agreements and instruments as may be deemed
necessary or advisable in order to fully effectuate the purposes and intent of
the foregoing resolutions.
Print Names of Authorized Officers: Title:
- ----------------------------------------------- ----------------------------
- ----------------------------------------------- ----------------------------
- ----------------------------------------------- ----------------------------
- ----------------------------------------------- ----------------------------
- ----------------------------------------------- ----------------------------
- ----------------------------------------------- ----------------------------
RESOLVED, that the Secretary or Assistant Secretary of this
corporation be, and hereby is authorized, empowered and directed to certify to
the passage of the foregoing resolutions under the seal of this corporation.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate this
Twenty Second day of December 1999.
--------------------------------------------------------
Signature
Secretary of BIO-IMAGING TECHNOLOGIES, INC.
<PAGE>
CONSENT AND RELEASE
Silicon Valley Bank sincerely appreciates your business and would like to
publicize your Company recently joining our "family". In order to do so, kindly
complete the following and return to us.
Bio-Imaging Technologies, Inc. ("Client") consents to and releases Silicon
Valley Bank ("Bank") from any liability in its use of (check all that apply):
Company Name
---------
Individual Name
---------
Quotation
---------
Photograph
---------
Client Reference
---------
Type of Credit Facility
---------
Amount of Credit Facility
---------
in Bank's written and oral presentations, advertising and promotional materials
and Internet Web site.
Client Name:
Bio-Imaging Technologies, Inc.
- --------------------------
Signature
- --------------------------
Name and Title
- --------------------------
Date
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated December 22, 1999 included in this Form 10-KSB,
into Bio-Imaging Technologies, Inc. and subsidiaries' previously filed
Registration Statements on Form S-8 (File Nos. 33-90412, 33-74152 and 33-22661)
and on Form S-3 (File Nos. 33-75370 and 33-25477).
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Roseland, New Jersey
December 22, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS INCLUDED IN THE REGISTRANT'S FORM 10-KSB FOR THE YEAR ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000822418
<NAME> Bio-Imaging Technologies, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 412,903
<SECURITIES> 0
<RECEIVABLES> 1,302,746
<ALLOWANCES> 65,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,788,776
<PP&E> 4,611,404
<DEPRECIATION> 3,431,150
<TOTAL-ASSETS> 3,148,654
<CURRENT-LIABILITIES> 1,000,983
<BONDS> 81,511
0
104
<COMMON> 1,944
<OTHER-SE> 2,064,112
<TOTAL-LIABILITY-AND-EQUITY> 3,148,654
<SALES> 0
<TOTAL-REVENUES> 4,349,079
<CGS> 0
<TOTAL-COSTS> 2,660,659
<OTHER-EXPENSES> 2,402,639
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (8,760)
<INCOME-PRETAX> (705,459)
<INCOME-TAX> 0
<INCOME-CONTINUING> (705,459)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (705,459)
<EPS-BASIC> (0.10)<F1>
<EPS-DILUTED> (0.10)<F2>
<FN>
<F1> This amount represents Basic Earnings per Share in accordance with the
requirements of Statement of Financial Accounting Standards No. 128 -
"Earnings per Share."
<F2> This amount represents Diluted Earnings per Share in accordance with the
requirements of Statement of Financial Accounting Standards No. 128 -
"Earnings per Share."
</FN>
</TABLE>
