<PAGE>
As Filed with the Securities and Exchange Commission on July 15, 1998
Registration No. 333-51079
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_______________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_______________
COVALENT GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
NEVADA 56-1668867
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification
Organization) Number)
ONE GLENHARDIE CORPORATE CENTER
1275 DRUMMERS LANE, SUITE 100
WAYNE, PENNSYLVANIA 19087
(610) 975-9533
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
BRUCE LAMONT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COVALENT GROUP, INC.
ONE GLENHARDIE CORPORATE CENTER
1275 DRUMMERS LANE, SUITE 100
WAYNE, PENNSYLVANIA 19087
(610) 975-9533
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
_______________
WITH A COPY TO:
PAUL T. PORRINI, ESQUIRE
PEPPER HAMILTON LLP
1235 WESTLAKES DRIVE, SUITE 400
BERWYN, PENNSYLVANIA 19312-2401
(610) 640-7800
_______________
Approximate date of commencement of proposed sale to public: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVENESS OF THIS REGISTRATION STATEMENT.
_______________
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED
PURSUANT TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING
BOX. [_]
IF ANY OF THE SECURITIES REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR INTEREST
REINVESTMENT PLANS, CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX
AND LIST THE SECURITIES ACT REGISTRATION NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [_]
<PAGE>
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [_]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM
SECURITIES AMOUNT OF SHARES OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED SHARE PRICE FEE
- -------------- ---------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Common Stock 55,000 $2.50(1) $137,500(1) $ 41(2)
250,000 $2.75 $687,500(3) $203(3)
100,000 $5.25 $525,000(4) $155(4)
----
$358(5)
====
================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933
solely for the purpose of calculating the registration fee.
(2) Previously paid in connection with the initial registration statement
filed on April 27, 1998.
(3) Calculated pursuant to Rule 457(g) under the Securities Act of 1933 in
connection with the registration of common stock underlying warrants
with an exercise price of $2.75 per share.
(4) Calculated pursuant to Rule 457(g) under the Securities Act of 1933 in
connection with the registration of common stock underlying a warrant
with an exercise price of $5.25 per share.
(5) Excludes the $41 filing fee previously paid in connection with the
original registration statement filed April 27, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
SUBJECT TO COMPLETION, DATED JULY 15, 1998
PROSPECTUS
COVALENT GROUP, INC.
405,000 Shares
of
Common Stock
This Prospectus relates to 405,000 shares (the "Offered Shares") of common
stock, par value $.001 per share (the "Common Stock") of Covalent Group, Inc., a
Nevada corporation (the "Company") offered for the account of certain
stockholders of the Company (the "Selling Stockholders"). Fifty-five thousand
(55,000) the Offered Shares were acquired by a Selling Stockholder upon exercise
of an option to purchase shares of Common Stock of the Company. Two hundred and
fifty thousand (250,000) Offered Shares underlie warrants to purchase Common
Stock with an exercise price of $2.75 per share held by two Selling Stockholders
and 100,000 Offered Shares underlie a warrant to purchase Common Stock with an
exercise price of $5.25 per share held by a Selling Stockholder. The Company
will pay all expenses incurred in connection with this offering other than
customary brokerage fees, commissions and expenses of the Selling Stockholders.
See "Selling Stockholders" and "Plan of Distribution."
The Company will not receive any proceeds from the sale of the Offered
Shares by the Selling Stockholders offered hereby.
The sale of the Offered Shares by the Selling Stockholders or by their
pledgees, donees, transferees or other successors in interest, may be effected
from time to time through December 31, 1998 directly by the Selling Stockholders
acting as principals for their own account or through brokers, agents, dealers
or underwriters in one or more transactions at market prices prevailing at the
time of sale on any stock exchange on which the Common Stock may be listed at
the time of sale or in private sales at prices related to such prevailing market
prices at the time of sale or at prices otherwise negotiated. The Selling
Stockholders may pay commissions or other compensation to broker-dealers in
connection with such sales, which may be in excess of customary commissions
charged for national stock exchange transactions. The Selling Stockholders and
any brokers-dealers acting in connection with the sale of the Offered Shares may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Act"). Any commissions received by a broker or dealer in
connection with resales of the Offered Shares may be deemed to be underwriting
commissions or discounts under the Act. This offering will terminate December
31, 1998. See "Plan of Distribution."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
SEE "RISK FACTORS" COMMENCING ON PAGE 6 HEREOF FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON
STOCK OFFERED HEREBY.
The Common Stock trades on the Nasdaq SmallCap Market under the symbol
"CVGR." On July 8, 1998, the last sale price of the Common Stock as reported
by the Nasdaq SmallCap Market was $1.188 per share.
The date of this Prospectus is ___________________, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
relating to the shares of Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement for further
information with respect to the Company and the securities offered hereby. Any
statements contained herein concerning the provisions of any document filed as
an exhibit to the Registration Statement or otherwise filed with the Commission
are not necessarily complete, and in each instance reference is made to the copy
of such document so filed. Each such statement shall be qualified in its
entirety by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Commission. Proxy statements concerning the Company, reports, and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices in New York (7
World Trade Center, Suite 1300, New York, New York 10048) and Chicago (Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661-2511).
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, DC 20549 at prescribed rates.
In addition, registration statements and certain other filings made with the
Commission through its "EDGAR" system are publicly available through the
Commission's site on the Internet's World Wide Web, located at
http://www.sec.gov. This Registration Statement, including all exhibits thereto,
has been filed with the Commission through EDGAR. Reports, proxy and information
statements and other information concerning the Company can also be inspected at
the offices of the Nasdaq SmallCap Market, 1735 K Street, N.W., Washington, D.C.
20006-1506.
The Company will furnish, without charge, to any person to whom a
copy of this Prospectus is delivered, upon such person's written or oral
request, a copy of any and all of the documents that have been incorporated by
reference in this Prospectus (not including exhibits to such documents, unless
such exhibits are specifically incorporated by reference into such documents).
Any such request should be directed to William K. Robinson, Chief Financial
Officer, Covalent Group, Inc., One Glenhardie Corporate Center, 1275 Drummers
Lane, Suite 100, Wayne, Pennsylvania 19087, telephone number: (610) 975-9533.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
(File No. 0-21145) are incorporated in this Prospectus by reference:
(a) The Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1997;
(b) The Company's amendment to its Form 10-KSB filed
July 15, 1998
(c) The Company's Proxy Statement on Schedule 14A filed
April 21, 1998;
(d) The Company's Current Report on Form 8-K filed January
8, 1998;
(e) The Company's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1998;
(f) The description of the Common Stock contained in the
Company's Registration Statement on Form 8-A filed on
July 23, 1996 under Section 12 of the Exchange Act
(File No. 0-21145) including any amendments or reports
filed for the purpose of updating such description; and
(g) All documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act prior to the termination of the offering
shall be deemed to be incorporated by reference herein
from their respective dates of filing. Any statements
contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in
any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be
deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
2
<PAGE>
CAUTIONARY STATEMENT
When used in this Prospectus and in other public statements by
the Company and Company officers, the words "estimate," "project," "intend,"
"believe," "anticipate" and similar expressions are intended to identify
forward-looking statements regarding events and financial trends which may
affect the Company's future operating results and financial position. Such
statements are subject to risks and uncertainties that could cause the Company's
actual results and financial position to differ materially. Such factors are
described in detail below under "Risk Factors" and include, among others: (i)
the Company's dependence on certain clients and industries; (ii) the terms of
the Company's service contracts allowing customers to terminate or delay
contracts; (iii) the Company's dependence on certain key officers; (iv) the
failure of the Company to obtain new business; (v) the intense competition and
low barriers to entry in the industries in which the Company competes; and (vi)
other economic, competitive, governmental and technological factors affecting
the Company's operations, markets, products, services and prices. Additional
factors are described in the Company's public reports filed with the Commission.
Investors are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date made. The Company undertakes no
obligation to publicly release the result of any revision of these forward-
looking statements to reflect events or circumstances after the date they are
made or to reflect the occurrence of unanticipated events.
THE COMPANY
GENERAL
The Company through its subsidiary Covalent Research Alliance
Corp. ("CRA"), is a total research management organization which designs and
manages clinical trials in the drug and device development process and with
associated cost containment and quality of care components. CRA specializes in
cost effectiveness and outcomes studies for major customer groups such as
pharmaceutical companies, managed care organizations, insurers and employers. It
offers a full array of integrated services including study design, clinical
trial monitoring and management, data management, biostatistical analysis and
regulatory affairs services. CRA is structured to deliver customized high
quality solutions to its Fortune 500 and other clients.
CRA utilizes its core expertise of clinical trials management to
provide high quality, medical outcomes and clinical research for its client
base. In addition, experience gained with more than 40 managed care
organizations facilitates designing and conducting clinical studies for
pharmaceutical clients in a managed care environment, thereby, improving the
market potential for a drug manufacturer's product. To aid its pharmaceutical
and managed care customers in clinical trials and outcomes research projects,
CRA also has developed a state-of-the-art interactive voice recognition system
called Virtual HouseCall, an automated system for collecting and reporting
subjective patient information. Through educational components, the Company
intends to influence patient behavior crucial to patient compliance with
prescription drug regimens and self-management of chronic diseases.
The Company was incorporated under the laws of the State of
Nevada on August 1, 1989 under the name of West End Ventures, Inc. ("West End").
West End's only activity prior to the acquisition of its subsidiary, Future
Medical Technologies, Inc. ("FMT"), a New Jersey corporation incorporated on
September 28, 1989 was the completion of its initial public offering on January
15, 1990. On January 26, 1990, West End acquired 100% of the outstanding
securities of FMT. FMT was located in Decatur, Georgia and designed,
manufactured and distributed disposable micro-biological analytical products and
ancillary equipment for the detection of yeast, mold or bacteria in liquids or
air for use in industrial and clinical laboratories. The principal product of
FMT was a disposable plastic device for analyzing bacteria growth in liquid
samples and the diagnosis of urinary tract infections. FMT also developed a
Salmonella detection system with the intended purpose of increased speed and
test reliability as a practical means for broad scale sampling and testing.
West End subsequently changed its name to Future
Medical Technologies International, Inc. ("FMTI"). On May 26, 1994, FMTI
effected a one for five reverse stock split. On February 22, 1995, the Company
effected a five for seven reverse stock split and completed the acquisition of
100% of the stock of CRA, a Pennsylvania corporation, in exchange for 7,200,000
shares of post-split common stock of FMTI.
On September 20, 1996, FMTI stockholders ratified the disposition
of 100% of the stock of FMT, as of July 31, 1996. At the same time, stockholders
approved the change of the parent organization's name from Future Medical
Technologies International, Inc. to Covalent Group, Inc.
The Company's principal executive office is located at One
Glenhardie Corporate Center, 1275 Drummers Lane, Suite 100, Wayne, Pennsylvania
19087, telephone number: (610) 975-9533.
3
<PAGE>
BUSINESS OF THE COMPANY
The Company provides a full range of contract research
organization ("CRO") services specializing in clinical studies that include
various types of outcomes measurement. The Company provides clinical trial
management, data management, biostatistical analysis, medical and regulatory
services, health economics and outcomes research. The principal categories of
services offered are:
Clinical Trials
- ---------------
CRA utilizes over 80 full time and independent contractor
personnel with experience in the pharmaceutical, biotech and managed care
industries that it believes can support the needs of the most rigorous clinical
trials or medical outcomes studies. CRA has assembled an extensive network of
clinical investigators, managed care organizations, and clinical research
specialists, which it uses to coordinate and conduct clinical research. Clinical
investigators in the network are contracted for a specific clinical study, on a
case by case basis, when their expertise with a specific disease will insure the
highest quality medical care, treatment and clinical evaluation. CRA's clinical
monitors are strategically located throughout the country to reduce the cost of
travel to clinical or managed care sites. CRA's clinical trial services include
project coordination, regulatory document processing, monitoring services and
quality control review.
Data Management
- ---------------
CRA has automated the data management process associated with
clinical trials management through its use and customization of the industry
standard software from "BBN Software Products' Clintrial." Clintrial protocols
are used to assist in the collection, validations, and reporting of clinical
results to its pharmaceutical company clients as part of their submission to the
Food and Drug Administration ("FDA") or other regulatory agencies. CRA's data
management professionals provide case report form review and tracking; data
entry; integrated clinical/statistical reports; and manuscripts for publication.
Biostatistics
- -------------
CRA also provides comprehensive clinical statistics support.
CRA's biostatisticians have extensive pharmaceutical/medical industry
experience. CRA's biostatistical services include clinical trials design;
preparing statistical analysis plans; representing clients at the FDA; and
creating statistical reports.
Medical and Regulatory Affairs Management
- -----------------------------------------
CRA's medical and regulatory group provides liaison services
between its clients and regulatory agencies in the preparation, review and
submission of Investigational New Drug ("IND"), New Drug Application ("NDA"),
510k, and Product License Application ("PLA") documents. CRA's medical services
include medical oversight of studies, review and interpretation of adverse
experiences, report writing and development of study protocols. Regulatory
services include strategy design, document preparation and client consultation.
Quality Assurance and Compliance
- --------------------------------
CRA also provides field inspections that include investigator
audits, presubmission protocol compliance audits, Good Clinical Practice audits
and staff training.
Outcomes Research and Management
- --------------------------------
CRA provides its clients retrospective database studies,
therapeutic end-point determinations, cost effectiveness studies, drug
utilization reviews, drug utilization effectiveness reviews, and health status
survey development as well as patient drug compliance programs, patient
education programs and costs containment studies.
4
<PAGE>
Wellness Measures
- -----------------
Wellness Measures is a division of CRA which provides a
comprehensive set of services (such as health fairs, holistic medicine
alternatives, fitness, nutrition and stress management programs) which improve
the health of individuals, insure proper utilization of health care services,
reduce health care costs, and improve morale and mental acuity. Wellness
Measures' assessment services allow its clients to make informed decisions that
benefit their companies, employees and their families.
Virtual HouseCall
- -----------------
Virtual HouseCall ("VHC"), as developed by CRA, is an interactive
voice recognition system that CRA believes excels in the type of data collection
and analysis required by healthcare industry segments focused on disease
management. Disease management is a comprehensive, integrated approach to care
and reimbursement with the goal of promoting maximum healthcare provider
efficiency and effectiveness. Data collection becomes key to continuing
assessment of disease management programs.
VHC is a telephone-based service that has been designed to reach
large numbers of patients in a personalized and supportive manner. VHC automates
the administration of subjective quality of life surveys and psychosocial
assessments, provides patient access to disease specific educational and
resource libraries, and facilitates the publication of personalized reports
through on-demand printing services and faxes to healthcare providers and
patients.
VHC is concentrating on five disease states that account for 70%
of managed care's patient expenditures. Virtually all managed care organizations
and many pharmaceutical companies are developing disease management programs in
the areas of asthma, diabetes, hypertension, depression and congestive heart
failure. CRA intends for VHC to play an important role in disease management
programs. Its content is modular and customizable, and the computer platform and
telephony systems are highly scalable.
CRA has positioned VHC as a research and patient education
service allowing for the greatest flexibility for CRA's customers. Surveys can
be administered once, while VHC-based patient tracking, assessment, education
can be provided as often as monthly. Per transaction costs are calculated by
type of service, length and frequency of interaction, and the number of
contacted patients.
CONTRACTUAL ARRANGEMENTS
Compensation for services is contracted at a fixed price, but may
include some variable components, and can cover a period of several months to
several years. A portion of the contract fee is typically paid when a clinical
trial is initiated and the contract provides for milestone payments throughout
the duration of the trial. Contracts can usually be terminated at any time by
the client, but are usually subject to termination fees. Contracts may be
terminated for a number of reasons including insufficient patient enrollment,
unexpected results in the clinical trial or a client's decision to terminate
development of a particular drug.
BACKLOG
The Company's backlog consists of anticipated revenue from
contracts that have been signed but not yet completed. Once a project commences,
revenue is recognized over the life of the contract, which is consistent with
industry practice.
A more complete description of the business of the Company is set
forth in the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997.
5
<PAGE>
RISK FACTORS
The securities offered hereby are speculative in nature and
involve a high degree of risk. An investment in the securities should not be
made by anyone who cannot afford the loss of his entire investment. Prior to
making an investment decision with respect to the securities offered by this
Prospectus, prospective purchasers should carefully consider, along with the
other matters discussed in this Prospectus, the following risk factors:
DEPENDENCE ON CERTAIN CLIENTS AND INDUSTRIES
Several clients account for a significant percentage of the
Company's revenues. During the year ended December 31, 1997, revenues from the
Company's four largest clients amounted to approximately 21%, 20%, 19% and 14%
respectively (or 74% in the aggregate) of total revenues; during the year ended
December 31, 1996, revenues from the Company's two largest clients amounted to
approximately 76% and 13% respectively (or 89% in the aggregate) of total
revenues; and during the year ended December 31, 1995, revenues from the largest
client amounted to 76% of total revenues with no other client amounting to more
than 10% of total revenues. The loss of business from any of the Company's major
clients or the failure of the Company to continue to obtain new business would
have a material adverse effect on the Company.
The Company's revenues are highly dependent on research and
development expenditures by the pharmaceutical industry. Decreases in these
expenditures, including decreases resulting from an economic downturn in this
industry or from mergers or other consolidations, could have a material adverse
effect on the Company. Additionally, the Company has benefited from the trend in
the pharmaceutical industry to outsource an increasing percentage of their
clinical trial projects. A reversal of this trend would have a material adverse
effect on the Company.
LOSS OR DELAY OF LARGE CONTRACTS
Most of the Company's service contracts are terminable without
cause by the client with 30 days notice. Clients may terminate or delay
contracts for a variety of reasons, including the failure of drugs being tested
to meet safety requirements, unexpected or undesired clinical results of the
product, the client's decision to forego a particular study, insufficient
patient enrollment or investigator recruitment or production problems resulting
in shortages of the drug. The Company believes that several factors, including
increased cost containment pressures associated with healthcare reform, have
caused pharmaceutical companies to apply more stringent criteria to the decision
to proceed with clinical trials and therefore may result in a greater
willingness of these companies to cancel contracts. The loss or delay of a large
contract could have a material adverse effect on the Company.
DEPENDENCE ON KEY PERSONNEL
The Company relies on a number of key executives including Bruce
LaMont, its President and Chief Executive Officer; Kenneth Borow, M.D.,
President, Clinical Research and Chief Medical Officer; David Shapiro, M.D.,
President, Health Management Division; and David Weitz, Vice President and Chief
Information Officer. The Company does not have employment agreements with these
persons and the loss of services of any key executives could have a material
adverse effect on the Company. Furthermore, the Company's performance also
depends on its ability to attract and retain qualified professional, scientific
and technical operating staff. There can be no assurance the Company will be
able to continue to attract and retain qualified staff.
COMPETITION
The Company competes against in-house departments of
pharmaceutical companies and against other CROs, most of which possess
substantially greater capital, technical and other resources than the Company.
CROs generally compete on the basis of previous experience, medical and
scientific expertise in specific therapeutic areas, the quality of contract
research, the ability to organize and manage large scale trials, database
management capabilities, the ability to provide statistical and regulatory
services, the ability to recruit investigators, the ability to integrate
information technology with systems to improve the effectiveness of contract
research and price. The Company's failure to compete effectively in any one or
more of these areas could have a material adverse effect on the Company.
6
<PAGE>
The CRO industry is highly fragmented with several hundred CROs
ranging from small, limited service providers to full service CROs with global
drug development operations. However, the industry is consolidating. This
consolidation is due, in part, to the decision by pharmaceutical companies to
contract with fewer CROs, to streamline the outsourcing process by entering into
preferred provider relationships with a few CROs or awarding a smaller number of
large contracts to qualified CROs. This trend is likely to increase competition
among the larger CROs and may lead to price erosion and other forms of
competition that could have a material adverse effect on the Company.
MANAGEMENT OF GROWTH
The Company has experienced rapid growth since 1995 and
management believes that sustained growth places a strain on operational, human
and financial resources. To manage its growth, the Company must continue to
improve its operating and administrative systems, as well as retain and
assimilate qualified management and professional, scientific and technical
personnel. Failure to manage growth of the organization effectively could have a
material adverse effect on the Company.
VOLATILITY OF QUARTERLY OPERATING RESULTS
The Company's quarterly operating results have been and will be
subject to volatility due to factors such as the commencement, completion or
cancellation of significant contracts and the mix of contracted services.
Because a large portion of the Company's operating costs are fixed, variations
in the timing and progress of large contracts or of multiple contracts can have
a material effect on quarterly results. The Company believes that comparison of
its quarterly results are not necessarily meaningful and should not be relied
upon as an indication of future performance. Furthermore, fluctuations in the
Company's quarterly operating results could affect the market price of its
Common Stock in a manner unrelated to the longer term operating performance of
the Company.
POTENTIAL LIABILITY
Clinical research services involve the testing of new drugs on
human volunteers pursuant to a study protocol that has been approved by an
impartial review board composed of medical and non-medical members. Such testing
involves risk of liability for personal injury or death to patients due to,
among other reasons, possible unforeseen adverse side effects or improper
administration of a new drug. Many of these patients are already seriously ill
and are at risk of further illness or death. While the Company is not aware of
any event which would likely have a material adverse impact on its financial
condition, the Company could be materially and adversely affected if it were
required to pay damages or incur defense costs in connection with a claim that
is outside the scope of an indemnity or insurance coverage, or if the indemnity,
although applicable, is not performed in accordance with its terms or if the
Company's liability exceeds the amount of applicable insurance. Additionally,
there can be no assurance that such insurance coverage will continue to be
available on terms acceptable to the Company.
DEPENDENCE ON GOVERNMENT REGULATION
The Company's business depends on strict regulation of the drug
development process by the federal government. Changes in regulations, including
a relaxation in regulatory standards or the introduction of streamlined drug
approval procedures, could materially adversely affect the demand for the
Company's services. Furthermore, failure on the part of the Company to comply
with current regulations regarding conduct of a clinical trial could result in
termination of ongoing research or disqualification of data for submission to
regulatory authorities.
UNCERTAINTY IN HEALTHCARE INDUSTRY
The healthcare industry is subject to changing political,
economic and regulatory influences that may affect the pharmaceutical industry.
Implementation of comprehensive or incremental government healthcare reform, as
well as industry wide healthcare containment pressures, may adversely affect
research and development expenditures by pharmaceutical companies, which could
decrease the business available to the CRO industry. The Company is unable to
predict the likelihood of healthcare legislation being enacted or the effects
such legislation would have on the Company.
7
<PAGE>
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock is subject to wide
fluctuations in response to quarterly variations in operating results, including
evolving business prospects of the Company, market conditions in the industry,
prospects of healthcare reform, changes in government regulation and general
economic conditions. Additionally, the stock market has from time to time
experienced extreme price and volume fluctuations in the shares of certain
issuers, which in some cases have been unrelated to the operating results of the
particular company affected. Because the Company's Common Stock currently trades
at a high price - earnings multiple, due in part to analysts' expectations of
continued growth of companies in the CRO industry, even a relatively small
shortfall from earnings expectations can cause an immediate and substantial
decline in the Company's Common Stock price.
Nasdaq SmallCap Market Maintenance Criteria
The Company's common stock began trading in the Nasdaq SmallCap
Market in December 1997. The Nasdaq SmallCap Market imposes continued listing
requirements on all securities listed on such market. Such requirements include,
among other things, that the Company maintains net tangible assets of $2 million
or more, or market capitalization of $35 million or more, or net income in the
latest fiscal year or two of its last three fiscal years of $500,000 or more. In
addition, the Nasdaq SmallCap Market requires that the shares listed thereon
must maintain a minimum bid price of $1.00 per share. While the Company
presently believes that it meets all of the Nasdaq SmallCap continued listing
requirements, there can be no assurance that the Company will continue to meet
such requirements in the foreseeable future. Accordingly, the Company runs the
risk of having its Common Stock delisted from the Nasdaq SmallCap Market if it
fails to continue to meet the quantitative and qualitative continued listing
standards. If such delisting occurs, the Company's Common Stock would be traded
in the over-counter market.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Offered Shares by the Selling Stockholder. The Selling Stockholder will receive
all of the net proceeds from the sale of the Offered Shares.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the shares of Common Stock by the Selling Stockholders
as of July 1, 1998:
<TABLE>
<CAPTION> Number of Shares
Number of Shares Owned Number of Owned after Percent
Name of Selling Stockholder Prior to the Offering Shares Registered the Offering(1) of Class(1)(2)
- --------------------------- --------------------------- -------------------- ---------------- ----------------
<S> <C> <C>
Judy Mesirov 69,500 55,000 14,500* *
Berkshire International 759,428(3) 200,000(4) 559,428 4.6
Finance, Inc.
S&F Consulting, Inc. 176,215(5) 150,000(6) 26,215* *
_____________________
</TABLE>
* Represents less than one percent of issued and outstanding shares of
Common Stock.
(1) Assuming all shares registered are sold in this offering.
(2) Assumes 12,093,209 shares of Common Stock outstanding after this offering
including the shares registered hereby.
(3) Represents 534,428 shares owned directly and 225,000 shares underlying
presently exercisable options and warrants.
(4) Represents shares underlying a warrant containing registration
rights issued on June 20, 1996 exercisable for 5 years at an exercise
price of $2.75 per share.
(5) Represents 175,000 shares underlying presently exercisable options and
warrants and 1,215 shares owned by an entity affiliated with S&F
Consulting, Inc.
(6) Represents shares underlying warrants as follows: 100,000 shares
underlying a warrant containing registration rights issued on May 8, 1996
exercisable for 5 years at an exercise price of $5.25 per share; and
50,000 shares underlying a warrant containing registration rights issued
on June 20, 1996 exercisable for 5 years at an exercise price of $2.75 per
share.
The shares being offered by Ms. Mesirov were acquired upon the
exercise of an option to purchase Common Stock of the Company. Ms. Mesirov was a
consultant to the Company from January 1994 to January 1996, and an employee of
the Company from January 1996 to October 1997. The Company agreed to register
the shares pursuant to an informal agreement.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 25,000,000 shares of Common
Stock. As of April 20, 1998, 11,743,209 shares were outstanding.
The holders of Common Stock have equal rights to receive
dividends when, as and if declared by the Board of Directors, out of funds
legally available therefore. However, the Company has no current plans to pay
dividends with respect to its shares of Common Stock. Holders of Common Stock
have one vote for each share held of record and do not have cumulative voting
rights.
Holders of Common Stock are entitled upon liquidation of the
Company to share ratably in the net assets available for distribution. Shares of
Common Stock are not redeemable and have no preemptive or similar rights under
the Company's Articles of Incorporation.
TRANSFER AGENT
American Stock Transfer & Trust Company of New York, New York,
serves as Transfer Agent for the Common Stock.
8
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders are offering the Offered Shares for
their own account, and not for the account of the Company. The Company will not
receive any proceeds from the sale of the Offered Shares by the Selling
Stockholders.
The Selling Stockholders have agreed: (a) not to effect any
offers or sales of the Common Stock in any manner other than as specified in
this Prospectus, (b) to inform the Company of any sale of Common Stock at least
one business day prior to such sale and (c) not to purchase or induce others to
purchase Common Stock in violation of Rule 102 of Regulation M under the
Exchange Act.
The sale of the Offered Shares by the Selling Stockholders or by
their pledgees, donees, transferees or other successors in interest may be
effected from time to time through December 31, 1998 to purchasers directly by
the Selling Stockholders acting as principals for their own accounts in one or
more transactions on the Nasdaq SmallCap Market or on any other national stock
exchange upon which the Company's Common Stock is listed or in private sales at
prices related to such prevailing market prices at the time of sale or at prices
otherwise negotiated. Alternatively, the Offered Shares may be offered from time
to time through agents, brokers, dealers or underwriters designated from time to
time, and such agents, brokers, dealers or underwriters may receive compensation
in the form of commissions or concessions from the Selling Stockholders or the
purchasers of the Common Stock which may be in excess of customary commissions
charged for national stock exchange transactions. This offering shall terminate
on December 31, 1998 unless extended by the Company in its sole discretion. The
Selling Stockholders and any brokers-dealers acting in connection with the sale
of the Offered Shares may be deemed to be "underwriters" within the meaning of
the Act. Any commissions received by a broker or dealer in connection with
resales of the Offered Shares may be deemed to be underwriting commissions or
discounts under the Act.
Under the Exchange Act, and the regulations thereunder, any
person engaged in a distribution of the shares of Common Stock of the Company
offered by this Prospectus may not simultaneously engage in market making
activities with respect to the Common Stock of the Company during the applicable
"cooling off" periods prior to the commencement of such distribution. The
Selling Stockholders may be subject to applicable provisions of the Exchange Act
and the rules and regulations thereunder including, without limitation, Rule 102
of Regulation M, which provisions may limit the timing of purchases of Common
Stock by the Selling Stockholders.
LEGAL OPINION
The validity of the Offered Shares is being passed upon for the
Company by Pepper Hamilton LLP.
INDEMNIFICATION
Section 12 of the Company's By-Laws states that the Company will
indemnify and hold harmless all officers and directors from and against
liability and litigation expense, including reasonable attorney's fees, arising
out of their status as such or their activities in any of their capacities as
officers or directors. Such liability could arise under the Act. Insofar as
indemnification for liabilities arising under the Act may be permitted to
directors, officers and controlling persons of the Company pursuant to the
foregoing By-Law provisions, or otherwise, the Company has been advised that, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
EXPERTS
The financial statements of the Company and its subsidiary
incorporated into this Prospectus by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1997 have been so
incorporated in reliance on the reports of Arthur Andersen LLP and Baratz and
Associates, P.A., respectively, independent public accountants, given on the
authority of said firms as experts in auditing and accounting.
9
<PAGE>
===================
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus in
connection with the offer made hereby, and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the securities offered hereby to any person in
any state or other jurisdiction in which such offer or solicitation is unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, imply that information contained herein is correct as of any
time subsequent to its date or that there has not been any change in the facts
set forth in this Prospectus or in the affairs of the Company since the date
hereof.
____________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain
Information by Reference................................................. 2
Cautionary Statement...................................................... 3
The Company............................................................... 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 8
Selling Stockholders...................................................... 8
Description of Securities................................................. 8
Plan of Distribution...................................................... 9
Legal Opinion............................................................. 9
Indemnification........................................................... 9
Experts................................................................... 9
</TABLE>
====================
================================================================================
405,000 Shares
COVALENT GROUP, INC.
COMMON STOCK
----------------------
PROSPECTUS
----------------------
________________, 1998
======================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.......... $ 399
Legal fees and expenses...................................... 5,000*
Accountants' fees and expenses............................... 2,500*
Miscellaneous................................................ 1,000*
-------
TOTAL................................................... $ 8,899*
=======
</TABLE>
___________
* Represents the Company's estimate of such expenses
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada General Corporation Law requires the Company to indemnify
officers and directors for any expenses incurred by any officer or director in
connection with any actions or proceedings, whether civil, criminal or
administrative, or investigative, brought against such officer or director
because of his or her status as an officer or director, to the extent that the
director or officer has been successful on the merits or otherwise in defense of
the action or proceeding. The Nevada General Corporation Law permits a
corporation to indemnify an officer or director, even in the absence of an
agreement to do so, for expenses incurred in connection with any action or
proceeding if such officer or director acted in good faith and in a manner in
which he or she reasonably believed to be in or not opposed to the best
interests of the corporation and such indemnification is authorized by the
stockholders, by a quorum of disinterested directors, by independent legal
counsel in a written opinion authorized by a majority vote of a quorum of
directors consisting of disinterested directors or by independent legal counsel
in a written opinion if a quorum of disinterested directors cannot be obtained.
The Nevada General Corporation Law prohibits indemnification of a director or
officer if a final adjudication establishes that the officer's or director's
acts or omissions involved intentional misconduct, fraud or a knowing violation
of the law and were material to the cause of action. Despite the foregoing
limitations on indemnification, the Nevada General Corporation Law also provides
that indemnification of directors is not permitted for the unlawful payment of
distributions, except for those directors registering their dissent to the
payment of the distribution.
The Company's bylaws provide that the Company shall indemnify and hold
harmless all officers and directors from and against liability and litigation
expense, including reasonable attorneys' fees, arising out of their status as
such of their activities in any of their capacities as officers or directors.
Moreover, the Company's bylaws provide that the Company may advance
expenses in defending any civil or criminal action prior to its final
disposition if the Stockholders authorize it in a particular case and if the
person for whose benefit such expenses are paid shall agree to repay the
corporation unless it shall be ultimately determined that he is entitled to be
indemnified by the Company.
The directors and officers of the Company and its subsidiaries are
covered by policies of insurance under which they are insured, within limits and
subject to certain limitations, against certain expenses in connection with the
defense of actions, suits or proceedings, and certain liabilities which might be
imposed as a result of such actions, suits or proceedings, in which they are
parties by reason of being or having been directors or officers. The Company is
similarly insured, with respect to certain payments it might be required to make
to its directors or officers under applicable statutes and its charter
provisions.
Reference is made to Item 17 of this Registration Statement for
additional information regarding indemnification of directors and officers.
II-1
<PAGE>
ITEM 16. EXHIBITS
Exhibit No. Description
----------- -----------
4.1 Stock Purchase Warrant Agreement between the Company and
Berkshire International Finance, Inc. dated June 20, 1996.
4.2 Stock Purchase Warrant Agreement between the Company and S&F
Consulting, Inc. dated June 20, 1996.
4.3 Stock Purchase Warrant Agreement between the Company and S&F
Consulting, Inc. dated May 8, 1996.
5 Opinion of Pepper Hamiltion LLP.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Baratz and Associates, P.A.
23.3 Consent of Pepper Hamilton LLP (included in Exhibit 5).
24 Power of Attorney (previously filed).
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
II-2
<PAGE>
(iii) To include any additional or changed material information
with respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
clauses is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration Statement;
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Wayne, Pennsylvania, on July 15, 1998.
COVALENT GROUP, INC.
By: /s/ Bruce LaMont
-----------------------------------
Bruce LaMont,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: July 15, 1998 /s/ Bruce LaMont
---------------------------------------
Bruce LaMont,
President, Chief Executive Officer and
Director
Date: July 15, 1998 /s/ William K. Robinson
---------------------------------------
William K. Robinson,
Chief Financial Officer and Director
Date: July 15, 1998 *
---------------------------------------
Ivan S. Rubin, Director
Date: July 15, 1998 *
---------------------------------------
John Whittle, Director
_______________
* By: /s/ Bruce LaMont
------------------------
Bruce LaMont
as attorney-in-fact pursuant to power of attorney previously filed
II-4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
4.1 Stock Purchase Warrant Agreement between the Company
and Berkshire International Finance, Inc. dated June
20, 1996.
4.2 Stock Purchase Warrant Agreement between the Company
and S&F Consulting, Inc. dated June 20, 1996.
4.3 Stock Purchase Warrant Agreement between the Company
and S&F Consulting, Inc. dated May 8, 1996.
5 Opinion of Pepper Hamilton LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Baratz and Associates, P.A.
<PAGE>
Exhibit 4.3
STOCK PURCHASE WARRANT AGREEMENT
TO SUBSCRIBE FOR AND PURCHASE SHARES OF
COVALENT GROUP, INC.
THIS CERTIFIES THAT, for value received, S&F Consulting, Inc.
(hereinafter called "Holder") or registered assign(s), is entitled to subscribe
for and purchase from Covalent Group Inc., incorporated under the laws of the
State of Nevada (hereinafter called the "Company") at the price of $5.25 per
share at any time from the issuance of this Warrant to and including the date
five (5) years from said date up to One Hundred Thousand (100,000) fully paid
and non-assessable shares of the Company's Common Stock, subject however, to the
provisions and upon the terms and conditions hereinafter set forth.
THIS SECURITY HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933 OR THE SECURITIES LAWS OF NEVADA OR ANY OTHER STATE AND MAY BE
OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF AN EXEMPTION FROM
SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE.
1. Warrant. The rights represented by this Warrant may be exercised
-------
by the Holder hereof, in whole or in part (but not as to a fractional share of
Common Stock), by the surrender of the Warrant Certificate or Certificates with
the Form of Election to Purchase duly executed, at the principal office of the
Company and upon payment to it, for the account of the Company, by cash, check,
certified check or bank draft, of the purchase price for such shares of Common
Stock. The Company agrees that the shares of Common Stock shall be and be
deemed to be issued to the Holder hereof as the record owner of such Shares, as
of the close of business on the date on which the Warrant Certificate shall have
been surrendered and payment made for such Shares, as aforesaid. Certificates
for the Shares shall be delivered to the Holder hereof within a reasonable time,
not exceeding ten days, after the rights represented by this Warrant shall have
been so exercised, and, unless this Warrant has expired, a new Warrant
Certificate, representing the number of shares of Common Stock, if any, with
respect to which this Warrant shall not then have been exercised, shall also be
issued to the Holder hereof within such time. The Company shall have no right to
call the Warrant or the shares of Common Stock issued upon the exercise hereof.
2. Transferability. The Holder of this Warrant, by acceptance
---------------
hereof, agrees that, prior to the disposition of the Warrant or shares of Common
Stock purchased on the exercise thereof under circumstances which might require
registration of such securities under the Securities Act of 1933, as then in
force, or any similar federal statute then in force, such
<PAGE>
Holder will give written notice to the Company, expressing such Holder's
intention of effecting as to the disposition to be made of the securities
theretofore issued upon exercise hereof. If, in the written opinion of Holder's
counsel, subject to the written approval of Company's counsel the proposed
disposition does not require registration under the Securities Act of 1933, as
then in force, or any similar federal statute then in force, of the Warrant or
securities issuable or issued upon the exercise of this Warrant, the Holder,
subject to the company's counsel's written approval, shall, as promptly as
practicable, notify the Company hereof of such opinion, whereupon such Holder
shall be entitled to dispose of the Warrant or such securities theretofore
issued upon the exercise hereof, all in accordance with the terms of the notice
delivered by such Holder to the Company.
3. Shares Issuable Upon Exercise. The Company covenants and agrees
-----------------------------
that all securities that may be issued upon the exercise of the rights,
represented by this Warrant will, upon issuance, be validly issued, fully paid
and non-assessable, and free from all taxes, liens, and
charges with respect to the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue). The Company further
covenants and agrees that, during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved, a sufficient number of shares of its Common Stock to provide for
the exercise of rights presented by this Warrant.
4. Certain Events. In the case, at any time during the period this
--------------
Warrant shall be exercisable, (i) the Company shall pay any dividend payable in
stock on its Common Stock, or make any distribution (other than cash dividends
paid at established annual or quarterly rates) to the Holders of its Common
Stock; (ii) the Company shall offer for subscription pro rata to the Holders of
its Common Stock any additional shares of stock of any class, or other rights;
(iii) there shall be any capital reorganization, or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with, or
sale of all or substantially all, its assets to another corporation; or (iv)
there shall be a voluntary or involuntary dissolution, liquidation or winding-up
of the Company, then, in any one or more of such cases, the Company shall give
to the Holder of this Warrant (i) at least twenty days prior written notice of
the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, and (ii) in
the case of any such reorganization, liquidation or winding-up, at least twenty
days prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (i) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the Holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (ii) shall also specify when the holders of
Common Stock shall be entitled to exchange their Common Stock for securities or
the property deliverable upon such reorganization, liquidation or winding-up, as
the case may be. Each such written notice shall be given by first class mail,
postage prepaid, addressed to the Holder of the Warrant at the address of such
Holder as shown on the books of the Company.
-2-
<PAGE>
5. Common Stock. As use herein, the term "Common Stock" shall mean
------------
and include the Company's Common Stock authorized on the date of the original
issue of any class of the Company thereafter authorized that shall not be
limited to a fixed sum or percentage in respect to the rights of the Holders
thereof to participate in dividends and in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding-up of the Company,
provided, that the shares purchasable pursuant to this Warrant shall include
only shares of such class referred to in the first paragraph hereof designated
in the Company's Articles of Incorporation as Common Stock on the date of the
original issue or Warrant, or, in case of any reorganization, reclassification,
consolidation, merger or sale of assets of the character referred to in
paragraph 4 hereof, the stock, securities or assets provided for in such
paragraph.
6. Exchange of Warrant Certificate. The Warrant Certificate is
-------------------------------
exchangeable, upon its surrender by the registered Holder at such office or
agency of the Company, for a new Warrant Certificate of like tenor,
representing, in the aggregate, the right to subscribe for and purchase
hereunder each of such new Warrant to represent the right to subscribe for and
purchase such number of shares and warrants as shall be designated by the
registered Holder at the time of such surrender. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant Certificate, and, in case of any such loss, theft or destruction, upon
delivery of a bond of indemnity satisfactory to the Company, or, in the case of
any such mutilation, upon surrender or cancellation of the Warrant Certificate,
the Company will issue to the registered Holder a new Warrant Certificate of
like tenor, in lieu of the Warrant Certificate, representing the right to
subscribe for and purchase the number of shares that may be subscribed for and
purchased at that time.
7. Registration Rights. The Company covenants and agrees as
-------------------
follows:
A. Piggy-Back Registration. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holder(s))
any of its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan, a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in which the
only Common Stock being registered is Common Stock issuable upon conversion of
debt securities which are also being registered), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company the Company shall cause to be registered under the
Act all of the Registrable Securities that each such Holder has requested to be
registered.
B. Obligations of the Company. Whenever required under this
paragraph 1 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
-3-
<PAGE>
i. Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to one hundred twenty
(120) days or until the distribution contemplated in the Registration Statement
has been completed; provided, however, that (i) such 120-day period shall be
extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities which are intended to be
offered on a continuous or delayed basis, such 120-day period shall be extended,
if necessary, to keep the registration statement effective until all such
Registrable Securities are sold.
ii. Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
iii Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request.
iv. Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders (no more than 5 states).
v. In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
vi. Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
vii. Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange or over-the-counter
market on which similar securities issued by the Company are then listed.
-4-
<PAGE>
viii. Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
C. Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this paragraph 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
D. Expenses of Piggy-Back Registration. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to subparagraph B for each Holder including fees and disbursements of
counsel for the Company in its capacity as counsel to the selling Holders
hereunder; if Company counsel does not make itself available for this purpose,
the Company will pay the reasonable fees and disbursements of one counsel for
the selling Holders selected by them, but excluding underwriting discounts and
commissions relating to Registrable Securities.
E. Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under subparagraph B to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters).
H. Indemnification. In the event any Registrable Securities are included in a
registration statement under this paragraph 8:
i. To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities joint or several) to which they may become subject under
the Act, the 1934 Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, or the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them
-5-
<PAGE>
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, this the indemnity agreement shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
ii. To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified hereunder, in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that this
indemnity agreement shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this subdivision ii exceed
the gross proceeds from the offering received by such Holder.
iii. Promptly after receipt by an indemnified party under
this subparagraph E of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this subparagraph E, deliver
to the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any
-6-
<PAGE>
liability to the indemnified party under this subparagraph E, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this subparagraph E.
iv. If the indemnification provided for in this
subparagraph E is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
v. The obligations of the Company and Holders under this
subparagraph E shall survive the completion of any offering of Registrable
Securities in a registration statement under this paragraph 8, and otherwise.
F. Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this paragraph 8 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities provided: (a) the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement; and (c) such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the Act.
8. Notices. Notices pursuant to this Agreement shall be given by
-------
first-class mail, postage prepaid, addressed to the registered Holder of each
Warrant at the address of such Holder appearing in the records of the Company,
if to the Holder, and to the Company's principal executive office, if to the
Company.
-7-
<PAGE>
IN WITNESS WHEREOF, Covalent Group, Inc. has caused this Warrant to be
signed by its duly authorized officers under its corporate seal, to be dated,
May 8, 1996.
COVALENT GROUP, INC.
By: /s/ Bruce LaMont
--------------------------------------
Bruce LaMont
President
-8-
<PAGE>
EXHIBIT 4.2
STOCK PURCHASE WARRANT AGREEMENT
TO SUBSCRIBE FOR AND PURCHASE SHARES OF
COVALENT GROUP, INC.
THIS CERTIFIES THAT, for value received, S&F Consulting, Inc.
(hereinafter called "Holder") or registered assign(s), is entitled to subscribe
for and purchase from Covalent Group Inc., incorporated under the laws of the
State of Nevada (hereinafter called the "Company") at the price of $2.75 per
share at any time from the issuance of this Warrant to and including the date
five (5) years from said date up to Fifty Thousand (50,000) fully paid and non-
assessable shares of the Company's Common Stock, subject however, to the
provisions and upon the terms and conditions hereinafter set forth.
THIS SECURITY HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933 OR THE SECURITIES LAWS OF NEVADA OR ANY OTHER STATE AND MAY BE
OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF AN EXEMPTION FROM
SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE.
1. Warrant. The rights represented by this Warrant may be exercised
-------
by the Holder hereof, in whole or in part (but not as to a fractional share of
Common Stock), by the surrender of the Warrant Certificate or Certificates with
the Form of Election to Purchase duly executed, at the principal office of the
Company and upon payment to it, for the account of the Company, by cash, check,
certified check or bank draft, of the purchase price for such shares of Common
Stock. The Company agrees that the shares of Common Stock shall be and be
deemed to be issued to the Holder hereof as the record owner of such Shares, as
of the close of business on the date on which the Warrant Certificate shall have
been surrendered and payment made for such Shares, as aforesaid. Certificates
for the Shares shall be delivered to the Holder hereof within a reasonable time,
not exceeding ten days, after the rights represented by this Warrant shall have
been so exercised, and, unless this Warrant has expired, a new Warrant
Certificate, representing the number of shares of Common Stock, if any, with
respect to which this Warrant shall not then have been exercised, shall also be
issued to the Holder hereof within such time. The Company shall have no right to
call the Warrant or the shares of Common Stock issued upon the exercise hereof.
2. Transferability. The Holder of this Warrant, by acceptance
---------------
hereof, agrees that, prior to the disposition of the Warrant or shares of Common
Stock purchased on the exercise thereof under circumstances which might require
registration of such securities under the Securities Act of 1933, as then in
force, or any similar federal statute then in force, such
<PAGE>
Holder will give written notice to the Company, expressing such Holder's
intention of effecting as to the disposition to be made of the securities
theretofore issued upon exercise hereof. If, in the written opinion of Holder's
counsel, subject to the written approval of Company's counsel the proposed
disposition does not require registration under the Securities Act of 1933, as
then in force, or any similar federal statute then in force, of the Warrant or
securities issuable or issued upon the exercise of this Warrant, the Holder,
subject to the company's counsel's written approval, shall, as promptly as
practicable, notify the Company hereof of such opinion, whereupon such Holder
shall be entitled to dispose of the Warrant or such securities theretofore
issued upon the exercise hereof, all in accordance with the terms of the notice
delivered by such Holder to the Company.
3. Shares Issuable Upon Exercise. The Company covenants and agrees
-----------------------------
that all securities that may be issued upon the exercise of the rights,
represented by this Warrant will, upon issuance, be validly issued, fully paid
and non-assessable, and free from all taxes, liens, and charges with respect to
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized, and reserved, a
sufficient number of shares of its Common Stock to provide for the exercise of
rights presented by this Warrant.
4. Certain Events. In the case, at any time during the period this
--------------
Warrant shall be exercisable, (i) the Company shall pay any dividend payable in
stock on its Common Stock, or make any distribution (other than cash dividends
paid at established annual or quarterly rates) to the Holders of its Common
Stock; (ii) the Company shall offer for subscription pro rata to the Holders of
its Common Stock any additional shares of stock of any class, or other rights;
(iii) there shall be any capital reorganization, or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with, or
sale of all or substantially all, its assets to another corporation; or (iv)
there shall be a voluntary or involuntary dissolution, liquidation or winding-up
of the Company, then, in any one or more of such cases, the Company shall give
to the Holder of this Warrant (i) at least twenty days prior written notice of
the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, and (ii) in
the case of any such reorganization, liquidation or winding-up, at least twenty
days prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (i) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the Holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (ii) shall also specify when the holders of
Common Stock shall be entitled to exchange their Common Stock for securities or
the property deliverable upon such reorganization, liquidation or winding-up, as
the case may be. Each such written notice shall be given by first class mail,
postage prepaid, addressed to the Holder of the Warrant at the address of such
Holder as shown on the books of the Company.
-2-
<PAGE>
5. Common Stock. As use herein, the term "Common Stock" shall mean
------------
and include the Company's Common Stock authorized on the date of the original
issue of any class of the Company thereafter authorized that shall not be
limited to a fixed sum or percentage in respect to the rights of the Holders
thereof to participate in dividends and in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding-up of the Company,
provided, that the shares purchasable pursuant to this Warrant shall include
only shares of such class referred to in the first paragraph hereof designated
in the Company's Articles of Incorporation as Common Stock on the date of the
original issue or Warrant, or, in case of any reorganization, reclassification,
consolidation, merger or sale of assets of the character referred to in
paragraph 4 hereof, the stock, securities or assets provided for in such
paragraph.
6. Exchange of Warrant Certificate. The Warrant Certificate is
-------------------------------
exchangeable, upon its surrender by the registered Holder at such office or
agency of the Company, for a new Warrant Certificate of like tenor,
representing, in the aggregate, the right to subscribe for and purchase
hereunder each of such new Warrant to represent the right to subscribe for and
purchase such number of shares and warrants as shall be designated by the
registered Holder at the time of such surrender. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant Certificate, and, in case of any such loss, theft or destruction, upon
delivery of a bond of indemnity satisfactory to the Company, or, in the case of
any such mutilation, upon surrender or cancellation of the Warrant Certificate,
the Company will issue to the registered Holder a new Warrant Certificate of
like tenor, in lieu of the Warrant Certificate, representing the right to
subscribe for and purchase the number of shares that may be subscribed for and
purchased at that time.
7. Registration Rights. The Company covenants and agrees as
-------------------
follows:
A. Piggy-Back Registration. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holder(s))
any of its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan, a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in which the
only Common Stock being registered is Common Stock issuable upon conversion of
debt securities which are also being registered), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company the Company shall cause to be registered under the
Act all of the Registrable Securities that each such Holder has requested to be
registered.
B. Obligations of the Company. Whenever required under this
paragraph 1 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
-3-
<PAGE>
i. Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for a period of up to one
hundred twenty (120) days or until the distribution contemplated in the
Registration Statement has been completed; provided, however, that (i) such 120-
day period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold.
ii. Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
iii. Furnish to the Holders such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request.
iv. Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders (no more than 5 states).
v. In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
vi. Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
vii. Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange or over-the-counter
market on which similar securities issued by the Company are then listed.
-4-
<PAGE>
vii. Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
C. Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this paragraph 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
D. Expenses of Piggy-Back Registration. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to subparagraph B for each Holder including fees and disbursements of
counsel for the Company in its capacity as counsel to the selling Holders
hereunder; if Company counsel does not make itself available for this purpose,
the Company will pay the reasonable fees and disbursements of one counsel for
the selling Holders selected by them, but excluding underwriting discounts and
commissions relating to Registrable Securities.
E. Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under subparagraph B to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters). H. Indemnification. In the
event any Registrable Securities are included in a registration statement under
this paragraph 8:
i. To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities joint or several) to which they may become subject under
the Act, the 1934 Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, or the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in
-5-
<PAGE>
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, this the indemnity agreement shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
ii. To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities joint or several) to which any of the foregoing
persons may become subject, under the Act, or the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified hereunder, in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that this indemnity agreement shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this subdivision
ii exceed the gross proceeds from the offering received by such Holder.
iii. Promptly after receipt by an indemnified party
under this subparagraph E of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this subparagraph E,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any
-6-
<PAGE>
liability to the indemnified party under this subparagraph E, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this subparagraph E.
iv. If the indemnification provided for in this
subparagraph E is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
v. The obligations of the Company and Holders under
this subparagraph E shall survive the completion of any offering of Registrable
Securities in a registration statement under this paragraph 8, and otherwise.
F. Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this paragraph 8 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities provided: (a) the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement; and (c) such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the Act.
8. Notices. Notices pursuant to this Agreement shall be given by
-------
first-class mail, postage prepaid, addressed to the registered Holder of each
Warrant at the address of such Holder appearing in the records of the Company,
if to the Holder, and to the Company's principal executive office, if to the
Company.
-7-
<PAGE>
IN WITNESS WHEREOF, Covalent Group, Inc. has caused this Warrant to be
signed by its duly authorized officers under its corporate seal, to be dated,
June 20, 1996.
COVALENT GROUP, INC.
By: /s/ Bruce LaMont
----------------------------------------
Bruce LaMont
President
-8-
<PAGE>
EXHIBIT 4.1
STOCK PURCHASE WARRANT AGREEMENT
TO SUBSCRIBE FOR AND PURCHASE SHARES OF
COVALENT GROUP, INC.
THIS CERTIFIES THAT, for value received, Berkshire International
Finance, Inc. (hereinafter called "Holder") or registered assign(s), is entitled
to subscribe for and purchase from Covalent Group Inc., incorporated under the
laws of the State of Nevada (hereinafter called the "Company") at the price of
$2.75 per share at any time from the issuance of this Warrant to and including
the date five (5) years from said date up to Two Hundred Thousand (200,000)
fully paid and non-assessable shares of the Company's Common Stock, subject
however, to the provisions and upon the terms and conditions hereinafter set
forth.
THIS SECURITY HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT
OF 1933 OR THE SECURITIES LAWS OF NEVADA OR ANY OTHER STATE AND MAY BE
OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF AN EXEMPTION FROM
SUCH REGISTRATION OR QUALIFICATION IS APPLICABLE.
1. Warrant. The rights represented by this Warrant may be exercised
-------
by the Holder hereof, in whole or in part (but not as to a fractional share of
Common Stock), by the surrender of the Warrant Certificate or Certificates with
the Form of Election to Purchase duly executed, at the principal office of the
Company and upon payment to it, for the account of the Company, by cash, check,
certified check or bank draft, of the purchase price for such shares of Common
Stock. The Company agrees that the shares of Common Stock shall be and be
deemed to be issued to the Holder hereof as the record owner of such Shares, as
of the close of business on the date on which the Warrant Certificate shall have
been surrendered and payment made for such Shares, as aforesaid. Certificates
for the Shares shall be delivered to the Holder hereof within a reasonable time,
not exceeding ten days, after the rights represented by this Warrant shall have
been so exercised, and, unless this Warrant has expired, a new Warrant
Certificate, representing the number of shares of Common Stock, if any, with
respect to which this Warrant shall not then have been exercised, shall also be
issued to the Holder hereof within such time. The Company shall have no right to
call the Warrant or the shares of Common Stock issued upon the exercise hereof.
2. Transferability. The Holder of this Warrant, by acceptance
---------------
hereof, agrees that, prior to the disposition of the Warrant or shares of Common
Stock purchased on the exercise thereof under circumstances which might require
registration of such securities under the Securities Act of 1933, as then in
force, or any similar federal statute then in force, such
<PAGE>
Holder will give written notice to the Company, expressing such Holder's
intention of effecting as to the disposition to be made of the securities
theretofore issued upon exercise hereof. If, in the written opinion of Holder's
counsel, subject to the written approval of Company's counsel the proposed
disposition does not require registration under the Securities Act of 1933, as
then in force, or any similar federal statute then in force, of the Warrant or
securities issuable or issued upon the exercise of this Warrant, the Holder,
subject to the company's counsel's written approval, shall, as promptly as
practicable, notify the Company hereof of such opinion, whereupon such Holder
shall be entitled to dispose of the Warrant or such securities theretofore
issued upon the exercise hereof, all in accordance with the terms of the notice
delivered by such Holder to the Company.
3. Shares Issuable Upon Exercise. The Company covenants and agrees
-----------------------------
that all securities that may be issued upon the exercise of the rights,
represented by this Warrant will, upon issuance, be validly issued, fully paid
and non-assessable, and free from all taxes, liens, and
charges with respect to the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue). The Company further
covenants and agrees that, during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved, a sufficient number of shares of its Common Stock to provide for
the exercise of rights presented by this Warrant.
4. Certain Events. In the case, at any time during the period this
--------------
Warrant shall be exercisable, (i) the Company shall pay any dividend payable in
stock on its Common Stock, or make any distribution (other than cash dividends
paid at established annual or quarterly rates) to the Holders of its Common
Stock; (ii) the Company shall offer for subscription pro rata to the Holders of
its Common Stock any additional shares of stock of any class, or other rights;
(iii) there shall be any capital reorganization, or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with, or
sale of all or substantially all, its assets to another corporation; or (iv)
there shall be a voluntary or involuntary dissolution, liquidation or winding-up
of the Company, then, in any one or more of such cases, the Company shall give
to the Holder of this Warrant (i) at least twenty days prior written notice of
the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, and (ii) in
the case of any such reorganization, liquidation or winding-up, at least twenty
days prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (i) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the Holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (ii) shall also specify when the holders of
Common Stock shall be entitled to exchange their Common Stock for securities or
the property deliverable upon such reorganization, liquidation or winding-up, as
the case may be. Each such written notice shall be given by first class mail,
postage prepaid, addressed to the Holder of the Warrant at the address of such
Holder as shown on the books of the Company.
-2-
<PAGE>
5. Common Stock. As use herein, the term "Common Stock" shall mean
------------
and include the Company's Common Stock authorized on the date of the original
issue of any class of the Company thereafter authorized that shall not be
limited to a fixed sum or percentage in respect to the rights of the Holders
thereof to participate in dividends and in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding-up of the Company,
provided, that the shares purchasable pursuant to this Warrant shall include
only shares of such class referred to in the first paragraph hereof designated
in the Company's Articles of Incorporation as Common Stock on the date of the
original issue or Warrant, or, in case of any reorganization, reclassification,
consolidation, merger or sale of assets of the character referred to in
paragraph 4 hereof, the stock, securities or assets provided for in such
paragraph.
6. Exchange of Warrant Certificate. The Warrant Certificate is
-------------------------------
exchangeable, upon its surrender by the registered Holder at such office or
agency of the Company, for a new Warrant Certificate of like tenor,
representing, in the aggregate, the right to subscribe for and purchase
hereunder each of such new Warrant to represent the right to subscribe for and
purchase such number of shares and warrants as shall be designated by the
registered Holder at the time of such surrender. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant Certificate, and, in case of any such loss, theft or destruction, upon
delivery of a bond of indemnity satisfactory to the Company, or, in the case of
any such mutilation, upon surrender or cancellation of the Warrant Certificate,
the Company will issue to the registered Holder a new Warrant Certificate of
like tenor, in lieu of the Warrant Certificate, representing the right to
subscribe for and purchase the number of shares that may be subscribed for and
purchased at that time.
7. Registration Rights. The Company covenants and agrees as
-------------------
follows:
A. Piggy-Back Registration. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holder(s))
any of its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan, a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in which the
only Common Stock being registered is Common Stock issuable upon conversion of
debt securities which are also being registered), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company the Company shall cause to be registered under the
Act all of the Registrable Securities that each such Holder has requested to be
registered.
B. Obligations of the Company. Whenever required under this
paragraph 1 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
-3-
<PAGE>
i. Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to one hundred twenty
(120) days or until the distribution contemplated in the Registration Statement
has been completed; provided, however, that (i) such 120-day period shall be
extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities which are intended to be
offered on a continuous or delayed basis, such 120-day period shall be extended,
if necessary, to keep the registration statement effective until all such
Registrable Securities are sold.
ii. Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
iii. Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request.
iv. Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders (no more than 5 states).
v. In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
vi. Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
vii Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange or over-the-counter
market on which similar securities issued by the Company are then listed.
-4-
<PAGE>
viii. Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
C. Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this paragraph 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
D. Expenses of Piggy-Back Registration. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to subparagraph B for each Holder including fees and disbursements of
counsel for the Company in its capacity as counsel to the selling Holders
hereunder; if Company counsel does not make itself available for this purpose,
the Company will pay the reasonable fees and disbursements of one counsel for
the selling Holders selected by them, but excluding underwriting discounts and
commissions relating to Registrable Securities.
E. Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under subparagraph B to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters).
H. Indemnification. In the event any Registrable Securities are
included in a registration statement under this paragraph 8:
i. To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities joint or several) to which they may become subject under
the Act, the 1934 Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, or the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in
-5-
<PAGE>
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, this the indemnity agreement shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
ii. To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified hereunder, in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that this
indemnity agreement shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this subdivision ii exceed
the gross proceeds from the offering received by such Holder.
iii. Promptly after receipt by an indemnified party under
this subparagraph E of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this subparagraph E, deliver
to the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any
-6-
<PAGE>
liability to the indemnified party under this subparagraph E, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this subparagraph E.
iv. If the indemnification provided for in this
subparagraph E is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
v. The obligations of the Company and Holders under this
subparagraph E shall survive the completion of any offering of Registrable
Securities in a registration statement under this paragraph 8, and otherwise.
F. Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this paragraph 8 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities provided: (a) the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement; and (c) such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the Act.
8. Notices. Notices pursuant to this Agreement shall be given by
-------
first-class mail, postage prepaid, addressed to the registered Holder of each
Warrant at the address of such Holder appearing in the records of the Company,
if to the Holder, and to the Company's principal executive office, if to the
Company.
-7-
<PAGE>
IN WITNESS WHEREOF, Covalent Group, Inc. has caused this Warrant to be
signed by its duly authorized officers under its corporate seal, to be dated,
June 20, 1996.
COVALENT GROUP, INC.
By: /s/ Bruce LaMont
-------------------------------------
Bruce LaMont
President
-8-
<PAGE>
Exhibit 5
OPINION OF PEPPER HAMILTON LLP
July 15, 1998
Covalent Group, Inc.
One Glenhardie Corporate Center
1275 Drummers Lane, Suite 100
Wayne, Pennsylvania 19087
Gentlemen:
We have acted as special counsel to Covalent Group, Inc., a
Nevada corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission (the "Commission") of a
registration statement (the "Registration Statement") of the Company on Form S-3
under the Securities Act of 1933, as amended (the "Act"). The Registration
Statement relates to the proposed offer and sale by a certain selling
stockholder of the Company (the "Selling Stockholder") of up to 55,000
outstanding shares (the "Shares") of the Company's common stock, par value $.001
per share (the "Common Stock").
In connection with this opinion, we have examined the
Registration Statement, including the exhibits thereto, the original or copies,
certified or otherwise identified to our satisfaction, of the Articles of
Incorporation and the Bylaws of the Company, amended to date, resolutions of the
Company's Board of Directors and such other documents and corporate records
relating to the Company and the original issuance of the Shares to the Selling
Stockholder as we have deemed appropriate. In edition, we have made such
investigation of the Nevada General Corporation Law statute (the "Nevada GCL")
as we have considered appropriate for the purpose of rendering the opinions
expressed herein. This opinion is limited to the Nevada GCL.
On the basis of the foregoing, we are of the opinion that the
Shares are duly authorized, validly issued, fully paid and nonassessable.
We hereby consent to the reference to our firm under the caption
"Legal Opinion" in the Registration Statement and to the filing of this opinion
as an exhibit to the Registration Statement.
Very truly yours,
PEPPER HAMILTON LLP
/s/ Jeffrey P. Libson
--------------------------------
A Partner
<PAGE>
Exhibit 23.1
CONSENT OF ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Covalent Group, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this Amendment No. 1 to S-3 Registration Statement of our report
dated March 6, 1998 included in Covalent Group, Inc.'s Form 10-KSB for the year
ended December 31, 1997 and to all references to our Firm included in this
Amendment No. 1 to S-3 Registration Statement.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
July 14, 1998
<PAGE>
Exhibit 23.2
CONSENT OF BARATZ AND ASSOCIATES, P.A.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Covalent Group, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this Amendment No. 1 to S-3 Registration Statement of our report
dated February 5, 1997 included in Covalent Group, Inc.'s Form 10-KSB for the
year ended December 31, 1997 and to all references to our Firm included in this
Amendment No. 1 to S-3 Registration Statement.
BARATZ AND ASSOCIATES, P.A.
/s/ Baratz and Associates, P.A.
Marlton, New Jersey
July 14, 1998
