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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the fiscal year ended
December 31, 1996
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from _________ to __________
Commission File No. 0-19892
IBAH, Inc.
(Exact name of registrant as specified in its charter)
Delaware 52-1670189
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Four Valley Square, 512 Township Line Road, Blue Bell, Pennsylvania 19422
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 283-0770
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference Part III of this Form 10-K or any amendment
to this Form 10-K.
[X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant on March 11, 1997 was approximately $108,000,000. For purposes of
making this declaration only, the Registrant has defined affiliates as including
all directors.
The number of outstanding shares of the Registrant's Common Stock, par
value $.01 per share, on March 11, 1997 was 22,514,712.
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The following documents are incorporated by reference into Part III,
Items 10, 11, 12 and 13 of this Form 10-K: The Registrant's definitive proxy
materials for its Annual Meeting of Stockholders to be held June 16, 1997.
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PART 1
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Item 1. Business
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IBAH, Inc. - Company Overview
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IBAH, Inc. ("IBAH" or the "Company") is a worldwide leader in providing
comprehensive product development services to client companies in the
pharmaceutical, biotechnology, medical device, and diagnostics industries. IBAH
is a clinical research organization ("CRO") which offers services for all stages
of drug development.
The Company provides its services through two primary operating
divisions, the United States and International Clinical Services Divisions
(together defined as the "Clinical Services Division") and Bio-Pharm
Pharmaceutics Services (the "Pharmaceutics Services Division"). On October 1,
1996, the Company acquired The Hardardt Group ("THG"), a clinical monitoring and
clinical trials management company, integrating it into the Clinical Services
Division. In July, 1996, the Company acquired Resource Biometrics, Inc. ("RBI")
to provide software tools to enhance the Company's and its clients' efficiency
and speed in analyzing clinical data. As of December 31, 1996, the Company had a
worldwide staff of 755 full-time equivalents. In addition, on February 28, 1997,
the Company signed a definitive agreement to purchase Pharmaco Pty., Ltd., one
of the leading CROs in Australia. The closing of this acquisition is contingent
upon the completion of due diligence. Pharmaco Pty., Ltd. had revenues of
approximately $1.2 million in 1996.
The Company generates almost all of its revenue by providing services on
a contractual basis to its clients. All of the Company's services are designed
to help client companies accelerate products from discovery through development
and commercialization faster and cost-effectively.
The Clinical Services Division, the core of IBAH, is a full service
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international CRO that began operations in 1985. This division's primary
services are designing product development programs, managing pre-clinical
studies, design and conduct clinical trials, clinical data management and
biostatistical analysis, writing reports of study findings, health economics
analysis and post-marketing studies, and regulatory dossier filings.
This division earns its revenues by providing services on a contractual
basis to its clients. The division's worldwide staff is located in offices in
the United States, Australia, Belgium, the Czech Republic, Denmark, France,
Germany, Spain, Switzerland and the United Kingdom. Through a joint venture with
a Russian company, this division also operates an office located in Russia.
Since the inception of Bio-Pharm Clinical Services, Inc., the predecessor
to IBAH, IBAH has prepared 47 New Drug Applications ("NDA"), five of which were
submitted in 1996, including one of the largest ever filed.
The Pharmaceutics Services Division provides traditional product
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formulation services, process development, manufacture of drugs and placebos for
clinical trials, pilot plant manufacturing, methods development, analytical
testing, and clinical trials drug packaging. The division's services also
include shelf life stability testing, process validation, and analysis of other
chemical and physical properties required in regulatory submissions.
This division began in October, 1993 and currently operates from a 20,000
square foot Good Manufacturing Practice ("cGMP") manufacturing facility with
full pilot plant capabilities located in suburban Philadelphia. To accommodate
growth, the division recently entered into a lease for a 124,000 square foot
facility in the same area as its current facility. The division expects to phase
in operations in the new facility over the next several years, beginning in the
second quarter of 1997.
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Company History
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IBAH was originally Affinity Biotech, Inc., a New Jersey corporation (the
"New Jersey Corporation"), which was incorporated in January, 1990. In April,
1992, the New Jersey Corporation was merged into Affinity Biotech, Inc., a
Delaware corporation ("Affinity"), which was incorporated in February, 1992. In
April, 1992, Affinity completed its initial public offering of common stock.
On April 27, 1994, Bio-Pharm Clinical Services, Inc. ("Bio-Pharm"), a
clinical research organization, and Affinity, a drug delivery and technology
corporation, merged (the "Merger") and simultaneous with the Merger, Affinity
changed its name to IBAH.
Bio-Pharm was founded in December, 1985 by Geraldine A. Henwood,
President of Bio-Pharm from 1985 through April, 1994, and President and Chief
Executive Officer of IBAH since April, 1994. Since the Merger resulted in the
former Bio-Pharm shareholders having a majority ownership of IBAH, the Merger
was accounted for as an acquisition of Affinity by Bio-Pharm.
In 1991, Bio-Pharm opened its first European operation based in
Frankfurt, Germany. Subsequently, an office was opened in Australia in 1993. In
January, 1994, Bio-Pharm purchased European Pharmaceutical Investigation
Consultants Limited ("EPIC"), a CRO headquartered in the United Kingdom with an
office in Switzerland. The EPIC acquisition was a major expansion step allowing
the Company to serve the United Kingdom and strengthen its position throughout
Europe. Since the EPIC acquisition, the Company has opened offices in France,
Belgium, Spain, Denmark, and the Czech Republic. Through a joint venture with a
Russian company, IBAH also operates an office located in Russia.
On July 28, 1995, the Company sold its Drug Delivery Services Division,
the part of Affinity which offered proprietary drug delivery services, to a
management group from that division.
On August 11, 1995, IBAH completed a private placement of convertible
preferred stock and warrants for a total investment in the Company of $7
million. The private placement was made to improve working capital and place the
Company in compliance with certain financial requirements necessary for the
continued listing of the stock on the NASDAQ National Market. The registration
with the Securities and Exchange Commission of the resale of the 5,997,324
shares of common stock, issuable upon conversion of the preferred stock and
exercise of the warrants issued in this private placement became effective on
October 31, 1995. See Note 4 of Notes to Consolidated Financial Statements.
On April 19, 1996, the Company completed a public offering of 3,000,000
shares of common stock of the Company to selected institutional investors,
netting the Company $18 million.
On July 18, 1996, IBAH acquired RBI based in the San Francisco,
California area. RBI is a provider of software products and data services to the
pharmaceutical, biotechnology, and medical device industries. The software tools
are being designed to increase the efficiency of data clean-up, database
consolidation, data analysis and reporting.
On October 1, 1996, IBAH acquired THG, located in northern New Jersey.
THG provides clinical trials management and clinical monitoring services to the
pharmaceutical and biotechnology industries, predominantly in the United States.
The THG operation has been completely integrated into the U.S. Clinical Services
Division. The acquisition has added critical mass and management talent to the
Company, enhancing its ability to obtain and perform large clinical trials.
Industry Background and Trends
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New pharmaceutical, biotechnology, medical device and diagnostic products
generally must undergo extensive testing to demonstrate their safety and
effectiveness in order to obtain regulatory approval for commercialization.
Companies seeking such approval are responsible for performing and analyzing the
results of
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multi-phase clinical trials that typically span two to five years and involve
hundreds to thousands of human participants. Historically, clinical trials were
performed almost exclusively by in-house personnel of the companies that owned
the products under development. For over a decade, there has been a growing
trend for companies developing new products to outsource certain activities by
contracting with CROs for the performance of clinical trials and related
activities in the development and approval process.
IBAH believes, based on its experience and reports from industry
analysts, that the following industry trends have increased and will continue to
increase the market for CRO services:
. Pharmaceutical and biotechnology research and development expenditures
continue to increase. From 1995 to 1996, research and development spending
for major U.S. pharmaceutical companies and the outsourcing of this spending
continue to increase. Worldwide research and development expenditures were
estimated at approximately $30 billion for 1996. Increased emphasis on the
development of effective treatments for chronic disorders and life
threatening, acute conditions, such as stroke and infectious diseases, is
contributing to this trend. Requirements from regulatory agencies to conduct
longer, more complex trials to demonstrate effectiveness and potential long-
term effects are also factors in this spending growth.
. Cost containment pressures continue to escalate as a result of various
influences, including efforts by governments and managed care organizations
to control prices, increased competition from generic drugs, and more
stringent regulatory requirements. As pharmaceutical companies continue
experiencing pressure on profit margins and attempt to hasten new product
introductions worldwide, they are increasingly outsourcing to CROs which
provide expertise, speed, and global reach.
. Maturation of the biotechnology industry has substantially increased the
number of biotechnology drugs in clinical development. Rather than build the
infrastructure necessary to handle the clinical development stages, many
biotechnology companies are choosing to outsource to CROs.
. Emphasis on globalization has led pharmaceutical and biotechnology companies
to pursue product development simultaneously in multiple countries and
conduct programs which simultaneously satisfy the requirements of multiple
regulatory agencies. In addition, since 1992 guidelines for the conduct of
clinical research within Europe require more stringent standards. The
emphasis on globalization combined with escalating complexity has increased
manpower and resource requirements for clinical trials, which in turn has
resulted in an increase in the use of CRO services.
The Drug Development Process
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Before a drug may be marketed, it must undergo extensive testing and
regulatory review to determine its safety and effectiveness. The following is a
brief description of the stages of U.S. and worldwide drug development. As a
full service CRO, IBAH offers comprehensive services in every phase of this
process:
Regulatory Affairs - Full-service CROs, such as IBAH, offer regulatory
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affairs services which assist clients with the design of regulatory strategy and
span the development process from formulation development to preclinical and
clinical trials through regulatory filings, e.g., New Drug Applications ("NDA"),
Product License Applications ("PLA"), and EU-multistate (cPMP) or National
filings. CROs also assist in the actual preparation of filing and communications
with the regulatory agencies. These services are critical to every phase of the
development process, and to a timely, successful completion of any product
development project.
Preclinical Testing - The initial stage in the drug development process
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is preclinical research. In this stage, the drug is tested in vitro (test tube)
and in animals, generally over one to three years. Safety studies, including
toxicology, are a major portion of this phase along with metabolism, kinetics,
and clinical pathology.
Phase I - Phase I trials are conducted in healthy volunteers, typically
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18-20 per study, to develop basic safety data relating to toxicity, metabolism,
absorption and other pharmacological actions. In order to establish
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safe dosage ranges, single and multiple dose tolerance tests are conducted.
Phase I generally lasts from six months to one year.
Phase II - Phase II trials are conducted on small numbers of subjects,
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typically 100 to 200 patients who suffer from the drug's targeted disease or
condition. Phase II trials last an average of six months to two years and
provide the first evidence of clinical efficacy (effectiveness) at different
doses, as well as additional safety data. These trials may include dose ranging
studies to establish optimal dosages wherein the drugs are usually tested
against a placebo or a currently marketed drug.
Phase III - Phase III trials are conducted on a significantly larger
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patient population, from hundreds to thousands of patients who suffer from the
targeted disease. Conducted at numerous investigational sites including
hospitals and clinics, these trials are designed to establish safety and
efficacy as well as the optimal dosing regimen of the drug under study. During
Phase III, which generally lasts from one to three years, the new drug is
compared with a placebo or with one or more drugs with established safety and
efficacy profiles in the same therapeutic category.
Phase IV - As a condition of granting marketing approval, the Food and
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Drug Administration ("FDA") or other global regulatory agencies, may require a
sponsor to conduct additional clinical trials or post-approval trials of the
product, monitor long-term risks and benefits, study different dosage levels, or
evaluate different safety and efficacy parameters in target patient populations.
Clients also pursue Phase IV trials to enhance such things as product profiles
with new claims and dosage regimens to gain comparative marketing information or
for health economics and outcomes research. These trials generally last one to
four years.
Regulatory Application - The regulatory filing which is submitted to a
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regulatory agency, such as the FDA or the Medicine Control Agency ("MCA"), is a
comprehensive filing that averages over 100,000 pages. It includes manufacturing
and animal testing data as well as clinical trial data. The largest portion of
the clinical data contained in a regulatory filing is generated during the Phase
II and III trials.
Regulatory Reviews - FDA reviews of filings in the U.S. can last from
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several months to several years, while European regulatory review generally
lasts 10-18 months in most countries. Regulatory approval is required prior to
commercialization. The FDA has been under increasing scrutiny and pressure to
shorten its approval process and has accelerated this process by granting
expedited approval of lifesaving drugs or drugs for conditions where there is no
current treatment.
Pharmaceutics Services - In parallel with the phases described above, the
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product dose form development process involves formulation development,
including placebo and active drug clinical manufacturing and process development
for commercial manufacturing, the development of analytical methodology,
execution of a high number of analytical tests, as well as stability testing.
These services are also being outsourced more extensively as companies increase
their efforts to cut costs and time from the development process.
IBAH's Services
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IBAH's services cover all phases of the drug development process,
including formulation development, analytical methodology and stability testing,
preclinical through clinical trials, data management and biostatistical
services, pharmacoeconomic studies, and regulatory filings.
Preclinical Services
IBAH offers a full range of preclinical testing services through an
alliance with the Laboratory of Pharmacology and Toxicology (LPT), a well-
established, experienced, preclinical organization headquartered in Hamburg,
Germany. This includes toxicology, carcinogenicity, mutagenicity, reproduction,
and pathology studies.
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Clinical Program Management
IBAH provides a broad range of services related to the design and
management of clinical programs. These activities include program design
strategy for product development to satisfy the regulatory requirements as well
as commercial objectives. The services are designed to achieve the client's
marketing goals by obtaining regulatory approval with maximum quality,
comprehensive product profile and speed to market at an efficient cost. Prior to
the commencement of clinical studies, IBAH assists clients in developing
specific attributes or design of the program to ensure that key product profile
objectives are incorporated into the program's design.
Once the clinical program has been designed, implementation of clinical
studies includes establishing study sites and monitoring the conduct of the
studies. IBAH recruits qualified independent investigators to carry out the
trials in compliance with applicable regulations and protocols designed for the
specific trial. Clinical monitoring includes regular visits to clinical trial
sites by IBAH's clinical research associates. The monitoring process focuses
heavily on quality control to assure the accuracy and reliability of the data
collected and compliance with all applicable requirements.
The Clinical Services Division's international project management team
offers experience in over 35 therapeutic areas and utilizes a Worldwide
Operations Database to track study progress.
Data Management, Analysis and Reporting
Critical to the success of any clinical trial is the assembly, analysis
and reporting of data collected. IBAH's cross-disciplinary teams -skilled in
data management, biostatistics, computer programming, clinical writing, and
regulatory affairs - utilize current data processing equipment and commercial
and proprietary software that enable the Company to process, analyze and present
vast amounts of data. The field data collected at the study sites is assembled
into a database and verified for accuracy of input. The information collected is
then analyzed and its statistical significance ascertained.
Considerable effort is directed toward the goal of having error-free data
in regulatory filings, thereby increasing reliability of results and minimizing
delays in the approval process.
IBAH's expertise is applied to create formats, graphics and presentations
to meet regulatory requirements and other client needs. Experienced writers work
with other members of IBAH's staff to prepare comprehensive interpretive reports
on the test results. Proprietary software programs are designed for the client's
use so that the database can be supplemented, reorganized and accessed by the
client for its own purposes or as requested by the reviewing regulatory agency.
The Company also offers a Windows-based Remote Data Entry system which provides
flexibility, security and efficiency in managing data generated in clinical
studies.
Preparation of NDAs and comparable foreign regulatory filings is a major
undertaking involving complex analyses and presentation of voluminous amounts of
data. The time required for review by the FDA or comparable foreign agencies
often depends on the manner in which the data is analyzed, organized, and
presented in the application. A well prepared filing increases the likelihood
for achieving a favorable outcome.
IBAH has the experience and the resources to assist clients in preparing
regulatory filings and in responding to inquiries by the reviewing agency. The
regulatory review process normally involves frequent communication between the
applicant and the reviewing staff which IBAH can facilitate. IBAH believes that
its assistance in the preparation of filings and the completion of the approval
process has resulted on occasion in a significant reduction in the time that
would have been required for the clients to prepare the filing and complete the
review process using only internal staff and facilities.
Regulatory Affairs
Since Bio-Pharm's inception in 1985, the Company has assisted in the
preparation of 47 NDAs, five of which were submitted in 1996, including one of
the largest ever filed.
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IBAH provides regulatory consulting services to clients at all stages of
the product development process, often beginning before the client has made the
initial filing for permission to begin human testing. Consulting engagements
focus on such topics as the development plan, protocol design and overall
strategy to meet regulatory requirements. In consulting engagements, as in many
other types of services, IBAH's personnel work closely with the client's staff
to complement the client's expertise and capabilities.
Increasingly, clients desire approvals in multiple countries. In such
cases, IBAH provides global regulatory affairs advice concerning the
requirements in each jurisdiction where an application will be made.
IBAH also consults with clients about manufacturing issues related to
regulatory approvals. The principal focus of such consultation is usually
compliance with regulatory requirements, including good manufacturing practices,
product testing and accountability.
Clients may enter into multiple contracts at different stages in the
development process. Sometimes IBAH's initial contract in connection with a new
product covers only consulting services. However, successful consulting projects
may lead to contracts for substantial additional services at later stages of the
development process.
Pharmaceutics Services
A fully equipped cGMP facility, specifically designed to carry out
clinical supplies manufacturing and formulation services, along with an
experienced clinical supply team allows for efficient production of high quality
supplies.
The Company also provides a full range of formulations services including
formulation development, analytical methods development, validation and testing,
and stability storage and testing.
Complex logistics are required to package, distribute and account for the
large quantities of study drug supplies used in a clinical trial, especially for
double-blind studies. For example, IBAH often receives bulk quantities of a
study drug and is engaged to render pharmaceutical handling services, or to
label, package and distribute a study drug in individual patient packs,
sometimes in refrigerated form. In addition, the Company also has the capability
to encapsulate solid dosage forms for blinded clinical trials and prepare
matching placebos.
Software Development
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Through RBI, the Company develops and markets software products for use
in clinical development. The software tools are being designed to increase the
efficiency of data, archiving, optical imaging, work flow management as well as
data clean-up, database consolidation, data analysis and reporting.
Clients and Marketing
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IBAH serves a broad range of clients, including most of the major
multinational pharmaceutical and biotech companies as well as smaller companies
in the pharmaceutical and biotechnology industries. Medical devices and
diagnostics increasingly are becoming subject to FDA approval, and manufacturers
of such products have been a growing part of IBAH's clientele in recent years.
IBAH attempts to develop close ties with its clients and has experienced a high
degree of repeat business after a relationship is established.
Over the last three years, four of IBAH's clients accounted for 10% or
more of its revenues in any given year. In 1996, one client accounted for 20.4%;
in 1995, two clients accounted for 10.2% and 14.9% respectively; and in 1994,
three clients accounted for 10.4%, 13.1%, and 14.7% respectively. These four
clients are international pharmaceutical companies with annual revenues
exceeding $2 billion.
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Historically, IBAH attracted new clients due to its reputation for speed
and quality, recommendations from established clients and the personal efforts
of its executives. Although these sources of attracting business remain. IBAH
also relies on and utilizes business development professionals in the Company's
worldwide locations to obtain new business.
Marketing efforts also include advertising through direct mail,
professional journals and trade publications; exhibiting at industry meetings;
distributing newsletters to industry professionals; and speaking engagements and
publications by key employees.
Contractual Arrangements
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Compensation for services is arranged on a combination of fixed and
variable costs. When the costs are variable, the unit price for a particular
task is fixed but the volume of such tasks is not. Typically projects have a
budget that assumes a number of units for each task, but the client retains the
right to alter the scope of the project as it develops.
When contracts are executed, IBAH typically receives an up-front payment,
which is credited against amounts due. Revenue is recognized as work units are
performed over the life of the development contract as specified in each client
contract. Subsequent billings based on project milestones or other relevant
terms such as project effort to date are also specified.
Project Backlog
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The Company's backlog consists of anticipated revenue from client
projects that are presently underway and/or scheduled to begin. Once work under
a client project commences, revenue is recognized over the life of the contract.
Generally, the Company includes the anticipated revenue on a project in its
backlog upon the receipt of a letter indicating the client's intention to
proceed or upon receipt of a definitive agreement covering the services.
In general, the Company's backlog position reflects future potential
revenue streams, however, the Company believes that backlog is not a meaningful
or consistent predictor of future results. Clinical studies under contracts
included in backlog are subject to termination or delay. Clients terminate or
delay contracts for a variety of reasons including, among others, the failure of
products being tested to satisfy safety requirements, unexpected or undesirable
clinical results of the product, the decision to forego a particular study,
regulatory issues or production problems resulting in shortages of the drug.
Most of the Company's contracts are terminable upon 30 to 60 days' notice by the
client. The Company typically is entitled to receive certain fees for winding
down a study which is terminated early or delayed.
IBAH's project backlog, in net revenue, as of December 31, 1996, was
$91.5 million, a 34% increase over the year-end 1995 of $68.5 million. Backlog
as of December 31, 1996 includes backlog resulting from the THG acquisition.
Competition
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IBAH competes against other full service CROs. The CRO industry is highly
fragmented, with a number of full-service CROs and many small, limited-service
providers, some of which serve only local markets. Based on data assembled from
various sources, industry analysts estimate that IBAH ranks sixth worldwide
measured in terms of 1996 revenue from CRO activities. IBAH believes that it has
among the largest CRO staffs in the European market. International business
accounted for approximately 37% of the Company's 1996 CRO net revenue.
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IBAH believes that clients choose a CRO based on several factors
including reputation, references from existing clients, the client's
relationship with the CRO, experience with the particular type of project and/or
therapeutic area of clinical development, the ability to add value to the
client's development plan, the CRO's financial stability and the CRO's ability
to provide the full range of services required by the client. IBAH believes that
it competes favorably in these respects. While the fee structure is an important
consideration, IBAH believes more important factors in its business growth have
been its experience, reputation and capability to render a broad range of
services worldwide in a timely and professional manner. The Company believes it
is price-competitive with the largest, full service CROs.
For many potential contracts, the client's threshold question is whether
to perform specific tasks internally or outsource them to a CRO. Various
economic, philosophic, cultural and organizational factors affect the decision
to use a CRO. IBAH believes that the trend toward greater outsourcing to CROs
will continue worldwide.
Foreign Currency
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The Company contracts with clients in various foreign currencies and
conducts its actual work with clients typically in multiple countries for each
major contract. Such activities can give rise to potential gains or losses on
specific transactions between countries where the work is conducted, which to
date have not been material. As the Company continues to grow internationally
there will be a currency risk, either favorable or unfavorable, when translating
foreign results into U.S. dollars.
Potential Liability and Insurance
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To manage its potential liability, IBAH purchases insurance and seeks
indemnity provisions in its contracts with clients and, in some cases, with
investigators with whom it contracts on behalf of clients. The contractual
indemnities generally do not protect IBAH against certain of its own actions
such as those involving its negligence or misconduct. These indemnities are
subject to negotiation with individual clients and investigators, and their
terms and scope vary. While most of the Company's clients are large, well-
capitalized companies, the financial performance of these indemnities generally
is not secured. Therefore, IBAH bears the risk that an indemnifying party may
not have the financial ability to fulfill its obligations. In some
circumstances, IBAH indemnifies and holds harmless investigators and its clients
against liabilities incurred by them due to the actions or inactions of IBAH.
The Company currently maintains professional liability insurance which covers
all areas worldwide where IBAH does business. IBAH could be materially and
adversely affected if it were required to pay damages or incur defense costs in
connection with an indemnity claim against it or in connection with a claim that
is outside the scope of an indemnity in IBAH's favor, or beyond the level of
insurance coverage, or where an applicable indemnity in its favor is not
performed in accordance with its terms.
Each physician-investigator retained by IBAH on behalf of a client must
agree to exercise independent medical judgment to serve the patient's interests
and medical needs, consistent with the patient's informed consent to participate
in the study. In some instances, this undertaking may obligate the investigator
to remove a patient from the study. IBAH does not assume the responsibility to
make medical determinations on patient management.
IBAH believes that the risk of liability from patients in clinical trials
is mitigated by various regulatory requirements, including the role of
Institutional Review Boards ("IRB", an independent committee that includes both
medical and non-medical personnel) and the need to obtain each patient's
informed consent. The FDA requires clinical trials to be reviewed and approved
by an IRB. An IRB is obligated among other duties, to protect the interests of
patients enrolled in a trial.
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Employees
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As of December 31, 1996, IBAH had 755 full-time equivalents, most of
whom were employed on a full-time basis. IBAH's staff includes many experts with
advanced training in a wide variety of disciplines, including approximately 28
medical doctors and 44 people holding Ph.D. degrees in the life sciences,
biostatistics, or other related fields. IBAH conducts its own training program
for its clinical research associates, which includes both in-house activities
and supervised field training. Most of the executives and senior managers had
significant experience with pharmaceutical or biotechnology companies before
joining IBAH.
Forward-Looking Information
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This document contains, and other materials filed or to be filed by IBAH
with the Securities and Exchange Commission (the "Commission"), as well as
information included in oral statements or other written statements made or to
be made by IBAH, contain or will contain or include, disclosures which are
forward-looking statements. These forward-looking statements address among other
things, strategic initiatives based upon the Company's current plans or
expectations and are subject to a number of uncertainties and risks that could
significantly affect current plans, anticipated actions and our future financial
condition and results. These uncertainties and risks include, but are not
limited to, those relating to conducting operations in a competitive
environment; loss or delay of large contracts for regulatory or other reasons;
acquisition activities (including uncertainties associated with projecting the
synergies to be gained by the 1996 acquisitions or the ability to close any 1997
acquisitions); competition or consolidation within the pharmaceutical industry;
fluctuations in foreign currency; and general economic conditions. As a
consequence, current plans, anticipated actions and future financial condition
and results may differ from those expressed in any forward-looking statements
made by or on behalf of IBAH.
Item 2. Properties
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IBAH's principal offices and facilities, which occupy approximately
85,000 square feet of space in Blue Bell, Pennsylvania, are leased for a term
expiring in 2000. The Company also has leases covering approximately 27,000
square feet of space near Frankfurt, Germany, approximately 20,000 square feet
(a small portion of which is subject to a long-term lease) in Chippenham,
England, and smaller offices in or near Basel, Switzerland; Paris, France;
Brussels, Belgium; Sydney, Australia; Prague, the Czech Republic; Barcelona,
Spain; Copenhagen, Denmark; Durham, North Carolina; San Francisco, California;
Chicago, Illinois; Minneapolis, Minnesota; and Parsippany, New Jersey. IBAH
considers its current space to be adequate for its operations. Its leases
generally reflect market rates in their respective geographic areas.
The Pharmaceutics Services Division's drug development services unit is
headquartered in suburban Philadelphia, where it leases approximately 20,000
square feet of office and laboratory space pursuant to a five-year noncancelable
operating lease that expires in December, 1998. To accommodate growth, this
division recently signed a lease for 124,000 square foot facility in the same
area as its current facility. The division expects to phase in operations in
this new facility over the next several years, beginning in the second quarter
of 1997.
Item 3. Legal Proceedings
- ------ -----------------
The Company is involved in various legal proceedings in the ordinary
course of its business, which are not anticipated to have a material adverse
effect on the Company's results of operations or financial condition.
11
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
On December 26, 1996 proxies were mailed to the Company's security
holders in connection with a Special Meeting of the Stockholders held on
February 5, 1997. The meeting was held to consider a proposal to approve the
Company's 1997 Equity Compensation Plan (the "Plan").
The Plan provides for the grant of incentive stock options ("ISOs") and
non-qualified stock options ("NQSOs") (collectively, "Options") to designated
employees, including employee members of the Board of Directors, key advisers
who render bona fide services to the Company (but not in connection with the
offer or sale of securities in capital-raising transactions), and non-employee
directors (there are approximately seven non-employee directors) (collectively,
"Participants"). Only employees are eligible to receive grants of ISOs under the
Plan. Those Participants to receive Options are selected by a committee composed
of two or more persons who are appointed by the Board of Directors and who are
not employees of the Company (the "Committee"). All Options granted to non-
employee directors must be ratified or approved by the Board of Directors.
The maximum number of shares of Common Stock which may be issued by the
Company under the Plan is 1,500,000 and the maximum number of shares any
individual may receive under the Plan during a calendar year is 200,000.
The Plan was approved by the stockholders with a vote of 16,744,052
shares in favor of the proposal, 2,313,074 against and 7,055 abstaining.
Item 4(a). Directors and Executive Officers of the Registrant
- --------- --------------------------------------------------
Set forth below is information concerning directors and executive
officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Ernst-Gunter Afting, Ph.D., M.D. 54 Director
Victor J. Bauer, Ph.D. 61 Director
Edwin A. Bescherer, Jr. 63 Director
Mark K. Brunhofer 31 Corporate Controller
Winston J. Churchill, J.D. 56 Chairman of the Board and Director
John H. Dillon, II 54 Executive Vice President, Worldwide Corporate
Development
Martyn D. Greenacre 55 Director
Judith L. Hardardt 58 Director
Geraldine A. Henwood 44 Chief Executive Officer and Director
David Jackson, M.D. 50 President, U.S. CRO
Sidney Jevons, Ph.D. 53 Chairman, U.K., Executive Vice President,
International Development and Director
Sandra Panem, Ph.D. 50 Director
John Santoro 41 President, Bio-Pharm Pharmaceutics
Services, Inc.
Richard L. Sherman, J.D. 50 Director
Leonard F. Stigliano 49 Chief Financial Officer
</TABLE>
12
<PAGE>
Certain Biographical and Other Information
------------------------------------------
Regarding Directors and Executive Officers of the Company
---------------------------------------------------------
Dr. Afting has served as a director since June, 1996. From 1995 to the
present, Dr. Afting has been president of GSF -National Research Center for
Environmental Health - in Munich, one of the largest governmental research
centers in Germany. He is a member of the advisory committee "Science,
Technology and Innovation (section biotechnology)" to the German Chancellor
Kohl. Dr. Afting has also served as a Professor and Member of the Medical
Faculty at the University of Gottingen from 1978 to the present. From 1993 to
1995, Dr. Afting was President and Chief Executive Officer of Roussel UCLAF in
Paris, France, a subsidiary of Hoechst AG, Frankfurt, Germany. Dr. Afting held
various positions within Hoechst AG from 1988 to 1993, including Head of
Pharmaceutical Division and Chairman of Divisional Board, and Head of Worldwide
Pharmaceutical Research and Member of Divisional Pharma Board. Dr. Afting
received an M.D. and Ph.D. in Chemistry from the University of
Freiburg/Breisgau. Dr. Afting is a member of the Board of Directors of Medigen,
Morphosys, Sequenone, Prolifix and Titan Pharmaceuticals Inc.
Dr. Bauer has served as a director since the Merger in April, 1994. In
February, 1997, Dr. Bauer became Executive Director, Iloperidone at Titan
Pharmaceuticals Inc., the parent company of Theracell, Inc. where Dr. Bauer
serves as Chairman. Before he assumed his role at Titan, Dr. Bauer had been a
self-employed consultant to companies in the pharmaceutical and biotechnology
industries since December, 1992. Prior to that time, Dr. Bauer was with Hoechst-
Roussel Pharmaceuticals Inc., where he served as President from 1988 through
1992. Dr. Bauer is a director and Trustee of the New Jersey Symphony Orchestra,
serving as Vice-Chairman of its Board. Dr. Bauer received a Ph.D. in Organic
Chemistry from the University of Wisconsin.
Mr. Bescherer has served as a director since March, 1996. He spent 17
years at The Dun & Bradstreet Corporation where he was the Chief Financial
Officer for 14 years, including the last eight years as an Executive Vice
President. Prior to joining Dun & Bradstreet, Mr. Bescherer spent twenty-three
years at General Electric in a variety of senior finance and management roles.
Mr. Brunhofer has been the Corporate Controller of IBAH since December,
1995 serving as the Principal Accounting Officer as well from June, 1996 to the
present. From the Merger in April, 1994 through December, 1995, Mr. Brunhofer
held the position of U.S. Controller of IBAH. From April, 1993 through the
Merger, he was the Controller of Bio-Pharm Clinical Services, Inc. From 1987
through 1993, he progressed from Staff Accountant, then Senior Accountant to
Audit Manager in the Philadelphia office of Arthur Andersen LLP. Mr. Brunhofer
is a certified public accountant.
Mr. Churchill has served as Chairman of the Company from its inception
in January, 1990. He has been President of Churchill Investment Partners, Inc.
("CIP"), a private investment firm, since 1989. From 1984 to 1989, Mr. Churchill
was a general partner of Bradford Associates, a private investment firm in
Princeton, New Jersey. Prior to that time, he practiced law at the Philadelphia
firm of Saul, Ewing, Remick & Saul for sixteen years and was a member of the
Executive Committee. Mr. Churchill received an M.A. in Economics from Oxford
University, where he studied on a Rhodes Scholarship, and a J.D. from Yale Law
School. Mr. Churchill is also Chairman of the Board of Directors of Central
Sprinkler Corporation; and a director of Geotek Communications, Inc., and
Tescorp, Inc.
Mr. Dillon has served as Executive Vice President, Worldwide Corporate
Development since January, 1997 and from June, 1995 through December, 1996 he
served as Executive Vice President, Worldwide Business Development. From June,
1994 to June, 1995 he served as Senior Vice President, Corporate Development.
Immediately prior to joining IBAH, Mr. Dillon served as CEO, Research Data
Corporation ("RDC"), a company providing data management and software
development services for the pharmaceutical industry. Mr. Dillon also served as
Senior Vice President, Corporate Development for RDC from 1991-1992. Prior to
joining RDC, Mr. Dillon was employed for 22 years at SmithKline Beecham
Corporation and its predecessors, most recently as Vice President, Worldwide
Business Development for the Pharmaceutical Division. Mr. Dillon received an
M.B.A. from the Wharton School at the University of Pennsylvania.
13
<PAGE>
Mr. Greenacre has served as a director since the Merger in April, 1994
and has been President and Chief Executive Officer of Zynaxis, Inc., a
therapeutics research firm, since March, 1993. From July, 1989 through June,
1992, Mr. Greenacre was Chairman - Europe Pharmaceuticals of SmithKline Beecham
plc. Health Care. Prior to that time, he was Vice President - Europe
Pharmaceuticals for SmithKline Beecham Health Care. Mr. Greenacre serves on the
Board of Directors of Cephalon, Inc., Zynaxis, Inc., Creative Biomolecules, Inc.
and Genset, Inc.
Ms. Hardardt has served as a director since the acquisition of The
Hardardt Group ("THG") on October 1, 1996. Ms. Hardardt was the founder of THG
and has served as its President since its inception in 1989. Prior to starting
THG, Ms. Hardardt worked as a consultant to the pharmaceutical industry and held
a variety of management positions with Janssen Pharmaceutica Inc.
Ms. Henwood has served as a director since July, 1992 and has been the
President and Chief Executive Officer of IBAH since the Merger in April, 1994.
She was the founder, Chairman of the Board, Chief Executive Officer and
President of Bio-Pharm from its inception in 1985 until the date of the Merger.
Prior to founding Bio-Pharm, Ms. Henwood held a variety of management positions
with predecessors of SmithKline Beecham Corporation.
Dr. Jackson has served as President of the U.S. CRO since September,
1996. From the date of the Merger until he assumed the position of President,
Dr. Jackson served as the Chief Medical Officer of the Company. For a brief
period before the Merger he was President and Chief Executive Officer of
Affinity. From 1988 to 1994, Dr. Jackson held the position of Vice President of
Clinical Research with Janssen Research Foundation.
Dr. Jevons has served as a director since the Merger in April, 1994.
Since the acquisition of EPIC by Bio-Pharm and the subsequent Merger, Dr. Jevons
has served the Company as President of European operations, Managing Director,
U.K. Operations, and, as of April 1, 1996, Chairman, U.K. and Executive Vice-
President of International Development. Prior to that time, Dr. Jevons was the
Managing Director of EPIC, which he co-founded in 1989. From 1985 until 1989, he
held senior management positions, including Chief Operations Officer, at a major
international CRO, Institute of Clinical Pharmacology. Prior to that time, he
held senior positions in both research and product development with Pfizer, Inc.
of the U.K. Dr. Jevons has a Ph.D. in biochemistry from the University of
Liverpool.
Dr. Panem has served as a director since July, 1995. She is currently
the President of Vector Fund Management, L.P., the asset management affiliate of
Vector Securities International, Inc., specializing in the emerging life
sciences and health care industries. Prior to joining Vector Fund Management in
1994, Dr. Panem served as Vice President and Portfolio Manager for the
Oppenheimer Global BioTech Fund. Prior to Oppenheimer, Dr. Panem was Vice
President at Salomon Brothers Venture Capital. She received a B.S. in
biochemistry and a Ph.D. in microbiology from the University of Chicago. Dr.
Panem serves as a director of Madek Biosciences Corp., Synaptic Pharmaceutical
Inc., Healthtech Services Corp. and Molecular Informatics Inc.
Mr. Santoro has been responsible for the Pharmaceutics Division of IBAH
since April, 1994 and currently holds the position of President, Bio-Pharm
Pharmaceutics Services, Inc. Prior to the Merger, Mr. Santoro was Vice President
of Bio-Pharm Clinical Services. In that position he was responsible for data
management and computer systems. From 1976 to 1987, he held various consulting
positions with a number of Fortune 500 companies related to data management and
computer systems.
Mr. Sherman has served as a director since 1993. He is the founding
principal of QED Technologies, a business consulting group founded in November,
1992. He is also a Principal of CIP Capital Management, Inc., the general
partner of CIP Capital, L.P., a private investment fund. From 1976 through June,
1989, Mr. Sherman held several positions with SmithKline Beecham Corporation and
its predecessors, including Deputy General Counsel. Before founding QED, Mr.
Sherman was a partner with the firm of Pepper, Hamilton & Scheetz, where his
practice focused on international and domestic commercial transactions,
technology transfer and business counseling, with particular expertise in
pharmaceuticals, medical devices, biotechnology and other healthcare
technologies. Mr. Sherman is member of the Board of Directors of Sparta
Pharmaceuticals, Inc.
14
<PAGE>
Mr. Stigliano joined IBAH as Chief Financial Officer in June, 1995. From
1991 until the time he joined the Company, Mr. Stigliano had been Chief
Financial Officer of Chemex Pharmaceuticals, Inc., a pharmaceutical development
company specializing in dermatology research. Prior to that time Mr. Stigliano
spent nine years with Technicon Instruments Corporation, Inc., a diagnostic
company which developed and marketed blood analyzers for clinical laboratories
where he held several positions including Senior Vice President, Finance &
Business Development and President, North America.
15
<PAGE>
PART II
-------
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
- ------ ---------------------------------------------------------------------
The Company's Common Stock is traded in the NASDAQ National Market under
the symbol "IBAH." On March 11, 1997, the closing quotation for the Common Stock
was $7.125. As of March 11, 1997, there were approximately 273 holders of record
of the Company's Common Stock and the Company estimates there were approximately
1200 beneficial stockholders.
The following table sets forth the high and low bid quotations of the
Company's Common Stock in the over-the-counter market by quarter for 1995 and
1996, as reported by NASDAQ. These prices reflect inter-dealer quotation,
without retail mark-up, mark-downs or other fees or commissions, and may not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
BID QUOTATIONS
--------------
1995 HIGH LOW
- ---- ---- ---
<S> <C> <C>
First Quarter 2 7/8 2
Second Quarter 2 7/8 1 3/4
Third Quarter 4 1/4 2
Fourth Quarter 6 3/8 3 1/2
1996
- ----
First Quarter 7 5 1/2
Second Quarter 8 5/8 6 1/4
Third Quarter 8 5 1/2
Fourth Quarter 8 1/4 5 3/4
</TABLE>
The Company has never declared or paid a cash dividend on its Common
Stock and has no present plans to pay cash dividends to its stockholders and,
for the foreseeable future, intends to retain all of its earnings, if any, for
use in its business. The declaration of any future dividends by IBAH is within
the discretion of its Board of Directors and will be dependent on the earnings,
financial condition and capital requirements of IBAH as well as any other
factors deemed relevant by its Board of Directors.
16
<PAGE>
Item 6. Selected Financial Data
- ------ -----------------------
IBAH, INC.
----------
SELECTED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------------
1992 1993 1994/1/ 1995 1996/2/
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues $ 18,048 $ 25,584 $ 50,132 $ 56,985 $ 82,609
Less - Reimbursed Costs 4,729 7,799 16,512 14,119 20,453
--------- --------- --------- --------- ---------
Net revenues 13,319 17,785 33,620 42,866 62,156
Operating expenses 13,083 19,042 53,503/3/ 45,768 61,591/3/
--------- --------- --------- --------- ---------
Operating income (loss) 236 (1,257) (19,883) (2,902) 565
Interest income (expense) (58) (263) (86) (111) 475
--------- --------- --------- --------- ---------
Income (loss) from continuing operations 178 (1,520) (19,969) (3,013) 1,040
Loss from discontinued operations/4/ - - (1,245) (1,546) -
--------- --------- --------- --------- ---------
Income (loss) before income taxes 178 (1,520) (21,214) (4,559) 1,040
Income taxes - _ - - 60
--------- --------- --------- --------- ---------
Net income (loss) $ 178 $ (1,520) $ (21,214) $ (4,559) $ 980
========= ========= ========= ========= =========
Income (loss) per share/5/
Continuing Operations $ 0.02 $ (0.15) $ (1.66) $ (0.21) $ 0.04
Discontinued Operations - - (0.10) (0.11) -
--------- --------- --------- --------- ---------
Income (loss) per share $ 0.02 $ (0.15) $ (1.76) $ (0.32) $ 0.04
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and investments $ 11 $ 2,027 $ 4,357 $ 8,321 $ 20,823
Working capital 435 1,985 2,122 4,640 9,206
Total assets 7,358 11,863 30,572 39,525 92,126
Long-term debt/6/ 620 4,582 4,098 3,503 3,261
Retained earnings (accumulated deficit)/3/ 594 (1,064) (21,214) (25,773) (24,793)
Stockholders' equity (deficit) 738 (924) 8,882 11,473 49,556
</TABLE>
The Company has paid no cash dividends since its inception.
(1) Includes, for the year ended December 31, 1994, the acquisition of EPIC
which closed on January 4, 1994, and the merger with Affinity Biotech,
Inc., which took place on April 27, 1994.
(2) Includes, for the year ended December 31, 1996, the acquisition of RBI
which closed on July 18, 1996, and the acquisition of THG which closed on
October 1, 1996.
(3) Includes a non-recurring charge of $18.3 million for acquired research and
development in connection with the Affinity merger in 1994 and $510,000 of
acquired research and development in connection with the RBI acquisition
in 1996.
(4) Represents the divestiture of the Drug Delivery Services Division. See
Note 5 of the Notes to Consolidated Financial Statements.
(5) See Note 2 of the Notes to Consolidated Financial Statements.
(6) Includes both current and long-term portions.
17
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------ -----------------------------------------------------------------------
of Operation
- ------------
Overview
- --------
The Company began operations in December 1985, through its predecessor
Bio-Pharm Clinical Services, Inc. ("Bio-Pharm"), and has achieved its growth
through internal development and acquisitions.
The Clinical Services Division, the core of IBAH, is a full service CRO
that serves the pharmaceutical, biotechnology, medical device and diagnostics
industries in accelerating the development and commercialization of new products
worldwide. This division's primary services are designing product development
programs, managing pre-clinical studies, design and conduct of clinical trials,
clinical data management and biostatistical analysis, writing reports of study
findings, health economics analysis and post-marketing studies, and regulatory
affairs.
This division began operations in December, 1985 and derives its
revenues by providing services on a contractual basis to its clients. The
division's worldwide staff is based in offices in the United States, Germany,
United Kingdom, Switzerland, France, Belgium, Spain, the Czech Republic, Denmark
and Australia. Through a joint venture with a Russian company, IBAH also
operates an office located in Russia. With its current operations in Europe, the
Company is positioned to service all of Western and Eastern Europe, including
Russia. Additional locations, demonstrated by the Company's recent signing of a
definitive agreement to purchase one of the leading CROs in Australia, will be
evaluated based on client needs.
Overall, the Company has grown its international business significantly
over the past several years to approximately 37% of 1996 worldwide CRO net
revenues. While the growth of its international organization has taken
significant management and financial resources, the Company believes that the
CRO industry is increasingly a global service industry. Accordingly, the ability
to perform clinical services and ancillary services on a global basis is a
strategic focus of the Company.
In October, 1996, the Company acquired THG, a CRO focusing on clinical
trials management and clinical monitoring. THG, which has been integrated into
the Clinical Services Division, adds critical mass and management talent to the
Company, enhancing its ability to obtain and perform large clinical trials. The
Company also signed a definitive agreement to purchase one of the leading
Australian CROs, Pharmaco Pty., Ltd., ("Pharmaco"), on February 28, 1997.
Pharmaco's 1996 revenues were approximately $1.2 million. The closing of this
acquisition is contingent upon the completion of due diligence. Once the
acquisition of Pharmaco is completed, the Company plans to integrate its
operations with the Company's current Australian office, adding depth and
strength to IBAH's Australian and Pacific Rim capabilities.
In July, 1996, the Company acquired RBI, a data management and software
company. RBI develops and markets software to increase the speed and efficiency
of clinical development. The RBI acquisition adds additional tools that are
designed to enhance the processing and analysis of clinical trials data for IBAH
and its clients. RBI offers software tools ranging from archiving, optical
imaging and work flow processing software to tools that facilitate data clean
up, data pooling and data reporting.
The Pharmaceutics Services Division was acquired through the Merger and
provides traditional product formulation and analytical, stability and other
manufacturing related services (the manufacture of trial drugs, among others) to
the same market as the CRO division. This division performs process development
for manufacturing, manufacture of dose forms for clinical trials, testing of
dose forms for shelf life stability and conformance with product specifications
and other chemical and physical properties required in drug development and
registration. The division operates from a manufacturing and office facility
located in suburban Philadelphia. The Company believes the demand for this
division's services will continue to grow as more companies look to out-source
pharmaceutical services.
18
<PAGE>
The Company contracts with clients in various foreign currencies and
typically conducts its actual work with clients in a number of different
countries for each major contract. Such activities can give rise to potential
gains or losses on specific transactions between countries where the work is
conducted, which to date have not been material. The Company's International
operations give rise to a currency risk, either favorable or unfavorable, when
translating results into U.S. dollars. However, since the Company's service
contracts are based in local currency, typically in the country where the client
contracts the work, there is additional currency exposure either favorable or
unfavorable within the International CRO in the form of transaction gains or
losses between currencies. For these types of transactions, the Company may
consider foreign currency hedging as a mechanism to protect exposures in a given
currency as they relate to foreign or U.S. dollar currency.
Results of Operations
- ---------------------
The historical Consolidated Statements of Operations, as presented on
page F-4, for the years ended December 31, 1994, 1995 and 1996, include the
businesses acquired from their respective dates of acquisition, as follows:
<TABLE>
<CAPTION>
Business Date of Acquisition Months Included
------------ ---------------------------- -------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C> <C>
EPIC January 4, 1994 Twelve Twelve Twelve
Affinity April 27, 1994 Eight Twelve Twelve
Resource Biometrics July 18, 1996 -- -- Five
The Hardardt Group October 1, 1996 -- -- Three
</TABLE>
Year ended December 31, 1996 as compared to December 31, 1995
Revenues earned from client projects are recognized on a percentage of
completion basis generally related to units of work or hours of completed
project work. For clinical studies, the CRO typically contracts on behalf of its
clients with third party independent investigators, usually physicians, and with
other third party providers of laboratory services or other specialized
services. These costs are passed through to clients, and in accordance with the
Company's policy are included in total revenues, but not in its net revenues.
Total revenues in 1996 were $82,609,000, an increase of 45.0% over 1995
results. Net revenues were $62,156,000 for the year ended 1996, an increase of
45.0% over the comparable 1995 period, the rate of growth being identical to
that of total revenues. Excluding acquisitions, internal revenue growth was
34.6%, while net revenue growth was 33.9%. The increase in net revenues was
principally due to the growth of the U.S. CRO business (an increase of 50.5%,
although without the THG and RBI acquisitions the increase was 30.2%); dramatic
growth in the Pharmaceutics business (an increase of 131%); and continued growth
in the International CRO (an increase of 24.1%). The increase in net revenues
from year to year reflects the continued growth in outsourcing of CRO services
by pharmaceutical and biotechnology companies as well as the benefit of the THG
and, to a lesser extent, the RBI acquisitions.
Direct expenses were $30,960,000, or 49.8% of net revenues in 1996 as
compared to 55.6% of net revenues in 1995. As a result, direct expenses
increased by 29.8% in 1996 over 1995, while net revenues increased by 45.0% for
the same period. Excluding acquisitions, direct expenses increased 19.5%. The
improvement in the ratio of direct expenses was made in all operating units,
principally in the Pharmaceutics Services Division, where additional volume
increased the utilization of capacity in this division, hence the improvement in
margins. Direct expenses are classified as those expenses that are directly
related to revenue producing departments.
19
<PAGE>
Selling, general and administrative expenses were $30,121,000, or 48.5%
of net revenues as compared to a 1995 ratio of selling, general and
administrative expenses to net revenues of 51.1%. Accordingly, selling, general
and administrative expenses increased by 37.4% as compared to net revenue growth
of 45.0%. Excluding acquisitions, selling, general and administrative expenses
increased 26.0%. The amortization of goodwill for the THG and RBI acquisitions
account for 1.6% of the 1996 increase. Total depreciation and amortization
expenses included in this figure were $2,988,000 in 1996 as compared to
$2,003,000 in 1995. The improvement in the ratio of selling, general and
administrative expenses as a percentage of net revenues was principally due to
spreading these expenses over a larger business volume.
Non-recurring acquired research and development expense in 1996 was
$510,000 versus no equivalent expense in 1995. The non-cash charge incurred in
1996 was directly related to the acquisition of RBI, accounted for as a purchase
transaction. This charge represents the portion of the RBI purchase price
allocated to software research and development.
Accordingly, total operating expenses in 1996 were $61,591,000, or 99.1%
of net revenues as compared to operating expenses in 1995 that exceeded net
revenues. Without the non-recurring acquired research related to the acquisition
of RBI total expenses were 98.3% of net revenues.
In 1996, the Company reported consolidated operating profit for the
first time since being a public company of $565,000 ($1,075,000 from continuing
operations if the acquired research from the acquisition of RBI is excluded) as
compared to an operating loss from continuing operations of $2,902,000 in 1995.
The substantial improvement in operating results was principally due to the
continued improvement in operating results for the U.S. CRO as well as the
maturation of the Pharmaceutics Services Division from a loss in 1995 to a
profit in 1996. Operating results from continuing operations improved once again
by quarter during 1996 as follows: first quarter-operating loss of $242,000;
second quarter-operating profit of $14,000; third quarter-operating profit of
389,000 (excluding the $510,000 RBI acquired research and development charge);
and fourth quarter-operating profit of $914,000.
Interest income, net of interest expense, was $475,000 in 1996 as
compared to net interest expense of $111,000 in 1995. The improvement from a net
interest expense to a net interest income position from 1995 to 1996 was
principally due to the improvement in operating results from a loss in 1995 to a
profit in 1996, and the successful completion of a public equity offering in
April 1996 which netted the Company $18 million. The net cash improvement due to
the public offering was partially offset in October 1996 by the $14 million cash
portion of the THG acquisition.
There were no losses associated with discontinued operations in 1996. In
1995, losses from discontinued operations were $1,546,000, due entirely to the
Drug Delivery business which was divested in July, 1995.
Income taxes were $60,000 in 1996 and were related to state income taxes
due from profitable operations in the U.S. There were no federal income taxes in
1996 as the Company had sufficient net operating loss carryforwards to offset
any federal taxes due on U.S. profits.
Net income for 1996 was $980,000, or $.04 per share as compared to a
loss from continuing operations in 1995 of $3,013,000, or $.21 per share. If the
one-time charge for acquired research related to the RBI acquisition were
eliminated, net income was $1,490,000 or $.06 per share.
20
<PAGE>
DIVISIONAL STATEMENT OF OPERATIONS
----------------------------------
Comparison of 1995 and 1996 Results
(in thousands of dollars)
<TABLE>
<CAPTION>
U.S. CRO(1) International CRO Pharmaceutics Consolidated
------------- ----------------- ------------- ------------
1995 1996 1995 1996 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Revenues $23,428 $35,260 $16,844 $20,895 $ 2,594 $ 6,001 $42,866 $62,156
Operating expenses:
Direct expenses 11,794 16,859 9,088 10,686 2,965 3,415 23,847 30,960
S,G & A 10,721 15,232 10,192 12,897 1,008 1,992 21,921 30,121
Non-recurring item -
acquired research
and development - 510 - - - - - 510
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss)
$ 913 $ 2,659 $(2,436) $(2,688) $(1,379) $ 594 $(2,902) $ 565
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
The information present in the above table does not purport to be indicative of
future results of operations.
(1) Includes the operating results of RBI since the July 18, 1996 acquisition
date and that of THG since the October 1, 1996 acquisition date.
Net revenues for the U.S. CRO were $35,260,000 in 1996, an increase
of 50.5% over 1995. Internal growth in 1996 over 1995 was 30.2% (excluding the
THG and RBI acquisitions whose results are included only since acquisition).
Both direct and indirect expenses improved as a percentage of net revenue due to
operational efficiencies, the completion of a major project, and the leveraging
effect of incremental increases in revenue volume. As a result, operating profit
before the one-time RBI acquired research and development charge improved to
9.0% of net revenues, an improvement of 247% over 1995.
International net revenues were $20,895,000 in 1996, an increase of
24.1% over 1995 results. While revenue volume increased, the operating loss of
$2,688,000 of this division was essentially the same year over year. The
performance in 1996 was negatively impacted by the Company's largest project
being placed on hold during the middle of 1996. This hold status was due to
certain regulatory issues surrounding the drug and out of the control of the
Company. As a result, the Company was not able to earn significant revenues from
this project in the second half of 1996, while staff had been recruited and
dedicated to this project. In early January, 1997 the project was taken off hold
status and the Company commenced work on this project in late first quarter of
1997, the scope of which is expected to increase quarterly during 1997.
The Pharmaceutics Services net revenues were $6,001,000 in 1996, an
increase of 131% over 1995. The improvement resulted from the continued demand
for outsourcing of these services and the fact that 1995 was the first full year
of operation. By utilizing more of its facility's capacity, the division was
able to record operating profit of $594,000, or 9.9% of net revenues in 1996, as
compared to an operating loss of $1,379,000 in 1995.
21
<PAGE>
Year ended December 31, 1995 as compared to December 31, 1994
Total revenues in 1995 were $56,985,000, an increase of 13.7% over
1994. Net revenues in 1995 were $42,866,000, an increase of 27.5% over 1994. The
increase in net revenues was principally due to the dramatic growth recorded by
the Company in its European operations which increased due to research and
development out-sourcing by European pharmaceutical companies. In addition, the
Pharmaceutics Division increased net revenue by 266% to $2,594,000 in 1995 as
1994 was a start-up year. Net revenues in 1995 represented the first full year
of operations for this division.
Direct expenses were $23,847,000 in 1995, or 55.6% of net revenues as
compared to 57.5% of net revenues in 1994. As a result, direct expenses
increased 23.3% in 1995 over 1994, while net revenues increased 27.5%. The
improvement in the ratio of direct expenses was made in the CRO where volume
increases in the International CRO and efficiency improvements overall increased
margins. These improvements were slightly offset by the Pharmaceutics Services
Division where direct expenses were higher than revenues because the division
was still maturing and its facility was not fully utilized.
Selling, general and administrative expenses were $21,921,000, or
51.1% of net revenues, an increase from 47.2% of net revenues in 1994. Overall,
selling, general and administrative expenses increased 38.2% in 1995 over 1994
due to increased expenses in the U.S. CRO. The increase in U.S. CRO expenses was
offset by a decrease, as a percentage of net revenues, in the International CRO
and the Pharmaceutics Services Division. The increase in the U.S. CRO expenses
was largely related to corporate expenses as 1995 was the first full year as a
public company. Offsetting this increase were decreases in the percentage of net
revenues in both the International CRO and the Pharmaceutics Services Division,
due to significant revenue growth from year to year.
Non-recurring acquired research and development expense of $18,297,000
was recorded in 1994. This amount represents the excess of the Affinity purchase
price over the estimated fair value of the net assets acquired.
Total operating expenses were $45,768,000, an increase of 30.0% over
total operating expenses (excluding the one-time Affinity acquired research and
development charge) in the prior year.
Net operating loss in 1995 was $2,902,000 as compared to a loss of
$19,883,000 in 1994. Excluding the one-time Affinity acquired research and
development charge in 1994, the 1994 operating loss was $1,586,000, resulting in
an increase in operating loss of $1,316,000 in 1995 over 1994. The increase in
operating loss was due to increases in administrative expenses in the U.S.
CRO business because of inflation factors and increases in corporate overhead.
Net interest expense was $111,000 in 1995 due principally to cash
requirements to fund losses in the International CRO, Pharmaceutics Services and
Drug Delivery divisions in the first half of 1995. In July, 1995, the Drug
Delivery business was divested and in August, 1995, the Company raised $7
million in a private equity financing (See Notes 4 and 5 to Notes to
Consolidated Financial Statements for details). In 1994, the Company recorded
net interest expense of $86,000.
Loss from discontinued operations was $1,546,000 in 1995 as compared
to $1,245,000 in 1994. This loss was entirely attributed to the Drug Delivery
business which was divested in July, 1995. The financial statements for all
periods have been restated to eliminate this business and indicate net losses
from discontinued operations as a separate line-item in the statement of
operations. The 1995 loss reflected loss from operations for the first seven
months of 1995 as well as reserves for reasonably anticipated expenses resulting
from the sale of this division.
Net loss for 1995 was $4,559,000 in 1995 as compared to a loss of
$21,214,000 in 1994. Excluding the one-time Affinity acquired research and
development charge, the 1994 net loss was $2,917,000.
22
<PAGE>
DIVISIONAL STATEMENT OF OPERATIONS
----------------------------------
Comparison of 1994 and 1995 Results
(in thousands of dollars)
<TABLE>
<CAPTION>
U.S. CRO International CRO Pharmaceutics Consolidated
-------- ----------------- ------------- ------------
1994 1995 1994 1995 1994 1995 1994 1995
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Revenues $23,849 $23,428 $ 9,062 $16,844 $ 709 $ 2,594 $ 33,620 $42,866
Operating expenses:
Direct expenses 13,268 11,794 5,304 9,088 771 2,965 19,343 23,847
S,G & A 9,497 10,721 5,552 10,192 814 1,008 15,863 21,921
Non-recurring item -
acquired research
and development 18,297 - - - - 18,297 -
======== ------- ------- ------- -------- ------- -------- --------
Operating income (loss)
$(17,213) $ 913 $(1,794) $(2,436) $ (876) $(1,379) $(19,883) $ (2,902)
======== ======= ======= ======= ======== ======= ======== ========
</TABLE>
The information present in the above table does not purport to be indicative of
future results of operations.
Net revenues for the U.S. CRO were $23,428,000 in 1995, a decrease of
1.8% over 1994 net revenues. The slight decline in revenues was largely due to
delays in several major projects. Direct expenses as a percentage of net
revenues decreased in 1995 to 50.3% from 55.6% in 1994. The decrease was a
result of cost reduction measures due to lower than anticipated revenue volume
growth. Selling, general and administrative expenses, after allocation of
corporate expenses to other business units, increased in 1995 to 45.8% of net
revenues from 39.8% in 1994. The increase was principally due to increased
corporate expenses as 1995 represented the first full year as a public Company.
International CRO net revenues were $16,844,000, an increase of 85.9%
over 1994 net revenues. The dramatic increase was due to increased outsourcing
of CRO services by European pharmaceutical companies and that the fact the
Company was positioned to benefit from this trend. Direct expenses were 53.9% of
net revenues in 1995, an improvement from 58.5% in 1994, due to volume-related
efficiencies of scale. Selling, general and administrative expenses were 60.5%
of net revenues, a slight improvement from 61.3% in 1994. The rate of overhead
spending in International reflects the continued commitment to building
infrastructure.
Liquidity and Capital Resources
- -------------------------------
As of December 31, 1996, the Company had cash and short-term
investments of $20.8 million as compared to $8.3 million as of December 31,
1995. Working capital was $9.2 million as of December 31, 1996, an improvement
of 98% over 1995. As of December 31, 1995, working capital was $4.6 million. In
April, 1996, the Company raised net proceeds of $18 million in equity financing
from the completion of a public offering of common stock to institutional
investors. In October, 1996, the Company acquired THG for cash and stock,
requiring a cash payment of $14 million. It is the Company's belief that it has
sufficient resources from existing cash flow that it will not need additional
cash for working capital purposes through an equity or debt offering.
Although the Company does not believe that it requires financing for
working capital purposes, it may seek additional cash infusions for aggressive
expansion of operations for competitive reasons or to prepare for certain
capital needs for strategic acquisitions. The Company intends to reinvest any
positive cash flow from operations to support operations through additional
capital spending to improve its competitive position.
23
<PAGE>
Based on the foregoing and other factors, and while there can be no
assurance that external financing will be available on terms acceptable to the
Company, the Company believes that it has, or has access to, adequate working
capital to meet its strategic objectives and fund its operations for the
foreseeable future (see Note 10 of Notes to Consolidated Financial Statements
regarding the Company's line of credit facilities).
Item 8. Financial Statements and Supplementary Data.
- ------ -------------------------------------------
The audited consolidated financial statements of the Company appear
beginning on page F-1 of this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure.
--------------------
None.
24
<PAGE>
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
- ------- --------------------------------------------------
Information concerning Directors and Executive Officers of the Company
is incorporated herein by reference to the Company's definitive proxy materials
for the Company's Annual Meeting of Stockholders to be held June 16, 1997.
Certain information regarding Directors and Executive Officers of the
Company is set forth in Item 4(a) of Part I of this Form 10-K.
Item 11. Executive Compensation.
- ------- ----------------------
Information concerning Executive Compensation is incorporated herein
by reference to the Company's definitive proxy materials for the Company's
Annual Meeting of Stockholders to be held June 16, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- ------- --------------------------------------------------------------
Information concerning Security Ownership of Certain Beneficial Owners
and Management is incorporated herein by reference to the Company's definitive
proxy materials for the Company's Annual Meeting of Stockholders to be held June
16, 1997.
Item 13. Certain Relationships and Related Transactions.
- ------- ----------------------------------------------
Information concerning Certain Relationships and Related Transactions
is incorporated herein by reference to the Company's definitive proxy materials
for the Company's Annual Meeting of Stockholders to be held June 16, 1997.
25
<PAGE>
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
- ------- ----------------------------------------------------------------
Financial Statements
- --------------------
The financial statements and financial statement information required by
this Item as well as the report of Independent Public Accountants are included
on pages F-1 through F-23 of this Report. All other schedules have been omitted
because they are inapplicable, not required, or the information is included
elsewhere in the financial statements or notes thereto.
Reports on Form 8-K
- -------------------
The Company filed one report on Form 8-K dated October 1, 1996 to report
on the acquisition of The Hardardt Group. No other reports on Form 8-K were
filed during the fourth quarter of 1996.
Exhibits
- --------
The following is a list of exhibits. Where so indicated by footnote,
exhibits which were previously filed are incorporated by reference. For exhibits
incorporated by reference, the location of the exhibit in the previous filing is
indicated in parentheses.
Exhibit
- -------
Number Description
- ------ -----------
3.1* Certificate of Incorporation, as amended.
3.2* By-laws, as amended.
3.3 Amended Certificate of Designation of Rights and
Preferences of Series A Convertible Preferred Stock.
(Exhibit 3.3)(8)
10.1 Form of Common Stock Purchase Warrant issued by the
Registrant to certain stockholders. (Exhibit 4.2)(1)
10.2 Registration Rights Agreement, dated February 23, 1993,
among Bio-Pharm Clinical Services, Inc. ("Bio-Pharm") and
certain stockholders. (Exhibit 10.23)(1)
10.3 Subscription Confirmation, dated December 11, 1990, among
Affinity Biotech, Inc. ("Affinity") and Winston J.
Churchill, Norman E. Jackson, Philip L. Rice, M.D., Carl
Sorenson and Walter C. Wojack. (Exhibit 10.2)(2)
10.4 Registration Rights Agreement, dated as of February 21,
1992, among Affinity and Winston J. Churchill and Barbara
Churchill, Norman E. Jackson, Philip L. Rice, M.D., Carl
Sorenson and Walter C. Wojack. (Exhibit 10.3)(2)
10.5+ 1992 Incentive Stock Plan. (Exhibit 10.10)(2)
26
<PAGE>
10.6+ 1993 Incentive Stock Plan. (Exhibit 10.1)(3)
10.7+ 1994 Incentive Stock Plan. (Appendix D)(4)
10.8+* Employment Agreement, dated October 1, 1996, between the
Registrant and Sherrin Baky.
10.9+ Employment Agreement, dated May 25, 1995, between the
Registrant and Leonard F. Stigliano, Chief Financial
Officer of the Registrant. (Exhibit 10.9)(8)
10.10+* Consultant Agreement, dated September 15, 1996, between the
Registrant and John M. Cullen, Ph.D., J.D.
10.11 Lease Agreement, dated May 16, 1994, between
Objektgesellschaft GbR and Bio-Pharm Clinical Services,
GmbH (in German with English summary). (Exhibit 10.12)(6)
10.12* Amended and Restated Loan and Security Agreement, dated
December 31, 1996, between the Registrant and CoreStates
Bank.
10.13 Lease Agreement, dated June 21, 1990, between Bio-Pharm and
Four Valley Square Associates. (Exhibit 10.27)(1)
10.14 Lease Agreement, dated December 15, 1993, between Bio-Pharm
and Valley Square Associates. (Exhibits 10.28 and 10.29)(1)
10.15+ IBAH, Inc. Employee Stock Purchase Plan. (Exhibit 10.18)(5)
10.16+ 1994 Non-Employee Directors Stock Option Plan. (Exhibit
10.19)(5)
10.17 Sublease and Lease Agreement, dated August 19, 1993, among
Affinity, International Envelope Company and Summit
Investment Corporation. (Exhibit 10.2)(3)
10.18 Lease Agreement, dated October 26, 1993, and effective as
of December 1, 1993, between Affinity Pharmaceutics, Inc.
and Rhone-Poulenc Rorer Pharmaceuticals Inc. (Exhibit
10.3)(3)
10.19 Asset Purchase Agreement, dated July 28, 1995, between the
Registrant and LDS Technologies, Inc. (Exhibit 10.4)(7)
10.20 Warrant for the purchase of shares of Common Stock issued
March 15, 1996 to Vector Securities International, Inc.
(Exhibit 10.26)(8)
10.21 Preferred Stock and Warrant Purchase Agreement, dated
August 10, 1995, among the Registrant and certain
purchasers of Series A Convertible Preferred Stock of the
Registrant. (Exhibit 10.27)(8)
10.22 Form of Warrant issued by the Registrant to the purchasers
pursuant to the Preferred Stock and Warrant Purchase
Agreement, dated August 10, 1995. (Exhibit 10.28)(8)
10.23+* Release and Settlement Agreement, dated February 28, 1997,
between the Registrant and Judith L. Hardardt.
10.24+* 1997 Equity Compensation Plan.
10.25 Agreement and Plan of Merger, dated October 1, 1996, by and
between the Registrant, IBAH Acquisition Company and the
Stockholders of HGB, Inc. (9)
27
<PAGE>
10.26* Lease Agreement, dated December 29, 1993, between HGB, Inc.
and Century Associates.
10.27* Lease Agreement, dated December 3, 1996, between 525
Virginia Drive Associates L.P. and Bio-Pharm Pharmaceutics
Services, Inc.
10.28* Stock Purchase Agreement, dated February 28, 1997, among
the Registrant, Catapult Pty. Ltd., Phillip Altman and
Juanita Altman.
10.29* Registration Rights Agreement, dated February 28, 1997, by
and among the Registrant and Catapult Pty., Ltd.
10.30* Agreement and Plan of Merger, dated July 18,1996, by and
among the Registrant, IBAH Acquisition Company and Resource
Biometrics , Inc.
21.1* Subsidiaries of the Registrant.
23.1* Consent of Arthur Andersen LLP.
27.1* Financial Data Schedule.
- -----------------------
+ Compensation plans and arrangements for executives and others.
* Filed herewith.
(1) Filed as an Exhibit to Affinity's Registration Statement on
Form S-4 (File No. 33-74274) filed with the Securities and
Exchange Commission ("SEC") on January 20, 1994.
(2) Filed as an Exhibit to Affinity's Registration Statement on
Form S-1 (File No. 33-46027) initially filed with the SEC
on March 4, 1992.
(3) Filed as an Exhibit to Affinity's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1993.
(4) Filed as Appendix D to the Joint Proxy Statement/Prospectus
included in Affinity's Registration Statement on Form S-4
(File No. 33-74274) filed with the SEC on January 20, 1994.
(5) Filed as an Exhibit to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994.
(6) Filed as an Exhibit to the Registrant's Annual Report on
Form 10-K/A for the year ended December 31, 1994.
28
<PAGE>
(7) Filed as an Exhibit to the Registrant's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1995.
(8) Filed as an Exhibit to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995.
(9) Filed as an Exhibit to the Registrant's Report on Form 8-K
dated October 1, 1996.
29
<PAGE>
IBAH, INC. AND SUBSIDIARIES
Consolidated Financial Statements
Comprising Item 8 of the
Annual Report on Form 10-K to the
Securities and Exchange Commission
Year ended December 31, 1996
Index to Consolidated Financial Statements
Item 8. Consolidated Financial Statements
Report of Independent Public Accountants F - 2
Consolidated Balance Sheets F - 3
Consolidated Statements of Operations F - 4
Consolidated Statements of Stockholders' Equity (Deficit) F - 5
Consolidated Statements of Cash Flows F - 6
Notes to Consolidated Financial Statements F - 7
Consolidated Financial Statement Schedules
The Consolidated Financial Statement Schedules have been omitted as the
information is not required, is immaterial or is presented elsewhere in
the Consolidated Financial Statements or Notes thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To IBAH, Inc.:
We have audited the accompanying consolidated balance sheets of IBAH, Inc. (a
Delaware corporation) and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express and opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IBAH, Inc. and subsidiaries as
of December 31, 1995 and 1996, and the results of their operations and their
cash flow for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
February 5, 1997
F-2
<PAGE>
IBAH, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
ASSETS December 31,
------ -------------------------------------
1995 1996
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,564,000 $ 15,588,000
Short-term investments 757,000 5,235,000
Accounts receivable, net 20,745,000 27,614,000
Prepaid expenses and other 659,000 868,000
------------- -------------
Total current assets 29,725,000 49,305,000
PROPERTY AND EQUIPMENT, net 6,454,000 7,799,000
GOODWILL, net 2,988,000 34,571,000
OTHER ASSETS 358,000 451,000
------------- -------------
$ 39,525,000 $ 92,126,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,223,000 $ 1,376,000
Accounts payable 3,651,000 3,497,000
Accrued compensation and related costs 1,588,000 6,095,000
Other accrued expenses 2,308,000 3,734,000
Payable to independent investigators 1,068,000 2,585,000
Deferred revenue 15,247,000 22,812,000
------------- -------------
Total current liabilities 25,085,000 40,099,000
------------- -------------
DEFERRED RENT 687,000 586,000
------------- -------------
LONG-TERM DEBT 2,280,000 1,885,000
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 2,000,000 shares authorized,
999,554 and 749,665 shares issued and outstanding
as of December 31, 1995 and 1996, respectively 10,000 7,000
Common stock, $.01 par value, 50,000,000 shares authorized,
14,391,262 and 22,023,846 shares issued and outstanding
as of December 31, 1995 and 1996, respectively 144,000 220,000
Additional paid-in capital 36,970,000 73,889,000
Accumulated deficit (25,773,000) (24,793,000)
Cumulative translation adjustment 122,000 233,000
------------- -------------
Total stockholders' equity 11,473,000 49,556,000
------------- -------------
$ 39,525,000 $ 92,126,000
============= =============
</TABLE>
The accompanying notes are an integral part of these statements
F-3
<PAGE>
IBAH, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
December 31,
------------------------------------------------
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES $ 50,132,000 $ 56,985,000 $ 82,609,000
Less-Reimbursed costs 16,512,000 14,119,000 20,453,000
-------------- -------------- --------------
Net revenues 33,620,000 42,866,000 62,156,000
-------------- -------------- --------------
OPERATING EXPENSES:
Direct 19,343,000 23,847,000 30,960,000
Selling, general and administrative 15,863,000 21,921,000 30,121,000
Non-recurring item - Acquired
research and development 18,297,000 - 510,000
-------------- -------------- --------------
Total operating expenses 53,503,000 45,768,000 61,591,000
-------------- -------------- --------------
Operating income (loss) (19,883,000) (2,902,000) 565,000
INTEREST EXPENSE (288,000) (345,000) (321,000)
INTEREST INCOME 202,000 234,000 796,000
-------------- -------------- --------------
Income (loss) from continuing operations (19,969,000) (3,013,000) 1,040,000
LOSS FROM DISCONTINUED OPERATIONS (1,245,000) (1,546,000) -
-------------- -------------- --------------
Income (loss) before income taxes (21,214,000) (4,559,000) 1,040,000
INCOME TAXES - - 60,000
-------------- -------------- --------------
NET INCOME (LOSS) $(21,214,000) $ (4,559,000) $ 980,000
============== ============== ==============
NET INCOME (LOSS) PER SHARE--
CONTINUING OPERATIONS $ (1.66) $ (0.21) $ 0.04
DISCONTINUED OPERATIONS (0.10) (0.11) -
-------------- -------------- --------------
NET INCOME (LOSS) PER COMMON SHARE $ (1.76) $ (0.32) $ 0.04
============== ============== ==============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 12,024,000 14,276,000 24,997,000
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
IBAH, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------------------------
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
--------------------------- --------------------------- Paid-in
Shares Amount Shares Amount Capital
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 - $ - 6,587,160 $ 66,000 $ 334,000
Reclassification of S corporation accumulated
deficit to additional paid-in capital - - - - (1,064,000)
Issuance of common stock in conjunction with
the EPIC, Ltd. acquisition - - 1,547,703 15,000 2,885,000
Conversion of subordinated notes and related
warrants into common stock - - 1,356,840 14,000 3,408,000
Sale of common stock - - 1,230,761 12,000 3,988,000
Retirement of treasury stock - - (1,893,809) (19,000) (211,000)
Issuance of common stock in conjunction with
the merger with Affinity Biotech, Inc. - - 5,408,249 54,000 20,510,000
Translation adjustments - - - - -
Net Loss - - - - -
------------ ------------ ------------ ------------ --------------
BALANCE, DECEMBER 31, 1994 - - 14,236,904 142,000 29,850,000
Sale of convertible preferred stock, net of expenses 999,554 10,000 - - 6,925,000
Issuance of common stock for stock option exercises
and Employee Stock Purchase Plan purchases - - 154,358 2,000 195,000
Translation adjustments - - - - -
Net loss - - - - -
------------ ------------ ------------ ------------ --------------
BALANCE, DECEMBER 31, 1995 999,554 10,000 14,391,262 144,000 36,970,000
Public offering of common stock, net of expenses - - 3,000,000 30,000 17,981,000
Issuance of common stock in conjunction with
the Resource Biometrics, Inc. acquisition - - 350,000 4,000 2,285,000
Issuance of common stock in conjunction with
the HGB, Inc. acquisition - - 2,719,999 27,000 15,411,000
Conversions of preferred stock into common stock (249,889) (3,000) 749,667 7,000 (4,000)
Issuance of common stock for warrant exercises - - 297,223 3,000 764,000
Issuance of common stock for stock option exercises
and Employee Stock Purchase Plan purchases - - 515,695 5,000 482,000
Translation adjustments - - - - -
Net income - - - - -
------------ ------------ ------------ ------------ --------------
BALANCE, DECEMBER 31, 1996 749,665 $ 7,000 22,023,846 $ 220,000 $ 73,889,000
============ ============ ============ ============ ==============
<CAPTION>
Retained Warrants Total
Earnings to Purchase Cumulative Stockholder
(Accumulated Preferred Translation Treasury Equity
Deficit) Stock Adjustment Stock (Deficit)
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $ (1,064,000) $ 41,000 $ (71,000) $ (230,000) $ (924,000)
Reclassification of S corporation accumulated
deficit to additional paid-in capital 1,064,000 - - - -
Issuance of common stock in conjunction with
the EPIC, Ltd. acquisition - - - - 2,900,000
Conversion of subordinated notes and related
warrants into common stock - (41,000) - - 3,381,000
Sale of common stock - - - - 4,000,000
Retirement of treasury stock - - - 230,000 -
Issuance of common stock in conjunction with
the merger with Affinity Biotech, Inc. - - - - 20,564,000
Translation adjustments - - 175,000 - 175,000
Net Loss (21,214,000) - - - (21,214,000)
------------ ------------ ------------ ------------ --------------
BALANCE, DECEMBER 31, 1994 (21,214,000) - 104,000 - 8,882,000
Sale of convertible preferred stock, net of expenses - - - - 6,935,000
Issuance of common stock for stock option exercises - - - - 197,000
and Employee Stock Purchase Plan purchases
Translation adjustments - - 18,000 - 18,000
Net loss (4,559,000) - - - (4,559,000)
------------ ------------ ------------ ------------ --------------
BALANCE, DECEMBER 31, 1995 (25,773,000) - 122,000 - 11,473,000
Public offering of common stock, net of expenses - - - - 18,011,000
Issuance of common stock in conjunction with
the Resource Biometrics, Inc. acquisition - - - - 2,289,000
Issuance of common stock in conjunction with
the HGB, Inc. acquisition - - - - 15,438,000
Conversions of preferred stock into common stock - - - - -
Issuance of common stock for warrant exercises - - - - 767,000
Issuance of common stock for stock option exercises
and Employee Stock Purchase Plan purchases - - - - 487,000
Translation adjustments - - 111,000 - 111,000
Net income 980,000 - - - 980,000
------------ ------------ ------------ ------------ --------------
BALANCE, DECEMBER 31, 1996 $(24,793,000) $ $ 233,000 $ - $ 49,556,000
============ ============ ============ ============ ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
IBAH, INC. AND SUBSIDIARIES
---------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
December 31,
-----------------------------------------------------------
1994 1995 1996
CASH FLOWS FROM OPERATING ACTIVITIES: ------------------ ---------------- ------------------
<S> <C> <C> <C>
Net income (loss) $ (21,214,000) $ (4,559,000) $ 980,000
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities-
Acquired research and development 18,297,000 - 510,000
Depreciation and amortization 1,265,000 2,003,000 2,988,000
Deferred rent 61,000 149,000 (101,000)
Discontinued operations 1,245,000 1,546,000 -
Deferred interest (158,000) - -
Deferred taxes - - (49,000)
Changes in assets and liabilities-
(Increase) decrease in-
Accounts receivable (6,023,000) (5,512,000) (2,971,000)
Prepaid expenses and other (105,000) (46,000) 27,000
Increase (decrease) in-
Accounts payable and accrued expenses (631,000) 2,586,000 2,585,000
Payables to independent investigators 1,692,000 (2,428,000) 1,536,000
Deferred revenue 3,698,000 5,805,000 3,852,000
------------------ ---------------- ------------------
Net cash provided by (used in) operating activities (1,873,000) (456,000) 9,357,000
------------------ ---------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Redemption (purchases) of short-term investments (1,565,000) 808,000 (4,411,000)
Purchases of property and equipment (3,064,000) (1,907,000) (2,646,000)
Proceeds from sale of discontinued operations - 50,000 -
Net cash acquired (paid) in business acquisitions 1,035,000 - (11,962,000)
Net investing activity of discontinued operations 645,000 (33,000) -
Other (555,000) (88,000) 207,000
----------------- ---------------- ------------------
Net cash used in investing activities (3,504,000) (1,170,000) (18,812,000)
----------------- ---------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock, net of expenses 4,000,000 185,000 19,265,000
Proceeds from sale of preferred stock, net of expenses - 6,947,000 -
Proceeds from issuance of debt, net of expenses 2,628,000 - -
Payments on long-term debt (590,000) (919,000) (1,620,000)
Net financing activity of discontinued operations (7,000) (6,000) -
----------------- ---------------- ------------------
Net cash provided by financing activities 6,031,000 6,207,000 17,645,000
----------------- ---------------- ------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 111,000 191,000 (166,000)
----------------- ---------------- ------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 765,000 4,772,000 8,024,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,027,000 2,792,000 7,564,000
----------------- ---------------- ------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,792,000 $ 7,546,000 $ 15,588,000
================= ================ ==================
SUPPLEMENTAL DICLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 419,000 $ 339,000 $ 325,000
================= ================ ==================
Equipment acquired under capital lease obligations $ 507,000 $ 292,000 $ 769,000
================= ================ ==================
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
IBAH, INC. AND SUBSIDIARIES
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. BACKGROUND
----------
IBAH, Inc. ("IBAH" or the "Company") provides a comprehensive range of product
development services worldwide for clients in the pharmaceutical, biotechnology,
medical device and diagnostics industries. The Company's principal activity is
to help its clients meet the complex regulatory requirements that must be
satisfied before a new product may be commercially marketed. The Company offers
clients access to extensive regulatory affairs and clinical development services
on an international scale through its Bio-Pharm Clinical Services ("the Clinical
Services Division"). The Company also provides pharmaceutical manufacturing and
stability testing services through Bio-Pharm Pharmaceutics Services ("the
Pharmaceutics Services Division"). The Bio-Pharm Drug Delivery Services Division
("the Drug Delivery Services Division") was divested on July 28, 1995 (see Note
5).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Principles of Consolidation
The accompanying financial statements include the accounts of IBAH, Inc., and
its subsidiaries. All material intercompany balances and transactions have been
eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the prior years' financial
statements to conform to the current year presentation.
F-7
<PAGE>
Translation of Foreign Financial Statements
Assets and liabilities of the Company's foreign operations are translated at the
year-end rate of exchange, and the income statements are translated at the
average rate of exchange for the year. Gains or losses from translating foreign
currency financial statements are accumulated in a separate component of
stockholders' equity.
Cash, Cash Equivalents and Investments
The Company considers all highly liquid investments purchased with remaining
maturities of three months or less to be cash equivalents.
Investments are held at market value, and at December 31, 1995 and 1996 were
classified as short-term. Cash, cash equivalents and investments consisted of
the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1996
-------------- --------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS:
Money market funds and demand accounts $ 4,476,000 $ 5,447,000
U.S. government securities 3,088,000 6,313,000
Repurchase agreement -- 2,092,000
Commercial paper -- 1,736,000
-------------- --------------
7,564,000 15,588,000
-------------- --------------
INVESTMENTS:
U.S. government securities 757,000 3,497,000
Commercial paper -- 1,738,000
-------------- --------------
757,000 5,235,000
-------------- --------------
$ 8,321,000 $ 20,823,000
============== ==============
</TABLE>
The repurchase agreement matured on January 2, 1997 and was secured by U.S.
government securities. The short-term investments outstanding on December 31,
1996 all mature in 1997.
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," effective
January 1, 1994. This statement requires the Company to classify its investment
securities as: (1) held to maturity, (2) available for sale or (3) held for
trading purposes. At December 31, 1995 and 1996, all of the Company's short-term
investments are classified as available for sale, therefore any unrealized
holding gains or losses should be presented in a separate component of
stockholders' equity. At December 31, 1995 and 1996, there were no significant
unrealized holding gains or losses.
F-8
<PAGE>
Supplemental Information Regarding Non-cash Investing and Financing Activities
The following table presents the non-cash assets and liabilities that were
consolidated as a result of the merger with Affinity Biotech, Inc. ("Affinity")
and the acquisition of European Pharmaceutical Investigation Consultants, Ltd.
("EPIC") in 1994 and the acquisitions of Resource Biometrics, Inc. ("RBI") and
HGB, Inc., doing business as The Hardardt Group ("THG") in 1996 (see Note 6):
<TABLE>
<CAPTION>
1994 1996
------------- -------------
<S> <C> <C>
Non-cash (assets) liabilities:
Short term investments $ (741,000) $ (64,000)
Accounts receivable (1,198,000) (4,207,000)
Prepaid expenses (136,000) (78,000)
Property and equipment (1,535,000) (327,000)
Goodwill (3,320,000) (32,096,000)
Other assets (143,000) (369,000)
Accounts payable 804,000 1,045,000
Accrued expenses 901,000 2,262,000
Deferred revenue and advances by clients 1,085,000 4,190,000
Long-term debt 151,000 465,000
------------- -------------
Net non-cash assets consolidated (4,132,000) (29,179,000)
Issuance of common stock 23,464,000 17,727,000
Acquired research and development (18,297,000) (510,000)
------------- -------------
Net cash acquired (paid) in business acquisitions $ 1,035,000 $(11,962,000)
============= =============
</TABLE>
During 1994, the Company assumed a note in the amount of approximately $483,000
related to leasehold improvements made to its German office (see Note 11).
In connection with the merger with Affinity, the Bio-Pharm warrants to purchase
preferred stock were exercised using the principal from the 8% subordinated
notes. The preferred stock was then converted into common stock. In addition,
the Bio-Pharm treasury stock was retired in conjunction with the merger.
Accounts and Unbilled Receivables
The Company considers accounts and unbilled receivables as reported to be
collectible and realizable. As of December 31, 1995 and 1996, the allowance for
doubtful accounts was $350,000 and $524,000, respectively. Prior to 1994, no
allowance for doubtful accounts was recorded. Approximately $400,000 and
$190,000 of write-offs were charged to this allowance which was offset by
approximately $200,000 and $360,000 charged to current year earnings in 1995 and
1996, respectively. If accounts or unbilled receivables become uncollectible or
unbillable, the Company's policy is to charge these write-offs against this
allowance. The Company continually reviews the realizability of its receivables
and charges current period earnings for the amount deemed unrealizable.
F-9
<PAGE>
Property and Equipment
Property and equipment are carried at cost. Improvements and betterments are
capitalized, and maintenance and repairs are charged to expense as incurred. The
Company provides depreciation and amortization using principally the
straight-line method for financial reporting purposes using the following
estimated lives:
<TABLE>
<S> <C>
Computer equipment and software 3 - 5 years
Equipment 5 - 7 years
Furniture and fixtures 5 years
Leasehold improvements Remaining term of lease
</TABLE>
Long-lived Assets
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-lived Assets to be Disposed of,"
effective January 1, 1996. This statement requires that long-lived assets and
certain identifiable intangibles to be held and used or disposed of by an entity
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company has
determined that no impairment loss need be recognized for applicable assets of
continuing operations (see Note 6).
Revenue Recognition and Concentration of Credit Risk
Substantially all revenues are earned by performing services under contracts
from various pharmaceutical, biotechnology, medical device and diagnostics
companies. Certain contracts require the Company to perform services for a
specified number of patients or data records. Revenues are recognized based on
the status of the work completed as of a given time as a percentage of the total
tasks required under the contract. Billings and payments are specified in the
contract. Other contracts include specified components for which the Company is
to be reimbursed for time and expenses. Clients are billed monthly for such time
and expenses and revenues are recognized as the time is incurred.
Over the last three years, four of IBAH's clients accounted for 10% or more of
its revenues in any given year. In 1994, three individual clients accounted for
14.7%, 13.1% and 10.4% of the Company's revenues, respectively. In 1995, two
individual clients accounted for 14.9% and 10.2% of the Company's net revenues,
respectively. In 1996, one individual client accounted for 20.4% of the
Company's net revenues.
The concentration of credit risk is limited to trade accounts receivables and is
subject to the financial and industry conditions of the Company's clients. The
Company does not require collateral or other securities to support client
receivables.
Expense Recognition
A portion of expenses are incurred under contracts with physicians. The
contracts call for the physicians to perform certain procedures or tests on a
specified number of patients. Expenses are recognized based upon the status of
the work completed as of a given time as a percentage of the total procedures
required under the contract. Included in reimbursed costs in the accompanying
consolidated statements of operations are principally the contracted physicians'
costs. Billings and payments are specified in the contract.
F-10
<PAGE>
Start-up Expenses
Included in selling, general and administrative expenses during 1994 are
$814,000 of start-up expenses which represent the costs incurred in forming the
Pharmaceutics Services Division until its facility had completed the necessary
validations in compliance with the Food and Drug Administration's Good
Manufacturing Practices during the third quarter of 1994. These costs included
primarily salaries, consulting fees and office rent.
Income Taxes
On January 1, 1994, upon terminating its S Corporation status, the Company
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," (SFAS 109) retroactively to inception. This statement requires
the use of the liability method in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities, and are
measured using enacted tax rates that are expected to be in effect when the
differences reverse. The adoption of SFAS 109 had no material impact on the
Company's financial statements.
Net Income (Loss) per Share
Net income per share is computed using the weighted average number of common
stock shares outstanding plus common stock equivalents. Net loss per share is
computed using the weighted average number of common stock shares outstanding.
For 1994 and 1995 common stock equivalents are antidilutive and have not been
considered in the net loss per share computation. Interest expense related to
the 8% subordinated notes which were converted in conjunction with the merger
with Affinity (see Note 6) has been excluded from the 1994 net loss per share
calculation. In conjunction with the merger with Affinity, all Bio-Pharm shares
of common stock were converted into 16.4679 shares of IBAH common stock. All
common share and per share amounts have been adjusted retroactively to give
effect to the merger.
3. 1996 PUBLIC OFFERING OF COMMON STOCK
------------------------------------
On April 19, 1996, the Company completed a public offering of 3,000,000 shares
of its common stock, par value $.01 per share, at an issuance price of $6.50 per
share for a total of $19.5 million. The net proceeds to the Company, after all
issuance expenses, were $18,011,000. These shares were sold to selected
institutional investors.
F-11
<PAGE>
4. 1995 PRIVATE EQUITY PLACEMENT
-----------------------------
On August 11, 1995, the Company completed a private equity placement of 999,554
shares of convertible preferred stock, par value $.01 per share, at a purchase
price of $7.003125 per share for a total of $6,935,000, net of transaction
costs. Each share of convertible preferred stock is convertible into three
shares of common stock. Each share of convertible preferred stock is entitled to
three detachable and transferable warrants to purchase shares of common stock
for $2.33 per share on or before August 11, 2000. In addition, each share of
convertible preferred stock is entitled to the voting equivalent of three shares
of common stock. The convertible preferred stock may be converted at the
Company's option after August 11, 1998, provided that the common stock has a
trading price equal to or greater than $10 per share. On October 10, 1995, the
Company filed a registration statement on Form S-3 with the Securities and
Exchange Commission for the common stock underlying the convertible preferred
stock and warrants. The registration of these securities was declared effective
on October 31, 1995. In the event the Company sells or issues additional shares
of common stock, warrants or other rights to purchase stock, stockholders of
convertible preferred stock are entitled to certain anti-dilution protection.
The holders of the convertible preferred stock are entitled to one seat on the
Company's Board of Directors, which was filled in August 1995.
In 1996, 249,889 shares of the convertible preferred stock were converted into
749,667 shares of common stock.
5. DIVESTITURE OF DRUG DELIVERY SERVICES DIVISION
----------------------------------------------
On July 28, 1995, the Company entered into an agreement to sell its Drug
Delivery Services Division effective July 1, 1995 to a management group from
that Division. The Drug Delivery Services Division had recorded a net loss of
$727,000 for the six months ended June 30, 1995. In addition a loss on disposal
of the Division of $819,000, including accruals for severance payments and
future liabilities, has been reflected in the consolidated statement of
operations for 1995. The operating losses of the Drug Delivery Services Division
have been retroactively restated as losses from discontinued operations in the
accompanying consolidated statements of operations. The Drug Delivery Services
Division was a significant portion of Affinity Biotech, Inc. (see Note 6).
6. MERGERS AND ACQUISITIONS
------------------------
Merger with Affinity Biotech, Inc.
On April 27, 1994, the merger ("the Merger") between Affinity Biotech, Inc.
("Affinity") and Bio-Pharm Clinical Services, Inc. ("Bio-Pharm") was
consummated. Simultaneous with the Merger, Affinity changed its name to IBAH.
Since the Merger resulted in the former Bio-Pharm shareholders having a majority
ownership of the merged entity, the Merger has been accounted for as a purchase
transaction with Bio-Pharm treated as the acquirer.
Concurrent with the Merger, Bio-Pharm's 8% subordinated notes were converted
into preferred stock and then converted into Bio-Pharm common stock (see Note
13). Bio-Pharm's common stock was then exchanged for shares of common stock of
the Company. Immediately prior to the Merger, an additional 74,737 shares of
Bio-Pharm common stock were sold and issued to institutional investors in
connection with a $4,000,000 private placement. These shares were subsequently
converted into 1,230,761 shares of common stock of the Company.
F-12
<PAGE>
The total purchase price of Affinity was $22,714,000, which consisted of the
following: (i) the $18,929,000 market value of the outstanding shares of
Affinity common stock (5,408,249 shares of common stock multiplied by $3.50 per
share, which represented the closing price on April 26, 1994), (ii) the $937,000
fair value of the outstanding Affinity options and warrants to purchase Affinity
common stock, (iii) the $698,000 fair value of the warrants issued to certain
venture investors to purchase shares of Bio-Pharm common stock, which warrants
were converted into warrants to purchase 684,505 shares of Company common stock
at $2.58 per share and (iv) transaction costs and an accrual for Affinity-
related severance costs totaling $2,150,000. Since Bio-Pharm is the acquirer for
accounting purposes, the Affinity options and warrants are required to be valued
for purchase accounting purposes. The fair value of the warrants issued to the
venture investors are included in the purchase price because those warrants were
issued to the investors in connection with their approval of the Merger. By
January 1997, all such warrants issued to the Bio-Pharm venture investors were
exercised (see Note 13). The total Affinity purchase price has been allocated to
the fair market value of the assets acquired and liabilities assumed. The book
value of Affinity's assets and liabilities approximates their fair market value.
Such estimate of fair market value may be revised at a later date. The
$18,297,000 excess of the purchase price over the estimated fair market value of
the net assets acquired was allocated to acquired research and development and,
accordingly, was charged to the statement of operations.
Acquisition of European Pharmaceutical Investigation Consultants Limited
("EPIC")
On January 4, 1994, Bio-Pharm purchased all of the outstanding shares of stock
of EPIC for $700,000 in cash and 1,547,703 shares of common stock with an
appraised value of $2,900,000. The acquisition was recorded using the purchase
method of accounting. The total purchase price of $3,765,000, including
transaction costs of $165,000, was allocated to the fair market value of the
assets acquired (which included $871,000 of cash) and liabilities assumed. The
book value of EPIC's assets and liabilities approximate their fair market value.
The $3,320,000 excess of the total purchase price over the estimated fair market
value of the net assets acquired was treated as goodwill and is being amortized
on a straight-line basis over 20 years. As of December 31, 1995 and 1996, the
accumulated amortization of goodwill related to EPIC was $332,000 and $498,000,
respectively.
Acquisition of Resource Biometrics, Inc. ("RBI")
On July 18, 1996, the Company purchased all of the outstanding shares of stock
of RBI for an initial consideration of 350,000 shares of the Company's common
stock. RBI is a provider of software products and data services to the
pharmaceutical, biotechnology and medical device industries. RBI's software
tools are used to increase the efficiency of data clean-up, database
consolidation, data analysis and reporting. The acquisition was recorded using
the purchase method of accounting. The total purchase price of $2,463,000,
including estimated transaction costs of $174,000, was allocated to the fair
value of the assets acquired and liabilities assumed. The $2,718,000 excess of
purchase price over book value on the acquisition date was allocated based on an
independent appraisal as follows: (1) $510,000 to acquired research and
development, which is charged to the statement of operations as a non-recurring
item; (2) $160,000 to software technology being amortized over 5 years; and (3)
$2,048,000 to goodwill being amortized over 20 years. Such allocation may be
revised at a later date if events and circumstances arise indicating a required
change. The results of RBI's operations are consolidated with those of the
Company effective the acquisition date.
Additional consideration may be payable to the former shareholders of RBI in the
form of shares of the Company's common stock. This additional consideration is
contingent on RBI exceeding certain earnings levels related to software
products, as defined in the acquisition agreement, during the years ended
December 31, 1997 through 1999. Any payments made under this contingency will be
accounted for as additional purchase price.
As of December 31, 1996, the accumulated amortization of goodwill related to the
RBI acquisition was $47,000.
F-13
<PAGE>
Acquisition of HGB, Inc., doing business as The Hardardt Group ("THG")
On October 1, 1996, the Company purchased all of the outstanding shares of stock
of THG for $14 million in cash and 2,719,999 shares of the Company's common
stock. The former stockholders of THG are restricted from selling their IBAH
common stock for a six-month period. THG is a provider of clinical trials
management and clinical monitoring services to the pharmaceutical, biotechnology
and medical device industries. THG provides these services predominantly in the
U.S. This acquisition was recorded under the purchase method of accounting. The
total purchase price of $31,007,000, including estimated transaction costs of
$1,569,000, has been allocated to the fair value of assets acquired and
liabilities assumed. The book value of THG's assets and liabilities approximate
their fair value. The $30,048,000 excess of purchase price over book value on
the acquisition date was allocated to goodwill. Goodwill is being amortized on a
straight-line basis over 25 years, based on an independent appraisal obtained by
the Company. As of December 31, 1996, the accumulated amortization of goodwill
related to the THG acquisition was $300,000.
Subsequent to these acquisitions, the Company continually evaluates whether
later events and circumstances have occurred that indicate the remaining
estimated useful life may warrant revision or that the remaining balance of
goodwill may not be recoverable. If factors indicate that goodwill should be
evaluated for possible impairment, the Company will use an estimate of the
related undiscounted cash flows over the remaining life of the goodwill in
measuring whether the goodwill is recoverable. As of December 31, 1996, the
Company has determined that the goodwill related to the EPIC, RBI and THG
acquisitions is recoverable.
The following table summarizes the unaudited pro forma combined results of
operations for the years ended December 31, 1995 and 1996, assuming that the
acquisitions of RBI and THG and the divestiture of the Drug Delivery Services
Division (see Note 5) had occurred on January 1, 1995:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1995 1996
------------------- ---------------------
<S> <C> <C>
Revenues $ 74,582,000 $ 99,328,000
Net Revenues 58,104,000 73,646,000
Operating Income (Loss) (2,390,000) 2,063,000
Net Income (Loss) (3,897,000) 1,561,000
Net Income (Loss) Per Share (0.22) 0.06
</TABLE>
The above pro forma information excludes the $510,000 one-time charge to
earnings for acquired research and development related to the RBI acquisition in
1996. The pro forma information also excludes the 1995 operating loss of the
Drug Delivery Services Division of $1,546,000 due to the Company's decision to
discontinue the operations of that division.
The shares used in computing pro forma net loss per share assumes that the
acquisitions of RBI and THG had occurred on January 1, 1995.
F-14
<PAGE>
7. ACCOUNTS RECEIVABLE
-------------------
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1995 1996
-------------------- --------------------
Trade:
<S> <C> <C>
Billed $ 13,653,000 $ 17,548,000
Unbilled 7,442,000 10,590,000
Allowance for doubtful accounts (350,000) (524,000)
-------------------- --------------------
$ 20,745,000 $ 27,614,000
==================== ====================
<CAPTION>
8. PROPERTY AND EQUIPMENT
----------------------
December 31,
------------------------------
1995 1996
------------ ------------
<S> <C> <C>
Computer equipment and software $ 4,094,000 $ 6,051,000
Equipment (see Note 11) 3,255,000 4,479,000
Furniture and fixtures 1,520,000 1,634,000
Leasehold improvements 1,578,000 1,834,000
------------ ------------
10,447,000 13,998,000
Less--accumulated depreciation
and amortization (3,993,000) (6,199,000)
------------ ------------
$ 6,454,000 $ 7,799,000
============ ============
</TABLE>
9. INCOME TAXES
------------
At December 31, 1996, the Company had net operating loss carryforwards for U.S.
income tax purposes of approximately $9,400,000 and for foreign income tax
purposes of approximately $6,000,000. If utilized, $3,200,000 of the U.S.
Federal net operating loss carryforward will not be benefited in the statement
of operations as it was generated by the exercise of nonqualified stock options
and will be recorded directly to additional paid-in capital in accordance with
SFAS 109. The Federal net operating loss carryforwards will expire at various
dates beginning in 2008, if not utilized.
Pursuant to the Tax Reform Act of 1986, annual use of the Company's U.S. Federal
net operating loss carryforwards may be limited if a cumulative change in
ownership of more that 50% has occurred within a three-year period. Upon
consummation of the Merger, the availability in any one year of Affinity's net
operating loss carryforward will be limited due to a change in ownership. Such
limitation will not have an effect on the Company's ability to ultimately
utilize this carryforward. The Company believes that no such change has taken
place since the Merger.
The components of income(loss) before income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
1994 1995 1996
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Domestic $ (19,384,000) $ (1,576,000) $ 3,889,000
Foreign (1,830,000) (2,983,000) (2,849,000)
-------------------- -------------------- --------------------
$ (21,214,000) $ (4,559,000) $ 1,040,000
==================== ==================== ====================
</TABLE>
F-15
<PAGE>
The income tax provision for the year ended December 31, 1996 relates entirely
to the state income taxes due to profitable operations in the U.S. The income
tax provision is composed of a current provision of $109,000 offset by a
deferred benefit of $49,000.
Income taxes computed at the Federal tax rate of 34% are reconciled to the total
income tax provision for the year ended December 31, 1996 as follows:
<TABLE>
<CAPTION>
<S> <C>
United States Federal statutory rate $ 354,000
Effect of foreign losses not benefited 969,000
State taxes 60,000
Nondeductible expenses 428,000
Net operating loss carryforwards utilized (1,751,000)
-----------
Provision for income taxes $ 60,000
===========
Effective tax rate 5.8%
===========
</TABLE>
The tax effect of temporary differences as established in accordance with SFAS
109 that give rise to deferred income taxes are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1995 1996
------------- -------------
<S> <C> <C>
Net operating loss carryforwards $ 5,500,000 $ 5,800,000
Book/tax difference of records assets and liabilities 50,000 (30,000)
Cash to accrual adjustment (50,000) -
------------- -------------
Total deferred tax assets 5,500,000 5,770,000
Less-valuation allowance (5,500,000) (5,818,000)
------------- -------------
Net deferred tax assets (liabilities) $ - $ (48,000)
============= =============
</TABLE>
A valuation allowance has been provided, as the realization of the deferred tax
assets is uncertain. The deferred tax liability relates to temporary differences
at THG for state taxes purposes. The Federal liability related to these THG
temporary differences has been benefited against the Company's Federal net
operating loss carryforwards.
10. LINE OF CREDIT
--------------
On July 8, 1994, the Company replaced its previously existing $2,000,000 line of
credit and note payable with a new loan agreement with another bank. With this
new agreement, the Company obtained a revolving line of credit in the amount of
$2,000,000, a non-revolving equipment term loan in the amount of $2,500,000 and
an additional term loan in the amount of $282,000 (see Note 11). In August 1996,
the Company renegotiated its banking relationship. The Company now maintains a
$5,000,000 credit facility with its bank. This facility is comprised of the
previously existing equipment term loans and a line of credit. The availability
under the line of credit is equal to $5,000,000 minus the outstanding balance on
the term loans, or $3,428,000 at December 31, 1996.
F-16
<PAGE>
These credit facilities, as amended during 1995 and 1996, carry various terms
and conditions. Interest on amounts borrowed under the line of credit, equipment
and term loan facilities accrued at an annual rate equal to the lender's prime
rate (8.5% at both December 31, 1994 and 1995 and 8.25% at December 31, 1996)
plus 0.25%, prime plus 0.75% and prime plus 0.75%, respectively. Indebtedness
under these facilities is secured by substantially all of the Company's assets,
and in the case of the equipment facility also includes a purchase money
security interest in the equipment purchased. The facility contains financial
and operational covenants to maintain specified levels of working capital, cash
level, debt service and debt-to-tangible net worth ratio.
At December 31, 1994 and at certain times in 1995, the Company was not in
compliance with certain financial covenants required by the loan agreement.
Waivers were obtained by the Company in each instance of noncompliance. During
1995 and 1996, the Company renegotiated its bank loan financial covenants and is
currently in compliance with all covenants.
There were no borrowings under the line of credit facility in 1994, 1995 or
1996.
11. LONG-TERM DEBT
--------------
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1995 1996
------------------- -------------------
<S> <C> <C>
Non-revolving equipment loan $ 2,188,000 $ 1,563,000
Note payable to bank 122,000 9,000
Note payable on leasehold improvements 366,000 242,000
Note payable for THG shareholder buyout - 273,000
Capital lease obligations 827,000 1,174,000
--------------- ---------------
3,503,000 3,261,000
Less--current portion (1,223,000) (1,376,000)
--------------- ---------------
$ 2,280,000 $ 1,885,000
=============== ===============
<CAPTION>
Aggregate maturities of long-term debt are as follows:
<S> <C>
1997 $ 1,376,000
1998 1,162,000
1999 592,000
2000 82,000
2001 49,000
----------------
$ 3,261,000
================
</TABLE>
The non-revolving equipment loan is for capital expenditures made in 1994 and is
payable in 48 equal payments of $52,083 plus interest beginning July 1995. It is
subject to the same restrictive covenants and terms as stated in Note 10. As
stated in Note 10, the note bears interest at the lender's prime rate (8.5% at
both December 31, 1994 and 1995 and 8.25% at December 31, 1996) plus 0.75%.
The note payable to bank includes a note from 1993 that was assumed by a new
lender in 1994. The note is secured by substantially all of the Company's
assets, and is subject to the same restrictive covenants as discussed in Note
10. Payments on this note are $9,399 per month plus interest at the lender's
prime rate plus 0.75%.
The note payable on leasehold improvements is for approximately $483,000 of
improvements made in Germany. It is payable in 60 equal payments of
approximately $10,000, which includes interest at 7.5%.
F-17
<PAGE>
In 1993, THG entered into an agreement with a stockholder to terminate his
employment with THG. In conjunction with this termination, THG agreed to pay
$749,000 in sixty monthly payments based on prime plus 2%. This amount
represents the remainder of this liability.
Capital lease obligations mature from 1997 through 2001 and have interest rates
ranging from 9.0% to 12.2%. Equipment, including computer equipment, consists of
$2,116,000 and $2,776,000 of cost and $1,270,000 and $1,637,000 of accumulated
depreciation for assets held under capital leases at December 31, 1995 and 1996,
respectively. At December 31, 1996, the aggregate remaining lease payments were
$1,361,000 including interest of $187,000.
12. COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company maintains insurance coverage against possible liabilities that may
be incurred in connection with the conduct of its worldwide business. While the
Company believes it operates safely and prudently, there can be no assurance
that all possible types of liabilities that may be incurred by the Company are
covered by its insurance or that the dollar amount of such liabilities will not
exceed the Company's policy limits.
In the normal course of business, the Company is a party to various claims and
legal proceedings. Although the ultimate outcome of these matters is presently
not determinable, management of the Company, after consultation with legal
counsel, does not believe that the resolution of these matters will have a
material effect upon the Company's financial condition or results of operations.
However, because this is a forward-looking statement which contains risks and
uncertainties, the actual resolution may be material if, for example, facts are
uncovered which are not currently known by the Company or the Company is subject
to an unforeseen, unfavorable ruling by a court.
13. SUBORDINATED NOTES AND SERIES A PREFERRED STOCK
-----------------------------------------------
On February 23, 1993, the Company sold subordinated notes and warrants for
$3,535,000. The subordinated notes had a face value of $3,535,000 and were due
on January 31, 2003. Interest on the notes was 8% per year and was payable as
follows: 35% of the interest payable in June and December of each year, with the
remaining 65% due on January 31, 2003. The deferred portion of the interest
would bear interest at the same rate as the notes and could be prepaid by the
Company. The notes had certain voting rights and certain covenants including
antidilution provisions and other covenants, as defined. The noteholders were
entitled to elect one member to the Company's Board of Directors.
The subordinated notes were recorded at a discounted value of $3,494,000 to
record the fair value of warrants issued. Upon the closing of the Merger (see
Note 6), the noteholders surrendered the subordinated notes in connection with
the exercise of the warrants and terminated all agreements with the Company
except for an agreement for certain registration rights. In addition, upon the
closing of the Merger, warrants to purchase 684,505 shares of common stock at
$2.58 per share were issued to the noteholders in connection with their approval
of the Merger.
In December 1996, warrants underlying 297,223 shares of common stock were
exercised. In January 1997, the remaining 387,282 warrants were exercised.
F-18
<PAGE>
14. STOCK OPTIONS AND WARRANTS
--------------------------
In conjunction with the Merger (see Note 6), the Company's stockholders approved
the 1994 Incentive Stock Plan (the "1994 Plan") which authorizes the granting of
incentive and nonqualified stock options, stock appreciation rights and stock
awards (together the "Incentives") to officers, key employees, directors and
consultants. All previously issued Bio-Pharm options were converted into the
1994 Plan. A maximum of 2,250,000 shares of common stock are issuable pursuant
to the 1994 Plan. The two predecessor plans of Affinity, described below, have
survived the Merger.
In January 1992, the Company established its 1992 Incentive Stock Plan (the
"1992 Plan"), which authorizes the granting of Incentives to officers, key
employees, directors and consultants. A maximum of 725,000 shares of common
stock are issuable pursuant to the 1992 Plan. On June 16, 1993, the stockholders
approved the Company's 1993 Incentive Stock Plan (the "1993 Plan"). The 1993
Plan authorizes the granting of Incentives to officers, key employees, directors
and consultants. A maximum of 750,000 shares of common stock are issuable
pursuant to the 1993 Plan.
The 1992, 1993 and 1994 Plans (collectively referred to as the "Plans") are
administered by a committee of the Board of Directors, the members of which are
ineligible to participate. The committee determines who will receive Incentives,
the types of Incentives to be granted and the terms and conditions of such
Incentives. To date, the Company has only granted nonqualified stock options,
the exercise price of which was determined by the committee at the time the
options were granted. Options issued under the Plans generally vest over five
years. All options expire no later than ten years from the date of the grant.
During 1995, the Company's stockholders approved the 1994 Non-employee Director
Stock Option Plan (the "Directors' Plan") which authorizes the granting of
nonqualified stock options to non-employee members of the Board of Directors. A
maximum of 300,000 shares of common stock are issuable pursuant to the
Directors' Plan. Options are granted to eligible Board members each year based
on a formula, as defined in the Directors' Plan.
In addition to options issued under the Plans and the Directors' Plan, certain
other options have been issued. As of December 31, 1995 all options issued not
pursuant to one of the plans indicated above have been exercised.
In October 1995, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). Effective January 1, 1995, the Company has elected to
adopt the disclosure requirement of this pronouncement. Had compensation cost
for the Company's stock option plans been determined based upon the fair value
at the grant date for awards under SFAS 123, the Company's net loss and net loss
per share for 1995 would have been $4,835,000 and $0.34, respectively, while net
income and net income per share for 1996 would have been $522,000 and $0.02,
respectively. Because the SFAS 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost, and thus pro forma net income (loss), may not be representative of that to
be expected in future years. The weighted average fair value at the date of
grant for options granted during 1995 and 1996 is estimated as $1.51 and $3.09
per share, respectively, using the Black-Scholes option-pricing model. The
assumptions used in the Black-Scholes model are as follows: dividend yield of
0%, expected volatility of 40%, risk-free interest rate of 6.46% in 1995 and
6.05% in 1996, and an expected option life of 6 years.
F-19
<PAGE>
Information with respect to the nonqualified stock options granted under the
Plans and the Directors' Plan and options granted separately from any plan is
summarized as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------------------------ -------------------------------- --------------------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Shares Ex. Price Shares Ex. Price Shares Ex. Price
-------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beg. of year 1,541,738 $ 0.38 2,774,780 $ 1.56 2,898,710 $ 1.78
Acquired in conjunction
with the Affinity Merger 937,280 3.54 - - - -
Granted 585,317 2.27 501,360 3.02 859,950 6.32
Exercised - - (132,866) 1.01 (500,396) 0.77
Canceled (289,555) 3.09 (244,564) 2.30 (175,425) 3.85
------------- ------------- --------------
Outstanding at end of year 2,774,780 1.56 2,898,710 1.78 3,082,839 3.09
============= ============= ==============
Exercisable at end of year 1,865,041 1.17 1,858,886 1.21 1,943,024 1.83
============= ============= ==============
<CAPTION>
The following table summarizes information about options outstanding at December
31, 1996:
Options Outstanding Options Exercisable
-------------------------------------------------------- -------------------------------------
Wtd. Avg.
Range of Remaining Wtd. Avg. Wtd. Avg.
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life in Years Price Exercisable Price
------------------ ------------------ ------------------ ----------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
$0.12-$0.91 871,208 3.2 $ 0.24 871,208 $ 0.24
$1.87-$3.00 1,098,921 6.8 2.49 763,726 2.52
$3.38-$6.50 891,960 8.3 5.57 308,090 4.66
$6.69-$8.13 220,750 9.6 7.34 - -
------------------ -----------------
3,082,839 6.4 3.09 1,943,024 1.83
================== =================
</TABLE>
As of December 31, 1996, 351,179 options were available for future grant under
the Plans and the Directors' Plan.
In February 1997, the Company's stockholders approved the 1997 Equity
Compensation Plan (the "1997 Plan"), which authorizes the granting of Incentives
to employees, directors and key advisors. A maximum of 1,500,000 shares of
common stock are issuable pursuant to the 1997 Plan. These option shares are not
included in the December 31, 1996 options available for future grant indicated
above.
F-20
<PAGE>
15. LEASES
------
The Company entered into a lease in 1989 for its corporate headquarters office
space, which included reduced rental payments in the initial years of the lease.
The accompanying financial statements reflect total rent expense on a
straight-line basis over the term of the lease. The Company also has leases for
its other 16 primary office and laboratory locations. Rent expense for all
operating leases was $1,911,000, $2,732,000 and $3,182,00 in 1994, 1995 and 1996
respectively. The future minimum lease payments as of December 31, 1996, under
the noncancelable operating leases for equipment and office space are as
follows:
<TABLE>
<S> <C>
1997 $ 3,834,000
1998 3,979,000
1999 3,324,000
2000 1,858,000
2001 1,018,000
2002 and thereafter 9,579,000
</TABLE>
Included in the future minimum lease payments above is a fifteen year lease for
new office, laboratory and manufacturing facilities for the Pharmaceutics
Services Division. This lease is for 124,000 square feet of space. The
Pharmaceutics Services Division expects to phase in operations in this new
facility over the next several years, beginning with 40,000 square feet in 1997.
As of December 31, 1996, the Company had issued a bank letter of credit for
$300,000 to the landlord of its headquarters facility in lieu of a cash security
deposit.
16. EMPLOYEE RETIREMENT PLANS
-------------------------
In January, 1991, the Company established a 401(k) Retirement Plan for all
qualified U. S. employees. The employer contributions credited to the plan were
charged to expense and were $53,000, $91,000 and $187,000 in 1994, 1995, and
1996, respectively. The plan also provides for discretionary contributions as
approved by the Board of Directors. There were no discretionary contributions in
1994, 1995, or 1996.
In the United Kingdom, the Company operates defined contribution pension plans.
The assets of the plans are held separately from those of the Company in eight
independently administered funds. The employer contributions credited to the
plan were charged to expense and were $197,000, $132,000 and $183,000 in 1994,
1995 and 1996 respectively.
Prior to acquisition, both RBI and THG maintained their own 401(k) Retirement
Plans for qualified employees. These plans have been merged into the IBAH plan
effective January 1, 1997. Since their acquisitions, $34,000 of employer match
contributions have been made to these Plans.
17. RELATED PARTY TRANSACTIONS
--------------------------
At December 31, 1996, the Company had two mortgage receivables totaling $150,000
due from two former stockholders of THG (see Note 6). These mortgages are
secured by a condominium and a personal residence and bear interest at 8% and
5.78%. Payments are in monthly installments of $765 and $773. These receivables
are included in other assets on the accompanying balance sheet.
On January 19, 1996, the Company entered into a one-year agreement with Vector
Securities International, Inc. ("Vector Securities"), an affiliate of Vector
Later-Stage Equity Fund, L.P., a fund managed by Sandra Panem, a member of the
Company's Board of Directors. Pursuant to the agreement, Vector Securities will
provide strategic advisory services to the Company in return for standard
up-front fees and fees related to any specific transactions consummated by the
Company.
F-21
<PAGE>
In January, 1992, Affinity entered into a five year contract for management
advisory services with an entity controlled by the Chairman of the Company's
Board. This contract provides for quarterly payments. Since the Merger, the
Company incurred $74,000 under this contract in 1994, $87,000 in 1995 and
$122,000 in 1996. This contract was terminated effective December 31, 1996.
At December 31, 1994, the Company had a $75,000 demand note from an employee.
The demand note is secured by 25,000 shares of the Company's common stock and
bears interest at prime, which was 8.5% at December 31, 1994. Interest income on
this note for the year ended December 31, 1994, was $6,000. The note was repaid
in 1995.
18. OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
--------------------------------------------------
The Company operates in two business segments: the Clinical Services Division
and the Pharmaceutics Services Division (see Note 1). The following table
presents information about the Company's operations by segment:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1994 1995 1996
------------- ------------- ------------
<S> <C> <C> <C>
Net revenues
Clinical Services Division $ 32,911,000 $ 40,272,000 $ 56,155,000
Pharmaceutics Services Division 709,000 2,594,000 6,001,000
------------- ------------- ------------
$ 33,620,000 $ 42,866,000 $ 62,156,000
============= ============= ============
Operating income(loss)
Clinical Services Division $ (19,007,000) $ (1,523,000) $ (29,000)
Pharmaceutics Services Division (876,000) (1,379,000) 594,000
------------- ------------- ------------
$ (19,833,000) $ (2,902,000) $ 565,000
============= ============= ============
Depreciation and Amortization
Clinical Services Division $ 1,152,000 $ 1,590,000 $ 2,431,000
Pharmaceutics Services Division 113,000 413,000 557,000
------------- ------------- ------------
$ 1,265,000 $ 2,003,000 $ 2,988,000
============= ============= ============
Capital Expenditures
Clinical Services Division $ 2,221,000 $ 1,336,000 $ 2,504,000
Pharmaceutics Services Division 1,350,000 863,000 911,000
------------- ------------- ------------
$ 3,571,000 $ 2,199,000 $ 3,415,000
============= ============= ============
Identifiable Assets
Clinical Services Division $ 28,288,000 $ 36,370,000 $ 87,510,000
Pharmaceutics Services Division 2,284,000 3,155,000 4,616,000
------------- ------------- ------------
$ 30,572,000 $ 39,525,000 $ 92,126,000
============= ============= ============
</TABLE>
The operating loss in the Clinical Services Division in 1994 and 1996 includes
the $18,297,000 and $510,000 one-time charge to earnings for acquired research
and development (see Note 6), respectively.
Domestic and export net revenues are not presented as export services from any
one operating unit are less than 10% of consolidated net revenues.
F-22
<PAGE>
The following table presents information about the Company's operations by
geographic area:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1994 1995 1996
------------- ------------- ------------
<S> <C> <C> <C>
Net revenues
United States $ 24,558,000 $ 26,022,000 $ 41,261,000
International 9,062,000 16,844,000 20,895,000
------------- ------------- ------------
$ 33,620,000 $ 42,866,000 62,156,000
============= ============= ============
Operating income(loss)
United States $ (18,089,000) $ (466,000) $ 3,253,000
International (1,794,000) (2,436,000) (2,688,000)
------------- ------------- ------------
$ (19,833,000) $ (2,902,000) 565,000
============= ============= ============
Identifiable Assets
United States $ 20,721,000 $ 19,097,000 $ 69,263,000
International 9,851,000 20,428,000 22,863,000
------------- ------------- ------------
$ 30,572,000 $ 39,525,000 92,126,000
============= ============= ============
</TABLE>
The international operations are concentrated primarily in western Europe.
The operating income (loss) in the United States in 1994 and 1996 includes the
$18,297,000 and $510,000 one-time charge to earnings for acquired research and
development (see Note 6), respectively.
Domestic and export net revenues are not presented as export services from any
one operating unit are less than 10% of consolidated net revenues.
F-23
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
IBAH, Inc.
Date: March 27, 1997 By: /s/ Geraldine A. Henwood
------------------------
Geraldine A. Henwood
Chief Executive Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
Date: March 27, 1997 By: /s/ Geraldine A. Henwood
------------------------
Geraldine A. Henwood
Chief Executive Officer and Director
(Principal Executive Officer)
Date: March 27, 1997 By: /s/ Leonard F. Stigliano
------------------------
Leonard F. Stigliano
Chief Financial Officer
(Principal Financial Officer)
Date: March 27, 1997 By: /s/ Mark K. Brunhofer
---------------------
Mark K. Brunhofer
Corporate Controller
(Principal Accounting Officer)
Date: March 27, 1997 By: /s/ Ernst-Gunter Afting, Ph.D., M.D.
------------------------------------
Ernst-Gunter Afting, Ph.D., M.D.
Director
Date: March 27, 1997 By: /s/ Winston J. Churchill, J.D.
------------------------------
Winston J. Churchill, J.D.
Chairman of the Board and Director
Date: March 27, 1997 By: /s/ Victor J. Bauer, Ph.D.
--------------------------
Victor J. Bauer, Ph.D.
Director
Date: March 27, 1997 By: /s/ Edwin A. Bescherer, Jr.
---------------------------
Edwin A. Bescherer, Jr.
Director
Date: March 27, 1997 By: /s/ Martyn D. Greenacre
-----------------------
Martyn D. Greenacre
Director
Date: March 27, 1997 By:
------------------------
Judith L. Hardardt
Director
<PAGE>
Date: March 27, 1997 By:
------------------------
Sidney Jevons, Ph.D.
Director
Date: March 27, 1997 By: /s/ Sandra Panem, Ph.D.
-----------------------
Sandra Panem, Ph.D.
Director
Date: March 27, 1997 By: /s/ Richard L. Sherman, J.D.
-----------------------------
Richard L. Sherman, J.D.
Director
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF
IBAH, INC.
IBAH, Inc. (the "Corporation"), a corporation organized under and by virtue
of the General Corporation Law of the State of Delaware (the "Delaware General
Corporation Law"), for the purpose of amending its Certificate of Incorporation,
as amended (the "Certificate of Incorporation"), pursuant to Section 242(b) of
the Delaware General Corporation Law,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation duly adopted
resolutions setting forth a proposed amendment of the Certificate of
Incorporation of the Corporation, as amended, declaring said amendment to be
advisable and directing that said amendment be submitted to the stockholders of
the Corporation for consideration and approval thereof at the annual meeting of
stockholders. The resolutions setting forth the proposed amendment are as
follows:
RESOLVED, that, pursuant to Section 242 of the General Corporation Law of
the State of Delaware, Article TENTH be added to the Certificate of
Incorporation of this Corporation as follows:
A. Election and Terms of Directors; Board Action. The directors, other
----------------------------------------------
than those who may be elected pursuant to this Certificate of Incorporation by
the holders of any series of preferred stock voting separately as a single
class, shall be divided, with respect to the time for which they severally hold
office, into three classes with the term of office of the first class to expire
at the first annual meeting of stockholders following the adoption of this
Article TENTH, the term of office of the second class to expire at the second
annual meeting of stockholders following the adoption of this Article TENTH and
the term of office of the third class to expire at the third annual meeting of
stockholders following the adoption of this Article TENTH, with each such
director to hold office until his or her successor shall have been duly elected
and qualified. At each annual meeting of stockholders, commencing with the first
annual meeting of stockholders following the adoption of this Article TENTH, (i)
directors elected to succeed those directors whose terms then expire shall be
elected for a term of office to expire at the third succeeding annual meeting of
stockholders after their election and until his or her successor shall have been
duly elected and qualified, and (ii) if authorized by a resolution of the Board
of Directors and expect as otherwise provided in this Certificate of
Incorporation with respect to the rights of the holders of any series of
preferred stock to elect directors, directors may be elected to fill any vacancy
on the Board of Directors, regardless of how such vacancy shall have been
created. Any director who may be elected pursuant to this Certificate of
Incorporation by the holders of any series of preferred stock voting separately
as a single class, shall, at each annual meeting of stockholders, be elected for
a term of office to expire at the next annual meeting of stockholders and until
his or her successor shall have been duly elected and qualified or until he or
she resigns or is removed from office by the holders of such series of preferred
stock; provided, however, that the term of office of any such director shall
expire at the next annual meeting that follows the date as of which any such
preferred stock shall no longer be outstanding.
B. Newly Created Directorships and Vacancies. Subject to applicable law
------------------------------------------
and to the rights of the holders of any series of preferred stock to elect
directors as provided in this Certificate of Incorporation, and unless the Board
of Directors otherwise determines, newly created directorships resulting from
any increase in the authorized number of directors or any vacancies on the Board
of Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause shall be filled only by a majority vote of
the directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires
and until such director's successor shall have been duly elected and qualified.
If there are no directors in office, subject to the rights of the holders of any
series of preferred stock to elect directors as provided in this Certificate of
Incorporation, then an election of directors may be held in the manner provided
by statute. No decrease in the number of authorized directors constituting the
entire Board of Directors shall shorten the term of any incumbent
<PAGE>
director. If a director elected by the holders of any series of preferred stock
entitled to vote separately as a single class is removed by such holders, and if
the holders of such series of preferred stock for any reason fail to elect
anyone to fill any such directorship, such position shall remain vacant until
such time as the holders of such series of preferred stock elect a director to
fill such position and shall not be filled by resolution or vote of the
Corporation's Board of Directors or the Corporation's other stockholders.
C. Removal. Any director classified pursuant to Section A of this Article
--------
TENTH, or all such directors, may be removed from office at any time, but only
for cause and only by the affirmative vote of the holders of at least 75 percent
of the voting power of all of the then outstanding shares entitled to vote
generally in the election of directors, voting together as a single class. Any
director who may be elected pursuant to this Certificate of Incorporation by the
holders of any series of preferred stock voting separately as a single class may
be removed from office at any time, with or without cause, by the affirmative
vote of the holders of a majority of the shares of such series of preferred
stock voting separately as a single class.
D. Amendment, Repeal or Alteration. Except as otherwise provided in
--------------------------------
this Certificate of Incorporation with respect to the rights of the holders of
any series of preferred stock to amend, repeal, alter or waive any provisions of
this Certificate of Incorporation affecting such series of preferred stock,
notwithstanding any other provision of this Certificate of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of a particular class or series
of the capital stock required by law or this Certificate of Incorporation, the
affirmative vote of the holders of at least 75 percent of the voting power of
all of the then outstanding shares entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend
or repeal this Article TENTH.
FURTHER RESOLVED, that the foregoing Amendment to the Certificate
of Incorporation of this Corporation shall be effective upon the effective date
of the filing of a Certificate of Amendment to the Certificate of Incorporation
of this Corporation, setting forth the foregoing Amendment, with the Secretary
of State of the State of Delaware.
SECOND: That thereafter, pursuant to resolution of the Board of
Directors, said amendment was submitted for the approval of the stockholders of
the Corporation at the annual meeting of stockholders of the Corporation held on
June 19, 1996.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of the Corporation was not reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, this Certificate of Amendment has been duly executed by
the undersigned officers this 26th day of June, 1996.
IBAH, Inc.
By: _________________________________
Geraldine A. Henwood
Chief Executive Officer
ATTEST:
__________________________
Jane H. Hollingsworth
Secretary
<PAGE>
BY-LAWS
OF
IBAH, INC.
================================
ARTICLE I
Offices
Section 1.1. Registered Office. The registered office of IBAH, Inc. (the
-----------------
"Corporation") shall be in the City of Wilmington, County of New Castle,
Delaware.
Section 1.2. Other Offices. The Corporation may also have offices at such
-------------
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Meetings of Stockholders.
Section 2.1. Place. All meetings of the stockholders for the election of
-----
directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, and shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2.2. Annual Meeting. An annual meeting of stockholders shall be
--------------
held for the election of directors at such date, time and place as may be
designated by resolution of the Board of Directors from time to time. Any other
proper business may be transacted at the meeting, irrespective of whether the
notice of such meeting contains a reference thereto, except as otherwise
provided in these By-laws, or by statute.
Section 2.3. Special Meetings. Special meetings of the stockholders, for
----------------
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called at any time by the Chairman of the
Board, the President or shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors, or at the request in
writing of stockholders holding a majority of the entire capital stock of the
Corporation issued and Outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting. Business transacted at
any special meeting of stockholders shall be limited to the purposes stated in
the notice.
Section 2.4. Notice of Meetings. Whenever stockholders are required or
------------------
permitted to take any action at a meeting, a written notice of the meeting
stating the place, date and hour of the meeting, and, in the case of a special
meeting, the purpose of purposes for which the meeting was called, shall be
given to each stockholder entitled to vote at such meeting not less than ten nor
more than sixty days before the date of the meeting. If mailed, such notice
shall be deemed to be given when deposited in the mail, postage prepaid,
directed to the stockholder at his or her address as it appears on the records
of the Corporation.
Section 2.5. List of Stockholders. The Secretary shall prepare and make,
--------------------
at least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting,
<PAGE>
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 2.6. Quorum. At each meeting of stockholders the presence in
------
person or by proxy of the holders of shares of stock having a majority of the
votes which could be cast by the holders of all outstanding shares of stock
entitled to vote at the meeting, shall be necessary and sufficient to constitute
a quorum for the transaction of business except as otherwise provided by statute
or by the Certificate of Incorporation. In the absence of a quorum, the
stockholders so present may, by majority vote, adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. Shares of its own stock
belonging to the Corporation or to another corporation, if a majority of the
shares entitled to vote in the election of directors of such other corporation
is held, directly or indirectly, by the Corporation, shall neither be entitled
to vote nor be counted for quorum purposes; provided, however, that the
foregoing shall not limit the right of the Corporation to vote stock, including,
but not limited, to its own stock, held by it in a fiduciary capacity.
Section 2.7. Organization. Meetings of stockholders shall be presided over
------------
by the Chairman of the Board, if any, or in his or her absence by the Vice
Chairman of the Board, if any, or in his or her absence by the President, or in
his or her absence by a Vice President, or in the absence of the foregoing
persons by a chairman designated by the Board of Directors. The Secretary shall
act as secretary of the meeting, but in his or her absence the chairman of the
meeting may appoint any person to act as secretary of the meeting.
Section 2.8. Voting: Proxies. Except as otherwise provided by this
---------------
Certificate of Incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
him or her which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders may authorize another person or
persons to act for him or her by proxy, but no such proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period. A duly executed proxy shall be irrevocable if it states that it
is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or another duly executed
proxy bearing a later date with the Secretary of the corporation. Voting at
meetings of stockholders need not be by written ballot and need not be conducted
by inspectors of election unless so determined by the holders of shares of stock
having a majority of the votes which could be cast by the holders of all
outstanding shares of stock entitled to vote thereon which are present in person
or by proxy at such meeting. At all meetings of stockholders for the election
of directors a plurality of the votes cast shall be sufficient to elect. All
other elections and questions shall, unless otherwise provided by law, the
Certificate of Incorporation or these By-laws, be decided by the vote of the
holders of shares of stock having a majority of the votes which could be cast by
the holders of all shares of stock entitled to vote thereon which are present in
person or represented by proxy at the meeting.
Section 2.9. Action without Meeting. Unless otherwise restricted by the
----------------------
Certificate of Incorporation, any action required or permitted to be taken at
any annual or special meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
<PAGE>
stockholders who have not consented in writing.
Section 2.10. Fixing Date for Determination of Stockholders of Record. In
-------------------------------------------------------
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors and which record date: (1) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty nor
less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days from the date upon
which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action. If no record date is fixed: (1) the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held; (2) the record
date for determining stockholders entitled to express consent to corporate
action in writing without a meeting when no prior action of the Board of
Directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation in accordance with applicable law, or, if prior action by the
Board of Directors is required by law, shall be at the close of business on the
day on which the Board of Directors adopts the resolution taking such prior
action; and (3) the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
<PAGE>
ARTICLE III
Board of Directors
Section 3.1. Number; Qualifications. The Board of Directors shall consist
----------------------
of not less than five nor more than eleven members, as shall be determined from
time to time by resolution of the Board, subject to the power of the
stockholders to change such action. At least three of the directors shall be
"Independent Directors". For purposes of these By-laws "Independent Director"
shall mean a person, other than an officer or employee of the Corporation or its
subsidiaries or any other individual who has a relationship with the Corporation
which, in the opinion of the Board of Directors, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director. The directors need not be stockholders.
Section 3.2. Election and Terms of Directors; Board Action. The
---------------------------------------------
directors, other than those who may be elected pursuant to the Certificate of
Incorporation by the holders of any series of preferred stock voting separately
as a single class, shall be divided, with respect to the time for which they
severally hold office, into three classes with the term of office of the first
class to expire at the 1997 annual meeting of stockholders, the term of office
of the second class to expire at the 1998 annual meeting of stockholders and the
term of office of the third class to expire at the 1999 annual meeting of
stockholders, with each such director to hold office until his or her successor
shall have been duly elected and qualified. At each annual meeting of
stockholders, commencing with the 1997 annual meeting of stockholders, (i)
directors elected to succeed those directors whose terms then expire shall be
elected for a term of office to expire at the third succeeding annual meeting of
stockholders after their election and until his or her successor shall have been
duly elected and qualified, and (ii) if authorized by a resolution of the Board
of Directors and except as otherwise provided in the Certificate of
Incorporation with respect to the rights of the holders of any series of
preferred stock to elect directors, directors may be elected to fill any vacancy
on the Board of Directors, regardless of how such vacancy shall have been
created. Any director who may be elected pursuant to the Certificate of
Incorporation by the holders of any series of preferred stock voting separately
as a single class, shall, at each annual meeting of stockholders, be elected for
a term of office to expire at the next annual meeting of stockholders and until
his or her successor shall have been duly elected and qualified or until he or
she resigns or is removed from office by the holders of such series of preferred
stock; provided, however, that the term of office of any such director shall
expire at the next annual meeting that follows the date as of which any such
preferred stock shall no longer be outstanding.
Section 3.3. Newly Created Directorships and Vacancies; Resignation;
-------------------------------------------------------
Removal. Subject to applicable law and to the rights of the holders of any
- -------
series of preferred stock to elect directors as provided in the Certificate of
Incorporation, and unless the Board of Directors otherwise determines, newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies on the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
shall be filled only by a majority vote of the directors then in office, though
less than a quorum, and directors so chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which they have been elected expires and until such director's
successor shall have been duly elected and qualified. If there are no directors
in office, subject to the rights of the holders of any series of preferred stock
to elect directors as provided in the Certificate of Incorporation, then an
election of directors may be held in the manner provided by statute. If, at the
time of filling any newly created directorship or any vacancy, the directors
then in office shall constitute less than a majority of the whole Board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
of the total number of shares at the time outstanding having the right to vote
for such directors, summarily order an election to fill any such newly created
directorships or vacancies, or to replace the directors chosen by the directors
then in office. No decrease in the number of authorized directors constituting
the entire Board of Directors shall shorten the term of any incumbent director.
If a director elected by the holders of any series of preferred stock entitled
to vote separately as a single class is removed by such holders, and if the
holders of such series of preferred stock for any reason fail to elect anyone to
fill any such directorship, such position shall remain vacant until such time as
the holders of such series of preferred stock elect a director to fill such
position and shall not be filled by resolution or
<PAGE>
vote of the corporation's Board of Directors or the corporation's other
stockholders. Any director may resign at any time upon written notice to the
corporation. Any director classified pursuant to Section 3.2, or all such
directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least 75 percent of the voting
power of all of the then outstanding shares entitled to vote generally in the
election of directors, voting together as a single class. Any director who may
be elected pursuant to the Certificate of Incorporation by the holders of any
series of preferred stock voting separately as a single class may be removed
from office at any time, with or without cause, by the affirmative vote of the
holders of a majority of the shares of such series of preferred stock voting
separately as a single class.
Section 3.4. Powers. The business of the Corporation shall be managed by
------
or under the direction of its Board of Directors which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these By-laws directed or
required to be exercised or done by the stockholders.
Section 3.5. Meetings. The Board of Directors of the Corporation may hold
--------
meetings, both regular and special, either within or without the State of
Delaware.
Section 3.6. First Meeting. The first meeting of each newly elected Board
-------------
of Directors shall be held immediately following the annual meeting of
stockholders at which such directors are elected and no notice of such meeting
shall be necessary to the newly elected directors in order legally to constitute
the meeting.
Section 3.7. Regular Meetings. Regular meetings of the Board of Directors
----------------
may be held without notice at such time and at such place within or without the
State of Delaware as shall from time to time be determined by the Board.
Section 3.8. Special Meetings. Special meetings of the Board of Directors
----------------
may be called by the Chairman of the Board or President on two business days'
notice to each director, either personally or by mail, by telegram or by
telephone; special meetings shall be called by the President or Secretary in
like manner and on like notice on the written request of two directors.
Section 3.9. Quorums. At all meetings of the Board of Directors a majority
-------
of the total number of directors shall constitute a quorum for the transaction
of business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 3.10. Conference Telephone. Members of the Board of Directors (or
--------------------
any committee designated by the Board) may participate in a meeting of the Board
or committee thereof by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other.
Section 3.11. Organization. Meetings of the Board of Directors shall be
------------
presided over by the Chairman of the Board, if any, or in his or her absence by
the Vice Chairman of the Board, if any, or in his or her absence by the
President, or in their absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his or her absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 3.12. Unanimous Consent. Unless otherwise restricted by the
-----------------
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
<PAGE>
Section 3.13. Committees. The Board of Directors may, by resolution passed
----------
by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of any member of such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution, shall have and may exercise
the powers of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors.
Section 3.14. Minutes. Each committee shall keep regular minutes of its
-------
meetings and report the same to the Board of Directors when required.
Section 3.15. Fees and Expenses. The directors may be paid their expenses,
-----------------
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors and a
stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed additional
compensation for attending committee meetings.
ARTICLE IV
Notices
Section 4.1. Methods of Notice. Whenever, under the provisions of the laws
-----------------
of the State of Delaware or of the Certificate of Incorporation or of these By-
laws, notice is required to be given to any director or stockholder, notice may
be given by mail, addressed to such director or stockholder, at his or her
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Notice to directors may also be
given by telegram or telephone.
Section 4.2. Waiver. Whenever any notice is required to be given under the
------
provisions of the statutes or of the Certificate of Incorporation or of these
By-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
Officers
Section 5.1. Election: Titles: Term of Office. The Board of Directors
--------------------------------
shall elect a President, a Vice-President, a Secretary and a Treasurer who shall
have such powers and duties as set forth herein and as from time to time be
determined by the Board of Directors. The Board of Directors may, if it so
determines, choose a Chairman of the Board and a Vice Chairman of the Board from
among its members. The Board of Directors may also elect or appoint additional
vice-presidents, one or more assistant secretaries and assistant treasurers, and
such other officers, agents, trustees and fiduciaries as it shall deem
necessary. Each such officer shall hold office until the first meeting of the
Board of Directors after the annual meeting of stockholders next succeeding his
or her election, and until his or her successor is elected and qualified. Any
number of offices may be held by the same person, unless the Certificate of
Incorporation or these By-laws otherwise provide.
Section 5.2. Resignation; Removal. Any officer may resign at any time upon
--------------------
written notice to the corporation. The Board of Directors may remove any
officer with or without cause at any time, but such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
corporation. Any number of offices may be held by the same person. Any vacancy
occurring in any
<PAGE>
office of the corporation by death, resignation, removal or otherwise may be
filled for the unexpired portion of the term by the Board of Directors at any
regular or special meeting of the Board.
Section 5.3. Salaries. The salaries and other compensation of all officers
--------
and agents of the Corporation shall be fixed by the Board of Directors.
Section 5.4 Chairman of the Board. The Chairman of the Board shall preside
---------------------
at all meetings of the Board of Directors and stockholders and shall have such
other powers and perform such other duties as may be assigned to him by the
Board.
Section 5.5. President. Subject to the control of the Board of Directors,
---------
the President shall be the chief executive officer of the Corporation and in
addition shall perform such duties as from time to time may be assigned to him
by the Board. He may execute on behalf of the Corporation all contracts, deeds,
bonds, mortgages, notes or other documents whether or not requiring the seal of
the Corporation. He shall have responsibility for the general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect.
Section 5.6. Vice-Presidents. In the absence of the President or in the
---------------
event of his inability or refusal to act, the Vice-President (or in the event
there be more than one Vice-President, the Vice-Presidents in the order
designated, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice-Presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 5.7. Secretary. The Secretary shall attend all meetings of the
---------
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He or she shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision he or she shall be. He or she
shall have custody of the corporate seal of the Corporation and shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his or her signature. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his or her signature.
Section 5.8. Assistant Secretary. The Assistant Secretary, or if there be
-------------------
more than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of his or her
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 5.9. Treasurer. The Treasurer shall have the custody of the
---------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He or she shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his or her transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, he or she shall give the
Corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in case of his or her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his or her possession or under his or her
control belonging to the Corporation.
Section 5.10. Assistant Treasurer. The Assistant Treasurer or if there
-------------------
shall be more than one,
<PAGE>
the Assistant Treasurers in the order determined by the Board of Directors (or
if there be no such determination, their in the order of their election), shall,
in the absence of the Treasurer or in the event of his or her inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE VI
Indemnification
Section 6.1. Right to Indemnification. The Corporation shall indemnify and
------------------------
hold harmless, to the fullest extent permitted by applicable law as it presently
exists or may Hereafter be amended, any person who was or is made or is
threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he or she or a person for whom he or
she is the legal representative, is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, enterprise or non-profit entity, including
service with respect to employee benefit plans, against all liability and loss
suffered and expenses incurred by such a person. The Corporation shall be
required to indemnify a person in connection with a proceeding initiated by such
person only if the proceeding was authorized by the Board of Directors of the
Corporation.
Section 6.2. Prepayment of Expenses. The Corporation shall pay the
----------------------
expenses incurred in defending any proceeding 'ii advance of its final
disposition, provided, however, that the payment of expenses incurred by a
director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the director or officer to repay
all amounts advanced if it should be ultimately determined that the director or
officer is not entitled to be indemnified under this Article VI or otherwise.
Section 6.3. Non-Exclusivity of Rights. The rights conferred on any person
-------------------------
by this Article VI shall not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, these Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 6.4. Amendment or Repeal. Any appeal or modification of the
-------------------
foregoing provisions of this Article VI shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
Section 6.5. Insurance. The Board of Directors may authorize, by a vote of
---------
a majority of the full Board, the Corporation to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of this Article
VI.
ARTICLE VII
Certificates of Stock
Section 7.1. Right to Certificate. Every holder of stock in the
--------------------
Corporation shall be entitled to have a certificate, signed by or in the name of
the Corporation by the Chairman of the Board of Directors, or the President or a
Vice President and the Treasurer or an Assistant Treasurer or the Secretary or
an Assistant Secretary of the Corporation, certifying the number of shares owned
by him or her in the Corporation.
Section 7.2. Statements Setting Forth Rights. If the Corporation shall be
-------------------------------
authorized to issue
<PAGE>
more than one class of stock or more than one series of any class, the
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and rights shall be set forth in
full or summarized on the face or back of the certificate which the Corporation
shall issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of the State of
Delaware, in lieu of the foregoing requirements, there may be set forth on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, a statement that the Corporation will furnish
without charge to each stockholder who so requests the designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and rights.
Section 7.3. Facsimile Signature. Where a certificate is countersigned (1)
-------------------
by a transfer agent other than the Corporation or its employee, or, (2) by a
registrar other than the Corporation or its employee, the signatures of the
officers of the Corporation may be facsimiles. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
leave ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of issue.
Section 7.4. Lost Certificates. The Board of Directors may delegate to its
-----------------
transfer agent the authority to issue without further action or approval of the
Board, a new certificate or certificates in place of any certificate or
certificates theretofore issued by the Corporation alleged to leave been lost,
stolen or destroyed, upon the receipt by the transfer agent of an affidavit of
that fact by the person claiming the certificate of stock to be lost, stolen or
destroyed, and upon the receipt from the owner of such lost, stolen or destroyed
certificate, or certificates, or his or her legal representative of a bond as
indemnity against any claim that may be made with respect to the certificate
alleged to have been lost, stolen or destroyed.
Section 7.5. Transfers of Stock. Upon surrender to the Corporation or the
------------------
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and if such shares are not restricted as to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 7.6. Registered Stockholders. The Corporation shall be entitled to
-----------------------
recognize the exclusive eight of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
Section 7.7. Transfer Agents and Registrars. The Board of Directors may
------------------------------
appoint one or more corporate transfer agents and registrars.
<PAGE>
ARTICLE VIII
General Provisions
Section 8.1. Dividends. Dividends upon the capital stock of the
---------
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 8.2. Reserves. Before payment of any dividend, there may be set
--------
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, 'or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conclusive to the interest
of the Corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
Section 8.3. Annual Statement. The Board of Directors shall present to
----------------
stockholders, prior to each annual meeting, a full and clear statement of the
business and condition of the Corporation.
Section 8.4. Checks. All checks or demands for money and notes of the
------
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors i-nay from time to time designate.
Section 8.5. Fiscal Year. The fiscal year of the Corporation shall be
-----------
fixed by resolution of the Board of Directors.
Section 8.6. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware. " The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
ARTICLE IX
Amendments
Section 9.1. Amendments. These By-laws may be altered or repealed at any
----------
regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration or repeal be contained in the notice of such special meeting.
***************************************************
Amendments
----------
July 14, 1992 (by the directors) -- Section 3.1 changed to provide for fourteen
members of the Board of Directors.
March 7, 1994 (by the directors) -- Section 3.1 changed to provide for nine
members of the Board of Directors (effective April 27, 1994).
April 27, 1994 (by the stockholders) -- Corporation's name changed from Affinity
Biotech, Inc. to IBAH, Inc.
March 15, 1996 (by the directors) -- Section 3.1 changed to provide for a
minimum of five and a maximum of eleven members of the Board of Directors, with
a minimum of three of the Directors being independent.
June 19, 1996 (by the stockholders) -- Sections 3.2 and 3.3 changed to provide
for the division of the Board of Directors into three classes.
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (this "Agreement") is made as of the 1st day of
October, 1996 between IBAH, Inc., Delaware corporation ("IBAH"), and Sherrin H.
Baky (the "Employee").
Background
----------
IBAH desires to employ the Employee, and the Employee desires to become an
employee of IBAH, upon the terms and conditions hereinafter set forth.
This Agreement is one of the Employment Agreements that is referred to in
the Agreement and Plan of Merger, by and among IBAH, IBAH Acquisition Company,
HBG, Inc. and the stockholders of HBG, Inc. (the "Merger Agreement").
Witnesseth:
----------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment.
----------
IBAH hereby employs the Employee as Executive Vice President of The
Hardardt Group, Inc., a wholly-owned subsidiary of IBAH, and Executive Vice
President of IBAH, and the Employee hereby accepts such employment. During the
term of employment under this Agreement (the "Employment Term"), the Employee
shall continue to perform duties similar to those she has heretofore
performed as Executive Vice President of HGB, Inc., and such other similar
duties as are requested from time to time by the Chief Executive Officer of IBAH
and such other person(s) as may be mutually agreed upon by the Chief Executive
Officer and the Employee.
2. Performance.
-----------
During the Employment Term, the Employee shall devote her entire business
efforts to the performance of her duties hereunder.
3. Term.
----
The Employment Term shall be for the period commencing on the date of this
Agreement and ending on the two year anniversary of this Agreement, unless
terminated earlier pursuant to the terms of Section 5 or Section 6 of this
Agreement.
<PAGE>
4. Compensation for Employment.
---------------------------
(a) The basic annual compensation of the Employee for her employment
services to IBAH and to all of its affiliated companies during the Employment
Term shall be $175,000 (the "Salary"), which IBAH shall pay to the Employee in
accordance with its normal payroll policy. IBAH may adjust the salary upward on
an annual basis as the Board may determine, but the Salary shall not be
decreased.
(b) During the Employment Term, IBAH shall also provide the Employee with
those fringe benefits generally afforded to other executives of IBAH of
comparable levels of compensation and responsibility, including, without
limitation, option and bonus plans (at Level Grade 0 under the current IBAH
plans), health insurance benefits, disability benefits, life insurance benefits
and retirement benefits (the "Fringe Benefits") in accordance with Section 5.5
of the Merger Agreement. IBAH shall also reimburse the Employee for any
reasonable business expenses incurred on IBAH's behalf in connection with the
performance of her services during the Employment Term, provided, however, that
such benefits are being offered by IBAH to its other executives of comparable
levels of compensation and responsibility.
(c) The Employee shall be entitled to four (4) weeks of paid vacation each
year, plus a vacation bonus of two (2) weeks of paid vacation each year.
5. Termination Without Compensation.
--------------------------------
(a) Expiration of Employment Term. Upon expiration of the Employment
-----------------------------
Term, IBAH shall not have further liability or obligation to the Employee
hereunder except for any unpaid Salary and Fringe Benefits accrued to the date
of expiration.
(b) Partial or Total Disability. If the Employee is unable to perform her
---------------------------
duties and responsibilities hereunder to the full extent required hereunder by
reason of illness, injury or incapacity for six months (during which time she
shall continue to be compensated hereunder), IBAH may terminate the Employment
Term, and IBAH shall not have any further liability or obligation to the
Employee hereunder except for any unpaid Salary and Fringe Benefits accrued to
the date of termination, and IBAH shall, through the two-year anniversary of
this Agreement, continue to provide to the Employee the same Fringe Benefits as
were provided prior to her termination to the maximum extent permissible under
the terms of the plans and policies governing those Fringe Benefits. In the
event of any dispute under this Section 6(b), the Employee shall submit to a
physical examination by a licensed physician mutually satisfactory to IBAH and
the Employee, the cost of such examination to be paid by IBAH, and the
determination of such physician shall be determinative. If, after termination
due to disability as provided herein, the Employee obtains, at her sole expense,
medical certification from a licensed physician reasonably satisfactory to IBAH
that such disability has ended, IBAH shall offer to employ the Employee pursuant
to the terms of this Agreement for the remainder of the Employment Term in
effect at the time of termination, except that IBAH shall not be required to
reemploy the Employee at the same officer position if IBAH shall have elected
another person
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<PAGE>
to such position during the period of the Employee's disability and such other
person continues in such position at the time of the Employee's return to
employment.
(c) Death. If the Employee dies, this Employment Agreement (except for
-----
the provisions of Sections 7, 8, 9, 10 and 11 hereof) shall terminate, and
thereafter IBAH shall not have any further liability or obligation to the
Employee, her executors, administrators, heirs, assigns or any other person
claiming under or through her except for unpaid Salary and Fringe Benefits
accrued to the date of her death.
(d) Cause. IBAH may terminate the Employment Term for "cause" (as defined
-----
below), and after the termination date, IBAH shall not have any further
liability or obligation to the Employee hereunder except for any unpaid Salary
and Fringe Benefits accrued to the date of termination and any other continuing
obligations arising out of this Agreement or other Agreements between IBAH and
the Employee. For purposes of this Agreement, "cause" shall mean breach of any
of the material terms or provisions of this Agreement other than by reason of
illness, injury or incapacity; habitual material neglect of her duties and
responsibilities hereunder; willful misconduct in performing her duties and
responsibilities hereunder; conviction of a felony or other crime involving
moral turpitude; or misappropriation of IBAH funds. Any breach of a material
term of this Agreement, habitual neglect of her duties, or willful misconduct
shall constitute "cause" only if the action or omission at issue shall be
continuing 30 days after IBAH gives the Employee written notice of the
termination date and the reasons for termination, and an opportunity to cure
such breach, neglect or misconduct. The Employee's conviction of a felony or
other crime involving moral turpitude or misappropriation of IBAH funds shall
constitute "cause" if IBAH gives the Employee ten days' written notice of
termination date.
6. Termination With Compensation.
-----------------------------
(a) By IBAH Without Cause. IBAH shall have the right to terminate the
---------------------
Employment Term without cause at any time by giving the Employee 30 days'
written notice of the termination date. Under such circumstances, IBAH shall
provide the Employee with the Termination Compensation specified in Section
6(c).
(b) By Employee. The Employee shall have the right to terminate the
-----------
Employment Term by giving 12 months' written notice of the termination date.
Under such circumstances, IBAH shall provide the Employee with the Termination
Compensation specified in Section 6(c)
(c) Termination Compensation. The "Termination Compensation" shall
------------------------
consist of the payment of the Employee's Salary under Section 4(a), and the
continuation of the Fringe Benefits under Section 4(b) to the maximum extent
permissible under the terms of the plans and policies governing these Fringe
Benefits, at the level in effect at the date of termination, for any remaining
part of the Employment Term in effect at the date of termination. The Employee
shall not be entitled to any Termination Compensation under this Section 6
unless the Employee executes and delivers to IBAH after a notice of termination
a release in a form satisfactory to IBAH in its sole discretion by which the
Employee releases IBAH from any obligations and
-3-
<PAGE>
liabilities of any type whatsoever that arise out of this Agreement or her
employment by IBAH, except for IBAH's obligation to provide the Salary and
Fringe Benefits specified in this Section 6 and any other continuing obligations
arising out of this Agreement or other agreements between IBAH and the Employee.
The parties hereto acknowledge that the Salary to be provided under this Section
6 is to be provided in consideration for the above-specified release.
(d) Exclusivity. Upon any termination by IBAH under Section 6(a) or 6(b),
-----------
IBAH shall not have any obligation under this Agreement to the Employee, her
executors, administrators, heirs, assigns or any other person claiming under or
through her other than to provide the Termination Compensation under the terms
and conditions of Section 6(c) and to fulfill any other continuing obligations
arising out of this Agreement.
7. Agreement Not to Compete.
------------------------
(a) During the Non-Competition Period (defined below), the Employee shall
not, within the Restricted Area (defined below), directly or indirectly, in any
capacity, render her services, engage or have a financial interest in, any
business that is competitive with any business activities in which IBAH or any
of its affiliates (each an "IBAH Party") shall have been engaged and in which
the Employee was actively involved during her employment by IBAH. In addition,
during the Non-Competition Period, the Employee shall not directly or indirectly
solicit any employees of IBAH or any of its affiliates to terminate their
employment with the applicable IBAH Party. Any interest in a publicly-traded
corporation, even though such corporation may be a competitor of IBAH, that the
Employee holds as of the date hereof and has disclosed to IBAH, shall not be
deemed to violate the restrictions contained in this Section 7(a). It shall
also not be a violation of this Agreement for the Employee to invest in mutual
funds or otherwise, so long as the Employee has no investment or trading
discretion, even if such funds own securities of a competitor of IBAH.
(b) The "Non-Competition Period" means the Employment Term, any
period of time during which the Employee receives Termination Compensation
under Section 6(b) hereof, and for two years after the later of (i) the end of
the Employment Term and (ii) the last date on which the Employee receives
Termination Compensation, so long as IBAH continues to provide to the Employee
health insurance benefits at the level in affect at the date of her termination
for the duration of the Non-Competition Period.
(c) The "Restricted Area" means the entire world. The Employee hereby
acknowledges that the scope of the Restricted Area is not unreasonable given the
nature of IBAH's business.
(d) If a court determines that the foregoing restrictions are too broad or
otherwise unreasonable under applicable law, including with respect to time or
space, the court is hereby requested and authorized by the parties hereto to
review the foregoing restriction to include the maximum restrictions allowable
under applicable law.
-4-
<PAGE>
(e) The terms of this Section 7 shall apply to the Employee and any
person, partnership, association, corporation or other entity (a "Person")
controlled by the Employee, including any relative of the Employee, to the same
extent as if they were parties hereto, and the Employee shall take whatever
actions may be necessary to cause any such persons or entities to adhere to the
terms of this Section 7.
8. Inventions, Designs and Product Developments.
--------------------------------------------
If at any time or times during the Employment Term, the Employee shall
(either alone or with others), make, conceive, create, discover, invent or
reduce to practice any invention, modification, discovery, design, development,
improvement, process, software program, work of authorship, documentation,
formula data, whether or not patentable or registrable under copyright,
trademark or similar statutes (including but not limited to the Semiconductor
Chip Protection Act) or subject to analogous protection) (herein called
"Developments") that (a) relates to the business of IBAH or any customer of or
supplier to IBAH or any of the products or services being developed,
manufactured or sold by IBAH or which may be used in relation therewith, (b)
results from tasks assigned to the Employee by IBAH or (c) results from the use
of premises or personal property (whether tangible or intangible) owned, leased
or contracted for by IBAH, such Developments and the benefits thereof are and
shall immediately become the sole and absolute property of IBAH and its assigns,
as "Work made for hire" or otherwise, and the Employee shall promptly disclose
to IBAH (or any persons designated by it) each such Development and, as may be
necessary to ensure IBAH's ownership of such Developments, the Employee hereby
assigns any rights (including, but not limited to, any copyrights and
trademarks) the Employee may have or acquire in the Development and benefits
and/or rights resulting therefrom to IBAH and its assigns without further
compensation and shall communicate, without cost or delay, and without
disclosing to others the same, all available information relating thereto (with
all necessary plans and models) to IBAH.
The Employee will, during the Employment Term and at any time thereafter,
at the request and cost of IBAH, promptly sign, execute, make and do all such
deeds, documents, acts and things as IBAH and its duly authorized agents may
reasonably require:
(a) to apply for, obtain, register and vest in the name of IBAH
alone (unless IBAH otherwise directs) letters patent, copyrights,
trademarks or other analogous protection in any country throughout the
world and when so obtained or vested to renew and restore the same;
and
(b) to defend any judicial, opposition or other proceedings in
respect of such applications and any judicial, opposition or other
proceedings or petitions or applications for revocation of such
letters patent, copyright, trademark or other analogous protection.
In the event IBAH is unable, after reasonable effort, to secure the
Employee's signature on any application for letters patent, copyright or
trademark registration or other
-5-
<PAGE>
documents regarding any legal protection relation to a Development, whether
because of the Employee's physical or mental incapacity or for any other reason
whatsoever, the Employee hereby irrevocably designates and appoints IBAH and its
duly authorized officers and agents as her agent and attorney-in-fact, to act
for and in her behalf and stead to execute and file any such application or
applications or other documents and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent, copyright or trademark
registrations or any other legal protection thereon with the same legal force
and effect as if executed by the Employee.
The Employee represents that she has never been (i) debarred or convicted
of a crime for which a person can be barred under 21 U.S.C. (S) 335a ("(S)
335a") nor (ii) threatened to be debarred or indicated for a crime or otherwise
engaged in conduct for which a person can be debarred under (S) 335a. The
Employee will promptly notify IBAH in the event of any such debarment,
conviction, threat or indictment occurring during the Employment Term.
9. Confidential Information.
------------------------
The Employee will not at any time, whether during or after the Employment
Term, reveal to any person or entity any of the trade secrets or confidential
information concerning the organization, business or finances of IBAH.
Confidential information or trade secrets includes, but is not limited to,
operating procedures, salary structure/compensation information, pricing
strategies, investigator lists, budgets and other related data, computer
software, databases and programming, data files, client lists and related
information, financial information and projections, inventions, know-how,
products, services, techniques and any other information which, if divulged to a
third party could have an adverse impact on IBAH, or on any third party to which
IBAH owes a confidentiality obligation, except as may be required in the
ordinary course of performing the Employee's duties as an employee of IBAH.
Further, the Employee acknowledges that client companies disclose
confidential information to IBAH and that IBAH agrees, in writing, to maintain
the confidentiality of this information. The Employee will not at any time,
whether during or after the Employment Term, reveal to any person or entity any
trade secrets or confidential information concerning the organizations, business
or finances of any third party or client to which IBAH owes a confidentiality
obligation.
10. Remedies.
--------
The parties expressly acknowledge that a breach or evasion of any term of
this Agreement by either party may cause immediate and irreparable harm to the
other party and that the remedy at law for any breach will be inadequate. Upon
any such breach or threatened breach, IBAH (or the applicable IBAH Party), or
the Employee, as the case may be, shall be entitled as a matter of right to
injunctive relief in any court of competent
-6-
<PAGE>
jurisdiction, in equity or otherwise, and to enforce the specific performance of
the parties' obligations under these provisions without the necessity of proving
the actual damage or the inadequacy of a legal remedy. Subject to the remainder
of this Section 10, the rights conferred upon the parties by the preceding
sentence shall not be exclusive of, but shall be in addition to, any other
rights or remedies which the parties may have at law, in equity or otherwise.
11. Arbitration and Indemnification.
-------------------------------
(a) Except as set forth in Section 10 above, any claim or controversy
arising out of or relating to this Agreement, or any breach thereof, or
otherwise relating to Employee's employment, compensation and benefits with
IBAH, or the termination thereof, excluding unemployment and workers'
compensation, shall be settled by arbitration in Philadelphia, Pennsylvania in
accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association (AAA) then in effect to the extent provided herein, and
except as modified herein; provided, however, that the Employee and IBAH agree
that (1) the "panel" of arbitrators as used in the AAA Rules shall consist of a
single arbitrator; (2) the arbitrator shall be an attorney licensed to practice
law in Pennsylvania or New Jersey who has experience in employment matters; (3)
the arbitrator shall be prohibited from disregarding, adding to or modifying the
terms of this Agreement; (4) the arbitrator shall be required to follow
established principles of substantive law and the law governing burdens of
proof; (5) only legally protected rights may be enforced in arbitration; (6) the
arbitrator shall be without authority to award punitive or exemplary damages;
(7) any award must be supported by substantial record evidence and (8) any
demand for arbitration must be filed and served if at all, within 180 days of
the occurrence of the act or omission complained of. Any claim or controversy
not submitted to arbitration in accordance with this Section 11 shall be
considered waived and, thereafter, no arbitrator or tribunal or court shall have
the power to rule or make any award on any such claim or controversy. The award
rendered in any arbitration proceeding held under this Section 11 shall be final
and binding, and judgment upon the award may be entered in any court having
jurisdiction thereof, provided it conforms to established principles of law and
is supported by substantial record evidence.
(b) IBAH agrees to defend and indemnify the Employee and hold her harmless
from any and all claims, demands, suits, judgments, fines, penalties, and
charges, including without limitation attorneys' fees in any way arising
directly or indirectly out of her employment by IBAH or the performance of her
obligations pursuant to this Agreement. The Employee and IBAH will cooperate in
any defense, but IBAH will maintain complete control of the defense, including
any decisions as to settlement.
-7-
<PAGE>
12. Survival.
--------
Notwithstanding the termination of the Employment Term pursuant to Section
5 or 6, the obligations of the Employee under Sections 7, 8, 9, 10 and 11 and
the obligations of IBAH under Sections 5, 6, 7, 10 and 11 hereof shall survive
and remain in full force and effect.
13. General.
-------
(a) Interpretation. Unless the context of this Agreement clearly requires
--------------
otherwise, (i) references to the plural include the singular, and to the
singular include the plural, (b) "or" has the inclusive meaning frequently
identified with the phrase "and/or" and (c) "including" has the inclusive
meaning frequently identified with the phrase "but not limited to." The section
and other headings contained in this Agreement are for reference purposes only
and shall not control or affect the construction of this Agreement or the
interpretation thereof in any respect. Section, subsection, schedule and exhibit
references are to this Agreement unless otherwise specified. Each accounting
term used herein that is not specifically defined herein shall have the meaning
given to it under GAAP.
(b) Binding Effect. All of the terms and provisions of this Agreement
--------------
shall be binding upon and inure to the benefit and be enforceable by the
respective heirs, representatives, successors (including any successor as a
result of a merger or similar reorganization) and assigns of the parties hereto,
except that the duties and responsibilities of the Employee hereunder are of a
personal nature and shall not be assignable in whole or in part by the Employee.
Any IBAH Party other than IBAH is a third party beneficiary of this Agreement
and may enforce the provisions of this Agreement that pertain to such IBAH
Party, including Sections 7, 8 and 9, to the same extent as if a party hereto.
(c) Notices. All notices required to be given under this Agreement shall
-------
be in writing and shall be deemed to have been given when personally delivered
or when mailed by registered or certified mail, postage prepaid, return receipt
requested, or when sent by Federal Express or other overnight delivery service,
addressed as follows:
-8-
<PAGE>
TO EMPLOYEE:
Sherrin H. Baky
12 Jonathan Smith Road
Morristown, New Jersey 07960
TO IBAH:
Jane Hollingsworth
General Counsel
IBAH, Inc.
Four Valley Square
512 Township Line Road
Blue Bell, Pennsylvania 19422
(d) Entire Agreement; Termination of Prior Agreement; Modification. This
--------------------------------------------------------------
Agreement constitutes the entire agreement of the parties hereto with respect to
the subject matter hereof. This Agreement may not be modified or amended in any
way except in writing by the parties hereto. Upon execution of this Agreement,
the Employment Agreement, dated October 1, 1992, as amended October 25, 1994, by
and between the Employee and HGB, Inc., and any other agreements or
understandings relating to the subject matter contained herein, shall
immediately terminate, and each of IBAH and the Employee release the other from
any and all claims, obligations and liabilities of any type whatsoever that
arise out of such agreements or understandings, or Employee's employment
pursuant thereto.
(e) Duration. Notwithstanding the termination of the Employment Term and
--------
of the Employee's relationship with IBAH, this Agreement shall continue to bind
the parties for so long as any obligations remain under this Agreement.
(f) Waiver. No waiver of any breach of this Agreement shall be construed
------
to be a waiver as to succeeding breaches.
(g) Severability. If any provision of this Agreement or application
------------
thereof to anyone under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or
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<PAGE>
unenforceable provision or application and shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(h) Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures hereto were upon the same instrument.
[Remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto duly executed this Agreement the day and year first written above.
IBAH, INC.
By: /s/ Geraldine A. Henwood
------------------------------------
Name:
Title:
/s/ Sherrin H. Baky
---------------------------------------
SHERRIN H. BAKY
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<PAGE>
CONSULTANT AGREEMENT
This Agreement ("Agreement") is made and entered into this 15th day of
September, 1996 by and between John M. Cullen, Ph.D., J.D. of 419 Minden Way,
Wynnewood, Pennsylvania 19096 ("Consultant") and IBAH, Inc., a Delaware
corporation with a principal place of business at Four Valley Square, 512
Township Line Road, Blue Bell, Pennsylvania 19422 ("IBAH").
WHEREAS, Consultant has been an executive employee of IBAH pursuant to an
Employment Agreement, dated January 4, 1994, (the "Employment Agreement") by and
between Consultant and Bio-Pharm Clinical Services, Inc., a predecessor
corporation to IBAH; and
WHEREAS, IBAH has decided to terminate to Employment Agreement pursuant to
Section 5D of the Employment Agreement; and
WHEREAS, IBAH and Consultant desire to enter into a consulting
relationship for a period of time to permit IBAH to continue to have the benefit
of Consultant's expertise in performing advisory services; and
WHEREAS, Consultant is now engaged in the business of providing such
services;
NOW, THEREFORE, for good and valuable consideration, AND INTENDING TO BE
LEGALLY BOUND, Consultant and IBAH hereby agree as follows:
10. DUTIES AND OBLIGATIONS OF CONSULTANT
------------------------------------
IBAH has engaged Consultant as an independent contractor to IBAH's business.
Consultant shall be available to IBAH to perform such duties and
responsibilities as shall be needed by the Chief Executive Officer of IBAH. It
is contemplated by the parties that Consultant will provide services under this
Agreement on an "as needed" and "as available" basis. Consultant's duties may
include, but shall not be limited to, advice and assistance in the areas of
sales and marketing, industry trends and objectives, and regulatory.
2.0 COMPENSATION
------------
In consideration for the services to be provided under Paragraph 1.0 of this
Agreement, IBAH agrees to pay Consultant a consulting fee (the "Fee"), payable
in equal monthly installments during the term of this Agreement, of $375,000 and
to reimburse Consultant for all reasonable expenses incurred in the performance
of his duties under this Agreement during the term. The Fee shall be paid in
full regardless of any termination of this
<PAGE>
Agreement by the parties prior to September 14, 1997. This provision shall
survive any termination of this Agreement.
3.0 TERM AND TERMINATION
--------------------
The Employment Agreement is hereby terminated, effective September 15, 1996. The
effective date of this Consultant Agreement shall be September 15, 1996, and it
shall continue for a term of one (1) year, until September 14, 1997, unless
terminated by mutual written agreement of the parties before that date.
Consultant may terminate this Agreement at any time by forty five (45) days
written notice. Upon termination of this Agreement, Consultant will assemble and
turn over in an orderly fashion to authorized representatives of IBAH all
documents, notes, computer programs and other material related to the services
performed by Consultant.
4.0 STOCK OPTIONS
-------------
Pursuant to the terms of the Employment Agreement, all Stock Options granted to
Consultant by IBAH during the term of his employment by IBAH shall be fully
vested as of the termination of the Employment Agreement on September 15, 1996.
Consultant's right to exercise these options through services provided to IBAH
by Vector Securities (or a subsequent vendor) shall continue throughout the term
of this Agreement plus a period of three months thereafter.
5.0 TAXES
-----
It is understood that payments to Consultant for services rendered shall be made
in full as agreed, without any deductions for taxes of any kind whatsoever, in
conformity with Consultant's status as an independent contractor. It is
understood that any taxes that may be due and payable as a result of the
payments specified herein by IBAH to Consultant shall be entirely Consultant's
responsibility. It is understood that, as part of this Agreement, Consultant
undertakes to pay all taxes for which Consultant may be liable on such payments
when due.
6.0 CONFIDENTIALITY
---------------
All information, know-how, trade secrets and data (technical or non-technical)
transmitted or observed in conjunction with the performance of services under
this Agreement is deemed to be the confidential and proprietary information of
IBAH, its subsidiaries, subdivisions, affiliates, successors, assigns and/or
clients. Confidential information or trade secrets includes, but is not limited
to, operating procedures, salary structure/compensation information, pricing
strategies, investigator lists, budgets and other related data, computer
software, databases and programming, data files, client lists and related
information, financial information and projections, inventions, know-how,
products, services, techniques and any other information which, if divulged to a
third party could have an adverse impact on IBAH, or on any third party to which
IBAH owes a confidentiality obligation, except as may be required in the
ordinary course of performing the Consultant's duties. Consultant
<PAGE>
agrees that he will not at any time, whether during or after the termination of
his status as a Consultant to IBAH, reveal to any person or entity any trade
secrets or confidential information of IBAH.
Consultant understands that client companies disclose confidential information
to IBAH and that IBAH agrees, in writing, to maintain the confidentiality of
this information. Accordingly, Consultant agrees that he will not at any time,
whether during or after the termination of his status as a Consultant to IBAH,
reveal to any person or entity any trade secrets or confidential information
concerning any third party or client to which IBAH owes a confidentiality
obligation.
6.1 Confidential information does not include disclosed information that:
(a) is or becomes part of the public domain through no fault of
Consultant; (b) is disclosed to Consultant by a third party entitled
to disclose it; or (c) is required by law to be disclosed.
6.2 Consultant will only use the confidential information furnished by
IBAH for the purpose of fulfilling his obligations under this
Agreement. Upon the completion or earlier termination of this
Agreement and at IBAH's request, Consultant will promptly return all
written confidential information.
6.3 Consultant will not use any such confidential information for his own
benefit or for the benefit of any third party, and will not furnish to
any third party any materials which incorporate any confidential
information except as otherwise hereinabove provided. All obligations
of confidentiality and non-disclosure set forth in this Agreement will
survive, without limitation, the expiration or earlier termination of
this Agreement.
6.4 The obligations of confidentiality contained herein shall remain in
effect for five (5) years after the termination of this Agreement.
7.0 INTELLECTUAL PROPERTY
---------------------
If at any time or times during the term of this Agreement, Consultant shall
(either alone or with others), make, conceive, create, discover, invent or
reduce to practice any invention, modification, discovery, design, development,
improvement, process, software program, work of authorship, documentation,
formula, data, whether or not patentable or registrable under copyright,
trademark or similar statutes (including but not limited to the Semiconductor
Chip Protection Act) or subject to analogous protection (herein called
"Developments") that:
(a) relates to the business of IBAH or any client of or supplier of
IBAH or any of the products or services being developed, manufactured
or sold by IBAH or which may be used in relation therewith;
(b) results from tasks assigned by IBAH; or,
<PAGE>
(c) results from the use of premises or personal property (whether
tangible or intangible) owned, leased or contracted for by IBAH,
such Developments and the benefits thereof are and shall immediately become the
sole and absolute property of IBAH and its assigns, as "work made for hire" or
otherwise, and Consultant shall promptly disclose to IBAH (or any persons
designated by it) each such Development and, as may be necessary to ensure
IBAH's ownership of such Developments. Consultant hereby assigns any rights
(including, but not limited to, any copyrights and trademarks) Consultant may
have or acquire in the Developments and benefits and/or rights resulting
therefrom to IBAH and its assigns without further compensation and shall
communicate, without cost or delay, and without disclosing to others the same,
all available information relating thereto (with all necessary plans and models)
to IBAH.
Consultant will, during the term of this Agreement and at any time thereafter,
at the request and cost of IBAH, promptly sign, execute, make and do all such
deeds, documents, acts and things as IBAH and its duly authorized agents may
reasonably require:
(a) to apply for, obtain, register and vest in the name of IBAH alone
(unless IBAH otherwise directs) letters patent, copyrights, trademarks or
other analogous protection in any country throughout the world and when so
obtained or vested to renew and restore the same; and
(b) to defend any judicial, opposition or other proceedings in respect of
such applications and any judicial, opposition or other proceedings or
petitions or applications for revocation of such letters patent, copyright,
trademark or other analogous protection.
In the event that IBAH is unable, after reasonable effort, to secure
Consultant's signature on any application for letters patent, copyright or
trademark registration or other documents regarding any legal protection
relating to a Development, whether because of Consultant's physical or mental
incapacity or for any other reason whatsoever, Consultant hereby irrevocably
designates and appoints IBAH and its duly authorized officers and agents as
Consultant's agent and attorney-in-fact, to act for and in Consultant's behalf
and stead to execute and file any such application or applications or other
documents and to do all other lawfully permitted acts to further the prosecution
and issuance of letters patent, copyright or trademark registrations or any
other legal protection thereon with the same legal force and effect as if
executed by Consultant.
8.0 MODIFICATIONS TO THIS AGREEMENT
-------------------------------
Modifications to this Agreement may only be made with the written agreement of
both parties.
<PAGE>
9.0 CONSULTANT'S RELATIONSHIP WITH IBAH
-----------------------------------
Consultant's relationship with IBAH under this Agreement shall be that of an
independent contractor, and nothing in the Agreement or the arrangement for
which it is made shall constitute Consultant, or anyone furnished or used by
Consultant in the performance of the services contemplated by this Agreement, as
an employee, joint venture partner or servant of IBAH.
Consultant will not participate in IBAH employee benefit plans nor receive any
other compensation beyond that stated above. Consultant will not have power or
authority to bind IBAH or to assume or create any obligation or responsibility,
express or implied, on IBAH's part or in IBAH's name except as otherwise set
forth in this Agreement and Consultant will not represent to any person or
entity that Consultant has such power or authority.
10.0 INSURANCE
---------
Consultant understands that, since Consultant is an independent contractor, any
personal injury or property damage suffered by Consultant in the course of
carrying out any duties under this Agreement will be Consultant's sole
responsibility. No insurance shall be obtained by IBAH concerning Consultant.
11.0 DEBARMENT
---------
Consultant represents that he has never been (i) debarred or convicted of a
crime for which a person can be debarred under 21 U.S.C. (S) 335a ((S) "335a")
or any other applicable law nor (ii) threatened to be debarred or indicted for a
crime or otherwise engaged in conduct for which a person can be debarred under
(S) 335a. Consultant will promptly notify IBAH in the event of any such
debarment, conviction, threat or indictment occurring during the term of this
Agreement.
12.0 RELEASE
-------
12.1 In consideration for entering into this Agreement, consideration
which Consultant hereby acknowledges, Consultant does hereby release
and forever discharge IBAH and its present and former subsidiaries,
affiliates, divisions, officers, directors, partners, principals,
employees, agents, predecessors, assigns, servants, attorneys and
insurers and each of them, and their respective successors, assigns,
heirs, administrators and personal representatives of and from all
actions and causes of action, suits, claims, debts and demands
whatsoever in law or equity, which Consultant may have or claim to
have against IBAH as a result of his employment or separation from
employment, and does hereby covenant not to file a lawsuit to assert
such claims. Consultant is not being asked to, and does not release,
any claim which is nonwaivable as a matter of law.
<PAGE>
12.2 By this release, Consultant knowingly and voluntarily waives any
rights under any and all laws which provide legal restrictions on
IBAH's right to terminate the Employment Agreement and/or the
Employment relationship with Consultant, and under any federal,
state, or other governmental statute, regulation, or ordinance,
including, without limitation: (1) Title VII of the Civil Rights Act
of 1964 and 1991; (2) the Age Discrimination in Employment Act of
1967; and (3) Pennsylvania Human Relations Act. Consultant also
waives any claim against IBAH for personal injury or any other action
against IBAH before any body (except for compensable injuries under
the Pennsylvania Workers Compensation Act). Consultant is not waiving
any rights or claims that may arise after the date this waiver is
executed.
12.3 Consultant forever waives and relinquishes all right to assert any
claim for recall, reemployment, or tenure with IBAH.
13.0 COVENANT NOT TO COMPETE
-----------------------
Consultant and IBAH agree that paragraph 8 of the Employment Agreement (Covenant
Not to Compete) shall be made a part of and be incorporated into this Agreement.
14.0 WAIVER
------
The failure of either party to enforce any provision of this Agreement shall not
be construed as a waiver or limitation of that party's right to subsequently
enforce and compel strict compliance with every provision of this Agreement.
IBAH, Inc.
/s/ John M. Cullen By: /s/ Geraldine A. Henwood
- ----------------------------- ---------------------------------
John M. Cullen, Ph.D., J.D. Geraldine A. Henwood
Chief Executive Officer
WITNESS:
_____________________________
<PAGE>
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
------------------------------------------------
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made as
of the 31st of December, 1996, by and between CORESTATES BANK, N.A (formerly
Meridian Bank) ("Bank"), and IBAH, Inc., a Delaware corporation ("Debtor").
W I T N E S E T H:
- - - - - - - - -
WHEREAS, on July 8, 1994, Bank and Debtor entered into a Loan and
Security Agreement (the "Agreement") providing for (i) a revolving line of
credit loan in a maximum principal amount of $2,000,000.00, (ii) a non-revolving
equipment loan (the "Non-Revolving Equipment Loan") in the original principal
amount of $2,500,000.00, and (iii) a term loan (the "Term Loan") in the original
principal amount of $281,965.41;
WHEREAS, said Agreement was amended on December 21, 1995, by a First
Amendment (the "First Amendment") to the Agreement; and
WHEREAS, the parties wish to further amend and restate the Agreement
in full (which amendment and restatement of the Agreement, First Amendment and
further amendments are hereinafter referred to as the "Loan Agreement"),
including providing for an increase in the revolving line of credit from
$2,000,000 to $5,000,000 (the "Revolving Line of Credit Loan").
NOW, THEREFORE, in consideration of the benefits, conditions and
covenants contained or referred to herein, and for other good and valuable
consideration the receipt of which is hereby acknowledged, and INTENDING TO BE
LEGALLY BOUND HEREBY, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.01 Certain Defined Terms: As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Accounts", "Chattel Paper", "Documents", "Equipment",
-------- ------------- --------- ---------
"General Intangibles", "Goods", "Instruments", "Inventory" and "Money" have the
------------------- ----- ----------- --------- -----
same respective meanings as are given to those terms in the Pennsylvania Uniform
Commercial Code. "Accounts" shall include "contracts" and "contract rights"
without respect to the definition of the latter terms under applicable laws, and
shall also include any rights to receive payment which may also be evidenced by
Instruments, Documents or Chattel Paper.
"Advance" shall include any sums advanced by Bank or
-------
credited by Bank to the account of Debtor, or for the account of Debtor to third
parties, including without limitation, advances of principal or to pay interest
or fees, or the incurring of expenses reimbursable by Debtor.
"Affiliate" includes any corporation, partnership,
---------
association, joint venture, company, trust, individual or entity, which now or
hereafter at any time controls, is controlled
<PAGE>
by, or is under common control with, Debtor, and each shareholder, officer and
director of Debtor.
"Availability" shall mean, as to the Revolving Line of
------------
Credit Loan, an amount, varying from time to time, equal to the result of (1)
$5,000,000 less all amounts due Bank by Debtor under the Non-Revolving Equipment
Loan and the Term Loan minus (2) the sum of all Line of Credit Advances
outstanding and unpaid, minus (3) the sum of all amounts committed under the
Subline provided for in Section 2.07 hereof.
"Bio-Pharm GmbH" means Euro Bio-Pharm Clinical Services
--------------
GmbH, a corporation organized under the laws of Germany and a Subsidiary of
Debtor, of which Debtor owns, through a subsidiary of Debtor, one hundred
percent (100%) of the ownership interests.
"Bio-Pharm GmbH Note" means a revolving line of credit
-------------------
note, dated December 31, 1996, in the amount of Seven Million Dollars
($7,000,000.00) made by Bio-Pharm GmbH in favor of Debtor.
"Capital Expenditure" means any payment made directly or
-------------------
indirectly for the purpose of acquiring or constructing fixed assets, real
property or equipment which has been reported as a capital expenditure on any
financial statements of Debtor prepared in accordance with GAAP by Arthur
Andersen & Co. or any other public accounting firm with a national reputation,
including, without limitation, payment obligations under all Capital Leases.
"Capital Lease" means any lease of property (real, personal
-------------
or mixed) which, in accordance with GAAP, should be capitalized on the lessee's
balance sheet or for which the amount of the asset and liability thereunder as
if so capitalized should be disclosed in a note to such balance sheet.
"Cash Collateral" means cash, cash equivalents,
---------------
certificates of deposit or other investments of Debtor maintained with Meridian
Asset Management or any other financial institution or investment firm, which
has been pledged by Debtor to Bank as security for the Non-Revolving Equipment
Loan pursuant to the Cash Collateral Pledge Agreement. The amount of Cash
Collateral may be counted toward the minimum cash level requirement set forth in
Section 7.14(c) hereof.
"Cash Level" means cash or cash equivalents level of Debtor
----------
held at CoreStates Bank, N.A. The minimum cash level requirement is set forth in
Section 7.14(c) hereof.
"Chief Executive Office" shall have the meaning ascribed to
----------------------
it under the Pennsylvania Uniform Commercial Code, 13 Pa. C.S. Section
9103(c)(4).
"Code" means the Internal Revenue Code of 1986, as the same
----
may be amended or supplemented from time to time, and any successor statute of
similar import, and the rules and regulations thereunder, as from time to time
in effect.
"Collateral" shall mean all real and personal property in
----------
which Debtor grants Bank a lien or security interest to secure the Obligations,
pursuant to this Agreement or any security agreement or other undertaking or
instrument related to the Loans or this Agreement.
<PAGE>
"Collateral Assignment and Security Agreements" means each
---------------------------------------------
of the two (2) Collateral Assignment and Security Agreements to be executed by
and between Debtor and Bank, pursuant to which Debtor shall assign its rights in
and to each of the the Euro Bio-Pharm GmbH Note and the Euro Bio-Pharm, Ltd.
Note.
"Controlled Group Member" means each trade or business
-----------------------
(whether or not incorporated) which together with the Debtor is treated as a
single employer under Section 4001(b)(1) of ERISA or Sections 414(b) or 414(c)
of the Code.
"Credit" or "Credits" shall mean an irrevocable commercial
------ -------
or standby letter of credit or letters of credit to be issued by Bank, as
provided in Section 2.07 hereof, for the account of Debtor.
"Current Assets" means, at any time, all assets which, in
--------------
accordance with GAAP, should be classified as current assets on the balance
sheet of Debtor, except that for purposes of this definition, total deferred
taxes (if any) shall be netted from the amount of such assets.
"Current Liabilities" means, at any time, all Liabilities
-------------------
which, in accordance with GAAP, should be classified as current liabilities on
the balance sheet of Debtor, except for purposes of this definition, total
deferred taxes (if any) shall be netted from the amount of such liabilities.
"Default Rate" means two percent (2.0%) (200 basis points)
------------
per annum in excess of the Loan Rate (calculated without references to any
maximum or minimum limitations on the Loan Rate) which would otherwise be in
effect from time to time for each Loan, but not in excess of the amount
permitted under applicable law. Each time the Loan Rate would change, the
Default Rate shall change contemporaneously without further notice to the
Debtor. The Default Rate shall also be payable upon any money judgment entered
against the Debtor with respect to any of the Loans, from and after the date of
entry of the judgment until satisfied in full.
"Designated Officer" means any person holding the office of
------------------
President, Chief Financial Officer, Chief Operating Officer or Controller for
Debtor, or any officer of Debtor designated in writing by any one or more of
them. Debtor hereby authorizes any Designated Officer of Debtor to act on behalf
of Debtor.
"Effective Date" means the later of the date on which this
--------------
Agreement is signed or the date this Agreement becomes effective after
satisfaction of the conditions set forth in Article 6 hereof. Unless otherwise
agreed, the date of Bank's first Advance shall be deemed the Effective Date.
"Environmental Laws" mean any Law relating to product
------------------
safety, occupational and health or safety, environmental protection or hazardous
waste or toxic substances management, handling or disposal, including, without
limitation, any restrictions, specifications or requirements pertaining to
products Debtor manufactures, processes or sells or pertaining to the services
it performs, the conduct of business and the use, maintenance or operation of
the real and personal properties owned or possessed by it.
"ERISA" means the Employee Retirement Income Security Act
-----
of 1974, as amended, and the regulations thereunder as in effect from time to
time.
<PAGE>
"Euro Bio-Pharm, Ltd." means Euro Bio-Pharm, Ltd., a
-------------------
corporation organized under the laws of the United Kingdom and a wholly-owned
Subsidiary of Debtor.
"Euro Bio-Pharm, Ltd. Note" means a revolving line of
-------------------------
credit note dated December 31, 1996, in the amount of Seven Million Dollars
($7,000,000.00) made by Euro Bio-Pharm, Ltd. in favor of Debtor.
"Event of Default" means an event specified in Section 10
----------------
hereof following any required notice and/or expiration of any applicable grace
or cure period.
"GAAP" shall mean generally accepted accounting principles
----
as in effect from time to time consistently applied from period to period
throughout the term of this Agreement, both as to classification of items and
amounts. Opinions of the Financial Accounting Standards Board, or its
predecessors or successors, shall presumptively evidence generally accepted
accounting principles.
"Hazardous Materials" means (i) friable asbestos or
-------------------
asbestos-containing material, (ii) transformers or other equipment with contain
dialectic fluid containing levels of polychlorinated biphenyls in excess of 50
parts per million, (ii) any flammable explosives, radioactive materials,
hazardous material, hazardous waste, hazardous or toxic substances or related
materials, (iv) any petroleum or petroleum byproducts, (v) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated by
any Environmental Law, or similar substances now or hereafter subject to
environmental or occupational safety regulation.
"Indebtedness" means, as the context shall require, all
------------
items of indebtedness, obligation or liability, whether matured or unmatured,
liquidated or unliquidated, direct or contingent, joint or several, including,
but without limitation:
(1) All indebtedness guaranteed, directly
or indirectly, in any manner, or endorsed (other than for collection or deposit
in the ordinary course of business) or discounted with recourse;
(2) All indebtedness in effect guaranteed,
directly or indirectly, through agreements, contingent or otherwise: (i) to
purchase such indebtedness; or (ii) to purchase, sell or lease (as lessee or
lessor) property, products, materials or supplies or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
such indebtedness or to assure the owner of the indebtedness against loss; or
(iii) to supply funds to or in any manner invest in Debtor;
(3) All indebtedness secured by (or for which
the holder of such indebtedness has a right, contingent or otherwise, to be
secured by) any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance upon property owned or acquired subject thereto,
whether or not the liabilities secured thereby have been assumed; and
(4) All indebtedness incurred as the lessee of
goods or services under Capital Leases or operating leases.
"International Facilities Agreement" means the agreement
----------------------------------
substantially in the form of Exhibit A attached hereto which may be entered into
---------
between Debtor and Bank, in the
<PAGE>
event that Debtor desires to open one or more Credits or enter into foreign
exchange contracts pursuant to the Subline provided for in Section 2.07 hereof.
"Laws" means all ordinances, statutes, rules, regulations,
----
orders, injunctions, writs or decrees of any government or political subdivision
or agency thereof, or any court or similar entity.
"Letter of Credit" means the Credit or Credits.
----------------
"Letter of Credit Documents" means the documents between
--------------------------
Bank and Debtor relating to a Letter of Credit, including without limitation,
the International Facilities Agreement attached hereto as Exhibit A and
---------
evidencing, inter alia, the agreement of Bank to issue such Letter of Credit and
Debtor's reimbursement obligation with respect thereto, all of which Letter of
Credit Documents shall be in form and substance satisfactory to Bank.
"Liabilities" means, at any time, all short-term and long-
-----------
term liabilities, as determined in accordance with GAAP, except that in
connection with Debtor's calculation of the leverage covenant set forth in
Section 7.14 hereof, "Liabilities" shall exclude deferred revenue.
"Lien" means any lien or encumbrance and includes, without
----
limitation, all mortgages, security interests, liens, chattel mortgages, capital
leases, trusts, charges, pledges, claims or other interests in property, legal
or equitable, whether consensual or nonconsensual, fixed, or contingent, choate
or inchoate, and whether given or implied by statute or common law or by
agreement or grant.
"Loans" means the Revolving Line of Credit Loan, the Non-
-----
Revolving Equipment Loan, the Term Loan, and the Advances made pursuant thereto.
"Loan Account" means the account or accounts on the books
------------
of Bank in which Bank may record Loans, Advances, payments made on the Loans,
and other appropriate debits and credits as provided by this Agreement.
"Loan Documents" means, individually and collectively, this
--------------
Agreement, the Notes, the Pledge Agreements, the Collateral Assignment and
Security Agreements and all other existing and future agreements, instruments,
documents, assignments, guaranties and undertakings (including amendments to any
of the foregoing) delivered by the Debtor or any other person or entity in
connection with any of the Loans.
"Loan Rate" shall mean, for each Loan, the rates for the
---------
respective Loans as specified in Articles 2, 3 or 4, per annum in excess of the
National Commercial Rate in effect from time to time. Each time the National
Commercial Rate changes the Loan Rate shall change automatically and
contemporaneously without further notice to Debtor.
"Locations" means any one or more of the places defined as
---------
such in Section 9.03(q).
"Maturity Date" shall mean, for each Loan, the earliest of
-------------
(i) the maturity dates for the respective Loans as specified in Articles 2, 3 or
4, or elsewhere herein or in any Note, or (ii) the date of acceleration of such
Loan upon an Event of Default.
<PAGE>
"Maximum Net Loss" means net loss as reported on any
----------------
financial statements of Debtor prepared in accordance with GAAP by Arthur
Andersen & Co. or any other public accounting firm with a national reputation,
during any one (1) fiscal year period.
"National Commercial Rate" means the floating annual rate
------------------------
of interest that is designated from time to time by the Bank as the "National
Commercial Rate" or any other base rate of interest rate index hereafter
established by Bank in lieu of its National Commercial Rate. Debtor acknowledges
that the National Commercial Rate may not be based on any external index or
interest rate, that Bank may lend to other borrowers, or classes of borrowers,
at rates above or below the National Commercial Rate or at rates based on other
indices, and that Bank may change the index from to time.
"Net Working Capital" means, at any time, the amount by
-------------------
which Current Assets exceed Current Liabilities.
"Non-Revolving Equipment Loan" means the Non-Revolving
----------------------------
Equipment Loan provided for in Article 3 hereof.
"Non-Revolving Equipment Note" means the Non-Revolving
----------------------------
Equipment Note dated July 8, 1994 in the face amount of Two Million Five Hundred
Thousand Dollars ($2,500,000.00), as amended and restated in full by that
certain Amended and Restated Non-Revolving Equipment Note dated as of December
31, 1996.
"Notes" means the Revolving Line of Credit Note, the Non-
-----
Revolving Equipment Note and the Term Loan Note.
"Obligations" means the obligations (whether contingent or
-----------
fixed, or otherwise) of Debtor:
(1) To pay the principal of and interest
on and other fees, charges and expenses accruing with respect to the Advances,
the Loans or any of the Loan Documents, and to satisfy all other Indebtedness to
Bank, whether hereunder or otherwise, whether now existing or hereafter
incurred, including any extensions, modifications, renewals thereof and
substitutions therefor;
(2) To repay to Bank all amounts advanced
by Bank in connection herewith, to any person or entity whatever, including
without limitation interest, fees or other charges or expenses, payments to
prior secured parties, mortgagees, or lienors, or for taxes, levies, insurance,
rent, repairs to or maintenance of any of the Collateral; and
(3) To reimburse Bank, on demand, for all
of Bank's expenses and costs, before or after closing hereon, including the
reasonable fees and expenses of its counsel, in connection with the preparation,
administration, amendment, modification, or enforcement of this Agreement and
the documents required hereunder, including, without limitation, prosecution or
defense of any proceeding brought, contemplated or threatened with respect to
the obligations referred to in the foregoing paragraphs (1) and (2) or any of
the transactions relating thereto.
"Patents" means any patents, all applications,
-------
registrations and recordings related to such patents in the United States Patent
and Trademark Office or in any similar office or
<PAGE>
agency of the United States, any state thereof, any political subdivision
thereof or in any other countries and all reissues, continuations-in-part,
extensions and renewals and licenses thereof.
"Permitted Liens" means:
---------------
(1) Liens for taxes, assessments, or
similar charges incurred in the ordinary course of business that are not yet due
and payable;
(2) Pledges or segregated deposits made in
the ordinary course of business to secure payment of workmen's compensation, or
to participate in any fund in connection with workmen's compensation,
unemployment insurance, old-age pension or other social security programs;
(3) Liens in favor of Bank;
(4) Purchase money security interests and
Capital Leases for acquisition of equipment or vehicles in the ordinary course
of business but only if the equipment or vehicle in question is not financed in
part with monies loaned hereunder and is trade fixtures or is not affixed to the
realty;
(5) The following, if incurred in the
ordinary course of business and the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings, to the extent (i)
levy and execution thereon have been stayed and continue to be stayed, (ii)
adequate reserves are set aside therefor, (iii) they do not, singly or in the
aggregate, materially detract from the value of any property of Debtor or
materially impair the operation of its business and (iv) they do not exceed the
respective amounts (if any) defining Events of Default provided in Section
10.01:
(a) Claims or liens for taxes or
assessments,
(b) Claims or liens of
mechanics, materialmen, warehousemen, carriers or other like liens, and
(c) Adverse judgments; and
(6) Any Lien existing on the date of this
Agreement and described on Exhibit B hereof.
---------
*
"Person" means, any individual, corporation, partnership,
------
association, joint-stock company, trust, incorporated organization, joint
venture, court or government or political subdivision or agency thereof.
"Plan" means any employee pension benefit plan, as such
----
term is defined in Section 3(2) of ERISA to which Section 4021(a) of ERISA
applies and (i) which is maintained for employees of Debtor or any Controlled
Group Member with respect to the Debtor, or (ii) to which Debtor or Controlled
Group Member with respect to the Debtor made, or was required to make,
contributions at any time within the preceding five (5) years. "Multiemployer
-------------
Plan" means any Plan which is a "multiemployer plan" within the meaning of
- ----
Section 4001(a)(3) of ERISA.
<PAGE>
"Pledge Agreements" means (i) the Pledge Agreement to be
-----------------
executed and delivered by Debtor to Bank, pledging certain stock and ownership
interests of Debtor in Affinity, EuroBioPharm and EPIC, Ltd., including all
schedules and exhibits thereto, and (ii) the Pledge Agreement to be executed by
and between Debtor and Bank, pledging certain ownership interests of Debtor in
BioPharm GmbH, and authenticated by a German Notar.
"Potential Default" means an event, circumstance, act,
-----------------
omission or state of affairs which would (with the passing of time or of any
grace period, or the giving of notice by the Bank or any third party, or any
combination of the foregoing) become an Event of Default.
"Profit" means, at any time, net income as reported on any
------
financial statements of Debtor prepared in accordance with GAAP, by Arthur
Andersen & Co. or any other public accounting firm with a national reputation.
"Rate" shall mean the Loan Rate or the Default Rate, as the
----
case may be, applicable hereunder to any Loans.
"Records" means correspondence, memoranda, tapes, data
-------
processing cards, discs, papers, tabulating runs, programs, books and other
documents, or manually or electronically recorded information (whether or not
transcribed) of any type, whether expressed in ordinary or machine or other
language.
"Revolving Line of Credit Loan" means the revolving line of
-----------------------------
credit provided for in Article 2 hereof (including the Subline provided
thereunder), and the Advances made pursuant thereto.
"Revolving Line of Credit Note" means the Revolving Line of
-----------------------------
Credit Note dated as of December 31, 1996, in the face amount of Five Million
Dollars ($5,000,000.00), as referred to in Article 2 hereof.
"Subline" means the Letter of Credit and foreign exchange
-------
subline provided for in Section 2.07 hereof.
"Subsidiary" of any Person at any time shall mean (i) any
----------
corporation or trust of which fifty percent (50%) or more (by number of shares
of number of votes) of the outstanding capital stock or shares of beneficial
interest normally entitled to vote for the election of one or more directors or
trustees (regardless of any contingency which does or may suspend or dilute the
voting rights) is at such time owned directly of indirectly by such Person or
one or more of such Person's Subsidiaries, or any partnership of which such
Person is a general partner or of which fifty percent (50%) or more of the
partnership interests is at the time directly or indirectly owned by such Person
or one or more of such Person's Subsidiaries, and (ii) any corporation, trust,
partnership or other entity which is controlled or capable of being controlled
by such Person or one or more of such Person's Subsidiaries.
"Tangible Net Worth" means as of any date of determination
------------------
total stockholders' equity, less intangible assets of Debtor as of such date
determined in accordance with GAAP.
"Term Loan" means the term loan provided for in Article 4
---------
hereof.
<PAGE>
"Term Loan Note" means the Term Loan Note referred to in
--------------
Section 4.01(a) hereof.
"Trademarks" means all trademarks, trade names, trade
----------
styles and service marks, all prints and labels on which such trademarks, trade
names, trade styles and service marks appear, have appeared or will appear, and
all designs and general intangibles of a like nature, now existing or hereafter
adopted or acquired; all applications, registrations and recordings relating to
the foregoing in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state thereof, any political
subdivision thereof or in any other countries, and all reissues, extensions and
renewals and licenses thereof.
1.02 Accounting Terms: All accounting terms not specifically
----------------
defined herein shall be construed, and all financial data submitted pursuant to
this Agreement shall be prepared, in accordance with GAAP.
ARTICLE 2 - THE REVOLVING LINE OF CREDIT LOAN
2.01 General Terms:
-------------
(a) Subject to the terms hereof, on the Effective
Date the Bank will establish the Revolving Line of Credit Loan in favor of
Debtor under which the Bank may thereafter make Advances from time to time up to
an aggregate principal amount at any one time outstanding not to exceed Five
Million Dollars ($5,000,000.00), all subject to the further terms and conditions
referred to herein, including without limitation the provisions of Section 2.07
hereof providing for the Subline. Advances under the Revolving Line of Credit
Loan will be used only to fund short-term borrowings and working capital needs
of the Debtor, with a foreign exchange and Letter of Credit Subline as provided
in Section 2.07 hereof. Until the Maturity Date, and except as otherwise
provided herein, any principal amount previously advanced or committed
hereunder, and repaid or otherwise extinguished, may be made available again by
the Bank on a revolving basis. Notwithstanding anything to the contrary herein
or in any Loan Document, the entire outstanding balance of principal, and any
accrued and unpaid interest thereon, shall be due and payable, and the Bank's
commitment and obligation to make Advances hereunder shall terminate, on the
earliest of (i) June 30, 1997 (unless extended in a writing signed by the Bank,
and if so extended then on such extended termination date; however, the
foregoing shall not create any obligation on the Bank to grant such extension),
or (ii) acceleration upon an Event of Default (the "Revolving Loan Commitment
Period").
(b) All advances shall bear interest at a variable
rate of one quarter percent (.25%) per annum (25 basis points) in excess of the
National Commercial Rate, in effect from time to time (except that interest
shall accrue at the Default Rate, so long as an Event of Default shall have
occurred and be continuing uncured).
2.02 Borrowing Procedures:
--------------------
(a) As of the date hereof, Debtor shall execute and
deliver to Bank a Revolving Line of Credit Note in the face amount of Five
Million Dollars ($5,000,000.00), on terms and in form and substance satisfactory
to Bank, which shall evidence the aggregate of all Advances outstanding from
time to time pursuant to the Revolving Line of Credit Loan. Debtor hereby agrees
to pay to Bank the full amount of all Advances (including without limitation
overadvances), whether made, accepted or issued for the benefit of Debtor,
together with all
<PAGE>
interest, fees and other charges which may accrue hereunder from time to time,
as provided in the Revolving Line of Credit Note. Debtor agrees and acknowledges
that its liability is a material and fundamental inducement to Bank's continuing
willingness to make Advances.
(b) Advances may be available, subject to the
conditions of this Agreement, up to the amount of the Availability and subject
to the limitations of Sections 2.01 and 2.06, upon the request of any Designated
Officer of Debtor. If a request (which otherwise satisfies the conditions
hereof) is received by Bank by 2:00 p.m. on any business day, Bank will make an
Advance on the same business day; otherwise, the Advance will be made on the
next business day. Bank may make each Advance by crediting the amount of the
Advance to the Loan Account, or by depositing the amount of the Advance to the
demand deposit bank account of Debtor held at Bank according to instructions
given Bank by Debtor, or by otherwise disbursing to a third party upon terms and
conditions mutually agreeable to Bank and Debtor. No matter how or when an
Advance is made, or into what account or to or for the benefit of Debtor, or at
Debtor's request, Debtor shall immediately and automatically thereupon be
obligated to Bank on account of such Advance. Debtor may not disavow its
obligations hereunder, whether for Advances previously made or for Advances
which may be made after any request therefor and attempted disavowal.
2.03 Interest and Payments; Charging Debtor's Accounts:
-------------------------------------------------
(a) Interest shall be accrued, paid and calculated as
follows:
(1) Interest will accrue and be payable on
principal amounts advanced by the Bank at the Loan Rate applicable to such Loan
(except that interest shall accrue at the Default Rate so long as an Event of
Default shall have occurred and be continuing uncured, and at all times after
acceleration and entry of any judgment), and shall be payable as accrued on the
last day of each calendar month, commencing immediately hereafter.
(2) Interest shall be calculated on the
basis of a 360-day year, counting the actual number of days elapsed. All accrued
and then unpaid interest shall nevertheless be payable upon the Maturity Date.
(b) If, at any time, the Rate shall be deemed by any
competent court of law, governmental agency or tribunal to exceed the maximum
rate of interest permitted by any applicable Laws, then, for such periods as the
Rate would be deemed excessive, its application shall be suspended and there
shall be charged instead the maximum rate of interest permissible under such
Laws. Any payments received by Bank during any such periods shall be
recalculated first as payments of interest at the maximum rate, and the balance
of each payment, if any, shall be deemed a payment (i) of any fees, charges,
reimbursements of expenses, or other items not treated as interest for purposes
of determining compliance with the maximum rate, and then (ii) of principal.
(c) All sums payable to Bank hereunder including
repayments of Advances, and payments of interest, fees and other charges shall
be paid directly to Bank on or before the date due. Bank is authorized to charge
the Loan Account, or any deposit account of Debtor, for interest, fees or
charges as they come due, or at Bank's option make an Advance to pay any of the
same, provided Bank bills Debtor for interest, fees or charges, and such bill
remains unpaid five (5) business days after billing. In any case, Bank shall
send to Debtor statements of all amounts due hereunder.
<PAGE>
(d) Bank is authorized to charge the Loan Account, or any deposit
account of Debtor, at any time, without prior notice but with subsequent advice,
for any or all principal, interest, fees, charges and expense reimbursements
payable hereunder which is not otherwise paid when due.
(e) The Revolving Line of Credit is subject to an unused commitment
fee in the amount of .25% of the unused portion of the line on a quarterly
basis, as determined by the Bank's ledgers. The Bank will automatically charge
Debtor's checking account within seven days of sending a bill to Debtor.
2.04 Prepayment; Facility Fees:
-------------------------
(a) Debtor may, without penalty or premium, pay the principal of
the Revolving Line of Credit Loan in whole or in part at any time.
(b) So long as an Event of Default shall not have occurred and be
continuing uncured, Bank shall have the right to perform or have performed an
audit of Debtor once during any one (1) fiscal year period, and Debtor shall, on
demand, pay Bank for audits performed by Bank or its agents at a rate (if
performed by Bank's salaried personnel) to be determined, but in any event not
less than $750 per audit or the actual fees charged to Bank therefor (if
performed by others), plus Bank's out-of-pocket expenses, such rates and fees
subject to adjustment by Bank. After an Event of Default, Bank shall be
permitted to perform such audits at any time upon reasonable notice.
(c) Debtor shall be required to pay standard issuance charges for
any Letter of Credit and all other routine transaction charges in connection
therewith, including for amendments, if any, and reasonable fees and expenses
provided for in the International Facilities Agreement, all subject to periodic
adjustments by the Bank.
2.05 Loan Account: Bank may, in its discretion, establish a Loan Account
------------
and enter therein Advances, interest, fees, other charges, expenses and other
items properly chargeable to Debtor under this Agreement; all payments made by
Debtor on account of Indebtedness relating to any Loans; all proceeds of
collateral which are finally paid to Bank at its offices in cash or solvent
credits; and any other appropriate debits and credits. Notwithstanding the
foregoing, the Bank shall bill for the items referred to in the foregoing
sentence unless and until an Event of Default occurs. Subaccounts may be
established for each Loan established hereunder. The aggregate of the debit
balances in the Loan Account shall reflect Debtor's aggregate Indebtedness to
Bank from time to time by reason of the Loans or otherwise with respect hereto.
2.06 Limits on Obligation of Bank to Make Advances Under Line of Credit
------------------------------------------------------------------
Loan: Notwithstanding any other provision hereof, the aggregate unpaid balance
- ----
of Debtor's Obligations, including without limitation all letters of credit
outstanding and all principal, interest, fees and other charges, under the
Revolving Line of Credit Loan at any time shall not exceed Five Million Dollars
($5,000,000.00) without Bank's consent; but if Bank consents, such consent shall
not bind Bank to continue to make any overadvance available thereafter. Debtor
agrees that it shall, immediately upon Bank's demand, pay or cause to be paid to
Bank the amount of any such excess, or, at Bank's option, deposit with Bank
liquid investment securities or money market instruments satisfactory to Bank
which have at deposit, and continue thereafter to have, a forced liquidation
value at least equal to such excess.
<PAGE>
2.07 Credits and Foreign Exchange Subline:
------------------------------------
(a) Subject to the terms and conditions of this Agreement, and
provided that no Default or Event of Default has occurred and is continuing,
Bank will, upon Debtor's request, open one or more Credits during the Revolving
Loan Commitment Period for the account of Debtor. During the Revolving Loan
Commitment Period, Debtor shall give Bank written notice executed on behalf of
Debtor by any Designated Officer of Debtor (the "Notice of Credit Issuance") of
any proposed issuance of a Credit. Each Notice of Credit Issuance, except with
respect to Credits to be opened on the Effective Date, shall be delivered to
Bank not less than five (5) business days before the requested issuance thereof.
Additionally, each Notice of Credit Issuance shall be accompanied by the Letter
of Credit Documents executed by Debtor relating to the subject Credit. Each
Credit shall be on substantially such terms as Debtor may specify in such Letter
of Credit Documents and must be in form and substance satisfactory to Bank and
shall have a fixed expiration date not later than the expiration of the
Revolving Loan Commitment Period.
(b) Subject to the terms and conditions of this Agreement, and
provided that no Default or Event of Default has occurred and is continuing,
Debtor may enter into foreign exchange contracts. The maximum amount of any
foreign exchange contract shall be equal to $1,000,000.00 minus any amounts
-----
committed under any Credits. Bank shall establish a reserve account equal to
twenty percent (20%) of the exposure in U.S. Dollars pursuant to such foreign
exchange contract so long as Debtor shall be indebted to Bank under such foreign
exchange contract. Bank shall not be required to deliver any foreign exchange
contract which has a delivery date exceeding twelve (12) months. Further, Bank
reserves the right in its sole discretion, not to honor certain foreign exchange
contract requests.
(c) In no event shall the aggregate maximum amount of the Letter of
Credit and foreign exchange Subline exceed the lesser of (i) $1,000,000.00 or
(ii) the Availability under the Revolving Line of Credit Loan.
(d) Debtor shall pay an annual commission, on or before June 30th
of each year, commencing June 30, 1996, in the amount of 1.25% per annum on all
outstanding Letters of Credit during the year ending on June 30th.
2.08. Borrowings under the Line of Credit shall not be used to maintain the
Minimum Cash Level.
ARTICLE 3 - THE NON-REVOLVING EQUIPMENT LOAN
3.01 General Terms:
-------------
(a) Subject to the terms hereof, on and after the Effective Date,
until the close of business twelve (12) months after such date, but not
thereafter (the "Takedown Period"), Bank will advance Debtor the sum of up to
Two Million Five Hundred Thousand Dollars ($2,500,000.00), which shall be used
to finance the purchase price for certain items of equipment. During the period
from the making of each Advance of the Non-Revolving Equipment Loan, throughout
the term of the Takedown Period, Debtor will pay interest as it accrues on the
Non-Revolving Equipment Loan, on the first day of each calendar month, but
<PAGE>
shall not be obligated to make principal repayments. Commencing on the first day
of the month immediately following the expiration of the Takedown Period, and on
the first day of each calendar month thereafter, Debtor shall pay to Bank forty-
eight (48) equal monthly installments of principal together with all unpaid
interest as it shall have accrued on the Non-Revolving Equipment Loan amortized
over such forty-eight (48) months. The entire outstanding balance of principal,
and any accrued and unpaid interest thereon, shall be due and payable in any
event on the earliest of (1) the sixtieth (60th) month following the Effective
Date (July 1, 1999) or (2) the date of acceleration of the Non-Revolving
Equipment Note upon an Event of Default.
(b) Advances under the Non-Revolving Equipment Loan shall be
advanced by Bank from time to time to pay bona fide expenses for acquiring and
installing equipment, net of costs for delivery, maintenance and taxes, not
exceeding amounts shown on invoices for such purchases which shall be submitted
to Bank along with a completed Request for Non-Revolving Equipment Loan
substantially in the form as Exhibit C attached hereto, along with such other
---------
information as the Bank may request, and approved by Bank, prior to payment. The
borrowings on account of the Non-Revolving Equipment Loan shall be evidenced by
the Non-Revolving Equipment Note.
(c) The outstanding principal balance under the Non-Revolving
Equipment Loan shall bear interest at a variable rate of three quarters percent
(0.75%) per annum (75 basis points) in excess of the National Commercial Rate in
effect from time to time. In any event, Debtor shall be required to maintain a
minimum amount of Five Million Dollars ($5,000,000.00) of Cash at all times as
long as Debtor has any outstanding obligations under the Non-Revolving Equipment
Loan.
(d) As of the date hereof, Debtor shall execute and deliver to Bank
an Amended and Restated Non-Revolving Equipment Note in the face amount of Two
Million Five Hundred Thousand Dollars ($2,500,000.00), amending and restating
that certain Non-Revolving Equipment Note dated July 8, 1994 in the face amount
of Two Million Five Hundred Thousand Dollars ($2,500,000.00), as amended and
restated on December 21, 1995, on terms and in form and substance satisfactory
to Bank, which shall evidence the indebtedness under the Non-Revolving Equipment
Loan.
3.02 Interest Rate and Payments, Etc.: The provisions of Section 2.03
--------------------------------
shall also apply to the Non-Revolving Equipment Loan.
3.03 Prepayment: Debtor may, without penalty or premium, pay the
----------
principal of the Term Loan in whole or in part at any time.
ARTICLE 4 - INTENTIONALLY DELETED
ARTICLE 5 - CONDITIONS PRECEDENT AND SUBSEQUENT
The obligation of Bank to enter into this Agreement and to make any Advance
hereunder is subject to the following conditions:
5.01 Documents Required for the Closing: Debtor shall have delivered or
----------------------------------
caused to be delivered to Bank, at the signing hereof, the following, in form
and substance satisfactory to Bank, executed by the applicable parties and
otherwise subject as follows:
<PAGE>
(a) The Notes;
(b) All necessary releases, satisfactions, assignments,
subordinations and termination statements to cause the security interests
granted therein to be first priority security interests in the Collateral
(subject only to Permitted Liens);
(c) The Pledge Agreement required by Section 8.08 hereof, pursuant
to which Debtor shall pledge (i) one hundred percent (100%) of the capital stock
of its wholly-owned Subsidiary, Affinity, (ii) one hundred percent (100%) of the
capital stock of its wholly-owned Subsidiary, EuroBioPharm, and (iii) sixty-six
percent (66%) of the capital stock of its wholly-owned Subsidiary, EPIC, Ltd.,
together with all appropriate stock powers and certificates required to be
delivered in connection therewith;
(d) The financing statements required by Section 6.07 hereof,
necessary to perfect the security interests in the Collateral;
(e) Copies of the resolutions of the board of directors and
shareholders of Debtor (certified as of the Effective Date by the corporate
secretary or assistant secretary of Debtor) authorizing the execution, delivery
and performance of this Agreement, the Notes and each other Loan Document to be
delivered to Bank pursuant hereto;
(f) Copies (certified by the Secretary of State of the state of
incorporation and by authorized officers of Debtor) of the articles of
incorporation or constituent documents, Articles of Merger evidencing the merger
of Bio-Pharm Clinical Services, Inc. with and into Affinity Biotech, Inc. and
the subsequent name change from Affinity Biotech, Inc. to IBAH, Inc., and any
fictitious name registrations, for Debtor, together with a copy (certified by
the secretary or assistant secretary of Debtor) of the by-laws for Debtor and a
certificate (dated as of the date of the Closing) of each of such officer to the
effect that the foregoing documents have not been amended since the date of the
aforesaid certifications;
(g) A certificate (dated the Effective Date) of the secretary or
assistant secretary of Debtor as to the incumbency and signatures of the
officers thereof who are executing this Agreement on the behalf of Debtor and as
to the Designated Officers of Debtor;
(h) Certificates of good standing and subsistence with respect to
Debtor as of the most recent date practicable prior to the Effective Date, from
each state in which it is organized or qualified (or to be qualified) to
transact business;
(i) Evidence of the insurance coverages required by this Agreement
together with evidence of payment of all premiums which are due and payable as
of the Effective Date;
(j) Uniform Commercial Code, Judgment, Suits and Tax Lien Searches
satisfactory to Bank regarding Debtor;
(k) Written opinions of Debtor's legal counsel dated the Effective
Date and addressed to Bank, in form and substance satisfactory to Bank regarding
such legal matters as Bank shall request relating to the subject matter hereof;
<PAGE>
(l) Certification by the chief financial officer of the Debtor that
at the Effective Date, Debtor's Net Working Capital shall not be less than
$5,000,000.00;
(m) Certification by the chief financial officer of the Debtor that
at the Effective Date, Debtor's minimum cash level shall not be less than
$5,000,000.00;
(n) Certification by the chief financial officer of the Debtor that
at the Effective Date, Debtor's maximum liabilities to Tangible Net Worth shall
not be less than 1.75:1;
(o) The Collateral Assignment and Security Agreements, assigning
the rights of Debtor in and to the Bio-Pharm Clincial Services, GmbH Note and
Euro Bio-Pharm, Ltd. Note;
(p) The originally executed Bio-Pharm Clinical Services, GmbH Note
and Euro Bio-Pharm Ltd. Note; and
(q) Such other undertakings, instruments and documents as Bank
shall require.
5.02 Other Conditions Precedent: The following additional conditions shall
--------------------------
have been satisfied:
(a) Payment of all expenses and legal fees and disbursements of
Bank and its counsel relating hereto (including without limitation lien search
fees, filings fees and appraisal costs), and other items provided in the
Commitment, shall have occurred no later than the Effective Date. If any such
expenses and fees are incurred post-closing, Debtor shall pay or reimburse them
promptly upon Bank's submission of a statement to Debtor.
(b) There shall have occurred no changes in the financial condition
or business of Debtor which are, in Lender's sole judgment, singly or
collectively materially adverse when compared with the financial condition and
business of Debtor since the date of its financial statements dated June 30,
1996
(c) Debtor shall have opened an account or accounts with the Bank
to facilitate disbursement of Advances and so long as Debtor shall be indebted
to Bank hereunder or under any of the Notes, Debtor shall maintain the minimum
cash level required by Section 7.14(c) hereof.
5.03 Condition Subsequent to Signing and Effective Date: The "Post-Closing
--------------------------------------------------
Items", if any, described on Exhibit D attached hereto and made part hereof,
---------
shall be delivered or completed within fifteen (15) days after the execution of
this Agreement, or else Bank shall not be obligated to make any further
Advances, and Bank shall have the option, at any time thereafter, to declare
that an Event of Default has occurred.
ARTICLE 6 - COLLATERAL SECURITY
6.01 The Collateral: The Collateral, together with all of the Debtor's
--------------
other property of any kind held by Bank or any of Bank's corporate affiliates
from time to time, in any capacity whatsoever, shall stand as one general,
continuing collateral security for the Obligations of Debtor.
<PAGE>
6.02 Rights in Property Held by Bank: As security for the prompt
-------------------------------
satisfaction of all Obligations, including payment of the Indebtedness evidenced
by the Notes, Debtor hereby assigns, transfers, and sets over to Bank all of its
right, title, and interest in and to, and grants Bank a lien upon and security
interest in, all amounts that may be owing from time to time to Debtor by Bank
or any of Bank's corporate affiliates from time to time in any capacity,
including, but without limitation, any balance or share belonging to it of any
deposit or other account with Bank, which lien and security interest shall be
independent of any right of set-off which Bank may have.
6.03 Rights in Property Held by Debtor: As further security for the prompt
---------------------------------
satisfaction of all Obligations, including without limitation payment of the
Indebtedness evidenced by the Notes and any future Advances by Bank, Debtor
hereby assigns, transfers, and sets over to Bank all of its right, title, and
interest in and to, and grants Bank a lien upon and continuing security interest
in, all of the following owned by Debtor now or hereafter, wherever located,
whether now owned or existing or hereafter acquired, together with all
replacements therefor and additions and accessions thereto, and all proceeds
(including, but without limitation, insurance proceeds) and products thereof:
(a) All Inventory including existing Inventory and all Inventory
hereafter coming into existence;
(b) All Accounts, both existing and hereafter coming into
existence, together with all documents, contracts, lien and security instruments
and guarantees relating thereto;
(c) All Goods, including Debtor's interests as lessee or lessor in
any leased Equipment;
(d) All Equipment, including without limitation vehicles,
furniture, tools and supplies, now owned or hereafter acquired, wherever
located, including Debtor's interests as lessee or lessor in any leased
Equipment;
(e) All General Intangibles now existing or hereafter in existence;
(f) All notes, drafts, acceptances, Chattel Paper, Documents,
Instruments, policies and certificates of insurance (including, without
limitation, credit insurance), guaranties and securities (domestic and foreign)
now or hereafter received by Debtor or in which Debtor now or hereafter has or
acquires an interest;
(g) All other rights to the payment of money, including without
limitation, shareholder assessments, partner capital contributions and tax
refunds;
(h) All cash and non-cash proceeds, products and insurance proceeds
of the foregoing;
(i) All Records pertaining to the foregoing; and
(j) All other assets of Debtor.
<PAGE>
6.04 Security for Intercompany Loans. As security for any intercompany
-------------------------------
loan or advance by Debtor to any Subsidiary of Debtor, Debtor shall be required
to do each of the following:
(a) Execute, deliver and perform the Pledge Agreements and do any
and all other actions required to be performed or have performed by Debtor in
order to record and perfect the lien of Bank upon such collateral pledged
therein;
(b) Execute and deliver to Bank each of the Collateral Assignment
and Security Agreements; and
(c) Deliver to Bank the originally executed Euro Bio-Pharm GmbH
Note and Euro Bio-Pharm, Ltd. Note.
6.05 Additional Security: To further secure the Loans made hereunder and
-------------------
all other Obligations of Debtor to Bank, whether now in existence or hereinafter
incurred, Debtor shall cause to be delivered at or after closing hereon such
additional undertakings, collateral, instruments and documents as Bank may
reasonably request consistent with the general intent of this Agreement.
6.06 Priority of Liens: The foregoing liens shall be first priority
-----------------
perfected liens, subject only to Permitted Liens or as specified in
Paragraph 6.10.
6.07 Financing Statements:
--------------------
(a) Debtor on Bank's request will:
(1) Execute and deliver to the Bank such financing statements
(including amendments thereto and continuation statements thereof), assignments,
certificates of title and applications and powers of attorney for transfer
thereof, conveyances, notices, instruments and other documents in form
satisfactory to Bank as Bank may specify to perfect or continue the perfection
of any security interest granted to Bank hereunder;
(2) Pay or reimburse Bank for all costs of filing or
recording the same in such public offices as Bank may designate; and
(3) Take such other steps as Bank may direct, to perfect
Bank's interest in the Collateral.
(b) In addition to the foregoing, and not in limitation thereof:
(1) A carbon, photographic, or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in any
appropriate office in lieu thereof, and Bank is authorized to add such
information to the filing copy of this Agreement to qualify it for filing as a
financing statement under applicable law, and to sign Debtor's name hereto to
the extent original signatures are required for filing; and
(2) To the extent lawful, Debtor hereby appoints Bank and
Bank's attorneys and agents as its attorney-in-fact (without requiring Bank or
any of them to act as such) with full power of substitution, to execute and file
any financing statement (including
<PAGE>
amendments and continuation statements thereto), and assignments and
confirmatory mortgages, deeds of trust or other conveyances for security
purposes relating to real estate, in the name of Debtor, or its successors or
assigns, and to perform all other acts that Bank deems appropriate to perfect
and continue its security interest in, and to protect and preserve, the
Collateral. This power of attorney is irrevocable as coupled with an interest.
6.08 Collecting on Accounts:
----------------------
(a) Upon the occurrence of an Event of Default, Bank shall have the
right to notify any and all obligors to make payment on Accounts or General
Intangibles directly to Bank, and to take control of the cash and non-cash
proceeds thereof, with full power to settle or compromise disputed claims
thereon. All such proceeds shall be applied in satisfaction of the Obligations,
including payment of the Indebtedness evidenced by the Notes, in such order as
Bank shall determine.
(b) Unless and until such time as Bank elects to notify obligors
pursuant to Section 6.08(a), Debtor is authorized to collect and enforce
Accounts in the ordinary course of business. The cost of such collection and
enforcement, including attorney's fees and out-of-pocket expenses, shall be
borne solely by Debtor whether the same is incurred by Bank or Debtor.
(c) The following provisions shall apply upon the occurrence of an
Event of Default. Debtor shall turn over to Bank all checks, drafts, cash and
other remittances in payment or on account of payment of the Accounts, and
whenever expressly required by Bank, the cash proceeds of any returned goods
from the sale of which any Account arose. Debtor shall deposit such collections
and cash proceeds with Bank within two (2) banking days of the receipt thereof,
and in precisely the form received, except for the appropriate endorsements
where necessary to permit the collection of the items, which endorsement Debtor
hereby agrees to make. If Debtor receives any such cash or collections directly,
it will not commingle any such checks, drafts, cash and other remittances
(including repayments) with any of its other funds or property, but will hold
them separate and apart therefrom expressly in trust for Bank. Debtor will
forward to Bank such statements and reports of collection and adjustments as
Bank may from time to time specify. Bank will apply the whole or any part of the
collected funds received by it against the then outstanding Loans and any other
of Debtor's Obligations, the order and method of such application to be in the
discretion of Bank or Bank may, if it so elects, release the whole or any part
of such funds to Debtor for use in the operation of such Debtor's business. In
the event that Bank elects to give Debtor immediate credit for such funds as are
yet uncollected, Debtor agrees that Bank may make a charge for the float equal
to two (2) days' collection time at the Rate, payable monthly at the end of each
month. Debtor hereby authorizes Bank to charge to any deposit account of Debtor
any item of payment credited against any Obligations which is dishonored by the
drawee or maker thereof or, if funds are not available in a deposit account,
then to make an Advance therefor and charge the Loan Account accordingly.
(d) In addition to the foregoing, upon the occurrence of an Event
of Default, Bank may, in its sole discretion, require Debtor, at its own expense
and in the manner requested by Bank, to direct that remittances and all other
proceeds of Accounts and other Collateral shall be (i) sent to the post office
box designated by and/or in the name of Bank, or in the name of Debtor, but as
to which access is limited to Bank, (ii) deposited into a locked box at Bank,
and/or (iii) deposited into a bank account maintained in the name of Bank and/or
a blocked bank account under arrangements with the depository bank under which
all funds deposited to such
<PAGE>
blocked bank account are required to be transferred solely to Bank. In
connection therewith, Debtor shall execute such post office box, locked box
and/or blocked bank account agreements as Bank shall specify.
6.09 Verification of Accounts: Bank shall at all times have the right to
------------------------
confirm orders, and to verify all Accounts or Accounts Receivable or other
Collateral in which it has a security interest and to do so in any fictitious
accounting firm name used by Bank for verifications or through any public
accountants.
6.10 Collateral Sharing. Upon at least thirty (30) days prior written
------------------
notice by Debtor to Bank of a request by a new lender to Debtor ("new lender")
for a security interest in the Collateral, and provided that there has been no
Event of Default hereunder and further provided that, in the reasonable opinion
of Bank, Debtor has not experienced an adverse material change in its financial
condition, Bank shall enter into an agreement, on terms and in form acceptable
to Bank, with such new lender whereby Bank shall share with such new lender, in
pari pasu, its security interest in the Collateral in excess of the amount of
all Loans and any other amounts due Bank by Debtor.
ARTICLE 7 - DEBTOR'S AFFIRMATIVE COVENANTS
Debtor covenants and agrees that, from and after the date of this Agreement
and so long as Debtor shall be indebted to Bank hereunder or under any of the
Notes, unless Bank shall otherwise consent in writing, Debtor will comply with
the following covenants:
7.01 Reports: As long as no Event of Default has occurred and is
-------
continuing uncured, Bank shall have the right to request from Debtor once during
any one (1) fiscal year period, and Debtor will make available to Bank a copy of
the invoice for each Account and a copy of any written contract or order from
which an Account arose. After an Event of Default, Bank shall have the right to
request at any time and Debtor shall make available the foregoing information.
7.02 Equipment Reports and Landlord's Waivers: At execution of this
----------------------------------------
Agreement and, thereafter, at the request of Bank, Debtor will provide Bank with
a listing of the types, and respective values of Equipment for each type, of all
Equipment, indicating to the extent applicable, and according to the Debtor's
method of accounting, the nature and type of the Equipment together with
documentation showing the location of the Equipment, whether the premises where
the Equipment is located is owned or leased by Debtor, or is owned by a third
party and if so, the name and address of the third party and, if owned by a
third party, will promptly furnish Bank with landlords' and mortgagees' waivers
of lien in form and content satisfactory to Bank; and in the case of Equipment
located at third party locations, take such steps as Bank may require to protect
Inventory against claims of third parties.
7.03 Customer Disputes: Debtor will promptly advise Bank of any dispute
-----------------
with a customer in any case where the dispute involves (i) an account or
accounts receivable aggregating $250,000.00 or more, or (ii) one of Debtor's ten
(10) largest customers by average monthly revenue and the customer has
threatened to terminate Debtor's services.
7.04 Service Agreements: Debtor will (without need of a prior request by
------------------
Bank) identify for Bank, and if requested provide copies to the Bank of, any
service contract or agreement for services provided to any Debtor's customer
which is not entered into, or the terms of which do not reflect terms granted,
in the ordinary course of business.
<PAGE>
7.05 Account Receivables and Payable Agings: Debtor will furnish Bank
--------------------------------------
quarterly within forty-five (45) days after the end of each quarter (and more
frequently, as required by Bank, when a Potential Default or an Event of Default
has occurred and is continuing) listings and agings of its Accounts Receivable
and its Accounts Payable.
7.06 Account Assignments: Debtor will give Bank upon request specific
-------------------
assignments of Accounts after they come into existence, and schedules of
Accounts, the form and content of such assignments and schedules to be
satisfactory to Bank, and will execute and deliver to Bank any instrument,
document, financing statement, assignment or other writing to carry out the
terms of this Agreement, to perfect Bank's security interest in the Accounts and
any other Collateral, or to enable Bank to enforce conveniently its security
interest in any of the foregoing.
7.07 Maintenance of Books and Records: Debtor will maintain, in accordance
--------------------------------
with GAAP, accurate records and books of account showing, among other things,
all Equipment and Accounts, the proceeds of the sale or other disposition
thereof and the collections therefrom; and hereby grants Bank the right to call
at Debtor's places of business during regular business hours, at intervals to be
determined by Bank, and, without hindrance or delay, to inspect, audit, check
and make extracts and copies from the books, records, journals, orders,
receipts, correspondence and other data relating to Equipment, Accounts, or any
other Collateral.
7.08 Notation of Security Interest: If requested by Bank, Debtor will mark
-----------------------------
its records concerning Equipment, Accounts, General Intangibles and other
Collateral in a manner satisfactory to Bank to show the latter's security
interest therein; and, if a Potential Default or an Event of Default shall have
occurred and be continuing uncured and unwaived, shall, at Bank's request notify
all purchasers, warehouses, warehousemen, agents, landlords, processors, or
others in possession of Equipment, of Bank's security interest in the
Collateral, and instruct them to hold Collateral for Bank's account and subject
to Bank's instructions.
7.09 Financial Statements, Reports:
-----------------------------
(a) Debtor will furnish Bank, within ninety (90) days after the
close of its fiscal year, annual consolidating financial statements, and the 10-
K report of Debtor. The financial statements will be audited by a certified
public accountant acceptable to the Bank and shall be prepared in accordance
with GAAP. In addition, together with such annual financial statements, a
Designated Officer of Debtor, on behalf of Debtor shall deliver to Bank a
Covenant Compliance Certificate substantially in form of Exhibit "E" attached
-----------
hereto.
(b) Debtor will deliver to Bank copies of all reports, returns and
other documents filed with any federal, state or local regulatory agencies,
including without limitation quarterly 10-Q reports as filed with the Securities
and Exchange Commission, within forty-five (45) days after the end of each
quarter. Debtor shall also provide such further information regarding the
operations, business, affairs, financial condition, commitments and
contingencies of Debtor as Bank may reasonably request, including without
limitation, contract status reports and backlog reports.
(c) Debtor will furnish Bank, within thirty (30) days after the
close of its fiscal year, an annual budget and projected cash flow for the
succeeding year.
<PAGE>
(d) Debtor shall each provide Bank, from time to time upon
Bank's request, such additional financial information as Bank may request from
time to time.
7.10 Existence, Properties, Etc.: Debtor will do or cause to be done
---------------------------
all things necessary to obtain, preserve, renew and keep in full force and
effect its existence and its qualification to do business and good standing in
each jurisdiction in which such qualification is necessary for the proper
conduct of its business, and conduct and operate its business in substantially
the manner in which same is presently conducted and operated; at all times
maintain, preserve and protect all material Patents, franchises, Trademarks,
copyrights and other General Intangibles; preserve the condition of all property
useful in the conduct of its business and keep the same in good repair, working
order and condition (reasonable wear and tear excepted) and from time to time
make, or cause to be made, all repairs, renewals, replacements, betterments and
improvements thereto, to the extent that the same are necessary for the proper
and advantageous conduct of its business; and comply with all present and future
regulatory and other Laws applicable to it in the operation of its businesses,
and with all material agreements to which it is subject.
7.11 Insurance: Debtor will keep its insurable properties adequately
---------
insured at all times, by financially sound and reputable insurers, with Bank
named as first lienholder and as a loss payee on all such policies, and maintain
such other insurance, to such extent and against such risks, including fire,
theft, vandalism, earthquake, storm and flood, and other risks insured against
by extended coverage, as is acceptable to Bank from time to time (the amount of
such insurance shall not be less than the greater of (1) eighty percent (80%) of
the insurable value of Debtor's assets or (2) the lesser of one hundred percent
(100%) of the insurable value of Debtor's assets or the outstanding principal
balance of the Loans), and maintain in full force and effect public liability
insurance against claims for personal injury or death or property damage
occurring upon, in, about or in connection with the use of any Location or other
real or personal property belonging to it, and contractual liability insurance,
in such amounts as are satisfactory to Bank, and maintain workers compensation
insurance, employers liability insurance and such other insurance as may be
required by law. Debtor authorizes Bank to pay for Debtor's account any of the
foregoing which Debtor fails to pay, and any such payment by Bank shall
constitute an item of Debtor's Obligations. Debtor agrees to notify Bank in
writing prior to any change in insurance coverage which would cause such
insurance to not meet the requirements of this Agreement; to provide Bank upon
demand copies of all insurance policies; to assign to Bank all right to receive
proceeds of any property casualty insurance as to property owned by Debtor; to
direct all property casualty insurers to pay all proceeds directly to Bank; and
Debtor hereby authorizes Bank to endorse any draft for such proceeds.
Notwithstanding the foregoing, the property casualty insurance policies of
Debtor shall contain a provision which requires the insured to give Bank thirty
(30) days prior written notice of cancellation of any such policy.
7.12 Taxes and Assessments: Debtor will pay or cause to be paid, when
---------------------
due, all taxes, assessments and charges or levies imposed upon any of its
property, or which it is required to withhold and pay over, except where
contested in good faith by appropriate proceedings, promptly commenced and
diligently conducted, with adequate reserves therefor having been set aside on
its books (but it shall, in any event, pay or cause to be paid all such taxes,
assessments, charges or levies forthwith whenever a Lien against the property of
Debtor would arise, or when foreclosure on any Lien that attaches appears
imminent).
7.13 Financial Covenants: Debtor shall comply with the following at
-------------------
the respective times indicated:
<PAGE>
(a) Debtor's Net Working Capital shall not be less than
$5,000,000 at the end of each fiscal quarter thereafter.
(b) Debtor's minimum Cash Level shall not be less than
$5,000,000.00 at all times.
(c) Debtor's maximum Liabilities (excluding deferred revenues)
to Tangible Net Worth shall not exceed 1.75:1.0 at the end of each calendar
quarter.
(d) Debtor's Cash Flow Ratio calculated on a rolling full
quarter basis shall be not less than 1.5:1.0.
7.14 Collection and Records of Accounts: Debtor will collect its
----------------------------------
Accounts only in the ordinary course of business, and will keep accurate and
complete Records of its Accounts, consistent with sound business practices.
7.15 Notice of Material Proceedings or Litigation: Debtor will give
--------------------------------------------
Bank immediate written notice of the commencement, existence or threat of any
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency against or affecting Debtor or any Affiliate
which, if adversely determined, would impair either the Debtor's right or
ability to carry on its business substantially as now conducted or would
materially affect its business, operations, properties, assets or condition
(financial or otherwise) or would materially affect its ability to perform its
Obligations to the Bank under this Agreement or any of the Loan Documents, and,
if requested by Bank, deliver copies of all non-privileged documents relating
thereto. In addition, Debtor will give Bank prompt written notice of any
judgment obtained against it and will advise Bank of Debtor's action with
respect to responding to such judgment.
7.16 Notice of Default: If the chief executive officer, chief
-----------------
operating officer or chief financial officer of Debtor knows of any Potential
Default or Event of Default which shall have occurred, or knows of the
occurrence of any event which is an event of default or, upon notice or lapse of
time or both, would constitute an event of default under any other material
agreement, instrument or document, order, or decree, to which Debtor is a party
or under which it is bound, breach of which would have a material adverse effect
on the business, operations, properties or financial condition of Debtor or the
ability of Debtor to perform its Obligations under the Loan Documents, Debtor
will promptly furnish to Bank a written statement as to such event or
occurrence, specifying the nature and extent thereof.
7.17 Changes: Debtor will promptly notify Bank of any and all
-------
proposed material changes in its business practices or properties and of any
changes in the Designated Officers of Debtor.
7.18 Further Assurances: From time to time, upon the written
------------------
reasonable request of Bank, Debtor will do, execute, acknowledge and deliver or
cause to be done, executed, acknowledged, and delivered, all such further acts,
deeds, instruments, transfers, powers of attorney or assurances as may be
required in connection with the transactions contemplated by this Agreement or
any other Loan Documents.
7.19 Authorization To Accountants: Debtor hereby irrevocably
----------------------------
authorizes all accountants and auditors employed by Debtor at any time while
there are any sums owed to Bank
<PAGE>
during the term of this Agreement, and until all of the Obligations have been
fully paid and discharged, to cooperate with Bank and to exhibit and deliver to
Bank copies of Debtor's financial statements, tax returns, trial balances, or
other accounting or tax records or other information of any sort which may be in
their possession, all at Debtor's expense.
7.20 Depreciation of Equipment: Debtor will promptly notify Bank of
-------------------------
any event causing material loss or depreciation in the value of any Equipment
and the amount of such loss or depreciation.
7.21 Computer Reports: Debtor hereby irrevocably authorizes all of
----------------
Debtor's computer service bureaus or companies (if any) to give Bank full access
to and to deliver to Bank, at Debtor's expense, printouts and all information
respecting any and all financial records now or hereafter maintained by the same
for Debtor.
7.22 Places of Business; Location of Collateral and Records: Debtor
------------------------------------------------------
will notify Bank in writing thirty (30) days in advance of each change in its
Chief Executive Office, and of each change in any Location at which Inventory,
Equipment, any Records of Accounts, General Intangibles or other Collateral, is
or will be kept. However, at Bank's request from time to time, Debtor shall
provide Bank with a complete schedule of all Locations.
7.23 Visitation: Debtor shall permit such person as the Bank may
----------
designate to visit and inspect any of the properties of the Debtor and any
Subsidiaries, to examine their respective books and records and take copies and
extracts therefrom and to discuss their respective affairs with their respective
officers, at such times and as often as the Bank may reasonably request. Debtor
hereby authorizes such officers to discuss with the Bank the affairs of Debtor
and any Subsidiaries.
7.24 Notice of Pension-Related Events. Promptly after any Debtor, or
--------------------------------
any Controlled Group Member with respect to any Debtor, or any administrator of
a Plan:
(a) receives any notification referred to in subsections (i),
(iv) or (vii) of Section 10.01(m) hereof;
(b) has knowledge of (1) the occurrence of a Reportable Event
as defined in Section 4043 of ERISA with respect to a Plan; (2) any event which
has occurred or any action which has been taken to amend or terminate a Plan as
referred to in subsections (ii) and (vi) of Section 10.01(m) hereof; (3) any
event which has occurred or any action which has been taken which could result
in complete withdrawal, partial withdrawal, or secondary liability for
withdrawal liability payments with respect to a Multiemployer Plan as referred
to in subsection (vii) of Section 10.01(m) hereof; or (4) any action which has
been taken in furtherance of, any agreement which has been entered into for, or
any petition which has been filed with a United States district court for, the
appointment of a trustee for a Plan as referred to in subsection (iii) of
Section 10.01(m) hereof; or
(c) files a notice of intent to terminate a Plan with the
Internal Revenue Service or the PBGC; or files with the Internal Revenue Service
a request pursuant to Section 412(d) of the Code for a variance from the minimum
funding standard for a Plan; or files a return with the Internal Revenue Service
with respect to the tax imposed under Section 4971 of the Code for failure to
meet the minimum funding standards established under Section 412 of the Code for
a Plan; then, Debtor will furnish to the Bank a copy of any notice received,
request or
<PAGE>
petition filed, and agreement entered into; the most recent Annual Report (Form
5500 Series) and attachments thereto for the Plan; the most recent actuarial
report for the Plan; any notice, return, or materials required to be filed with
the Internal Revenue Service in connection with the event, action, or filing;
and a written statement of the Chairman, President, or chief financial officer
of Debtor, as the case may be, describing the event or the action taken and the
reasons therefor.
7.25 Debtor will maintain Bank as its primary bank of account and
CoreStates Asset Management as its primary investment manager for the term of
the Agreement.
7.26 Compliance with Environmental and Other Laws:
--------------------------------------------
(d) Debtor shall comply in all material respects with all
Environmental Laws applicable to it.
(e) Debtor shall furnish to Bank, immediately upon receipt or
dispatch, a copy of any notice, summons, citation, directive, letter or other
written communication from or to any federal, state or local environmental
agency or department, which may evidence or result in a liability under any
Environmental Law such that the costs of correcting, or of paying penalties
assessed in connection with, such liability would have a material adverse effect
upon the business of Debtor as now conducted or upon Debtor's business,
operations, properties or condition, financial or otherwise. In such event,
Debtor shall use diligent efforts to complete all remediation which may be
required by such communication from any federal, state, county, municipal or
other administrative, investigative, prosecutorial or enforcement agency or
environmental or occupational safety regulatory agency ("Environmental
Regulator") and to obtain from all such Environmental Regulators having
jurisdiction thereof, and deliver to Bank as received, such approvals and
certifications as can be obtained from such agencies from time to time to
confirm the Debtor's completion of all remediation and Debtor's compliance with
all governmental requirements applicable thereto.
7.27 Information Regarding Environmental Matters: Debtor will
-------------------------------------------
provide Bank the following:
(a) Immediately upon receipt, with complete copies of all
notices from any Environmental Regulator notifying Debtor, or alleging, that
there exists or may exist a material violation or potential material violation
by Debtor of any federal or state law, now or hereafter in force, regulating the
handling labeling, custody, storing, transportation, discharge, disposal,
release, treatment, processing or other disposition of any Hazardous Material;
and
(b) Upon Bank's request from time to time, with complete copies
of (i) any or all documents required to be filed or in fact filed, by Debtor
with any Environmental Regulator, (ii) any or all material safety data sheets or
other documents or data which applicable law or any Environmental Regulator now
or hereafter requires Debtor to prepare, compile or maintain, and (iii) any and
all documents and other information which applicable law or any Environmental
Regulator requires to be made available to employees, contractors, transferees,
the local community, local government agencies or the public; (iv) any reports
of Debtor's employees, consultants, advisors, engineers or others relating to
Debtor's compliance with applicable environmental or occupational safety laws,
or to the status or manner of disposal, discharge or release of any petroleum
product or hazardous substance.
<PAGE>
7.28 Maintenance of Patents, Etc. and Information Regarding Patents:
--------------------------------------------------------------
Debtor shall maintain in full force and effect all Patents, franchises,
licenses, permits and qualification necessary to own, lease and/or operate its
properties and business. Debtor will provide Bank immediately upon its receipt
complete copies of all notices from the United States Patent and Trademark
Office ("PTO") awarding any Patents to Debtor or the discontinuance of any
Patent filing or any communication or information in connection therewith.
Further, Debtor shall provide Bank copies of all correspondence and other
documentation delivered by Debtor to the PTO. In the event that Debtor is
awarded a Patent after the date hereof which is material to the operations and
business of Debtor, Debtor shall execute a patent assignment and any and all
other documents necessary to preserve and protect Bank's security interest in
such Patent.
ARTICLE 8 - NEGATIVE COVENANTS OF DEBTOR
Debtor hereby covenants and agrees that, from the date of this
Agreement and so long as Debtor shall be indebted to Bank hereunder or under any
of the Notes, it will comply with the following covenants, unless Bank shall
consent otherwise in writing, which consent shall not be unreasonably withheld:
8.01 Amendments, Mergers, etc.: Debtor shall not change its name,
-------------------------
enter into any merger, consolidation, reorganization or recapitalization or
reclassify its capital stock.
8.02 Sale of Assets: Debtor shall not sell, transfer, lease or
--------------
otherwise dispose of all or (except in the ordinary course of business) any
material part of its assets.
8.03 Liens: Except pursuant to Paragraph 6.10, Debtor shall not
-----
mortgage, pledge, grant or permit to exist any Lien or Liens upon, any of its
assets, of any kind, now owned or hereafter acquired, except for Permitted
Liens, nor hypothecate or grant a Lien on its capital, net worth, equity
accounts, or any capital stock, as the case may be. Debtor shall not mortgage,
pledge, grant or permit to exist any Lien or Liens upon any of the remaining
thirty-four percent (34%) of the capital stock or ownership interests of Debtor
in any of Euro Bio-Pharm, Ltd. or Bio-Pharm Clinical Service, GmbH which has not
been pledged to Bank pursuant to the Pledge Agreements, unless prior consent has
been received from the Bank.
8.04 Disposition of Right to Income: Debtor shall not mortgage or
------------------------------
grant or permit to exist any Lien or Liens in, any of the Collateral,
(including, without limitation, the Accounts), other than to Bank, except for
Permitted Liens. Further, Debtor shall not sell, discount, transfer, assign,
factor or otherwise dispose of its Collateral except in the ordinary course of
business.
8.05 Guarantor: Debtor shall not become liable, directly or
---------
indirectly, as guarantor or otherwise, for any obligation of any other Person,
except for the endorsement of negotiable instruments, including company checks
of Debtor, for deposit or collection in the ordinary course of business, or
pursuant hereto.
8.06 Indebtedness: Debtor shall not incur, create, or assume any
------------
Indebtedness, except: (1) the Loans; (2) Indebtedness secured only by Permitted
Liens (including Capital Leases to the extent permitted in Section 7.14(c)
hereof); (3) trade Indebtedness or operating lease indebtedness (to the extent
approved) incurred in the ordinary course of business; (4) unsecured purchase
money Indebtedness for equipment acquired hereafter in the ordinary course of
business, and (5) any other Indebtedness existing as the date hereof and set
forth on Exhibit I.
---------
<PAGE>
8.07 Dividends and Distributions: Debtor shall not declare or pay any
---------------------------
dividends, or make any capital or equity distributions to any shareholder which
would result in the occurrence of a Potential Default or Event of Default. Any
dividend or distribution made in violation of this covenant shall be deemed
subject to a resulting or constructive trust in favor of Bank.
8.08 Loans: Debtor shall not make any loan or advance to any officer,
-----
shareholder, director, partner, or other affiliated Person or Persons, or any
Person related to or affiliated with such Persons in excess of an aggregate
amount outstanding at any time of Two Hundred Fifty Thousand Dollars
($250,000.00). In addition, Debtor shall not make any intercompany loan or
advance to the Subsidiaries of Debtor in excess of an aggregate amount
outstanding at any time of Seven Million Dollars ($7,000,000.00). As security
for any intercompany loan, Debtor shall be required to do any and all actions
set forth in Section 6.04 hereof.
8.09 Statements Not Misleading, etc.: Debtor shall not knowingly,
-------------------------------
after reasonable inquiry, furnish Bank any certificate or other document that
will contain any untrue statement of material fact or that will omit to state a
material fact necessary to make it not misleading in light of the circumstances
under which it is furnished.
8.10 No Release of Hazardous Materials: Debtor shall not cause or
---------------------------------
permit to exist, as a result of an intentional or unintentional action or
omission on its part, or on the part of any third party, any disposal,
releasing, spilling, leaking, pumping, emitting, pouring, emptying or dumping of
any Hazardous Material in or onto any of the Locations except in compliance with
Environmental Laws.
8.11 Transactions with Affiliates, Etc.: Debtor shall not permit any
---------------------------------
transfers of property or payments to any present or former Affiliate,
shareholder, officer or employee of Debtor, or the successors, assigns or
transferees of such individuals or entities, except for: (i) normal salary and
compensation reasonable in amount under the circumstances in accordance with
past practices; (ii) purchases or sales of Inventory in the ordinary course of
business and on terms not less favorable to Debtor than arms-length market
terms; and (iii) payments required under bona fide written rental, franchise or
other operating agreements entered into in the ordinary course of business on
arms-length terms.
8.12 Regulation U: Debtor shall not use the proceeds of any Loans
------------
hereunder directly or indirectly to purchase or carry any "margin stock" (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System) or to extend credit to others for the purpose of purchasing or carrying,
directly or indirectly, any such margin stock.
8.13 Acquisitions. Debtor will not acquire all or any portion of
------------
another business, including but not limited to a Subsidiary, for a purchase
price in excess of $3,000,000 or a cash payment of over $1,000,000, without the
prior written consent of the Bank, which consent shall not be unreasonably
withheld.
ARTICLE 9 - REPRESENTATIONS AND WARRANTIES
To induce Bank to enter into this Agreement, Debtor makes the
following continuing representations and warranties to Bank, which
representations and warranties shall be deemed renewed as of the date of each
request for an Advance and deemed incorporated in each such request:
<PAGE>
9.01 Representations and Warranties as to Accounts Receivable: As to
--------------------------------------------------------
each Account Receivable carried on Debtor's financial statements or otherwise
reported to Bank as an Account: (a) the Account arose from a bona fide outright
sale of goods by Debtor or for services performed by Debtor and such services
have been performed for the respective obligors or their designees; (b) the
Account is based on an enforceable order or contract for services performed and
that the same were performed in accordance with such order or contract; (c) the
title of Debtor to the Account is absolute and is not subject to any prior
assignment, claim, lien or security interest, except a Permitted Lien; (d) the
amount shown on Debtor's books and on any invoice or statement delivered to Bank
is owing to Debtor and no partial payment has been made thereon by anyone; (e)
the Account, in the amount reported, is not subject to any contra, credit, claim
of reduction, counterclaim, set-off, recoupment, or any claim for credit,
allowances or adjustments by the obligor known to Debtor because of returned,
inferior or unsatisfactory services, or for any other reason, except for
customary discounts allowed for prompt payment; (f) the Account does not
represent progress or contract billings except for services actually performed;
(g) to the best knowledge of Debtor, the obligor is not bankrupt or insolvent or
the subject of receivership proceedings, nor has made an assignment for benefit
of creditors or a composition with creditors; and (h) at least 75% of the
account balances for all Accounts for the same obligor comply with these
representations and warranties.
9.02 Representations and Warranties as to Equipment: As to each item
----------------------------------------------
of Equipment shown on Debtor's financial statements:
(a) Such Equipment has been purchased and received by the
Debtor, and is held by the Debtor free and clear of all Liens and claims
whatever except a Permitted Lien;
(b) Such Equipment is in merchantable condition, not obsolete,
not defective, usable for the purposes for which purchased, held and processed;
(c) The value at which the Equipment is carried is the cost of
such Equipment on an item by item basis.
9.03 Other Representations and Warranties:
------------------------------------
(a) Debtor is a business corporation, duly organized, validly
existing and in good standing under the state of its respective organization
first recited above, and in each other jurisdiction that requires such
qualification wherein it owns or leases any property or conducts any business,
except where the failure to qualify would have a material adverse effect on the
business, operations, properties and financial condition of Debtor;
(b) The making, delivery and performance of this Agreement, the
Notes, the Pledge Agreements, the Collateral Assignment and Security Agreements
and the other Loan Documents will not immediately, or with the passage of time,
the giving of notice, or both:
(1) Violate the charter or by-law provisions of Debtor or
violate any Laws or result in a default under any material contract, agreement,
or instrument to which Debtor is a party or by which it or its property is
bound; or
(2) Terminate or give any party the right to terminate any
material contract, agreement or instrument to which Debtor is a party or by
which its properties may be bound or affected; or
<PAGE>
(3) Result in the creation or imposition of any Lien upon,
any of the assets of Debtor except in favor of the Bank;
(c) Debtor has the corporate power and authority to enter into
and perform this Agreement, the Notes, the Pledge Agreements, the Collateral
Assignment and Security Agreements and the other Loan Documents, and to incur
the Obligations herein and therein provided for, and has taken all action
necessary to authorize the execution, delivery, and performance of the same;
(d) This Agreement, the Notes, the Pledge Agreements, the
Collateral Assignment and Security Agreements and the other Loan Documents are
and continue to be valid, binding, and enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency and
reorganization laws and general equitable principles;
(e) Except as described on Exhibit F attached hereto, Debtor is
---------
not a party to or, to its best knowledge, threatened with, any litigation, suit,
action, investigation, proceedings or controversy before any Court,
administrative agency or other governmental authority which, if adversely
determined, would result in any material adverse change in its business
operations, properties or assets or in its condition, financial or otherwise, or
in any way affect this Agreement or the transactions contemplated hereby, and
Debtor is not in violation of or in default with respect to any judgment, order,
writ, injunction, decree or rule of any court, administrative agency or
governmental instrumentality or in any material respect under any regulation of
any administrative agency or governmental instrumentality.
(f) Debtor has good and marketable title to all of its assets,
subject to no Lien or other claim of any third person except for Permitted
Liens;
(g) The financial statements, including any schedules and notes
pertaining thereto, of Debtor which have been provided to Bank prior to or on
the Effective Date have been prepared in accordance with GAAP, and fully and
fairly present the financial condition of Debtor at the dates thereof and the
results of operations for the periods covered thereby. There have been no
material adverse changes in the financial condition of Debtor since the date of
its financial statements dated December 31, 1993 which were delivered to Bank
prior to the date of the Commitment;
(h) Except as may be disclosed on Exhibit F or Exhibit G,
--------- ---------
Debtor has filed all federal, state, and local tax returns, and other reports
which it is required by Law to file prior to the date hereof and which are
material to the conduct of its business, has paid or caused to be paid all
taxes, assessments and other governmental charges that are due and payable prior
to the date hereof, has complied with all applicable Federal and State tax laws,
and has made adequate provision for the payment of such taxes, assessments or
other charges accruing but not yet payable, and Debtor has no knowledge of any
deficiency or additional assessment in a materially important amount in
connection with any taxes, assessments or charges not provided for on its books;
(i) Except as described on Exhibit G, Debtor is in compliance
---------
in all material respects with ERISA, Debtor does not sponsor, maintain or
contribute to or plan to sponsor, maintain or contribute to, or has not
sponsored, maintained or contributed to at any previous date, any "Defined
Benefit Plans", as defined in Section 3(35) of ERISA, and no Reportable
<PAGE>
Event, as defined in Section 4043 of ERISA, or Prohibited Transaction, as
defined in Section 406 of ERISA, has occurred with respect to any Plan; and
(j) Debtor is not in material violation of or subject to any
contingent liability on account of any Law (including but not limited to any
Environmental Law). No Lien arising under or in connection with any
Environmental Law has attached to any revenues or any real or personal property
owned, leased, occupied or operated by Debtor, nor does Debtor have any reason
to believe that any governmental agency has incurred any costs which may give
rise to any such lien hereafter.
(k) To the best of Debtor's knowledge, after reasonable
inquiry, no representation or warranty furnished pursuant hereto contains any
untrue statement of material fact or omits to state a material fact necessary to
make such representation or warranty not misleading in light of the
circumstances under which it was made.
(l) Each consent, approval or authorization of, or filing,
registration or qualification with, any Person which is required to be obtained
or effected by Debtor in connection with the execution and delivery of this
Agreement, the Notes, the Pledge Agreements, the Collateral Assignment and
Security Agreements and the other Loan Documents, or the undertaking or
performance of any obligation hereunder or thereunder, has been duly obtained or
effected;
(m) Except as specifically disclosed in Exhibit I attached
---------
hereto, Debtor has no other material real property leases, employment
agreements, insurance and welfare agreements. Except for commitments to purchase
equipment to be financed by the Non-Revolving Equipment Loan and except as
otherwise disclosed on the financial statements for the period ended May 31,
1994, which are attached as an annex to Exhibit I, Debtor has no other
---------
contingent or noncontingent liability, which is or are material in amount. To
the best of Debtor's knowledge, all parties to all such leases, contracts and
other commitments to which Debtor is or was party have complied with the
provisions of such leases, contracts and other commitments, no party is in
default under any thereof and no event has occurred which, but for the giving of
notice or the passage of time, or both, would constitute a default with respect
thereto;
(n) Debtor has not made any agreement or has taken any action
which may cause anyone to become entitled to a commission or finder's fee as a
result of the making of the Loans;
(o) Debtor will take all necessary steps to preserve Debtor's
corporate existence, and all of its franchises and licenses, and will comply
with all present and future regulatory and other Laws applicable to it in the
operation of its business, and with all material agreements to which it is
subject;
(p) Debtor shall not make any borrowing hereunder for the
purpose of buying or carrying any "margin stock," as such term is used in
Regulation U of the Board of Governors of the Federal Reserve System, as amended
from time to time. Neither Debtor nor any Subsidiary owns any "margin stock".
Debtor is not engaged in the business of extending credit to others for such
purpose, and no part of the proceeds of any borrowing hereunder will be used to
purchase or carry any "margin stock" or to extend credit to others for the
purpose of purchasing or carrying any "margin stock".
<PAGE>
(q) For purposes of this Agreement, each of the following shall
be defined as a "Location": (i) Debtor's Chief Executive Office, (ii) the
locations of all Equipment and other Collateral, and (iii) the locations of each
office at which Debtor maintains Records concerning Accounts, General
Intangibles and other financial matters. All of Debtor's Locations are
identified on Exhibit H hereto.
---------
(r) Attached hereto as Exhibit I is a schedule setting forth
---------
all Indebtedness of Debtor (other than outstanding and unfilled orders to
purchase property, products, materials or supplies) where the principal amount
of the Indebtedness (in the case of Indebtedness classifiable as liabilities
under GAAP) or the present value of all future payments with respect to the
Indebtedness (in the case of all other Indebtedness) exceeds $100,000.00.
(s) No Debtor has Indebtedness to any Affiliate, or is owed
anything on account of indebtedness of an Affiliate to it, except subordinated
indebtedness and such Indebtedness (if any) shown on Exhibit J.
---------
(t) The only Subsidiaries of Debtor are outlined on Exhibit K
attached hereto.
(u) The authorized and issued capital stock or ownership
interests of each Subsidiary of Debtor is as indicated on Exhibit K attached
---------
hereto. Exhibit K attached hereto also sets forth the ownership of the issued
---------
and outstanding shares of capital stock or ownership interests of each
Subsidiary of Debtor. All of the issued and outstanding shares of capital stock
or ownership interests of each Subsidiary of Debtor have been validly issued and
are fully paid and nonassessable. There are no options, warrants or other rights
outstanding to purchase any such shares or ownership interests except as
indicated on Exhibit K attached hereto. Debtor has good and marketable title to
---------
all of the issued and outstanding shares of capital stock or ownership interests
of each Subsidiary of Debtor that it purports to own, free and clear in each
case of any Lien except for Liens created under the Pledge Agreements.
ARTICLE 10 - DEFAULT
10.01 Events of Default: The occurrence of any one or more of the
-----------------
following shall constitute an Event of Default hereunder:
(a) Debtor shall fail to pay, when due, any installment of
principal or any installment of interest payable hereunder or under any of the
Notes or other Loan Documents; or Debtor shall fail to pay any fee, charge or
expense, payable hereunder or under any of the Notes or other Loan Documents
within ten (10) days after notice from Bank; or
(b) Debtor shall fail to pay any Indebtedness exceeding in the
aggregate amount outstanding at any one time the sum of One Hundred Thousand
Dollars ($100,000.00), when due, to any Person and such failure shall continue
beyond any applicable grace period, or any other event of default shall arise
under any agreement evidencing any Indebtedness; and with respect to any
defaults as are not reasonably capable of cure within the applicable grace
period, no Event of Default shall be deemed to have occurred so long as Debtor
shall have, in good faith, commenced said cure within said initial grace period
and thereafter shall diligently pursue said cure to completion within such
additional period of time as shall be reasonably required, not to exceed thirty
(30) days in any event.
<PAGE>
(c) Any financial statement, representation or warranty made or
furnished by Debtor or its agents to Bank in connection with this Agreement, or
as an inducement to Bank to enter into this Agreement, or in any separate
statement or document to be delivered hereunder to Bank, shall be false,
incorrect, or incomplete when made as to any material fact or facts;
(d) Debtor shall generally not or shall be unable to or shall admit or
have admitted its inability to pay, or shall fail to pay, its debts as they
mature, or shall make an assignment for the benefit of its creditors;
(e) Proceedings in bankruptcy, or for reorganization of Debtor or for
the readjustment of debts, under the Bankruptcy Code, as amended, or any part
thereof, or under any other Laws, whether state or federal, for the relief of
debtors, now or hereafter existing, shall be commenced or shall have been
commenced by or against Debtor and if commenced against Debtor shall not be
stayed or discharged within sixty (60) days of commencement;
(f) A receiver or trustee shall be appointed or shall have been
appointed for Debtor or any substantial part of its assets, or any proceedings
shall be instituted for the dissolution or the full or partial liquidation of
Debtor and such receiver or trustee shall not be discharged within sixty (60)
days of initial appointment, or such proceedings shall not be stayed or
discharged within thirty (30) days of their commencement, or Debtor shall
discontinue business or materially change the nature of its business;
(g) Debtor shall suffer a final judgment for the payment of money in
excess of One Hundred Thousand Dollars ($100,000.00), and shall not discharge
the same within a period of thirty (30) days unless execution thereon is
effectively stayed or bonded pending further proceedings;
(h) A judgment creditor of Debtor shall obtain possession of or any
attachment or other judicial process shall issue against, any of the Collateral
by any means, including, but without limitation, levy, distraint, replevin or
self-help or on a consensual basis, if such possession, attachment, process,
levy or distraint is, in Bank's reasonable opinion, material or if such
possession, attachment, process, levy or distraint shall not have been finally
stayed, enjoined or terminated within thirty (30) days after it was first
obtained;
(i) The validity or enforceability of this Agreement, the Notes, the
Pledge Agreements, the Collateral Assignment and Security Agreements or any of
the other Loan Documents shall be contested in any judicial forum by Debtor or
any Affiliate, or Debtor shall deny that it has any liability or obligation
hereunder or thereunder;
(j) Any default by Debtor with respect to any other Obligation to Bank
as to which any required notice has been given, any applicable grace period has
expired, and such default remains uncured and unwaived;
(k) Any event of default (or any event or condition which, with notice
or lapse of time or both, would become an event of default) shall arise under
any document relating to the Letter of Credit, including, without limitation,
the failure of Debtor to pay its obligations to Bank thereunder;
(l) Any financial statement, representation or warranty made or
furnished by Debtor under any of the Letter of Credit Documents to Bank in
connection with the Letter of
<PAGE>
Credit, or as an inducement to Bank to enter into the Letter of Credit, or in
any separate statement or document to be delivered thereunder to Bank, shall be
false, incorrect, or incomplete when made as to any material fact or facts;
(m) Any one or more of the following events occurs which, in Bank's
reasonable opinion, when taken individually or collectively, have, or is or are
likely to have, a material, adverse effect on the financial condition or
business operations of Debtor and such event or circumstance continues for a
period of sixty (60) days after written notice to cure is given by Bank:
(i) The PBGC notifies a Plan pursuant to Section 4042 of ERISA
by service of a complaint, threat of filing a lawsuit, or otherwise of its
determination that an event described in Section 4042(a) of ERISA has occurred,
a Plan should be terminated, or a trustee should be appointed for a Plan; or
(ii) Any action is taken to terminate a Plan pursuant to its
provisions or the Plan administrator files with the PBGC a notice of intent to
terminate a Plan in accordance with Section 4041 of ERISA; or
(iii) Any action is taken by a plan administrator to have a
trustee appointed for a Plan pursuant to Section 4042 of ERISA; or
(iv) A return is filed with the Internal Revenue Service, or a
Plan is notified by the Secretary of the Treasury that a notice of deficiency
has been mailed, with respect to the tax imposed under Section 4971(a) of the
Code for failure to meet the minimum funding standards established under Section
412 of the Code; or
(v) A Reportable Event occurs with respect to a Plan; or
(vi) Any action is taken to amend a Plan to become an employee
benefit plan described in Section 4021(b)(1) of ERISA, causing a Plan
termination under Section 4041(e) of ERISA; or
(vii) Either Debtor or any member of the same controlled group
receives a notice of liability or demand for payment on account of complete
withdrawal under Section 4203 of ERISA, partial withdrawal under Section 4205 of
ERISA or on account of becoming secondarily liable for withdrawal liability
payments under Section 4204 of ERISA (sale of assets);
(n) A material adverse change shall occur in the financial condition,
business or prospects of Debtor;
(o) Debtor shall fail to observe or perform any other obligation to be
observed or performed by it hereunder or under any of the Notes, Pledge
Agreements, Collateral Assignment and Security Agreements or the other Loan
Documents, which is not specifically enumerated in subsections (a)-(n) above,
and such failure shall continue uncured for a period of thirty (30) consecutive
days.
10.02 Acceleration: Immediately and without notice upon the occurrence of
------------
an Event of Default specified in subsection 10.01(e) or subsection 10.01(f), or
in other cases, at the option of
<PAGE>
Bank, upon notice by Bank or its agent or attorney to Debtor of the occurrence
of an Event of Default, all Obligations, whether hereunder or otherwise,
including without limitation those evidenced by the Notes, shall immediately
become due and payable, without further action or notice of any kind.
10.03 Remedies: Upon the occurrence of an Event of Default, Bank shall
--------
have, in addition to the rights and remedies given it by this Agreement, the
Notes, the Pledge Agreements, the Collateral Assignment and Security Agreements
or any of the other Loan Documents and the remaining documents delivered
pursuant hereto, all those allowed by all applicable Laws, including, without
limitation, the Uniform Commercial Code.
Without limiting the generality of the foregoing, Bank may
immediately, without demand for performance and without other notice or demand
whatsoever to Debtor (except as specifically required by this Agreement or the
documents delivered pursuant hereto or as required by applicable laws), sell at
public or private sale or otherwise realize upon, at any place designated by
Bank in its sole discretion, including any place of business of Bank or any of
its affiliates, the whole or, from time to time, any part of the Collateral, or
any interest which Debtor may have therein. After deducting from the proceeds of
sale or other disposition of the Collateral all expenses (including all expenses
for legal services), Bank shall apply such proceeds toward the satisfaction of
the Obligations, in such order as it shall determine. Any remainder of the
proceeds after satisfaction in full of the Obligations shall be distributed as
required by applicable Laws. At any such sale or other disposition, Bank may, to
the extent permissible under applicable Laws, purchase the whole or any part of
the Collateral, free from any right of redemption on the part of Debtor, which
right is hereby waived and released. Notice of any sale or other disposition
shall be given to Debtor at the address hereinafter set forth or such other
address as may from time to time be shown on Bank's records at least ten (10)
days before the time of any intended public sale or of the time after which any
intended private sale or other disposition of the Collateral is to be made,
which Debtor hereby agree shall be reasonable notice of such sale or other
disposition. Debtor agrees to assemble, or to cause to be assembled, at Debtor's
own expense, the Collateral at such place or places as Bank shall designate.
Without limiting the generality of any of the rights and remedies conferred upon
Bank under this Section, Bank may, to the full extent permitted by applicable
Laws do any or all of the following:
(a) Enter upon any premises of Debtor, exclude Debtor therefrom, and
take immediate possession of the Collateral, either personally or by means of a
receiver appointed by a court of competent jurisdiction, or by other lawful
means;
(b) At Bank's option, use, operate, manage and control the Collateral
in any lawful manner;
(c) Collect and receive any or all rents, income, revenue, earnings,
issues, and profits (including the Accounts), and proceeds therefrom; and
(d) Maintain, repair, renovate, alter or remove the Collateral as Bank
may determine in its discretion.
10.04 Application of Proceeds. Upon the occurrence of an Event of Default,
-----------------------
and so long as the Event of Default continues uncured or unwaived, Debtor
irrevocably waives the right to direct the application of all payments,
including proceeds of Collateral, that may be received by Bank or for the
benefit of Debtor. The proceeds of any sale or other disposition of all or any
part
<PAGE>
of the Collateral, or any interest which Debtor may have therein, shall be
applied by Bank in the following order:
(a) First, to payment of all costs and expenses incurred by Bank under
any of the Loan Documents including without limitation all costs and expenses
relating to disposition of Collateral or enforcement of the Debtor's
Obligations, and reasonable attorneys' fees,
(b) Second, to the payment in full of the unpaid principal balance of,
and all accrued and unpaid interest on, the Loans, the Notes, and other
Obligations all in accordance with the terms of the Notes, this Agreement, the
Pledge Agreements, the Collateral Assignment and Security Agreements and the
other Loan Documents, and
(c) Third, to the payment in full of all other Obligations of Debtor
to Bank, and
(d) Fourth, to the Debtor to the extent of any surplus. Debtor shall
remain liable to Bank for any deficiency in payment of the Obligations to Bank
after application of the proceeds in accordance with this Section 10.04.
10.05 Enforcement and Waiver by the Bank: Bank shall have the right at all
----------------------------------
times to enforce the provisions of this Agreement and the documents delivered
pursuant hereto in strict accordance with the terms hereof and thereof,
notwithstanding any conduct or custom on the part of Bank in refraining from so
doing at any time or times. The failure of Bank at any time or times to enforce
its rights under such provisions, strictly in accordance with the same, shall
not be construed as having created a custom in any way or manner contrary to
specific provisions of this Agreement or as having in any way or manner modified
or waived the same. All rights and remedies of Bank are cumulative and
concurrent and the exercise of one right or remedy shall not be deemed a waiver
or release of any other right or remedy.
ARTICLE 11 - MISCELLANEOUS
11.01 Interpretation: The provisions of this Agreement shall be in
--------------
addition to those of any Letter of Credit Documents, security agreement, note or
other evidence of liability now or hereafter at any time held by Bank, all of
which shall be construed as complementary and supplementary to each other to the
extent possible. Nothing herein contained shall prevent Bank from enforcing any
or all other agreements in accordance with their respective terms.
11.02 Further Assurances: From time to time, Debtor will execute and
------------------
deliver to Bank such additional documents and will provide such additional
information as Bank may reasonably require, to carry out the terms of this
Agreement and be informed of the Debtor's status and affairs.
11.03 Power to Execute Documents: Upon and after the occurrence of an
--------------------------
Event of Default, and so long as any Obligations remain outstanding, Debtor
hereby irrevocably (this power being coupled with an interest) appoints,
constitutes and names Bank, or any of its attorneys or agents, the true and
lawful attorney for Debtor, with full power of substitution, to do any or all of
the following at any time (but this grant of authority shall not negate any
other grant of authority under this Agreement which may authorize other actions,
or similar actions under other circumstances, and Debtor shall not take any
actions to contest or reverse or negate Bank's actions hereunder):
<PAGE>
(a) to receive mail at Bank's designated address and open the same,
endorse, sign and deliver, in the name of Debtor, or in Bank's name, all checks,
drafts, money orders and other instruments, for the payment of moneys which are
payable to Debtor;
(b) to sign the name of Debtor, and to receive for Debtor, on any
schedules, assignments, instruments, documents and Uniform Commercial Code
financing, amending or continuation statements which Debtor is obligated to give
Bank hereunder or any invoice, warehouse receipt, bill of lading or other
Document, Instrument or Chattel Paper, or any Accounts, statements therefor,
drafts against obligors or drawn or to be drawn under any letters of credit,
notices to obligors, certificates or other documents to be delivered or
presented under letters of credit or schedules or assignments of Accounts; and
(c) to take or bring at the Debtor's expense, in the name of Debtor,
or Bank, all steps, actions and suits that Bank considers necessary or desirable
to effect collections of Accounts, to enforce payment of any Account, to settle,
compromise, sell, assign, discharge or release, in whole or in part, any amounts
owing on Accounts, to extend the time of payment of any and all Accounts and to
make allowances and adjustments with regard to Accounts; and
(d) to do such other and further acts and deeds in the name of Debtor
that Bank may deem necessary or desirable to enforce the rights of Debtor
against third parties with respect to any Collateral.
11.04 Cost, Expenses, and Fees Paid and Payable to Bank:
-------------------------------------------------
(a) All reasonable attorneys fees and other expenses incurred by Bank
as part of this transaction shall be a part of the Obligations hereunder and
shall be paid at the signing hereof or at such later time as the Bank may
specify.
(b) Debtor agrees that all costs, expenses, and reasonable attorneys'
fees of, or incidental to the custody, care, management, sale or collection of,
or realization upon, any of the Collateral or in any way relating to the care,
enforcement or protection of the Collateral or in the enforcement of any and all
rights of Bank either hereunder or under any applicable law or custom, shall
become part of the Obligations and entitled to the benefits of this Agreement as
if an Advance made hereunder upon the application of Debtor, and Bank may at any
time apply to the payment of all such costs and expenses all moneys of Debtor or
other proceeds arising from the possession or disposition of all or any portion
of the Collateral.
11.05 Notices: Any notices or consents required or permitted by this
-------
Agreement shall be in writing and shall be deemed delivered if personally
delivered or if sent by certified mail, postage prepaid, return receipt
requested or overnight courier service, as follows, unless such address is
changed by written notice hereunder:
If to Debtor: IBAH, Inc.
Four Valley Square
512 Township Line Road
Blue Bell, PA 19422
ATTN: Leonard F. Stigliano
Vice President and CFO
<PAGE>
with a copy to: Jane H. Hollingsworth, Esquire
IBAH, Inc.
Four Valley Square
512 Township Line Road
Blue Bell, PA 19422
If to Bank: with a copy to: CoreStates Bank, N.A.
55 Valley Stream Parkway, Suite 200
Malvern, PA 19355
ATTN: Ash Lilani, Assistant Vice President
Linda Ann Galante, Esquire
Stradley, Ronon, Stevens & Young, LLP
30 Valley Stream Parkway
Malvern, PA 19355
Any notice hereunder shall be deemed to have been given three (3)
days after mailing thereof, or upon actual delivery to an agent of the recipient
party, to the other party at such party's then effective address hereunder.
Notices by Bank may be given on its behalf by its agent or attorney.
11.06 Waiver and Release by Debtor: To the maximum extent permitted
----------------------------
by applicable Laws, Debtor:
(a) Waives demand, protest, presentment, and notice of
dishonor of all commercial paper at any time held by Bank on which Debtor is in
any way liable;
(b) Releases Bank and its officers, attorneys, agents and
employees from all claims for loss or damage caused by any act or omission on
the part of any of them except negligence.
11.07 JURISDICTION: DEBTOR CONSENTS TO THE PERSONAL JURISDICTION OF
------------
THE FEDERAL OR STATE COURTS LOCATED IN THE COMMONWEALTH OF PENNSYLVANIA AND
AGREES THAT VENUE SHALL BE PROPER AND THE FORUM SHALL BE CONVENIENT IN THE CITY
OF PHILADELPHIA OR IN CHESTER COUNTY, PENNSYLVANIA, IF SUIT IS FILED BY ANY
PARTY TO ENFORCE, INTERPRET OR CONSTRUE THIS AGREEMENT. DEBTOR AND BANK HEREBY
MUTUALLY AND RECIPROCALLY WAIVE ALL RIGHT TO JURY TRIAL.
11.08 Applicable Law: The internal substantive laws of the
--------------
Commonwealth of Pennsylvania shall govern the construction of this Agreement and
the rights and remedies of the parties hereto without regard to any laws
relating to conflict of laws or choice of law.
11.09 Indemnity: To the maximum extent permitted by applicable law,
---------
Debtor, for itself and its successors (herein, "Indemnifying Parties"), shall
jointly and severally indemnify, hold harmless, and upon request defend Bank and
its shareholders, officers, directors, employees, attorneys and agents, and
their respective successors and assigns (collectively, the "Indemnified
Parties") from and against any and all claims and liabilities asserted against
any Indemnified Party by any Indemnifying Party or any third party (including
without limitation for negligence or gross negligence) (herein, "Claims"), and
will pay and reimburse to the Indemnified Parties all
<PAGE>
losses, payments, reasonable costs and expenses associated therewith, or with
the defense of all Indemnified Parties (including without limitation reasonable
attorneys' fees) which any Indemnified Party may suffer, incur or be exposed to
by reason of or in connection with or rising out of the transport, release,
treatment, processing, manufacture, deposit, storage, disposal, burial, dumping,
injecting, spilling, leaking or placement at any time heretofore or hereafter,
by any person or entity, of any Hazardous Material (except in compliance with
all Environmental Laws), including but not limited to any of the following
whether incurred by an Indemnified Party, an Indemnifying Party or any third
party: (1) costs of or liability for investigation, monitoring, boring, testing
and evaluation; (2) costs or liabilities for abatement, correction, response,
cleanup, removal or remediation; (3) fines, damages, penalties and other
liabilities; (4) liability for personal injury or property damage.
11.10 Investigation and Cure of Environmental Matters: In the event
-----------------------------------------------
of failure of Debtor to comply with any provision of this Agreement or any other
Loan Document relating to Hazardous Materials, Environmental Laws or
Environmental Regulators, or if Bank shall have reason to believe that any
Hazardous Material has been or is likely to be released on, in or under any
Location (except in compliance with all Environmental Laws), Bank may do any or
all of the following: (i) Bank shall have the right to investigate, or to demand
that Debtor investigate and report to Bank on (in which case Debtor shall
investigate and report to Bank on) investigation of such Location, and if Bank
requests through an independent reputable environmental consulting or
engineering firm acceptable to Bank; (ii) without obligation to do so, to cure
such default or to comply or cause compliance, or to demand that Debtor cure
such default or comply or cause compliance, with any or all Environmental Laws.
All of the foregoing shall be at the expense of Debtor, and any expense incurred
by Bank in connection with any of the foregoing (including without limitation
its expenses relating to attorneys fees and any environmental consultants or
engineers) shall be additional obligation of Debtor hereunder which shall be
payable to Bank upon demand, with interest computed at the Default Rate from the
date(s) upon which said costs and expenses were incurred by Bank.
11.11 Binding Effect, Assignment and Entire Agreement: This Agreement
-----------------------------------------------
shall become effective upon delivery of the Notes, and acceptance of this
Agreement by execution in, to Bank's main office in Malvern, Pennsylvania and
shall inure to the benefit of, and shall be binding upon, the respective heirs,
executors, administrators, successors and permitted assigns of the parties
hereto. Debtor has no right to assign any of its rights or obligations hereunder
without the prior written consent of Bank. This Agreement, and the documents
executed and delivered pursuant hereto, constitute the entire agreement between
the parties, and may be amended only by a writing signed on behalf of each
party.
11.12 Severability: If any provision of this Agreement shall be held
------------
invalid under any applicable Laws, such invalidity shall not affect any other
provision of this Agreement which can be given effect without the invalid
provision. To this end, the provisions hereof are severable.
11.13 Counterparts: This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, under seal, as of the day and year first above written.
IBAH, INC.
Attest:_____________________________ By:______________________________
Name: Name:
Title: Title:
CORESTATES BANK, N.A.
Attest:_____________________________ By:______________________________
Name: Name: Ash Lilani
Title: Title: Assistant Vice President
<PAGE>
SPECIAL RELEASE AND SETTLEMENT AGREEMENT
This Special Release and Settlement Agreement (the "Agreement") is made and
entered into this 28th day of February, 1997 by and between Judith L. Hardardt,
an individual residing at RedGate Road, Morristown, New Jersey 07960
("Employee") and IBAH, Inc., a Delaware corporation with a principal place of
business at Four Valley Square, 512 Township Line Road, Blue Bell, Pennsylvania
19422 ("IBAH").
WHEREAS, Employee has been an executive employee of IBAH pursuant to an
Employment Agreement, dated October 1, 1996 (the "Employment Agreement") by and
between Employee and IBAH; and
WHEREAS, Employee and IBAH have decided to terminate the Employment
Agreement, to resolve all issues surrounding the Employment Agreement and to
enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, AND INTENDING TO BE LEGALLY BOUND,
Employee and IBAH agree as follows:
1. For a period of one year from the date of this Agreement, IBAH shall
continue to pay Employee's salary, as defined in the Employment Agreement, and
continue to cover Employee with group health insurance, life insurance and
disability benefits pursuant to the same terms and conditions offered to other
employees of IBAH.
2. Section 7 of the Employment Agreement is incorporated into and made a part
of this Agreement with the understanding that the term of the Non-Competition
Period, as defined in the Employment Agreement, shall be for two years from the
date of this Agreement.
3. During the Non-Competition Period, Employee shall not directly or indirectly
solicit any employee or consultant of IBAH to terminate or reduce their
employment or consultancy with IBAH. Employee further agrees not to communicate
in any manner, directly or indirectly, with any employee or consultant of IBAH
regarding any aspect of the business or clients of IBAH during the Non-
Competition Period.
4. Employee shall not be renominated for a position on the Board of Directors
of IBAH when her current term expires in June 1997. IBAH shall not change or
amend the provision of the By-laws indemnifying directors of IBAH up to the
limits of the law unless such change or amendment shall apply to all directors
as a group.
<PAGE>
5. In the event that either party elects to terminate the lease (the "Lease")
dated June 2, 1992 among William Hardardt, Employee and IBAH for a condominium
located at Unit 3A, 132 Claremont Road, Bernardsville, New Jersey, the party
terminating the Lease will give the other party three months written notice to
terminate the Lease and such notice shall be deemed sufficient notice to
terminate under the Lease.
6. Except in connection with litigation or threatened litigation between the
parties to this Agreement, Employee agrees not to take any action or make any
statement, orally or in writing, which disparages or damages the reputation of
IBAH or any of its affiliates, officers, directors, employees, consultants,
agents, shareholders or representatives. It shall not be a violation of this
Agreement, however, for Employee to respond truthfully to a subpoena or to a
request for information from any governmental agency or as may be required by
any law, statute, or administrative regulation.
Except in connection with litigation or threatened litigation between the
parties to this Agreement, IBAH agrees not to take any action or make any
statement, orally or in writing, which disparages or damages the reputation of
Employee. It shall not be a violation of this Agreement, however, for IBAH to
respond truthfully to a subpoena or to a request for information from any
governmental agency or as may be required by any law, statute, or administrative
regulation.
Employee's departure from IBAH will be announced by posting of the notice
attached hereto as Exhibit A.
7. Employee shall be entitled to keep only the following property of IBAH: desk
chair in Employee's former office, one printer, laptop computer and fax machine
kept at Employee's home, and one cellular telephone. Except for the equipment
listed in this Section, Employee represents and warrants to IBAH that she has
assembled and turned over to an authorized representative of IBAH all IBAH or
IBAH client property, programs, documents and notes, whether in electronic or
paper form and including all copies thereof.
8. The Employment Agreement is hereby terminated, effective the date of this
Agreement. No duties or obligations from the Employment Agreement shall survive
the termination of the Employment Agreement except those obligations
specifically set forth in this Agreement and those in Sections 8, 9,10 and 11 of
the Employment Agreement which are hereby incorporated into and made a part of
this Agreement and shall apply to any breach of this Agreement, provided
however, that IBAH's obligation to defend and indemnify under Section 11 applies
only to third party claims.
9. Modifications to this Agreement may only be made with the written agreement
of both parties.
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<PAGE>
10. In consideration for entering into this Agreement, consideration which
Employee hereby acknowledges, Employee does hereby release and forever discharge
IBAH and its present and former subsidiaries, affiliates, divisions, officers,
directors, partners, principals, employees, agents, predecessors, assigns,
servants, attorneys and insurers and each of them, and their respective
successors, assigns, heirs, administrators and personal representatives of and
from all actions and causes of action, suits, claims, debts and demands
whatsoever in law or equity, which Employee may have or claim to have against
IBAH as a result of her employment under the employment Agreement or separation
from employment, and does hereby covenant not to file a lawsuit to assert such
claims. Employee is not being asked to, and does not release, any claim which
is nonwaivable as a matter of law.
By this release, Employee knowingly and voluntarily waives any rights under
any and all laws which provide legal restrictions on IBAH's right to terminate
the Employment Agreement and/or the Employment relationship with Employee, and
under any federal, state, or other governmental statute, regulation, or
ordinance, including, without limitation: (1) Title VII of the Civil Rights Act
of 1964 and 1991; (2) the Age Discrimination in Employment Act of 1967; and (3)
Pennsylvania Human Relations Act. Employee also waives any claim against IBAH
for personal injury or any other action against IBAH before any body (except for
compensable injuries under the Pennsylvania or New Jersey Workers Compensation
Act).
11. In consideration for entering into this Agreement, consideration which IBAH
hereby acknowledges, IBAH does hereby release and forever discharge Employee and
her respective successors, assigns, heirs, administrators and personal
representatives of and from all actions and causes of action, suits, claims,
debts and demands whatsoever in law or equity, which IBAH may have or claim to
have against Employee as a result of her employment under the Employment
Agreement or separation from employment, and does hereby covenant not to file a
lawsuit to assert such claims.
12. Employee acknowledges that she has been given twenty-one (21) days within
which to consider this Agreement and that she has consulted with an attorney
prior to executing this Agreement. Employee has carefully read and understands
all provisions of this Agreement, which sets forth the entire agreement between
Employee and IBAH. Employee acknowledges that she has not relied on any
representation, oral or written, not set forth in this Agreement.
13. Employee further understands that she has a period of seven (7) days
following the signing of this Agreement to revoke this Agreement. The Agreement
shall not become effective or enforceable until those seven (7) days have
expired.
14. The failure of either party to enforce any provision of this Agreement
shall not be construed as a waiver or limitation of that party's right to
subsequently enforce and compel strict compliance with every provision of this
Agreement.
15. This Agreement may be executed by the exchange of facsimile counterparts,
and the parties will exchange fully executed originals within thirty (30) days
of the date hereof.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto duly executed this Agreement the day and year first written above.
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<PAGE>
IBAH, Inc.
______________________________ By:_____________________________
Judith L. Hardardt Geraldine A. Henwood
Chief Executive Officer
______________________________
William Hardardt
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<PAGE>
EXHIBIT A
[LOGO FOR IBAH, INC. APPEARS HERE]
Throughout the 1990s, Judith Hardardt established and built a top-notch
organization. Her tireless zeal and intelligence served her company and
clients well. We have appreciated Ms. Hardardt's efforts as we have
successfully navigated the integration of The Hardardt Group into the IBAH
family. It is with regret that we announce that Judith Hardardt is leaving
the company and we wish her well in her future endeavors.
Geraldine A. Henwood
Chief Executive Officer
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<PAGE>
Appendix A
----------
IBAH, INC.
1997 EQUITY COMPENSATION PLAN
-----------------------------
The purpose of the IBAH, Inc. 1997 Equity Compensation Plan (the "Plan") is
to provide (i) designated employees of IBAH, Inc. (the "Company") and its
subsidiaries, (ii) certain key advisors who perform services for the Company or
its subsidiaries and (iii) non-employee members of the Board of Directors of the
Company (the "Board") with the opportunity to receive grants of incentive stock
options and nonqualified stock options. The Company believes that the Plan will
encourage the participants to contribute materially to the growth of the
Company, thereby benefitting the Company's stockholders, and will align the
economic interests of the participants with those of the stockholders.
1. Administration
--------------
(a) Committee. The Plan shall be administered and interpreted by a
---------
committee (the "Committee"), which shall consist of two or more persons
appointed by the Board, all of whom shall be "outside directors" as defined
under section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") and related Treasury regulations. The Committee may also consist of
"non-employee directors" as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). However, notwithstanding anything
in the Plan to the contrary, the Board must ratify or approve any grants made to
Non-Employee Directors. References in the Plan to the "Committee" shall be
deemed to include the Board, with respect to ratification or approval of grants
made to Non-Employee Directors.
(b) Committee Authority. The Committee shall have the sole authority to
-------------------
(i) determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability and (iv) deal
with any other matters arising under the Plan.
(c) Committee Determinations. The Committee shall have full power and
------------------------
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its
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sole discretion, in the best interest of the Company, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to similarly
situated individuals.
2. Options
-------
Awards under the Plan may consist of grants of incentive stock options
("Incentive Stock Options") or nonqualified stock options ("Nonqualified Stock
Options") as described in Section 5 (Incentive Stock Options and Nonqualified
Stock Options are collectively referred to as "Options"). All Options shall be
subject to the terms and conditions set forth herein and to such other terms and
conditions consistent with this Plan as the Committee deems appropriate and as
are specified in writing by the Committee to the individual in a grant
instrument (the "Grant Instrument") or an amendment to the Grant Instrument.
The Committee shall approve the form and provisions of each Grant Instrument.
Options need not be uniform as among the grantees.
3. Shares Subject to the Plan
--------------------------
(a) Shares Authorized. Subject to the adjustment specified below, the
-----------------
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan is 1,500,000 shares, and the maximum
aggregate number of shares of Company Stock that shall be subject to Options
granted under the Plan to any individual during any calendar year shall be
200,000 shares. The shares may be authorized but unissued shares of Company
Stock or reacquired shares of Company Stock, including shares purchased by the
Company on the open market for purposes of the Plan. If and to the extent
Options granted under the Plan terminate, expire, or are canceled, forfeited,
exchanged or surrendered without having been exercised, the shares subject to
such grants shall again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of shares of
-----------
Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Options, the maximum number of shares of Company Stock for
which any individual participating in the Plan may be granted Options in any
year, the number of shares covered by outstanding Options, the kind of shares
issued under the Plan, and the price per share of such Options shall be
appropriately adjusted by the Committee to reflect any increase or decrease in
the number of, or change in the kind or value of, issued shares of Company Stock
to preclude, to the extent practicable, the enlargement or dilution of rights
and benefits under such Options; provided, however, that any fractional shares
resulting from such adjustment shall be
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eliminated. Any adjustments determined by the Committee shall be final, binding
and conclusive.
4. Eligibility for Participation
-----------------------------
(a) Eligible Persons. All employees of the Company and its subsidiaries
----------------
("Employees"), including Employees who are officers or members of the Board, and
members of the Board who are not Employees ("Non-Employee Directors") shall be
eligible to participate in the Plan. Key advisors who perform services to the
Company or any of its subsidiaries ("Key Advisors") shall be eligible to
participate in the Plan if the Key Advisors render bona fide services and such
services are not in connection with the offer or sale of securities in a
capital-raising transaction.
(b) Selection of Grantees. The Committee shall select the Employees, Non-
---------------------
Employee Directors and Key Advisors to receive Options and shall determine the
number of shares of Company Stock subject to a particular Option in such manner
as the Committee determines. Employees, Key Advisors and Non-Employee Directors
who receive Options under this Plan shall hereinafter be referred to as
"Grantees".
5. Granting of Options
-------------------
(a) Number of Shares. The Committee shall determine the number of shares
----------------
of Company Stock that will be subject to each grant of Options to Employees,
Non-Employee Directors and Key Advisors.
(b) Type of Option and Price.
------------------------
(i) The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of section
422 of the Code or Nonqualified Stock Options that are not intended so to
qualify, or any combination of Incentive Stock Options and Nonqualified Stock
Options, all in accordance with the terms and conditions set forth herein.
Incentive Stock Options may be granted only to Employees. Nonqualified Stock
Options may be granted to Employees, Non-Employee Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Company Stock
subject to an Option shall be determined by the Committee and may be equal to,
greater than, or less than the Fair Market Value (as defined below) of a share
of Company Stock on the date the Option is granted; provided, however, that (x)
the Exercise Price of an Incentive Stock Option shall be equal to, or greater
than, the Fair Market Value of a share of Company Stock on the date the
Incentive Stock Option is granted and (y) an Incentive Stock Option may not be
granted to an Employee who, at the time of grant, owns stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary of the
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<PAGE>
Company, unless the Exercise Price per share is not less than 110% of the Fair
Market Value of Company Stock on the date of grant.
(iii) If the Company Stock is publicly traded, then the Fair Market
Value per share shall be determined as follows: (x) if the principal trading
market for the Company Stock is a national securities exchange or the Nasdaq
National Market, the mean between the reported high and low sale prices thereof
on the relevant date or (if there were no trades on that date) the latest
preceding date upon which a sale was reported, or (y) if the Company Stock is
not principally traded on such exchange or market, the mean between the last
reported "bid" and "asked" prices of Company Stock on the relevant date, as
reported on Nasdaq or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines. If the Company Stock is
not publicly traded or, if publicly traded, is not subject to reported
transactions or "bid" or "asked" quotations as set forth above, the Fair Market
Value per share shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of each Option.
-----------
The term of any Option shall not exceed ten years from the date of grant.
However, an Incentive Stock Option that is granted to an Employee who, at the
time of grant, owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company, or any parent or subsidiary
of the Company, may not have a term that exceeds five years from the date of
grant.
(d) Exercisability of Options. Options shall become exercisable in
-------------------------
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument or an
amendment to the Grant Instrument. The Committee may accelerate the
exercisability of any or all outstanding Options at any time for any reason.
(e) Termination of Employment, Disability or Death.
----------------------------------------------
(i) Except as provided below, an Option may only be exercised while
the Grantee is employed by, or providing services to, the Company as an
Employee, Key Advisor or member of the Board. In the event that a Grantee ceases
to be employed by, or provide services to, the Company for any reason other than
a "disability", death, or "termination for cause", any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within 90 days after
the date on which the Grantee ceases to be employed by, or provide services to,
the Company (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the Option
term. Any of the Grantee's Options that are not otherwise exercisable as of the
date on which the Grantee ceases to be employed by, or provide services to, the
Company shall terminate as of such date.
(ii) In the event the Grantee ceases to be employed by, or provide
services to, the Company on account of a "termination for cause" by the Company,
any Option held by the
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<PAGE>
Grantee shall terminate as of the date the Grantee ceases to be employed by, or
provide services to, the Company.
(iii) In the event the Grantee ceases to be employed by, or provide
services to, the Company because the Grantee is "disabled", any Option which is
otherwise exercisable by the Grantee shall terminate unless exercised within one
year after the date on which the Grantee ceases to be employed by, or provide
services to, the Company (or within such other period of time as may be
specified by the Committee), but in any event no later than the date of
expiration of the Option term. Any of the Grantee's Options which are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by, or provide services to, the Company shall terminate as of such date.
(iv) If the Grantee dies while employed by, or providing services to, the
Company or within 90 days after the date on which the Grantee ceases to be
employed by, or provide services to, the Company on account of a termination of
employment specified in Section 5(e)(i) above (or within such other period of
time as may be specified by the Committee), any Option that is otherwise
exercisable by the Grantee shall terminate unless exercised within one year
after the date on which the Grantee ceases to be employed by, or provide
services to, the Company (or within such other period of time as may be
specified by the Committee), but in any event no later than the date of
expiration of the Option term. Any of the Grantee's Options that are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by, or provide services to, the Company shall terminate as of such date.
(v) For purposes of this Section 5(e):
(A) The term "Company" shall mean the Company and its parent and subsidiary
corporations.
(B) "Employed by, or provide services to, the Company" shall mean
employment or service as an Employee, Key Advisor or member of the Board, so
that, for purposes of exercising Options, a Grantee shall not be considered to
have terminated employment until the Grantee ceases to be an Employee, Key
Advisor and member of the Board, unless the Committee determines otherwise.
(C) "Disability" shall mean a Grantee's becoming disabled within the
meaning of section 22(e)(3) of the Code.
(D) "Termination for cause" shall mean, except to the extent specified
otherwise by the Committee, a finding by the Committee that the Grantee has
committed a material breach of his or her employment or service contract with
the Company, or has been engaged in disloyalty to the Company, including,
without limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his or her employment or service, or has disclosed
trade secrets or confidential information of
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the Company to persons not entitled to receive such information. In the
event a Grantee's employment is terminated for cause, in addition to the
immediate termination of all Options, the Grantee shall automatically
forfeit all shares underlying any exercised portion of an Option for which
the Company has not yet delivered the share certificates, upon refund by
the Company of the Exercise Price paid by the Grantee for such shares.
(f) Exercise of Options. A Grantee may exercise an Option that has become
-------------------
exercisable, in whole or in part, by delivering a notice of exercise to the
Company with payment of the Exercise Price. The Grantee shall pay the Exercise
Price for an Option as specified by the Committee (x) in cash, (y) with the
approval of the Committee, by delivering shares of Company Stock owned by the
Grantee (including Company Stock acquired in connection with the exercise of an
Option, subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the Exercise Price
or (z) by such other method as the Committee may approve, including payment
through a broker in accordance with procedures permitted by Regulation T of the
Federal Reserve Board. Shares of Company Stock used to exercise an Option shall
have been held by the Grantee for the requisite period of time to avoid adverse
accounting consequences to the Company with respect to the Option. The Grantee
shall pay the Exercise Price and the amount of any withholding tax due (pursuant
to Section 6) at the time of exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option shall
---------------------------------
provide that, if the aggregate Fair Market Value of the stock on the date of the
grant with respect to which Incentive Stock Options are exercisable for the
first time by a Grantee during any calendar year, under the Plan or any other
stock option plan of the Company or a parent or subsidiary, exceeds $100,000,
then the Option, as to the excess, shall be treated as a Nonqualified Stock
Option. An Incentive Stock Option shall not be granted to any person who is not
an Employee of the Company or a parent or subsidiary (within the meaning of
section 424(f) of the Code).
6. Withholding of Taxes
--------------------
(a) Required Withholding. All Options under the Plan shall be subject to
--------------------
applicable federal (including FICA), state and local tax withholding
requirements. The Company may require the Grantee or other person receiving
shares upon the exercise of Options to pay to the Company the amount of any
federal, state or local taxes that the Company is required to withhold with
respect to such Options, or the Company may deduct from other wages paid by the
Company the amount of any withholding taxes due with respect to such Options.
(b) Election to Withhold Shares. If the Committee so permits, a Grantee
---------------------------
may elect to satisfy the Company's income tax withholding obligation with
respect to an Option by having shares withheld up to an amount that does not
exceed the Grantee's maximum marginal tax rate for federal (including FICA),
state and local tax liabilities. The election must be in a form and manner
prescribed by the Committee and shall be subject to the prior approval of the
Committee.
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7. Transferability of Options
--------------------------
(a) Nontransferability of Options. Except as provided below, only the
-----------------------------
Grantee may exercise rights under an Option during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or, with respect to Nonqualified Stock Options, if permitted in
any specific case by the Committee, pursuant to a domestic relations order (as
defined under the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the regulations thereunder). When a Grantee dies, the
personal representative or other person entitled to succeed to the rights of the
Grantee ("Successor Grantee") may exercise such rights. A Successor Grantee
must furnish proof satisfactory to the Company of his or her right to receive
the Option under the Grantee's will or under the applicable laws of descent and
distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the foregoing,
--------------------------------------
the Committee may provide, in a Grant Instrument, that a Grantee may transfer
Nonqualified Stock Options to family members or other persons or entities
according to such terms as the Committee may determine; provided that the
Grantee receives no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same terms and conditions
as were applicable to the Option immediately before the transfer.
8. Change of Control of the Company
--------------------------------
As used herein, a "Change of Control" shall be deemed to have occurred if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
more than 50% of the voting power of the then outstanding securities of the
Company, except where the acquisition is approved by the Board;
(b) The stockholders of the Company approve (or, if stockholder approval is
not required, the Board approves) an agreement providing for (i) the merger or
consolidation of the Company with another corporation where the stockholders of
the Company, immediately prior to the merger or consolidation, will not
beneficially own, immediately after the merger or consolidation, shares
entitling such stockholders to more than 50% of all votes to which all
stockholders of the surviving corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote), or where the members of the Board,
immediately prior to the merger or consolidation, would not, immediately after
the merger or consolidation, constitute a majority of the board of directors of
the surviving corporation, (ii) the sale or other disposition of all or
substantially all of the assets of the Company, or (iii) a liquidation or
dissolution of the Company;
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(c) Any person has commenced a tender offer or exchange offer for or more
than 50% of the voting power of the then outstanding shares of the Company; or
(d) At least a majority of the Board does not consist of individuals who
were elected, or nominated for election, by the directors in office at the time
of such election or nomination.
9. Consequences of a Change of Control
-----------------------------------
(a) Notice and Acceleration. Upon a Change of Control, unless the
-----------------------
Committee determines otherwise, (i) the Company shall provide each Grantee with
outstanding Options written notice of such Change of Control and (ii) all
outstanding Options that are not then exercisable shall automatically accelerate
and become fully exercisable.
(b) Assumption of Options. Upon a Change of Control where the Company is
---------------------
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
that are not exercised shall be assumed by, or replaced with comparable options
by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, subject to
------------------
subsection (e) below, in the event of a Change of Control, the Committee may
take one or both of the following actions: the Committee may (i) require that
Grantees surrender their outstanding Options in exchange for a payment by the
Company, in cash or Company Stock as determined by the Committee, in an amount
equal to the amount by which the then Fair Market Value of the shares of Company
Stock subject to the Grantee's unexercised Options exceeds the Exercise Price of
the Options, or (ii) after giving Grantees an opportunity to exercise their
outstanding Options, terminate any or all unexercised Options at such time as
the Committee deems appropriate. Such surrender or termination shall take place
as of the date of the Change of Control or such other date as the Committee may
specify.
(d) Committee. The Committee making the determinations under this Section
---------
9 following a Change of Control must be comprised of the same members as those
on the Committee immediately before the Change of Control. If the Committee
members do not meet this requirement, the automatic provisions of Subsections
(a) and (b) shall apply, and the Committee shall not have discretion to vary
them with respect to an outstanding Option without the consent of the Grantee.
(e) Limitations. Notwithstanding anything in the Plan to the contrary, in
-----------
the event of a Change of Control, the Committee shall not have the right to take
any actions described in the Plan (including without limitation actions
described in subsection (c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
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10. Amendment and Termination of the Plan
-------------------------------------
(a) Amendment. The Board may amend or terminate the Plan at any time;
---------
provided, however, that the Board shall not amend the Plan without stockholder
approval if such approval is required by Section 162(m) of the Code.
(b) Termination of Plan. The Plan shall terminate on the day immediately
-------------------
preceding the tenth anniversary of its effective date, unless the Plan is
terminated earlier by the Board or is extended by the Board with the approval of
the stockholders.
(c) Termination and Amendment of Outstanding Options. A termination or
------------------------------------------------
amendment of the Plan that occurs after an Option is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 17(b). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Option. Whether or not the Plan has terminated, an outstanding Option may be
terminated or amended under Section 17(b) or may be amended by agreement of the
Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
------------------
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
11. Funding of the Plan
-------------------
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Options under this Plan. In no event shall
interest be paid or accrued on any Option.
12. Rights of Participants
----------------------
Nothing in this Plan shall entitle any Employee, Non-Employee Director, Key
Advisor or other person to any claim or right to be granted an Option under this
Plan. Neither this Plan nor any action taken hereunder shall be construed as
giving any individual any rights to be retained by or in the employ of the
Company or any other employment rights.
13. No Fractional Shares
--------------------
No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan or any Option. The Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
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14. Requirements for Issuance or Transfer of Shares
-----------------------------------------------
No Company Stock shall be issued or transferred in connection with any
Option hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Option granted to any Grantee hereunder on such Grantee's undertaking in
writing to comply with such restrictions on his or her subsequent disposition of
such shares of Company Stock as the Committee shall deem necessary or advisable
as a result of any applicable law, regulation or official interpretation
thereof, and certificates representing such shares may be legended to reflect
any such restrictions. Certificates representing shares of Company Stock issued
or transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
15. Headings
--------
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
16. Effective Date of the Plan.
--------------------------
Subject to approval by the Company's stockholders, the Plan shall be
effective on January 1, 1997.
17. Miscellaneous
-------------
(a) Grants in Connection with Corporate Transactions and Otherwise.
--------------------------------------------------------------
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes, or
(ii) limit the right of the Company to grant stock options or make other awards
outside of this Plan. Without limiting the foregoing, the Committee may grant
an Option to an employee of another corporation who becomes an Employee by
reason of a corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its subsidiaries
in substitution for a stock option granted by such corporation. The terms and
conditions of the substitute grants may vary from the terms and conditions
required by the Plan and from those of the substituted stock incentives. The
Committee shall prescribe the provisions of the substitute grants.
(b) Compliance with Law. The Plan, the exercise of Options and the
-------------------
obligations of the Company to issue or transfer shares of Company Stock under
Options shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required.
A-10
<PAGE>
With respect to persons subject to Section 16 of the Exchange Act, it is the
intent of the Company that the Plan and all transactions under the Plan comply
with all applicable provisions of Rule 16b-3 or its successors under the
Exchange Act. The Committee may revoke any Option if it is contrary to law or
modify an Option to bring it into compliance with any valid and mandatory
government regulation. The Committee may also adopt rules regarding the
withholding of taxes on payments to Grantees. The Committee may, in its sole
discretion, agree to limit its authority under this Section.
(c) Governing Law. The validity, construction, interpretation and effect
-------------
of the Plan and Grant Instruments issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the State of Delaware.
A-11
<PAGE>
STANDARD FORM OF OFFICE LEASE
-----------------------------
AGREEMENT OF LEASE, made as of this 29th day of December, 1993, between 6
----
CENTURY ASSOCIATES, a New Jersey limited partnership, having an office c/o
Bellemead Management Co., Inc., 280 Corporate Center, 4 Becker Farm Road, Third
Floor, Roseland, New Jersey 07068 (the "Owner" or "Landlord"), and HGB, INC., a
New Jersey corporation, having an address c/o The Hardardt Group, Village Road,
New Vernon, New Jersey 07976 (the "Tenant").
WITNESSETH: Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord a portion of the third (3rd) floor of a certain office building located
at 6 Century Drive, Parsippany-Troy Hills, New Jersey (the "Premises" or
"Demised Premises" or "demised premises"), more particularly shown upon the
Rental Plan annexed hereto and made a part hereof as Exhibit "A", for a term
commencing and terminating as set forth in Article 37 of the Rider to Lease.
The annual rental rate ("Minimum Rent") for the Premises shall be TWO
HUNDRED TEN THOUSAND FIFTY TWO AND 50/100 DOLLARS ($210,052.50), payable in
advance on the first day of each calendar month in equal monthly installments of
SEVENTEEN THOUSAND FIVE HUNDRED FOUR AND 38/100 DOLLARS ($17,504.38) during the
term of this Lease.
Installments of Minimum Rent payable hereunder shall be paid at the office
of Landlord or at such other place as Landlord may designate from time to time
by written notice to Tenant hereunder, without setoff or deduction whatsoever
except that Tenant shall pay (i) security equal to one (1) monthly installment
of Minimum Rent on the date hereof and (ii) prepaid rent equal to the sum of
five (5) monthly installments of Minimum Rent, two (2) monthly installments of
which shall be due on the date hereof and three (3)
<PAGE>
monthly installments of which shall be due on or before the commencement Date
(hereinafter defined in Section 37.1 hereof). Said prepaid rent shall be (a)
deposited in the same interest bearing account (described in Section 62.3
hereof) in which the security is deposited and (b) disbursed pursuant to Article
67 hereof.
<PAGE>
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner of with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The Parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
RENT
1. Tenant shall pay the rent as above and as hereinafter provided.
OCCUPANCY
2. Tenant shall use and occupy demised premises for general
executive and administrative offices only and for no other purpose.
TENANT ALTERATIONS
3. Except for the initial work performed on Tenant's behalf at the
commencement of the lease term, Tenant shall make no other changes in or to the
demised premises of any nature without Owner's prior written consent. Subject to
the prior written consent of Owner, and to the provisions of this article.
Tenant at Tenant's expense, may make alterations, installations, additions or
improvements which are non-structural and which do not affect utility services
or plumbing and electrical lines, in or to the interior of the demised premises
by using contractors or mechanics first approved by Owner. Tenant shall, before
making any alterations, additions, installations or improvements, at its
expense, obtain all permits, approvals and certificates required by any
governmental or quasi-governmental bodies and (upon completion) certificates of
final approval thereof and shall deliver promptly duplicates of all such
permits, approvals and certificates to Owner and Tenant agrees to carry and will
cause Tenant's contractors and sub-contractors to carry such workman's
compensation, general liability, personal and property damage insurance as Owner
may require. If any mechanic's lien is filed against the demised premises, or
the building of which the same forms a part, for work claimed to have been done
for, or materials furnished to, Tenant, whether or not done pursuant to this
article, the same shall be discharged by Tenant within thirty days thereafter,
at Tenant's expense, by filing the bond required by law. Except for the initial
work performed on Tenant's behalf at the commencement of the lease term, all
other fixtures and all paneling, cables, telephones wires, partitions, railings
and like installations, installed in the premises at any time, either by Tenant
or by Owner in Tenant's behalf, shall, upon installation, become the property of
Owner and shall remain upon and be surrendered with the demised premises unless
Owner, by notice to Tenant no later than twenty days prior to the date fixed as
the termination of this lease, elects to relinquish Owner's right thereto and to
have them removed by Tenant, in which event the same shall be removed from the
premises by Tenant prior to the expiration of the lease, at Tenant's expense.
Nothing in this Article shall be construed to give Owner title to or to prevent
Tenant's removal of trade fixtures, moveable office furniture and equipment, but
upon removal of any such from the premises or upon removal of other
installations as may be required by Owner, Tenant shall immediately and at its
expense, repair and restore the premises to the condition existing prior to
installation and repair any damage to the demised premises or the building due
to such removal, reasonable wear and tear excepted. All property permitted or
required to be removed, by Tenant at the end of the term remaining in the
premises after Tenant's removal shall be deemed abandoned and may, at the
election of Owner, either be retained as Owner's property or may be removed from
the premises by Owner, at Tenant's expense.
MAINTENANCE AND REPAIRS
4. Tenant shall, throughout the term of this lease, take good care
of the demised premises and the fixtures and appurtenances therein. Tenant shall
be responsible for all damage or injury to the demised premises or any other
part of the building and the systems and equipment thereof, whether requiring
structural or nonstructural repairs caused by or resulting from carelessness,
omission, neglect or improper conduct of Tenant, Tenant's subtenants, agents,
employees, invitees or licensees, or which arise out of any work, labor, service
or equipment done for or supplied to Tenant or any subtenant or arising out of
the installation, use or operation of the property or equipment of Tenant or any
subtenant. Tenant shall also repair all damage to the building and the demised
premises caused by the moving of Tenant's fixtures, furniture and equipment.
Tenant shall promptly make, at Tenant's expense, all repairs in and to the
demised premises for which Tenant is responsible, using only the contractor for
the trade or trades in question, selected from a list of at least two
contractors per trade submitted by Owner. Any other repairs in or to the
building or the facilities and systems thereof for which Tenant is responsible
shall be performed by Owner at the Tenant's expense. Owner shall maintain in
good working order and repair the exterior and the structural portions of the
building, including the structural portions of its demised premises, and the
public portions of the building interior and the building plumbing, electrical,
heating and ventilating systems (to the extent such systems presently exist)
serving the demised premises. Tenant agrees to give prompt notice of any
defective condition in the premises for which Owner may be responsible
hereunder. Except for Owner's gross negligence or wilfull misconduct, there
shall be no allowance to Tenant for diminution of rental value and no liability
on the part of Owner by reason of inconvenience, annoyance or injury to business
arising from Owner or others making repairs, alterations, additions or
improvements in or to any portion of the building or the demised premises or in
and to the fixtures, appurtenances or equipment thereof. It is specifically
agreed that Tenant shall not be entitled to any setoff or reduction of rent by
reason of any failure of Owner to comply with the covenants of this or any other
article of this Lease. Tenant agrees that Tenant's sole remedy at law in such
instance will be by way of an action for damages for breach of contract. The
provisions of this Article 4 shall not apply in the case of fire or other
casualty which are dealt with in Article 9 hereof.
WINDOW CLEANING
5. Tenant will not clean nor require, permit, suffer or allow any
window in the demised premises to be cleaned from the outside.
REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOADS
6. Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter, Tenant, at Tenant's sole cost and
expense, shall promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer pursuant to law,
and all orders, rules and regulations of any body which shall impose any
violation, order or duty upon Owner or Tenant with respect to the demised
premises, arising out of Tenant's use or manner of use thereof, (including
Tenant's permitted use) or, with respect to the building if arising out of
Tenant's use or manner of use of the premises or the building (including the use
permitted under the lease). Nothing herein shall require Tenant to make
structural repairs or alterations unless Tenant has, by its manner of use of the
demised premises or method of operation therein, violated any such laws,
ordinances, orders, rules, regulations or requirements with respect thereto.
Tenant may, after securing Owner to Owner's satisfaction against all damages,
interest, penalties and expenses, including, but not limited to, reasonable
attorney's fees, by cash deposit or by surety bond in an amount and in a company
satisfactory to Owner, contest and appeal any such laws, ordinances, orders,
rules, regulations or requirements provided some is done with all reasonable
promptness and provided such appeal shall not subject Owner to prosecution for a
criminal offense or constitute a default under any lease or mortgage under which
Owner may be obligated, or cause the demised premises or any part thereof to be
condemned or vacated. Tenant shall not do or permit any act or thing to be done
in or to the demised premises which is contrary to law, or which will invalidate
or be in conflict with public liability, fire or other policies of insurance at
any time carried by or for the benefit of Owner with respect to the demised
premises or the building of which the demised premises form a part, or which
shall or might subject Owner to any liability or responsibility to any person or
for property damage. Tenant shall not keep anything in the demised premises
except as now or hereafter permitted by the Fire Department, Board of Fire
Underwriters, Fire Insurance Rating Organization or other authority having
jurisdiction, and then only in such manner and such quantity so as not to
increase the rate for fire insurance applicable to the building, nor use the
premises in a manner which will increase the insurance rate for the building or
any property located therein over that in effect prior to the commencement of
Tenant's occupancy. Tenant shall pay all costs, expenses, fines, penalties, or
damages, which may be imposed upon Owner by reason of Tenant's failure to comply
with the provisions of this article and if by reason of such failure the fire
insurance rate shall, at the beginning of this lease or at any time thereafter,
be higher than it otherwise would be, then Tenant shall reimburse Owner, as
additional rent hereunder, for that portion of all fire insurance premiums
thereafter paid by Owner which shall have been charged because of such failure
by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a
schedule or "make-up" of rate for the building or demised premises issued by any
body making fire insurance rates applicable to said premises shall be conclusive
evidence of the facts therein stated and of the several items and charges in the
fire insurance rates then applicable to said premises. Tenant shall not place a
load upon any floor of the demised premises exceeding the floor load per square
foot area which it was designed to carry and which is allowed by law. Owner
reserves the right to prescribe the weight and position of all safes, business
machines and mechanical equipment. Such installations shall be placed and
maintained by Tenant, at Tenant's expense, in settings sufficient, in Owner's
reasonable judgement, to absorb and prevent vibration, noise and annoyance to
other tenants of the building.
SUBORDINATION
7. (a) This lease is subject and subordinate to all ground or
underlying leases and to all mortgages which may now or hereafter affect such
leases or the real property of which demised premises are a part and to all
renewals, modifications, consolidations,
<PAGE>
replacements and extensions of any such underlying leases and mortgages. This
clause shall be self-operative and no further instrument of subordination shall
be required by any ground or underlying lessor or by any mortgagee, affecting
any lease or the real property of which the demised premises are a part. In
confirmation of such subordination, Tenant shall execute promptly any
certificate that Owner may request.
(b) With respect to all mortgages which may as of the date
hereof affect this Lease or the building of which the demised premises form a
part, Owner agrees that upon Tenant's written request received by Owner within
ten (10) days after the date hereof (time being of the essence), Owner shall
endeavor to use reasonable efforts (at no cost or expense to Owner) to obtain a
non-disturbance and attornment agreement in recordable form from the holder of
any such mortgage, providing in substance that so long as Tenant shall have
entered into possession and occupancy of the demised premises and commenced
payment of Minimum Rent and additional rent due hereunder, and so long as Tenant
has not breached its obligations for the timely payment of Minimum Rent and
additional rent and in the performance of the other terms, covenants and
conditions to be performed or observed on Tenant's part under the Lease.
Tenant's possession of the demised premises will not be disturbed during the
term hereof, notwithstanding the foreclosure of any such mortgage, and Tenant
will not be named as a party defendant in any foreclosure proceedings brought
for the recovery of possession, it being hereby covenanted and agreed by Tenant
that the holder of any such mortgage, or anyone claiming by, through or under
said holder shall not be (i) liable for any act or omission for any prior
landlord (including Owner), or (ii) subject to any offsets or defenses which
Tenant might have against any prior landlord (including Owner), or (iii) bound
by any Minimum Rent, Adjusted Minimum rent or additional rent or other charges
which Tenant might have paid for more than the current month to a prior landlord
(including Owner), or (iv) bound by any modifications of this Lease made without
the written consent of such mortgagee.
(c) The failure of Owner to obtain a non-disturbance and
attornment agreement shall not be deemed a default on Owner's part of its
obligations hereunder, or impose any claim in favor of Tenant against Owner by
reason thereof, or affect the validity of this Lease. Tenant agrees to (i)
execute and deliver to such mortgagee a non-disturbance and attornment agreement
in form and substance satisfactory to and customarily adopted by such mortgagee
and (ii) reimburse Owner for all expenses incurred by Owner in connection
therewith, including legal expenses.
PROPERTY-LOSS, DAMAGE, REIMBURSEMENT, INDEMNITY
8. Owner or its agents shall not be liable for any damage to
property of Tenant or of others entrusted to employees of the building, nor for
loss of or damage to any property of Tenant by theft or otherwise, nor for any
injury or damage to persons or property resulting from any cause of whatsoever
nature, unless caused by or due to the negligence of Owner, its agents, servants
or employees. Owner or its agents will not be liable for any such damage caused
by other tenants or persons in, upon or about said building or caused by
operations in construction of any private, public or quasi public work. If at
any time any windows of the demised premises are temporarily closed, darkened or
bricked up (or permanently closed, darkened or bricked up, if required by law)
for any reason whatsoever including, but not limited to Owner's own acts. Owner
shall not be liable for any damage Tenant may sustain thereby and Tenant shall
not be entitled to any compensation therefor nor-abatement or diminution of rent
nor shall the same release Tenant from its obligations hereunder nor constitute
an eviction. Tenant shall indemnify and save harmless Owner against and from all
liabilities, obligations, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including reasonable attorneys
fees, paid, suffered or incurred as a result of any breach by Tenant, Tenant's
agents, contractors, employees, invitees, or licensees, of any covenant or
condition of this lease, or the carelessness, negligence or improper conduct of
the Tenant, Tenant's agents, contractors, employees, invitees or licensees.
Tenant's liability under this lease extends to the acts and omissions of any
sub-tenant, and any agent, contractor, employee, invitee or licensee of any
sub-tenant. In case any action or proceeding is brought against Owner by reason
of any such claim, Tenant, upon written notice from Owner, will, at Tenant's
expense, resist or defend such action or proceeding by counsel approved by Owner
in writing, such approval not to be unreasonably withheld.
DESTRUCTION, FIRE AND OTHER CASUALTY
9. (a) If the demised premises or any part thereof shall be damaged by
fire or other casualty, Tenant shall give immediate notice thereof to Owner and
this lease shall continue in full force and effect except as hereinafter set
forth. (b) If the demised premises are partially damaged or rendered partially
unusable by fire or other casualty, Owner shall notify Tenant of its intention
to restore said damage which shall be repaired by and at the expense of Owner
and the rent, until such repair shall be substantially completed, shall be
apportioned from the day following the casualty according to the part of the
premises which is usable. (c) If the demised premises are totally damaged or
rendered wholly unusable by fire or other casualty, then the rent shall be
proportionately paid up to the time of the casualty and thenceforth shall cease
until the date when the premises shall have been repaired and restored by Owner,
subject to Owner's right to elect not to restore the same as hereinafter
provided. (d) If the demised premises are rendered wholly unusable or (whether
or not the demised premises are damaged in whole or in part) if the building
shall be so damaged that Owner shall decide to demolish it or to rebuild it,
then, in any of such events, Owner may elect to terminate this lease by written
notice to Tenant, given within 90 days after such fire or casualty, specifying a
date for the expiration of the lease, which date shall not be more than 60 days
after the giving of such notice, and upon the date specified in such notice the
term of this lease shall expire as fully and completely as if such date were the
date set forth above for the termination of this lease and Tenant shall
forthwith quit, surrender and vacate the premises without prejudice however, to
Landlord's rights and remedies against Tenant under the lease provisions in
effect prior to such termination, and any rent owing shall be paid up to such
date and any payments of rent made by Tenant which were on account of any period
subsequent to such date shall be returned to Tenant. Unless Owner shall serve a
termination notice as provided for herein, Owner shall make the repairs and
restorations under the conditions of (b) and (c) hereof, with all reasonable
expedition, subject to delays due to adjustment of insurance claims, labor
troubles and causes beyond Owner's reasonable control. After any such casualty,
Tenant shall cooperate with Owner's restoration by removing from the premises as
promptly as reasonably possible, all of Tenant's salvageable inventory and
movable equipment, furniture, and other property. Tenant's liability for rent
shall resume ten (10) days after written notice from Owner that the premises are
substantially ready for Tenant's occupancy. In the event (i) the demised
premises shall be damaged by fire or other casualty during the term and Tenant
shall be unable to use the demised premises as a result of such damage and (ii)
Owner shall not exercise the right to terminate this Lease and shall,
accordingly, be obligated to repair any such damage pursuant to the provisions
hereof, and (iii) Owner shall have failed to repair such damage within six (6)
months after the date of such fire or other casualty, as such period shall be
extended by the number of days that Owner is delayed in completing such
restoration by any cause or factor beyond Owner's reasonable control, including,
but not limited to, Tenant's failure to cooperate with Owner, strikes or other
labor disputes, accidents, orders or regulations of any Federal, State, County
or Municipal Authority, delays due to adjustment of insurance claims, lack of
availability of materials, parts or utility services, acts of God, fire,
earthquake, floods, explosion, action of the elements, war, hostilities,
invasion, insurrection, riot, mob violence, sabotage, or by reason of any other
cause, whether similar or not to the foregoing, that is beyond the reasonable
control of Owner, (such six (6) month period as so extended is referred to as
the "Restoration Period"), then, in such event, Tenant shall have a one time
option to give the Owner, within ten (10) days next following the expiration of
the Restoration Period, time being of the essence, a thirty (30) day notice of
termination of this Lease and upon the expiration of said thirty (30) days, this
Lease and the term thereunder shall end and expire as fully and completely as if
the expiration of such thirty (30) day period were the day herein definitely
fixed for the end and expiration of this Lease and the term thereof and Tenant
shall then quit and surrender the demised premises to Owner but Tenant shall
remain liable through and including the date of such damage as provided in this
Lease. Failure of Tenant to timely deliver a thirty (30) day notice of
termination shall be conclusively deemed to be an express election by Tenant to
waive Tenant's right to terminate the Lease as provided in this Article 9. (e)
Nothing contained hereinabove shall relieve Tenant from liability that may exist
as a result of damage from fire or other casualty. Notwithstanding the
foregoing, each party shall look first to any insurance in its favor before
making any claim against the other party for recovery for loss or damage
resulting from fire or other casualty, and to the extent that such insurance is
in force and collectible and to the extent permitted by law, Owner and Tenant
each hereby releases and waives all right of recovery against the other or any
one claiming through or under each of them by way of subrogation or otherwise.
The foregoing release and waiver shall be in force only if both relessors'
insurance policies contain a clause providing that such a release or waiver
shall not invalidate the insurance. If, and to the extent, that such waiver can
be obtained only by the payment of additional premiums, then the party
benefiting from the waiver shall pay such premium within ten days after written
demand or shall be deemed to have agreed that the party obtaining insurance
coverage shall be free of any further obligation under the provisions hereof
with respect to waiver of subrogation. Tenant acknowledges that Owner will not
carry insurance on Tenant's furniture and/or furnishings or any fixtures or
equipment, improvements, or appurtenances removable by Tenant and agrees that
Owner will not be obligated to repair any damage thereto or replace the same.
EMIMENT DOMAIN
10. If the whole or any part of the demised premises shall be acquired
or condemned by Emiment Domain for any public or quasi public use or purpose,
then and in that event, the term of this lease shall cease and terminate from
the date of title vesting in such proceeding and Tenant shall have no claim for
the value of any unexpired term of said lease and assigns to Owner. Tenant's
entire interest in any such award. Tenant shall be permitted to prosecute its
own claim against the condemning authority for moving expenses and other
damages provided Tenant's award does not in any way diminish Owner's award
hereunder.
ASSIGNMENT, MORTGAGE, ETC.
11. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this agreements, nor
underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner in each instance.
Subject to Article 48 hereof, transfer of the majority of the stock of a
corporate Tenant shall be
<PAGE>
deemed an assignment. If this lease be assigned, or if the demised premises or
any part thereof be underlet or occupied by anybody other than Tenant. Owner
may, after default by Tenant, collect rent from the assignee, under-tenant or
occupant, and apply the net amount collected to the rent herein reserved, but no
such assignment, underletting, occupancy or collection shall be deemed a waiver
of this covenant, or the acceptance of the assignee, under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further
assignment or underletting.
ELECTRIC CURRENT
12. Tenant covenants and agrees that at all times its use of electric
current shall not exceed the capacity 6 existing feeders to the building or the
risers or wiring installation and Tenant may not use any electrical equipment
which, in Owner's opinion, reasonably exercised, will overload such
installations or interfere with the use thereof by other tenants of the
building. The change at any time of the character of electric service shall
in no wise make owner liable or responsible to Tenant, for any loss, damages or
expenses which Tenant may sustain.
ACCESS TO PREMISES
13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and, at
other reasonable times during normal business hours, to examine the same and to
make such repairs, replacements and improvements as Owner may deem necessary and
reasonably desirable to the demised premises or to any other portion of the
building or which Owner may elect to perform. Tenant shall permit Owner to use
and maintain and replace pipes and conduits in and through the demised premises
and to erect new pipes and conduits therein provided they are concealed
within the walls, floor, or ceiling. Owner may, during the progress of any work
in the demised premises, take all necessary materials and equipment into said
premises without the same constituting an eviction nor shall the Tenant be
entitled to any abatement of rent while such work is in progress nor to any
damages by reason of loss or interruption of business or otherwise. Throughout
the term hereof Owner shall have the right to enter the demised premises at
reasonable hours upon reasonable notice for the purpose of showing the same to
prospective purchases or mortgagees of the building, and during the last six
months of the term for the purpose of showing the same to prospective tenants.
If Tenant is not present to open and permit an entry into the premises, Owner or
Owner's agents may enter the same whenever such entry may be necessary or
permissible by master key or forcibly and provided reasonable care is exercised
to safeguard Tenant's property, such entry shall not render Owner or its agents
liable therefor, nor in any event shall the obligations of Tenant hereunder be
affected. If during the last month of the term Tenant shall have removed all or
substantially all of Tenant's property therefrom, Owner may immediately enter,
alter, renovate or redecorate the demised premises without limitation or
abatement of rent, or incurring liability to Tenant for any compensation and
such act shall have no effect on this lease or Tenant's obligations hereunder.
SMOKING POLICY
14. Landlord reserves the right to establish a no smoking policy in
some or all common areas of the building including but not limited to elevators,
lobbies, atriums, stairwells, corridors and restrooms.
CERTIFICATE OF OCCUPANCY
15. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the building of which the
demised premises are a part. Tenant has inspected the premises and accepts them
as is, subject to the rider annexed hereto with respect to Owner's work, if any.
In any event, Owner makes no representation as to the condition of the premises
and Tenant agrees to accept the same subject to violations, whether or not of
record.
BANKRUPTCY
16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by the sending of a
written notice to Tenant within a reasonable time after the happening of any one
or more of the following events: (1) the commencement of a case in bankruptcy or
under the laws of any state naming Tenant as the debtor; or (2) the making by
Tenant of an assignment or any other arrangement for the benefit of creditors
under any state statute. Neither Tenant nor any person claiming through or under
Tenant, or by reason of any statute or order of court, shall thereafter be
entitled to possession of the premises demised but shall forthwith quit and
surrender the premises. If this lease shall be assigned in accordance with its
terms, the provisions of this Article 16 shall be applicable only to the party
then owning Tenant's interest in this lease.
(b) it is stipulated and agreed that in the event of the termination
of this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rent reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the difference between any
installment of rent becoming due hereunder after the date of termination and the
fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such reletting
shall be deemed to be the fair and reasonable rental value for the part or the
whole of the premises so re-let during the term of the re-letting. Nothing
herein contained shall limit or prejudice the right of the Owner to prove for
and obtain as liquidated damages by reason of such termination, an amount equal
to the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
DEFAULT
17. (1) If Tenant defaults in fulfilling any of the covenants of
this lease other than the covenants for the payment of rent or additional rent;
or if the demised premises becomes vacant or deserted; or if any execution or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the demised premises shall be taken or occupied by someone other than Tenant; or
if this lease be rejected under Section 235 of Title 11 of the U.S. Code
(bankruptcy code); or if Tenant shall fail to move into or take possession of
the premises within fifteen (15) days after the commencement of the term of this
lease, then, in any one or more of such events, upon Owner serving a written
five (5) days notice upon Tenant specifying the nature of said default and upon
the expiration of said five (5) days, if Tenant shall have failed to comply with
or remedy such default, or if the said default or omission complained of shall
be of a nature that the same cannot be completely cured or remedied within said
five (5) day period, and if Tenant shall not have diligently commenced curing
such default within such five (5) day period, and shall not thereafter with
reasonable diligence and in good faith, proceed to remedy or cure such default,
then Owner may serve a written three (3) days' notice of cancellation of this
lease upon Tenant, and upon the expiration of said three (3) days this lease and
the term thereunder shall end and expire as fully and completely as if the
expiration of such three (3) day period were the day herein definitely fixed for
the end and expiration of this lease and the term thereof and Tenant shall then
quit and surrender the demised premises to Owner but Tenant shall remain liable
as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given,
and the term shall expire as aforesaid; or if Tenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required;
then and in any of such events Owner may upon notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease had not been made. If Tenant shall make default hereunder prior to
the date fixed as the commencement of any renewal or extension of this lease,
Owner may cancel and terminate such renewal or extension agreement by written
notice.
REMEDIES OF OWNER AND WAIVER OF REDEMPTION
18. In case of any such default, re-entry, expiration and/or
dispossess by summary of proceedings or otherwise, (a) the rent shall become due
thereupon and be paid up to the time of such re-entry, dispossess and/or
expiration, (b) Owner may re-let the premises or any part or parts thereof,
either in the name of Owner or otherwise, for a term or terms, which may at
Owner's option be less than or exceed the period which would otherwise have
constituted the balance of the term of this lease and may grant concessions or
free rent or charge a higher rental than that in this lease, and/or (c) Tenant
or the legal representatives of Tenant shall also pay Owner as liquidated
damages for the failure of Tenant to observe and perform said Tenant's covenants
herein contained, any deficiency between the rent hereby reserved and/or
convenanted to be paid and the net amount, if any, of the rents collected on
account of the lease or leases of the demised premises for each month of the
period which would otherwise have constituted the balance of the term of this
lease. The failure of Owner to re-let the premises or any part or parts thereof
shall not release or affect Tenant's liability for damages. In computing such
liquidated damages there shall be added to the said deficiency such reasonable,
customary and ordinary expenses as Owner may incur in connection with
re-letting, such as legal expenses, attorneys' fees, brokerage, advertising and
for keeping the demised premises in good order or for preparing the same for
re-letting. Any such liquidated damages shall be paid in monthly installments by
Tenant on the rent day specified in this lease and any suit brought to collect
the amount of the deficiency for any month shall not prejudice in any way the
rights of Owner to collect the deficiency for any subsequent month by a similar
proceeding. Owner, in putting the demised premises in good order or preparing
the same for re-rental may, at Owner's option, make such alterations, repairs,
replacements, and/or decorations in the demised premises as Owner, in Owner's
sole judgment, considers advisable and necessary for the purpose of re-letting
the demised premises, and the making of such alterations, repairs, replacements,
and/or decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Owner shall in no event be liable in any way
whatsoever for failure to re-let the demised premises, or in the event that the
demised premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or
<PAGE>
threatened breach by Tenant of any of the covenants or provisions hereof, Owner
shall have the right of injunction and the right to invoke any remedy allowed at
law or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for. Mention in this lease of any particular remedy, shall not
preclude Owner from any other remedy, in law or in equity. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws in the event of the Tenant being evicted or dispossessed
for any cause, or in the event of Owner obtaining possession of demised
premises, by reason of the violation by Tenant of any of the covenants and
conditions of this lease, or otherwise.
FEES AND EXPENSES
19. If Tenant shall default in the observance or performance of any
term or covenant on Tenant's part to be observed or performed under or by virtue
of any of the terms or provisions in any article of this lease, then, unless
otherwise provided elsewhere in this lease. Owner may immediately or at any time
thereafter and without notice perform the obligation of Tenant thereunder. If
Owner, in connection with the foregoing or in connection with any default by
Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs
any obligations for the payment of money, including but not limited to
reasonable attorney's fees, in instituting, prosecuting or defending any action
or proceeding, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within five (5) days of rendition of any bill
or statement to Tenant therefor. If Tenant's lease term shall have expired at
the time of making of such expenditures or incurring of such obligations, such
sums shall be recoverable by Owner as damages.
BUILDING ALTERATIONS AND MANAGEMENT
20. Owner shall have the right at any time without the same
constituting an eviction and without incurring liability to Tenant therefor to
change the arrangement and/or location of public entrances, passageways, doors,
doorways, corridors, elevators, stairs, toilets or other public parts of the
building and to change the name, number or designation by which the building may
be known. There shall be no allowance to Tenant for diminution of rental value
and no liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or other Tenants making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition
of such controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem necessary for the security of the
building and its occupants.
NO REPRESENTATIONS BY OWNER
21. Neither Owner nor Owner's agents have made any representations or
promises with respect to the physical condition of the building, the land upon
which it is erected or the demised premises, the rents, leases, expenses of
operation or any other matter or thing affecting or related to the premises
except as herein expressly set forth and no rights, easements or licenses are
acquired by Tenant by implications or otherwise except as expressly set forth in
the provisions of this lease. Tenant has inspected the building and the demised
premises and is thoroughly acquainted with their condition and agrees to take
the same "as is" and acknowledges that the taking of possession of the demised
premises by Tenant shall be conclusive evidence that the said premises and the
building of which the same form a part were in good and satisfactory condition
at the time such possession was so taken, except as to latent defects. All
understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of
it in whole or in part, unless such executory agreement is in writing and
signed by the party against whom enforcement of the change, modification,
discharge or abandonment is sought.
END OF TERM
22. Upon the expiration or other termination of the term of this
lease, Tenant shall quit and surrender to Owner the demised premises, broom
clean, in good order and condition, ordinary wear and damages which Tenant is
not required to repair as provided elsewhere in this lease excepted, and Tenant
shall remove all its property. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of this lease. If the
last day of the term of this Lease or any renewal thereof, falls on Sunday, this
lease shall expire at noon on the preceding Saturday unless it be a legal
holiday in which case it shall expire at noon on the preceding business day.
QUIET ENJOYMENT
23. Owner covenants and agrees with Tenant that upon Tenant paying
the rent and additional rent and observing and performing all the terms,
covenants and conditions, on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 31 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.
FAILURE TO GIVE POSSESSION
24. If Owner is unable to give possession of the demised premises on
the date of the commencement of the term hereof, because of the holding-over or
retention of possession of any tenant, undertenant or occupants or if the
demised premises are located in a building being constructed, because such
building has not been sufficiently completed to make the premises ready for
occupancy or because of the fact that a certificate of occupancy has not been
procurred or for any other reason, Owner shall not be subject to any liability
for failure to give possession on said date and the validity of the lease shall
not be impaired under such circumstances, nor shall the same be construed in any
wise to extend the term of this lease, but the rent payable hereunder shall be
abated (provided Tenant is not responsible for Owner's inability to obtain
possession) until after Owner shall have given Tenant written notice that the
premises are substantially ready for Tenant's occupancy. If permission is given
to Tenant to enter into the possession of the demised premises or to occupy
premises other than the demised premises prior to the date specified as the
commencement of the term of this lease, Tenant covenants and agrees that such
occupancy shall be deemed to be under all the terms, covenants, conditions and
provisions of this lease, except as to the covenant to pay rent. Notwithstanding
anything to the contrary contained in this Article 24, in the event the
Commencement Date (as hereinafter defined) does not occur within one hundred
eighty (180) days after the Estimated Commencement Date (as hereinafter defined)
("Outside Date"), Tenant shall have a singe option to cancel this Lease and the
term thereof by giving notice to Owner of such cancellation within ten (10)
days, time being of the essence, next following the Outside Date, as said
Outside Date may be extended pursuant to the following provisions. Upon the
giving of such notice, this lease and the term thereof shall expire and come to
an end as of the date of the giving of such notice and Tenant shall then quit
and surrender the demised premises to Owner but Tenant shall remain liable as
provided in the Lease. If Tenant shall fail to give timely notice exercising the
foregoing option to cancel this Lease and the term thereof, then the term shall
commence and end in accordance with the provisions of this Lease. Owner shall
have the right to extended the Outside Date by a period equal to the aggregate
number of days of delay in Substantial Completion (as hereinafter defined) or in
the issuance of a temporary or permanent Certificate of Occupancy covering the
demised premises occasioned by reason of Tenant's failure to cooperate with
Owner, Tenant's delays in submitting any drawings or specifications, or in
supplying information, or in approving drawings, specifications or estimates, or
in giving authorizations, or by reason of any "Extra" or "Change Order"
designated by Tenant, or by reason of any changes by Tenant in any designations
previously made by Tenant, or by reason of any similar acts or omissions of
Tenant or by reason of any cause or factor beyond Landlord's reasonable control
including but not limited to, strikes or other labor disputes, accidents, orders
or regulations of any Federal, State, County or Municipal authority, lack of
availability of materials, parts or utility services, delays due to adjustment
of insurance claims, acts of God, fire, earthquake, floods, explosion, action of
the elements, war, hostilities, invasion, insurrection, riot, mob violence,
sabotage or by reason of any other cause, whether similar or not to the
foregoing that is beyond the reasonable control of Owner. If Tenant shall use or
occupy all or part of the demised premises, the foregoing option to cancel this
Lease and the term thereof shall no longer be of any force and effect.
NO WAIVER
25. The failure of Owner to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of this lease or
of any of the Rules or Regulations set forth or hereafter adopted by Owner,
shall not prevent a subsequent act which would have originally consituted a
violation from having all the force and effect of an original violation. The
receipt by Owner of rent with knowledge of the breach of any coventant of this
lease shall not be deemed a waiver of such breach and no provision of this lease
shall be deemed to have been waived by Owner unless such waiver be in writing
signed by Owner. no payment by Tenant or receipt by Owner of a lessor amount
than the monthly rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
of any check or any letter accompanying any check or payments as rent be deemed
an accord and satisfaction, and Owner may accept such check or payments without
prejudice to Owner's rights to recover the balance of such rent or pursue any
other remedy in this lease provided. No act or thing done by Owner or Owner's
agents during the term hereby demised shall be deemed an acceptance of a
surrender of said premises, and no agreement to accept such surrender shall be
valid unless in writing signed by Owner, No employee of Owner or Owner's agent
shall have any power to accept the keys of said premises prior to the
termination of the lease and the delivery of keys to any such agent or employee
shall not operate as a termination of the lease or a surrender of the premises.
WAIVER OF TRIAL BY JURY
26. It is natually agreed by and between Owner and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any matters
whatsoever arising out of in any way connected with this lease, the relationship
of Owner and Tenant, Tenant's use of or occupancy of said premises, and any
emergency statutory or any other statutory remedy. It is further matually agreed
that in the event Owner commences any summary proceeding for possession of the
premises, Tenant will not interpose any counterclaim of whatever nature or
decription in any such proceeding, including a counterclaim under Article 4;
provided, however, that Tenant shall be entitled to interpose any mandatory
<PAGE>
counterclaim which would otherwise be barred pursuant to the entire controversy
doctrine.
INABILITY TO PERFORM
27. This Lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of Tenant to
be performed shall in no wise be affected, impaired or excused because Owner is
unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if Owner is prevented or delayed from so doing by reason of strike or
labor troubles or any cause whatsoever including, but not limited to, government
preemption in connection with a National Emergency or by reason of any rule,
order or regulation of any department or subdivision thereof of any government
agency or by reason of the conditions of supply and demand which have been or
are affected by war or other emergency.
BILLS AND NOTICES
28. See Article 57 Rider to Lease.
Services Provided by Owner
29. As long as Tenant is not in default under any of the covenants of
this Lease, Owner shall provide: (a) necessary elevator facilities on business
days from 8 a.m. to 6 p.m. and have one elevator subject to call at all other
times; (b) heat to the demised premises when and as required by law, on business
days from 8 a.m. to 6 p.m.; (c) water for ordinary lavatory purposes, but if
Tenant uses or consumes water for any other purposes or in unusual quantities
(of which fact Owner shall be the sole judge), Owner may install a water meter
at Tenant's expense which Tenant shall thereafter maintain a Tenant's expense in
good working order and repair to register such water consumption and Tenant
shall pay for water consumed as shown on said meter as additional rent as and
when bills are rendered; (d) cleaning service for the demised premises on
business days at Owner's expense provided that the same are kept in order by
Tenant. If, however, said premises are to be kept clean by Tenant, it shall be
done at Tenant's sole expense, in a manner satisfactory to Owner and no one
other than persons approved by Owner shall be permitted to enter said premises
or the building of which they are a part for such purpose. Tenant shall pay
Owner the cost of removal of any of Tenant's refuse and rubbish from the
building; (e) if the demised premises are serviced by Owner's air
conditioning/cooling and ventilating system, air conditioning/cooling will be
furnished to tenant from May 15th through September 30th on business days
(Mondays through Fridays, holidays excepted) from 8:00 a.m. to 6:00 p.m., and
ventilation will be furnished on business days during the aforesaid hours except
when air conditioning/cooling is being furnished as aforesaid. If Tenant
requires air conditioning/cooling or ventilation for more extended hours or on
Saturdays, Sundays or on holidays, Owner will furnish the same as Tenant's
expense; (f) Owner reserves the right to stop services of the heating,
elevators, plumbing, air-conditioning, power systems or cleaning or other
services, if any, when necessary by reason of accident or for repairs,
alterations, replacements or improvements necessary or desirable in the judgment
of Owner for as long as may be reasonably required by reason thereof. If the
building of which the demised premises are a part supplies manually operated
elevator service, Owner at any time may substitute automatic control elevator
service and upon ten days' written notice to Tenant, proceed with alterations
necessary therefor without in any wise affecting this Lease or the obligation of
Tenant hereunder. The same shall be done with minimum of inconvenience to Tenant
and Owner shall pursue the alteration with due diligence.
CAPTIONS
30. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provisions thereof.
DEFINITIONS
31. The term "office", or "offices", wherever used in this lease,
shall not be construed to mean premises used as a store or stores, for the sale
or display, at any time, of goods, wares or merchandise, of any kind, or as a
restaurant, shop, booth, bootblack or other stand, barber shop, or for other
similar purposes or for manufacturing. The term "Owner" means a landlord or
lessor, and as used in this lease means only the owner, or the mortgagee in
possession, for the time being of the land and building (or the owner of a lease
of the building or of the land and building) of which the demised premises form
a part, so that in the event of any sale or sales of said land and building or
of said lease, or in the event of a lease of said building, or of the land and
building, the said Owner shall be and hereby is entirely freed and relieved of
all covenants and obligations of Owner hereunder, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest, or between the parties and the purchaser, at any such sale, or the
said lessee of the building, or of the land and building, that the purchaser of
the lessee of the building has assumed and agreed to carry out any and all
covenants and obligations of Owner, hereunder. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their technical legal
meaning. The term "business days" as used in this lease shall exclude Saturdays
(except such portion thereof as is covered by specific hours in Article 29
hereof), Sundays and all days set forth on Exhibit E.
ADJACENT EXCAVATION-SHARING
32. Intentionally Deleted Prior to Execution.
RULES AND REGULATIONS
33. Tenant and Tenant's servants, employees, agents, visitors, and
licensees shall observe faithfully, comply strictly with, the written Rules and
Regulations and such other and further reasonable written Rules and Regulations
as Owner or Owner's agents may from time to time adopt. Notice of any additional
rules or regulations shall be given in such manner as Owner may elect. In case
Tenant disputes the reasonableness of any additional Rule or Regulation
hereafter made or adopted by Owner or Owner's agents, the parties hereto agree
to submit the question of the reasonableness of such Rule or Regulation for
decision to the Newark office of the American Arbitration Association, whose
determination shall be final and conclusive upon the parties hereto. The right
to dispute the reasonableness of any additional Rule or Regulation upon Tenant's
part shall be deemed waived unless the same shall be asserted by service of a
notice, in writing upon Owner within ten (10) days after the receipt of notice
thereof. Nothing in this lease contained shall be construed to impose upon Owner
any duty or obligations to enforce the Rules and Regulations or terms, covenants
or conditions in any other lease, as against any other tenant and Owner shall
not be liable to Tenant for violation of the same by any other tenant, its
servants, employees, agents, visitors or licensees.
SECURITY
34. Tenant shall deposit with Owner on the date hereof the sum of
$17,504.38 as security for the faithful performance and observance by Tenant of
the terms, provisions and conditions of this lease; it is agreed that in the
event Tenant defaults in respect of any of the terms, provisions and conditions
of this lease, including, but not limited to, the payment of rent and additional
rent. Owner may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and additional rent
or any other sum as to which Tenant is in default or for any sum which Owner may
expend or may be required to expend by reason of Tenant's default in respect of
any of the terms, covenants and conditions of this lease, including but not
limited to, any damages or deficiency in the re-letting of the premises, whether
such damages or deficiency accrued before or after summary proceedings or other
re-entry by Owner. In the event that Tenant shall fully and faithfully comply
with all of the terms, provisions, covenants and conditions of this lease, the
security shall be returned to Tenant after the date fixed as the end of the
Lease and after delivery of entire possession of the demised premises to Owner.
In the event of a sale of the land and building or leasing of the building, of
which the demised premises form a part, Owner shall have the right to transfer
the security to the vendee or lessee and Owner shall thereupon be released by
Tenant from all liability for the return of such security; and Tenant agrees to
look to the new Owner solely for the return of said security, and it is agreed
that the provisions hereof shall apply to every transfer or assignment made of
the security to a new Owner. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted
encumbrance.
ESTOPPEL CERTIFICATE
35. Tenant, at any time, and from time to time, upon at least 10
days' prior notice by Owner, shall execute, acknowledge and deliver to Owner,
and/or to any other person, firm or corporation specified by Owner, a statement
certifying that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), stating the dates to which the rent and
additional rent have been paid, and stating whether or not there exists any
default by Owner under this Lease, and, if so, specifying each such default.
SUCCESSORS AND ASSIGNS
35A. The covenants, conditions and agreements Assigns contained in
this lease shall bind and inure to the benefit of Owner and Tenant and their
respective heirs, distributees, executors, administrators, successors, and
except as otherwise provided in this lease, their assigns.
EXHIBITS
35B. This lease consists of this Printed Portion containing Articles
1-35C. and each of the following, attached hereto and made a part hereof: (a)
Rider to Lease and (b) the following exhibits: Exhibit A (Rental Plan), Exhibit
B (Work Letter), Exhibit C (Legal Description), Exhibit D (Cleaning Service
Rider) and Exhibit E (Legal Holidays).
RIDER
35C. In the event of any in consistency between the provisions of the
Rider to Lease and those contained in this Printed Portion to which the Rider to
Lease is annexed, the provisions of the Rider to Lease shall govern and be
binding.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed this Lease
on the day and year first written above.
ATTESTED BY: LANDLORD:
6 CENTURY ASSOCIATES
By: 6 Century Corp.,
General Partner
/s/ Nancy Castellani By: /s/ Robert R. Martie
- ---------------------- ------------------------
Nancy Castellani Robert R. Martie
Vice President
ATTESTED BY: AGENT FOR LANDLORD:
BELLEMEAD MANAGEMENT CO., INC.
/s/ Nancy Castellani By: /s/ Robert R. Martie
- ---------------------- ---------------------------
Nancy Castellani Robert R. Martie
Vice President
ATTESTED BY: TENANT:
HGB, INC.
/s/ Sherrin H. Baky By: /s/ Judith L. Hardardt
- ---------------------- ---------------------------
Name: Sherrin H. Baky Name: Judith L. Hardardt
----------------- ----------------------
(Please Print) (Please Print)
Title: Corporate Secretary Title: President
APPLY CORPORATE SEAL HERE
<PAGE>
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 33.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purposes other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery
by Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for
any purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage remaining from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in manner offensive or
objectionable to Owner or other occupants of the building by reason of noise,
odors, and/or vibrations, or interfere in any way with other Tenants or those
having business therein, nor shall any animals or birds be kept in or about the
building. Smoking or carrying lighted cigars or cigarettes in the elevators of
the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premises if the
same is visible from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of violation of the foregoing by any Tenant.
Owner may remove same without any liability, and may charge the expense incurred
by such removal to Tenant or Tenants violating this rule. Interior signs on
doors and directory tablet shall be inscribed, painted or affixed for each
Tenant by Owner at the expense of such Tenant, and shall be of a size, color and
style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part
of the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Owner, and as Owner may direct. Not tenant shall lay linoleum, or
other similar floor covering, so that the same shall come in direct contact
with the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly
prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Tenant, nor shall any changes be made in existing
locks or mechanism thereof. Each Tenant must, upon the termination of his
Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either
furnished to, otherwise procured by, such Tenant, and in the event of the loss
of any keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter
of any description shall be delivered to and removed from the premises only on
the freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease or which these Rules and Regulations are a part.
9. Canvassing, soliciting and peddling in the building is prohibited and
each Tenant shall cooperate to prevent the same.
10. Owner reserves the right to exclude from the building between the
hours of 6 P.M. and 8 A.M. and at all hours on Sundays, and legal holidays all
persons who do not present a pass to the building signed by Owner. Owner will
furnish passes to persons for whom any Tenant requests same in writing. Each
Tenant shall be responsible for all persons for whom he requests such pass and
shall be liable to Owner for all acts of such persons.
11. Owner shall have the right to prohibit any advertising by any Tenant
which in Owner's opinion, tends to impair the reputation of the building or its
desirability as a building for offices, and upon written notice from Owner,
Tenant shall refrain from such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or emanate
from the demised premises.
13. If the building contains central air conditioning and ventilation,
Tenant agrees to keep all windows closed at all times and to abide by all rules
and regulations issued by the Owner with respect to such services. If Tenant
requires air conditioning or ventilation after the usual hours, Tenant shall
give notice in writing to the building superintendent prior to 3:00 P.M. in the
case of services required on week days, and prior to 3:00 P.M. on the day prior
in the case of after hours service required on weekends or on holidays.
14. Tenant shall not move any safe, heavy machinery, heavy equipment,
bulky matter, or fixtures into or out of the building Landlord's prior written
consent. If such safe, machinery, equipment, bulky matter or fixtures requires
special handling, all work in connection therewith shall comply with all laws
and regulations applicable thereto and shall be done during such hours as Owner
may designate.
15. Tenant shall report all peddlers, solicitors and beggars to the office
of the Building or as Landlord otherwise requests. Landlord shall exercise
reasonable steps to keep such persons outside of the Building.
16. Tenant shall take reasonable action to assure that its employees,
invitees and guests do not (a) utilize any parking spaces designated for the
use of others, nor (b) park in any driveways, fire lanes or other areas not
striped for vehicular parking.
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TABLE OF CONTENTS FOR
RIDER TO LEASE
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ARTICLE PAGE
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36. DEFINITIONS; DEMISED PREMISES;
ADJUSTED MINIMUM RENT........................................ 1
37. COMMENCEMENT OF TERM; COMMENCEMENT DATE;
ESTIMATED COMMENCEMENT DATE AND TERMINATION DATE............. 5
38. TENANT'S POSSESSION.......................................... 6
39. HEATING, AIR-CONDITIONING AND VENTILATION;
LEGAL HOLIDAYS; "AFTER HOURS"................................ 6
40. ELECTRIC CURRENT............................................. 6
41. LIABILITY INSURANCE.......................................... 7
42. ALL RISK INSURANCE........................................... 7
42B. LANDLORD'S INSURANCE......................................... 8
43. PARKING FACILITIES........................................... 8
44. ACCESS AND COMMON AREAS...................................... 8
45. RELOCATION................................................... 9
46. BROKER....................................................... 9
47. CLEANING SERVICES............................................ 9
48. ASSIGNMENT AND SUBLETTING.................................... 10
49. TENANT'S COOPERATION; REASONABLE
MODIFICATIONS; ESTOPPEL CERTIFICATE.......................... 14
50. LIMITATION OF LIABILITY;..................................... 15
DEFINITION OF "LANDLORD"
51. STATUTORY WAIVER; NOTICE BY TENANT........................... 15
52. CORPORATE AUTHORITY.......................................... 15
53. PERSONAL TAXES............................................... 16
54. BUILDING CHANGES............................................. 16
55. HOLDING OVER................................................. 16
56. RESTRICTIVE COVENANT - FOOD SERVICE.......................... 16
57. NOTICES...................................................... 17
58. INTERPRETATION............................................... 17
59. NO OFFER OR AGREEMENT........................................ 18
60. DAMAGES...................................................... 18
61. BANKRUPTCY................................................... 19
62. SECURITY..................................................... 19
63. PARTNERSHIP TENANT........................................... 20
64. LANDLORD'S WORK; LANDLORD'S WORK LETTER...................... 20
65. RENEWAL OPTION............................................... 21
66. ISRA COMPLIANCE.............................................. 22
67. PREPAID RENT................................................. 23
</TABLE>
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<TABLE>
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68. RIGHT TO FIRST/SECOND OFFER................................. 23
SIGNATURE PAGE.............................................. 26
</TABLE>
<PAGE>
RIDER TO LEASE
--------------
DATED: As of December 29, 1993
LANDLORD: 6 Century Associates
TENANT: HGB, Inc.
PREMISES: Portion of the third (3rd) floor
6 Century Drive
Parsippany-Troy Hills, New Jersey
36 DEFINITIONS; DEMISED PREMISES;
ADJUSTED MINIMUM RENT
------------------------------
36.1 Definitions. For purposes of this Article, the following
terms shall have the meanings set forth below:
(1) Assessed Valuation shall mean the assessed valuation of the
Real Estate for the First Tax Year, as such assessed valuation is or may be
ultimately determined by final administrative or judicial proceeding, or by
abatement by an appropriate taxing authority;
(2) Base Tax Rate shall mean the real estate tax rate in effect
on the date of this Lease;
(3) First Operating Year shall mean the calendar year ending
December 31, 1994. Operating Year shall mean any calendar year thereafter;
(4) First Tax Year shall mean the calendar year ending December
31, 1994. Tax Year shall mean any calendar year thereafter;
(5) Land shall mean the land described in Exhibit C to this
Lease;
(6) Occupancy Percentage shall be as defined in Section 36.2;
(7) Real Estate Tax Base shall mean the amount determined by
multiplying the Assessed Valuation by the Base Tax Rate;
(8) Taxes shall mean all real estate taxes, charges and
assessments imposed upon the Land, Building and other improvements thereon or
the occupancy or leasing thereof (collectively, the "Real Estate"). If any
franchise, capital stock, capital gains, rent, income, profit or any other tax
or charge shall be imposed upon all or any part of the Real Estate, such
franchise, capital stock, capital gains, rent, income, profit or other tax or
charge shall be deemed included in the term "Taxes" for the purposes of this
Article. Landlord shall have the exclusive right, but not the obligation, to
contest or appeal any Tax assessment levied on the Real Estate by any
governmental or quasi-governmental authority;
36.2 The Demised Premises shall be deemed to contain a floor area
of 12,003 square feet and the building of which the Demised Premises form a part
("Building" or "building") shall be deemed to contain a total floor area of
100,036 square feet. Tenant's Occupancy Percentage shall be deemed to be 12
percent.
36.3 Adjusted Minimum Rent shall mean the Minimum Rent as
increased in accordance with this Article to reflect any increase in Taxes and
Building Operating Costs. Tenant shall pay such increases as additional rent as
hereinafter provided.
36.4 Taxes. (1) If the Taxes for any Tax Year during the term
of this Lease shall be greater than the Real Estate Tax Base, then Tenant shall
pay to Landlord, as additional rent, an amount equal to the Occupancy
Percentage of such excess.
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(2) Upon the issuance by the respective taxing authorities having
jurisdiction over the Real Estate of a bill or bills for the Taxes imposed upon
the Real Estate for the First Tax year, Landlord shall submit a copy of such
bill or bills to Tenant. Thereafter, on or about each anniversary of said date,
Landlord shall submit to Tenant a copy of the latest tax bill or bills for the
Taxes for each subsequent Tax Year indicating each change in the Taxes and the
effective date of such change together with a statement (the "Tax Statement")
which shall indicate the amount, if any, required to be paid by Tenant as
additional rent. Within 30 days after the issuance of the Tax Statement, Tenant
shall pay the additional rent as set forth therein. Any payments due pursuant to
this Article for a period of less than a full Tax Year, either at the
commencement or at the end of the term of this Lease, shall be ratably
apportioned.
(3) If at any time the taxing jurisdiction in which the Real Estate
is located should change its method of valuating the Real Estate for the First
Tax Year as part of a general revaluation program ("Revaluation"), then, the
provisions of Sections 36.1(2) and 36.1(1) above notwithstanding, for purposes
of computing the Real Estate Base pursuant to Section 36.1(7) Landlord may, at
its option, use one of the following methods:
(a) The Assessed Valuation shall be the amount for which the Real
Estate would have been assessed for the First Tax Year if there had been no
Revaluation, and the Base Tax Rate shall be as defined in Section 36.1(2) above,
or
(b) The Assessed Valuation shall be the actual amount assessed, and
the Base Tax Rate shall be the real estate tax rate as subsequently reduced by
the taxing jurisdiction in connection with the Revaluation.
Landlord shall inform the Tenant as to which of the above two methods
Landlord has elected at such time as Landlord submits the Tax Statement to
Tenant.
36.5 Building Operating Costs. (1) Tenant hereby agrees that for each
Operating Year during the term of this Lease for which the total Building
Operating costs (as hereinafter defined) shall exceed the Building Operating
Costs for the First Operating Year, Tenant shall pay to Landlord, as additional
rent, an amount equal to the Occupancy Percentage of such excess within 30 days
after presentation of Landlord's statement (the "Operating Statement") therefor.
The Operating Statement shall indicate (i) the intial additional amount required
to be paid by Tenant as additional rent as in this Article provided; (ii) the
Tenant's new Adjusted Minimum Rent; and (iii) the manner in which such
adjustment is computed. Landlord shall present its Operating Statement within 90
days after the commencement of each such Operating Year ("Billing Date"). Tenant
shall thereafter, for the balance of that Operating Year and for that portion of
the next Operating Year until the Billing Date during such year, make monthly
payments of 1/12th of such increase to reflect the change as of the Billing
Date, which amounts shall be credited for the account of Tenant against the
annual payment due on the succeeding Billing Date.
(2) The "Building Operating Costs" shall include each and every
expense incurred in connection with the ownership, administration, management,
operation, repair, replacement and maintenance of the real Estate, including but
not limited to, wages, salaries and fees paid to persons either employed by
Landlord or engaged as independent contractors in the operaton of the Real
Estate, and such other typical items of expense as indicated below. All such
costs and the values allocated to services rendered and supplies delivered shall
be reflected on the comparative statement which shall be exhibited to the Tenant
upon request.
(3) The expenses referred to in this Article shall be determined in
accordance with generally accepted accounting principles. So long as Tenant is
not in default under any
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provisions of this Lease, Tenant or its representatives shall have the right, at
its own expense, upon reasonable notice and during reasonable hours, to inspect
the books of Landlord for the purpose of verifying the information contained in
any Operating Statement, provided prior written request for such inspection
shall be made by Tenant and further provided that such request is made within
one hundred twenty (120) days of receipt of the Operating Statement to be
verified. Any Operating Statement not verified within said one hundred twenty
(120) day period shall be deemed to be correct.
(4) Some of the typical items of expense which comprise or may
comprise the Building Operating Costs and to be included in the Statement are or
may be: (a) general repairs and maintenance; (b) utility costs, including but
not limited to, cost of electricity to power HVAC units serving the entire
Building (both tenant and common areas), cost of oil or other fuel required to
heat the entire Building, cost of electricity to light the common areas; (c)
cleaning costs, including but not limited to, window cleaning, general interior
office cleaning, cleaning of common areas; (d) service contracts, including but
not limited to, contracts for elevator service, HVAC service, rubbish removal,
carting, janitorial and watchman services and snow removal; (e) costs of
landscaping; (f) costs of insurance; (g) fees and/or salaries of
superintendents, engineers, mechanics, custodians; (h) towel service for common
lavatories; and (i) sales and use taxes. Notwithstanding the above, the
following costs or expenses are specifically excluded from Building Operating
Costs:
(a) Taxes;
(b) Franchise or income taxes imposed upon the Landlord;
(c) Debt service on mortgages;
(d) Leasing commissions;
(e) Capital improvements;
(f) Cost of alterations or improvements to the Demised Premises, or
the premises of other tenants;
(g) Costs of correcting defects in or inadequacy of the initial
design or construction of the Building;
(h) Costs for which the Landlord is reimbursed by insurance by its
carrier, or any tenant's carrier;
(i) Any bad debt loss, rent loss, or reserves from bad debts or rent
loss;
(j) Expenses of extraordinary services provided to other tenants in
the Building;
(k) Costs associated with the operation of the business of the
partnership, or entity which constitutes the Landlord as the same
are distinguished from the costs of operation of the Building,
including partnership, accounting and legal matters, costs of
defending any lawsuit with a mortgagee (except as the actions of
the Tenant may be an issue), costs of selling, syndicating,
financing, mortgaging, or hypothecating any of the Landlord's
interest in the Building, costs of any disputes between the
Landlord and its employees (if any), disputes of Landlord with
building management or outside fees paid in connection with
disputes with other tenants;
(l) Fines, penalties and interest;
(m) Rent paid under superior leases, including ground rentals;
(n) Costs incurred by Landlord for alterations which are considered
capital improvements under generally accepted accounting
principals consistently applied;
(o) Any expenses in connection with services or other benefits which
are not provided to Tenant or the Building's common areas, or for
which Tenant is charged directly, but which are provided to
another tenant or occupant of the Building;
(p) Overhead and profit increments paid to Landlord, or to
subsidiaries or affiliates of Landlord for
3
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services in the Building to the extent the same exceeds the costs
of such services rendered by unaffiliated, third-parties on a
competitive basis; and
(q) Rentals and/or other related expenses incurred in leasing air
conditioning systems, elevators, or other equipment, which are
considered to be of a capital nature, except for equipment not
affixed to the Building, which is used to provide janitorial or
similar services.
(5) Anything to the contrary contained in this Article 36 notwithstanding,
if the average occupancy of the Building is less than ninety-five (95%) percent
during the First Operating Year, then Landlord shall make a determination
("Landlord's Determination") of what the Building Operating Costs for such year
would have been if during the entire year the average tenant occupancy of the
Building were ninety-five (95%) percent. Landlord's Determination shall be
binding and conclusive upon Tenant and shall for all purposes of this Lease be
deemed to be the Building Operating Costs for the First Operating Year. Landlord
shall notify Tenant of Landlord's Determination within ninety (90) days
following the last day of the First Operating Year. Thereafter, if for any
subsequent Lease year the average tenant occupancy of the Building is below
ninety-five (95%), the Building Operating Costs for any such year shall be
adjusted by Landlord to the amount that such Building Operating Costs would have
been if the average tenant occupancy during that year has been ninety-five (95%)
percent.
36.6 If, pursuant to any Tax Statement or Operating Statement showing
Taxes or Building Operating Costs for any year subsequent to the First Tax Year
or First Operating Year, respectively, there shall be an additional amount
payable or a refund due with respect to Taxes and/or Building Operating Costs
for the period covered by such statement(s), such amount shall be calculated,
and any amount payable by the Tenant to the Landlord as additional rent shall be
promptly paid, or the amount due to the Tenant shall be credited against amounts
owing Landlord. However, it is agreed by the parties that any refund shall not
in any way operate to reduce the Minimum Rent. If such calculation takes place
and/or any payment in connection herewith becomes payable after the expiration
of the term of this Lease, this provision shall be deemed to have survived such
expiration.
36.7 Any increase in additional rent under this Article shall be
prorated for the final Operating Year if such Operating Year covers a period of
less than twelve (12) full months. Tenant's obligation to pay additional rent
under this Article for the final Operating Year shall survive the expiration of
the term of this Lease.
36.8 In the event that the payment of any sum required to be paid by
Tenant to Landlord under this Lease (including without limiting the generality
of the foregoing, Minimum Rent, Adjusted Minimum Rent, or payment made by
Landlord under any provision of this Lease for which Landlord is entitled to
reimbursement by Tenant) shall become overdue for 10 days beyond the date on
which they are due and payable as provided in this Lease, then a delinquency
service charge equal to four percent of the amount overdue shall become
immediately due and payable to Landlord as liquidated damages for Tenant's
failure to make prompt payment. Further, such delinquency service charge shall
be payable on the first day of the month next succeeding the month during which
such late charges become payable as additional rent, together with interest at
the maximum rate permitted by law on the amounts overdue from the date on which
they became due and payable. In the event of nonpayment of any delinquency
service charges and interest provided for above, Landlord shall have, in
addition to all other rights and remedies, all the rights and remedies provided
for herein and by law in the case of nonpayment of rent. No failure by Landlord
to insist upon the strict performance by Tenant of Tenant's obligations to pay
late charges shall constitute a waiver by Landlord of its rights to enforce the
provisions of this Section
4
<PAGE>
36.8 in any instance thereafter occurring. The provisions of this Section 36.8
shall not be construed in any way to extend any time period provided for in this
Lease.
36.9 If Tenant fails to remit when due any sum required to be paid by
Tenant to Landlord under this Lease (including, without limiting the generality
of the foregoing, Minimum Rent, Adjusted Minimum Rent, or payment made by
Landlord under any provision of this Lease for which Landlord is entitled to
reimbursement by Tenant), Landlord may, in addition to all other rights and
remedies provided herein and by law, serve a written notice of cancellation of
this Lease upon Tenant and if Tenant fails to cure the applicable default or
defaults within ten (10) days after receipt of the above-referenced notice, this
Lease and the term thereof shall terminate and expire as fully and completely as
if the day on which said notice of cancellation was given were the day herein
definitely fixed for the end and expiration of this Lease and the term thereof
and Tenant shall then quit and surrender the Demised Premises to Landlord but
Tenant shall remain liable as herein provided. Following each second
consecutive monthly installment of Adjusted Minimum Rent that remains unpaid for
longer than ten (10) days beyond the date on which same is due and payable,
Landlord may, in addition to all other rights and remedies provided herein and
by law, require that (i) beginning with the first monthly installment of
Adjusted Minimum Rent next due, the Adjusted Minimum Rent shall no longer be
paid in monthly installments but shall be payable in advance on a quarterly
basis and/or (ii) Tenant increase the amount of the security deposited with
Landlord by an amount equal to two (2) months' Minimum Rent. If Tenant shall
deliver to Landlord a check that is returned unpaid for any reason, Tenant shall
pay Landlord TWENTY FIVE AND 00/100 DOLLARS ($25.00) for Landlord's expense in
connection therewith and said charge shall be payable to Landlord on the first
day of the next succeeding month as additional rent.
37. COMMENCEMENT OF TERM; COMMENCEMENT DATE;
ESTIMATED COMMENCEMENT DATE AND TERMINATION DATE
------------------------------------------------
37.1 The parties intended that the Lease shall commence on or about
February 25, 1994 (the "Estimated Commencement Date"). Notwithstanding the
above, the commencement date ("Commencement Date") as defined, fixed and
ascertained in this Article shall be the date upon which the work required to be
performed by the Landlord pursuant to the Work Letter attached hereto a Exhibit
"B" (the "Work"), shall be substantially completed. The Work shall be deemed to
be substantially completed ("Substantial Completion") for all purposes
hereunder, on the earlier of the date upon which:
A. (i) Landlord has procured a temporary or permanent Certificate of
Occupancy, permitting occupancy of the Demised Premises by the Tenant ; and (ii)
the Landlord's architects shall have certified that Landlord has substantially
performed the Work. Substantial Completion shall be deemed to have occurred even
though minor details of work remain to be done, provided such details do not
materially interfere with the Tenant's use of the Demised Premises,
or
B. Tenant shall have taken possession of all or any part of the
Demised Premises.
37.2 On or about the Commencement Date, Landlord shall deliver to
Tenant a notice ("Commencement Date Notice") fixing the Commencement Date and
termination date which shall be a date six (6) years after the Commencement
Date ("Termination Date"). Tenant shall acknowledge receipt of the Commencement
Date Notice by signing a copy of same and returning it to Landlord within five
(5) days of the receipt thereof.
37.3 The date upon which Tenant's obligation to pay Minimum Rent due
hereunder commences ("Rent Commencement Date") shall be deemed to be three (3)
months after the Commencement Date. Notwithstanding the foregoing, Tenant shall
pay Landlord upon the
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execution of this Lease the first monthly installment of Minimum Rent and the
security referred to in Articles 34 and 62 hereof.
37.4 If, prior to the Commencement Date, Tenant shall enter the
Demised Premises to make any installations of its equipment, fixtures and
furnishings, Landlord shall have no liability for any personal injury or
property damage suffered by Tenant.
37.5 Anything contained in this Article 37 to the contrary
notwithstanding, if for any reason the Premises are not ready for occupancy on
the Estimated Commencement Date, this Lease shall nevertheless continue in full
force and effect; the Commencement Date shall be postponed until Substantial
Completion has occurred and the Rent Commencement Date shall be postponed for a
like number of days, subject to Article 64. The Termination Date shall be
adjusted to provide the full term set forth above.
38. TENANT'S POSSESSION
-------------------
38.1 When Tenant takes possession of the Demised Premises, Tenant
shall be deemed to have accepted the Demised Premises as substantially completed
as of the date of such possession, subject to Tenant's punch-list items.
39. HEATING, AIR-CONDITIONING AND VENTILATION;
LEGAL HOLIDAYS; "AFTER HOURS"
------------------------------------------
39.1 Notwithstanding the provisions of subsections (b) and (e) of
Article 29 of this Lease , but subject to all of the other terms, covenants and
conditions of said Article 29, Landlord shall provide and furnish appropriate
heat, air-conditioning or ventilation to the Demised Premises between the hours
of 8:00 a.m. to 6:00 p.m., Monday through Friday, other than Legal Holidays
(which are listed on Exhibit "E"), attached to this Lease. The heat,
air-conditioning or ventilation supplied to the Demised Premises shall be
consistent with other similarly situated office buildings in the Parsippany-Troy
Hills area.
39.2 At all other times not otherwise provided for in Section 39.1
above, Landlord agrees that it shall, upon prior written request from Tenant,
provide after-hours air-conditioning, ventilation or heating, as the case may
be, for which Tenant shall pay to Landlord as additional rent hereunder, a sum
equal to $50.00 per hour for providing heat, air-conditioning or ventilation
(irrespective of whether any other tenants in the Building are furnished with
heat, air-conditioning or ventilation at the same time) that being intended to
cover Landlord's cost for the power or fuel required to provide the same. In the
event that during the term of this Lease, or any renewal hereof, the Landlord's
cost for providing after-hours heating, air-conditioning or ventilation shall
increase by virtue of utility rate increases or unit fuel cost increases, the
above-specified hourly charges shall be adjusted from time to time to reflect
said increases. In addition to the foregoing, should there be any charges
incurred by Landlord for additional attendant engineers or similar additional
requirements as may be imposed from time to time by the State Labor Department,
local authorities, union requirements, or the like, Tenant agrees to reimburse
Landlord for its out-of-pocket expenses incurred in connection therewith,
related to the after-hours use by Tenant.
40. ELECTRIC CURRENT
----------------
40.1 Landlord's obligation to supply current shall be limited to the
current required to power the Building standard heating and air-conditioning
systems and the lighting of common areas.
40.2 Tenant shall arrange to purchase and pay for all of the electric
current requirements for light and power used in connection with Tenant's
operations within the Demised Premises. Landlord shall furnish and install an
electric meter for the
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measurement of the consumption of Tenant's electric current as herein provided.
40.3 At the request of Landlord prior to the occupancy of the Demised
Premises, Tenant shall execute any and all applications for service, or forms
required by the local utility company supplying electric current to the Building
for the metering of all electric current and power required for the operation
of the electrical equipment of any nature whatsoever and lights within or
serving the Demised Premises.
40.4 Tenant's electric consumption within the Demised Premises shall
be measured by a separate electric meter within the Demised Premises. Tenant
shall pay its own electric costs directly to the utility company serving the
Demised Premises and the provisions of Sections 40.1 and 40.2 shall thereupon
apply hereunder.
41. LIABILITY INSURANCE
-------------------
41.1 Tenant, at its sole cost and expense, shall procure, provide and
maintain in force during the term of this Lease the following policies to be
written by good and solvent insurance companies satisfactory to Landlord having
a policyholders' rating of no less than A+ XV as determined by the AM Best
Company, or any successor thereto: (1) comprehensive general liability
insurance, which shall include coverage for personal liability, contractual
liability, Tenant's legal liability, bodily injury, death and property damage,
all on an occurrence basis with respect to the business carried on, in or from
the Demised Premises and Tenant's use and occupancy of the Demised Premises,
with coverage for any one occurrence or claim of not less than $1,000,000 or
such other amount as Landlord may reasonably require upon not less than six (6)
months' prior written notice. Such insurance shall include Landlord and the
managing agent of the Building as additional insureds and shall protect Landlord
in respect of claims by Tenant as if Landlord were separately insured; and (2)
insurance against such other perils and in such amounts as may be required by
law upon not less than thirty (30) days' prior written notice.
41.2 Each of the aforesaid policies shall contain an undertaking by
the insurer that no material change adverse to Landlord or Tenant will be made
and such policy will not lapse or be cancelled, except after not less than
thirty (30) days' prior written notice to Landlord of the intended change, lapse
or cancellation. On or before the Commencement Date and thereafter, at least
thirty (30) days prior to the effective date of any policy, Tenant agrees to
deliver to Landlord a duplicate original of the aforesaid policies.
42. ALL RISK INSURANCE
------------------
41.1 Tenant, at its sole cost and expense, shall procure, provide and
maintain in force during the term of this Lease the following policy to be
written by a good and solvent insurance company satisfactory to Landlord having
a policyholders' rating of no less than A+ XV as determined by the AM Best
Company, or any successor thereto: "All Risk" insurance, which shall cover the
Demised Premises, Tenant's personal property, equipment and improvements against
loss or damage by fire and any other hazards or casualties in an amount to
provide for the actual replacement cost of the Demised Premises, Tenant's
personal property, equipment and improvements. Such insurance shall include
Landlord and the managing agent of the Building as additional insureds and shall
protect Landlord in respect of claims by Tenant as if Landlord were separately
insured. The aforesaid "All Risk" policy shall contain an undertaking by the
insurer that no material change adverse to Landlord or Tenant will be made and
such policy will not lapse or be cancelled, except after not less than ninety
(90) days' prior written notice to Landlord of the intended change, lapse, or
cancellation. On or before the Commencement Date and thereafter, at least thirty
(30) days prior to the effective date of the "All
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Risk" policy, Tenant agrees to deliver to Landlord a duplicate original of said
policy.
42.B LANDLORD'S INSURANCE
--------------------
42B.1 Throughout the term of this Lease, Landlord shall maintain in
full force and effect a comprehensive liability policy and an all risk insurance
policy for the full replacement value of the Building.
43. PARKING FACILITIES
------------------
43.1 So long as Tenant is not in default under this Lease, Landlord
hereby grants to Tenant the revocable license (the "License") to park up to
forty eight (48) cars ("Allotted Parking"), for use solely by Tenant and
Tenant's employees, licensees, guests and invitees in the parking area or areas
serving the Building (the "Parking Area"). Landlord agrees to mark once, at
Tenant's expense, as the designated parking spaces of Tenant four (4) parking
spaces within the Parking Area. Such designations shall not increase the
Allotted Parking defined in the first sentence of this Section. The use of any
more than the Allotted Parking by Tenant, its employees, licensees, guests or
invitees, after notice from Landlord at least two (2) times during any calender
year, shall be deemed a material event of default under this Lease, and Landlord
may immediately suspend or revoke the License, remove Tenant's designations from
any parking spaces so marked and/or exercise such remedies as are provided in
this Lease. Landlord shall not be responsible to Tenant (i) if Tenant's
designated parking spaces are used by anyone other than Tenant, its employees,
licensees, guests and invitees, (ii) for enforcing the License or (iii) for
violation of the License by other tenants of the Building, by third parties, or
guests or visitors to the Building.
43.2 In the event the number of parking spaces in the Parking Area is
reduced by circumstances beyond the control of Landlord, the Allotted Parking
shall be reduced proportionately.
43.3 Nothing contained in this Lease shall be deemed to create
liability upon Landlord for any damage to motor vehicles of visitors or
employees, for any loss of property from within those motor vehicles, or for any
injury to Tenant, its employees, licensees, guests and invitees unless
ultimately determined to be caused by the sole negligence or willful misconduct
of Landlord, its agents, servants and employees. Tenant agrees to acquaint its
employees with any parking rules and regulations promulgated by Landlord and
assumes responsibility for compliance by its employees with such parking
provisions, and Tenant shall be liable to Landlord for all unpaid parking
charges, if any, incurred by its employees. Any amount due from Tenant pursuant
to this Article 43 shall be deemed additional rent and failure to pay same shall
constitute a default under the Lease. If Tenant or its employees, licensees,
guests and invitees park illegally or in areas designated for use by others, or
in driveways, fire lanes or areas not striped for general parking, then Landlord
may charge Tenant, as additional rent, FIFTY and 00/100 DOLLARS ($50.00) per
day for each day or partial day each motor vehicle is so parked. In addition,
Tenant authorizes Landlord to (i) tow away from the Parking Area, at Tenant's
sole cost and expense, any motor vehicle belonging to Tenant or Tenant's
employees, licensees, guests and invitees parked illegally or in violation of
this Article 43 or any parking rules and regulations promulgated by Landlord
after notice to Tenant and (ii) attach violation stickers or notices to any
motor vehicles belonging to Tenant or Tenant's employees, licensees, guests and
invitees parked illegally or in violation of this Article 43 or any parking
rules and regulations promulgated by Landlord.
44. ACCESS AND COMMON AREAS
-----------------------
44.1 Tenant shall have the right of nonexclusive use, in common with
others, of (a) automobile parking areas not designated for use by others and
driveways (subject to Article 43 hereof); (b)
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footways, and (c) such elevator and other facilities as may be constructed and
designated from time to time by Landlord in the Building, all to be subject to
the terms and conditions of the Lease and to reasonable rules and regulations
for the use thereof as prescribed from time to time by Landlord.
45. RELOCATION
----------
45.1 If the Demised Premises contain less than 10,000 square feet of
rentable area, Landlord shall have the right, at its option, upon at least sixty
(60) days' written notice to Tenant, to relocate Tenant and to substitute for
the Demised Premises other space within the office park of which the Building
forms a part containing at least as much rentable area as the Demised Premises
(the "Substitute Premises"). The Substitute Premises shall be improved by
Landlord at its expense, with decorations and improvements that are
substantially comparable in quantity and quality to those provided by Landlord
in the original Demised Premises. Landlord shall pay the expenses reasonably
incurred by Tenant in connection with such substitution, including but not
limited to costs of moving, door lettering and telephone relocation. The
Substitute Premises shall become the "Demised Premises" for purposes of this
Lease following Tenant's taking occupancy thereof.
46. BROKER
------
46.1 Tenant and Landlord each represents to the other that no real
estate broker other than Matthew Ray of Joseph Hilton & Associates is
responsible for bringing about, or negotiating, this Lease and Tenant and
Landlord have not dealt with any other broker in connection with the Demised
Premises.
46.2 In accordance with the foregoing representation, Tenant and
Landlord each agrees to defend, indemnify and hold harmless the other, its
affiliates and/or subsidiaries, partners and officers from any expense or
liability (including attorney's fees) arising out of any claim for commission by
any broker other than Matthew Ray of Joseph Hilton & Associates claiming or
alleging to have acted on behalf of or to have dealt with Tenant or Landlord, as
applicable. Landlord agrees to pay a commission to the broker for facilitating
this transaction in accordance with a separate agreement between the Landlord
and said broker.
47. CLEANING SERVICES
-----------------
47.1 So long as Tenant is not in default under this Lease, Landlord
shall provide services for maintenance of the grounds, common areas and parking
areas and such other cleaning services within the Demised Premises as are set
forth on "Cleaning Services Rider" annexed hereto and made a part hereof as
Exhibit "D", as same may be reasonably amended from time to time by Landlord.
47.2 Tenant acknowledges that Landlord's obligation to cause the
office areas of the Demised Premises to be cleaned excludes any portions of the
Demised Premises which are inaccessible to Landlord or Landlord's cleaning
contractor. Tenant shall pay to Landlord the cost of removal from the Demised
Premises of any of Tenant's refuse or rubbish other than ordinary office waste,
and Tenant, at Tenant's expense, shall cause all portions of the Demised
Premises not used as office areas to be cleaned daily in a manner satisfactory
to Landlord. Tenant also shall cause all portions of the Demised Premises used
for the storage, preparation, service or consumption of food or beverages to be
exterminated against infestation by vermin, roaches or rodents regularly and, in
addition, whenever there shall be evidence of any infestation. Tenant shall
contract directly with Landlord or, at Landlord's option, directly with
Landlord's contractors, for the removal of such other refuse and rubbish and for
cleaning services in addition to those furnished by Landlord and for
extermination services required hereunder.
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48. ASSIGNMENT AND SUBLETTING
-------------------------
48.1 For purposes of this Article and Article 11, any occupancy
arrangement (including without limitation management agreements, concessions and
licenses) affecting all or any part of the Demised Premises, other than a direct
lease with Landlord, not deemed an assignment shall be referred to as a sublease
and any occupant of all or part of the Demised Premises, other than a tenant
under a direct lease with Landlord, not deemed an assignee shall be referred to
as a sublessee. Supplementing the provisions of Article 11, and except as
provided in section 48.8 if the Tenant shall desire to assign this Lease, sublet
or underlet all or any portion of the Demised Premises, it shall first submit in
writing to the Landlord a notice setting forth in reasonable detail:
(a) the identity and address of the proposed assignee or sublessee;
(b) in the case of a subletting, the terms and conditions thereof;
(c) the nature and character of the business of the proposed
assignee and sublessee and its proposed use for the Demised Premises;
(d) evidence that the proposed assignee or sublessee is a United
States citizen or citizens or a corporation qualified to do business in the
State of New Jersey and organized and existing under the laws of one of the
States of the United States;
(e) banking, financial and other credit information relating to the
proposed assignee or sublessee reasonably sufficient to enable Landlord to
determine the proposed assignee's or sublessee's financial responsibility; and
(f) in the case of a subletting of only a portion of the Demised
Premises, plans and specifications for Tenant's layout, partitioning, and
electrical installations for the portion of the Demised Premises to be sublet.
48.2 If the nature and character of the business of the proposed
assignee or sublesse, and the proposed use and occupancy of the Demised
Premises, or any portion thereof, by the proposed assignee or sublessee, is in
keeping and compatible with the dignity and character of the Building, then,
subject to compliance with the requirements of Article 11 and this Article 48,
anything to the contrary in Article 11 notwithstanding, Landlord agrees not
unreasonably to withhold or delay its consent to any such proposed assignment or
subletting; provided, however, that Tenant shall, by notice in writing as
described in Section 48.1, advise Landlord of its intention to assign this Lease
or to sublease all or any part of the Demised Premises, from, on and after a
stated date (which shall not be less than 60 days after the date of Tenant's
notice), in which event Landlord shall have the right, to be exercised by giving
written notice, to recapture the space described in Tenant's notice. Such
recapture notice shall, if given, cancel and terminate this Lease with respect
to the space therein described as of a date which shall be the later of 30 days
following the date set forth in Tenant's notice, or 30 days after Tenant shall
have surrendered possession of the Demised Premises. In the event less than all
of the Demised Premises are recaptured, Landlord shall construct and erect such
partitioning and modify building systems as may be required to separate the
space retained by Tenant from the space recaptured. The cost of such alterations
shall be borne by Landlord.
48.3 If this Lease be cancelled pursuant to the foregoing with
respect to less than the entire Demised Premises, the Minimum Rent and/or the
Adjusted Minimum Rent and Tenant's Occupancy Percentage shall be adjusted on the
basis of the number of square feet retained by Tenant in proportion to the
number of square feet originally demised under this Lease, and this Lease, as so
amended, shall continue thereafter in full force and effect.
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48.4 In addition to the foregoing requirements: (a) no sublease shall
violate any law or result in an occupancy of the Demised Premises by more than
two tenants, including the Tenant hereunder, (b) no sublease shall be for a term
of less than two years, unless the unexpired term of this Lease shall be less
than two years at the commencement of the sublease, (c) no assignee or sublessee
shall be an existing tenant of or any party then negotiating for space in the
Building, or any other building in the office park of which the Building is a
part (i) owned by Landlord, Bellemead Development Corporation ("Bellemead") or
any partnership in which Bellemead or an affiliate of Bellemead is a partner or
(ii) managed by Bellemead or an affiliate of Bellemead ("Affiliated Building"),
(d) no sublease shall result in the occupancy of less than 1000 square feet of
space, (e) Tenant shall not be in default under any of the terms and conditions
of this Lease at the time of any notice or request for consent under the terms
of this Article or at the effective date of such assignment or subletting, (f)
no subletting or assignment shall be for a rental rate less than that currently
being charged by Landlord for comparable space in the Building or any Affiliated
Building. Furthermore, anything to the contrary in Section 48.2 notwithstanding,
Landlord shall not consent to any sublease or assignment unless Tenant agrees at
the time of the proposed sublease or assignment and in the Tenant's notice
required in Section 48.2 to pay over to Landlord seventy-five (75%) percent of
all consideration (of whatever nature) that would be payable by the prospective
sublessee or assignee to Tenant over the term of the sublease or assignment
pursuant to such sublease or assignment which exceeds the prorata share of the
-------
Minimum Rent allocable to the Demised Premises, or any part thereof, as the case
may be, payable by Tenant hereunder and (g) Tenant shall pay when due all
brokerage or similar commissions arising from any assignment or sublease.
48.5 Any sublease must provide (a) that it shall be subject and
subordinate to all of the terms and conditions of this Lease, (b) that
notwithstanding Article 2 hereof, the use of the Demised Premises thereunder
shall be restricted exclusively to executive and administrative office use, (c)
that the term thereof shall not extend beyond a date which is one day prior to
the expiration date of the Term hereof, (d) no sublessee or its heirs,
distributees, executors, administrators, legal representatives, successors or
assigns, without the prior consent of Landlord in each instance, which consent
Landlord may withhold for any reason or no reason, shall (i) assign, whether by
merger, consolidation or otherwise, mortgage or encumber its interest in any
sublease, in whole or in part, or (ii) sublet, or permit the subletting of, that
part of the Demised Premises affected by such subletting or any part thereof, or
(iii) permit such part of the Demised Premises affected by such subletting or
any part thereof to be occupied or used for desk space, mailing privileges or
otherwise, by any person other than such sublessee. The sale, pledge, transfer
or other alienation of (y) any of the issued and outstanding capital stock of
any corporate sublessee (unless such stock is publicly traded on any recognized
security exchange or over-the-counter market) or (z) any transfer or interest in
any partnership or joint venture sublessee, however accomplished, and whether in
a single transaction or in a series of related or unrelated transactions, shall
be deemed, for the purposes of this Section, an assignment of such sublease
which shall require the prior consent of Landlord in each instance, and (e) in
the event of cancellation or termination of this Lease for any reason whatsoever
or of the surrender of this Lease whether voluntary, involuntary or by operation
of law, prior to the expiration date of such sublease, including extensions and
renewals granted thereunder, that, at Landlord's options, the subtenant shall
vacate the Demised Premises or shall make full and complete attornment to
Landlord for the balance of the term of the sublease, which attornment shall be
evidenced by an agreement in form and substance satisfactory to Landlord which
the subtenant shall execute and deliver at any time within five days after
request by Landlord, its successors and assigns. The subtenant shall waive the
provisions of any law now or hereafter in effect which may give the subtenant
any right of election to terminate the sublease or to surrender possession of
the Demised Premises in the event any proceeding is brought by Landlord to
terminate this
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Lease. No assignee or sublessee shall receive any credit from Landlord
whatsoever for security deposits, rent or any other monies paid to Tenant unless
same shall have been actually received by Landlord.
48.6 Each of the following events shall be deemed to constitute an
assignment of this Lease and shall require the prior written consent of Landlord
in each instance:
(a) Any assignment or transfer of this Lease by operation of law;
(b) Any hypothecation, pledge or collateral assignment of this
Lease;
(c) Any involuntary assignment or transfer of this Lease in
connection with bankruptcy, insolvency, receivership or otherwise;
(d) Any assignment, transfer, disposition, sale or acquiring of a
controlling interest in Tenant to or by any person, entity or group of related
persons or affiliated entities, whether in a single transaction or in a series
of related or unrelated transactions; and
(e) Any issuance of an interest or interests in Tenant (whether
stock, partnership interests or otherwise) to any person, entity or group of
related persons or affiliated entities, whether in a single transaction or in a
series of related or unrelated transactions, such that following such issuance,
such person, entity or group shall hold a controlling interest in Tenant.
For purposes of the immediately preceding sentence, a "controlling interest" of
Tenant shall mean fifty (50%) percent or more of the aggregate issued and
outstanding equitable interest (whether stock, partnership interests or
otherwise) thereof.
48.7 Tenant, its sublessees, and their respective successors and
assigns acknowledge and agree that the restriction that Landlord's consent under
certain circumstances to a proposed assignment of this Lease or to a subletting
shall not be unreasonably withheld and shall not be intended or construed as an
agreement or covenant on the part of Landlord, but rather as a qualification on
Tenant's covenant not to assign this Lease or sublet, and they further agree
that Landlord shall not be liable in damages or subject to liability of any
other kind or nature whatever by reason of Landlord's failure or refusal to
grant its consent to any proposed assignment of this Lease or subletting of the
Demised Premises, the sole and exclusive recourse being a declaratory judgment
on the question of Landlord's reasonableness.
48.8 It is a condition to the effectiveness of any permitted
assignment or sublease otherwise complying with Article 11 and this Article 48
that the (i) Tenant increase on Landlord's demand the amount of security
deposited with Landlord by a sum not to exceed two (2) months Adjusted Minimum
Rent and (ii) assignee execute, acknowledge and deliver to Landlord an agreement
in form and substance satisfactory to Landlord whereby the assignee assumes all
obligations of Tenant under this Lease, and agrees that the provisions of
Article 11 and this Article 48 shall continue to be binding upon it in respect
of all future assignments of this Lease. No assignment of this Lease shall
release the assignor from its continuing obligations to Landlord under this
Lease or any renewals or extensions thereof, except as expressly herein
provided, and Tenant and any subsequent assignor shall continue to remain
jointly and severally liable (as primary obligor) for all of Tenant's
obligations hereunder.
48.9 Tenant covenants to obtain all permits and approvals required by
any governmental or quasi-governmental agency for any work or otherwise required
in connection with any assignment of this Lease or any sublease, and Tenant
shall deliver copies of the same to Landlord prior to the commencement of work
if work is to be done. Tenant is furthermore responsible for and is
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required to reimburse Landlord for all costs including, but not limited to,
architectural, engineering and legal fees which Landlord incurs in reviewing any
proposed assignment of this Lease or any sublease and any permits, approvals and
applications for the construction within the Demised Premises.
48.10 If Landlord reasonably withholds its consent of any proposed
assignment or sublease, or if Landlord exercises its recapture option under
Section 48.2, Tenant shall indemnify, defend and hold harmless Landlord against
and from all loss, liability, damage, cost and expense (including reasonable
attorneys' fees and disbursements) resulting from any claims that may be made
against Landlord by the proposed assignee or sublessee or by any brokers or
other persons claiming a commission or similar compensation in connection with
the proposed assignment or sublease.
48.11 If Landlord consents to any proposed assignment or sublease and
Tenant fails to consummate the assignment or sublease to which Landlord
consented within 45 days after the giving of such consent, Tenant shall be
required again to comply with all of the provisions and conditions of this
Article 48 before assigning this Lease or subletting all or part of the Demised
Premises.
48.12 The joint and several liability of the named Tenant and any
immediate or remote successor in interest of the named Tenant for the due
performance and observance of all covenants and conditions to be performed and
observed by Tenant shall not be impaired by any agreement of Landlord extending
the time for such performance or observance or by Landlord's waiving or failing
to enforce any provisions of this Lease.
48.13 The listing of any name other than that of Tenant on any door of
the Demised Premises or on any directory or in any elevator in the Building or
otherwise, shall not operate to vest in the person so named any right or
interest in this Lease or in the Demised Premises or the Building, or be deemed
to constitute, or serve as a substitute for any prior consent required under
this Article, and it is understood that any such listing shall constitute a
privilege extended by Landlord which shall be revocable at Landlord's will by
notice to Tenant.
48.14 Any provisions of Article 11 and Article 48 to the contrary
notwithstanding, but subject to the other terms, conditions and provisions
contained in said Articles:
(a) Any corporate Tenant shall have the right, without the consent of
Landlord, to assign this Lease or sublet all or any part of the Demised
Premises to any corporation controlling, controlled by or under common
control with Tenant, provided that no such assignee shall further assign
--------
this Lease and no such sublessee shall assign or encumber its sublease or
further sublet all or any part of the Demised Premises, and provided,
--------
further, that any event resulting in such assignee or sublessee ceasing to
-------
be a corporation controlling, controlled by or under common control with
Tenant shall be deemed to be an assignment or sublease requiring the prior
consent of Landlord and Tenant shall thereupon be required to comply with
all provisions of Article 11 and this Article 48 applicable thereto. For
purposes of the immediately foregoing, "control", means ownership of at
least fifty one percent (51%) of the issued and outstanding voting stock of
such corporation.
(b) Any corporate Tenant shall also have the right, without the
consent of Landlord, to assign this Lease to any corporation succeeding to
Tenant by merger or consolidation in accordance with applicable statutory
provisions for merger or consolidation of corporations or by purchase of
all or substantially all of Tenant's assets, provided that immediately
after such merger, consolidation or purchase, the shareholders' equity
(capital stock, additional paid-in capital and retained earnings) of the
successor corporation or the purchasing corporation, as the case may be,
shall be at least equal to the shareholder's equity of Tenant immediately
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prior to such merger, consolidation or purchase and this shall be so
certified by the chief financial officer of the assignee.
It is Landlord's intent to permit assignment of the Lease and subletting
pursuant to this Section 48.14 exclusively as an accommodation to the bona fide
and legitimate business needs of Tenant, and notwithstanding the provisions
hereof, no assignment of this Lease or sublease of all or any part of the
Demised Premises without Landlord's consent hereunder shall be permitted where
the sole or primary purpose of such assignment or subletting is to permit
occupancy of all or any part of the Demised Premises by a third party in
avoidance of Landlord's consent, or in the case of a corporation's purchasing
all or substantially all of Tenant's assets where this Lease constitutes all or
a substantial portion of such assets.
Tenant shall promptly give Landlord prior written notice of any assignment
of this Lease or subletting permitted under this Section 48.14 accompanied by
all documentation required by Landlord to establish compliance with the
requirements of subsections (a) and (b) above and Tenant shall also promptly
provide Landlord with a copy of any executed instrument of merger, consolidation
or assignment or the executed sublease, as the case may be.
49. TENANT'S COOPORATION; REASONABLE
MODIFICATIONS; ESTOPPEL CERTIFICATE
-----------------------------------
49.1 If, in connection with obtaining financing for the Building
and/or the Real Estate, or otherwise upon the interest of the Landlord, as
lessee, under any ground or underlying lease, any lending institution shall
request reasonable modifications of this Lease as a condition of such financing,
Tenant covenants not unreasonably to withhold or delay its agreement to such
modification, upon Landlord's request, provided that such modification does not
materially or adversely affect the rights of Tenant under this Lease.
49.2 Tenant agrees at any time and from time to time, upon not less
than ten days' prior written request, that Tenant shall execute, acknowledge
and deliver to Landlord, or its designee, a statement in writing certifying:
that this Lease is unmodified and is in full force and effect (or if there have
been modifications, the specifics thereof and that the Lease is in full force
and effect as modified); the dates to which the Minimum Rent (or Adjusted
Minimum Rent) and additional rent have been paid; the amount of all rents paid
in advance, if any; and any other information that Landlord shall reasonably
request. Tenant further agrees to furnish Landlord upon demand at any time such
information and assurances as Landlord may request that Tenant has not breached
the provisions of this Lease. It is intended hereby that any such statement
delivered pursuant to this Article may be relied upon by a prospective purchaser
of the Landlord's interest or a mortgagee of Landlord's interest, or any
assignee of any mortgage upon Landlord's interests in the Real Estate. The
foregoing obligation shall be deemed a substantial obligation of the tenancy,
the breach of which shall give Landlord those remedies herein provided for an
event of default. Tenant's failure to timely deliver such statement shall be
conclusive upon Tenant: (a) that this Lease is in full force and effect, without
modification except as may be represented by Landlord; (b) that there are no
uncured defaults in Landlord's performance and Tenant has no right of offset,
counterclaim, defenses or deduction against the Minimum Rent, Adjusted Minimum
Rent, additional rent or against Landlord; and (c) that no more than one month's
installment of Minimum Rent has been paid in advance.
49.3 Tenant agrees at any time it is in monetary default hereunder
that Tenant shall demonstrate to Landlord upon not less than ten (10) days prior
written request Tenant's financial status and that of any occupant of the
Demised Premises by submitting to Landlord all reasonable information as
Landlord may request, including but not limited to a balance sheet as of a date
within ninety (90) days of Landlord's request therefor and statements of
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income or profit and loss. The foregoing obligation shall be deemed a
substantial obligation of the tenancy, the breach of which shall give Landlord
those remedies herein provided for an event of default.
50. LIMITATION OF LIABILITY;
DEFINITION OF "LANDLORD"
------------------------
50.1 Notwithstanding anything to the contrary herein provided, each
and every term, covenant, condition and provision of this Lease, is hereby made
specifically subject to the provisions of this Article 50. The term "Owner" or
"Landlord" as used in this Lease means only the owners or lessors for the time
being of the Real Estate, so that in the event of any conveyance of such
interest and the transfer to the transferee of any funds then being held under
this Lease by such owner, Landlord shall be and hereby is entirely freed and
relieved of any and all obligations of Landlord hereunder thereafter accruing,
and it shall be deemed without further agreement between the parties and such
grantee(s) that the grantee has assumed and agreed to observe and perform all
obligations of Landlord hereunder. It is specifically understood and agreed that
notwithstanding anything to the contrary herein provided or otherwise provided
at law or in equity, there shall be absolutely no personal liability in excess
of its interest in the Real Estate to the Landlord or any successor in interest
thereto (whether the same be an individual, joint venture, tenancy in common,
firm or partnership, general, limited or otherwise) or on the part of the
members of any firm, partnership or joint venture or other unincorporated
Landlord with respect to any of the terms, covenants and/or conditions of this
Lease; in the event of a breach or default by Landlord, or any successor in
interest thereof, of any of its obligations under this Lease, Tenant shall look
solely to the then Landlord for the satisfaction of each and every remedy of
Tenant, such exculpation of personal and additional liability which is in excess
of such interest in the Real Estate to be absolute and without any exception
whatsoever.
51. STATUTORY WAIVER; NOTICE BY TENANT
----------------------------------
51.1 Tenant waives the benefit of N.J.S.A. 46:8-6 and 46:8-7, as same
may be amended. Tenant further waives its right under N.J.S.A 2A:18-60, as same
be amended. Tenant agrees that it will not be relieved of the obligations to pay
the Minimum Rent, Adjusted Minimum Rent or any additional rent in case of damage
to or destruction of the Building, except as provided in Article 9 of the
Printed Portion of this Lease.
51.2 Tenant shall give Landlord prompt notice in case of fire or
accident within the Demised Premises, or, upon the Real Estate if involving
Tenant, its servants, agents, guests, employees, invitees or licensees.
52. CORPORATE AUTHORITY
-------------------
52.1 Tenant represents that the officer executing and delivering this
Lease has been duly authorized to enter into this Lease and that the execution
and delivery of this Lease by Tenant do not and shall not violate any provision
of any by-law, agreement, order, judgment, governmental regulation or any other
obligation to which Tenant is a party or is subject.
52.2 Upon Landord's request, Tenant shall deliver an appropriate
certification by its secretary or assistant secretary to the above effect.
52.3 Landlord represents that the officer executing and delivering
this Lease has been duly authorized to enter into this Lease and that the
execution and delivery of this Lease by Landlord do not and shall not violate
any provision of any by-law, agreement, order, judgment, governmental regulation
or any other obligation to which Landlord is a party or is subject.
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53. PERSONAL TAXES
--------------
53.1 Tenant agrees to pay all taxes imposed upon Tenant or on the
personal property of Tenant in connection with its use and occupancy of the
Demised Premises including, but not limited to, personal property, income,
withholding and unemployment compensation, and to hold Landlord harmless from
collection thereof out of monies due and owing Landlord.
54. BUILDING CHANGES
----------------
54.1 This Lease shall not be affected or impaired by any change to
any lawns, sidewalk, driveways, parking areas or streets adjacent to or around
the Building, except as provided in the provisions of this Lease dealing with
condemnation.
55. HOLDING OVER
------------
55.1 Tenant shall pay Landlord one and one-half (1 1/2) times the
fair market rental value of the Demised Premises, as determined by Landlord (but
in no event less than one and one-half (1 1/2) times the total of Adjusted
Minimum Rent plus additional rent then applicable under the Lease) for each
month or partial month during which Tenant retains possession of the Demised
Premises, or any part thereof, after the expiration or termination of the Lease.
Tenant understands that on the last day of the term of this Lease, all or a part
of the Demised Premises may be subject to certain rights of occupancy held by
other parties and that any retention of possession by Tenant after the last day
of the term of this Lease may cause significant hardship on Landlord and on
parties to whom certain rights of occupancy for all or any part of the Demised
Premises have been granted. In connection with the foregoing, Tenant shall
defend, indemnify and hold Landlord harmless against all liabilities and damages
sustained by reason of any such retention of possession. Nothing contained in
this Lease shall be construed as a consent by Landlord to the occupancy or
possession by Tenant of the Demised Premises beyond the Termination Date or
prior expiration of the term hereof, and Landlord, upon the Termination Date or
prior expiration of the term hereof, shall also be entitled to consequential
damages and to the benefit of all legal remedies that now may be in force or may
be hereafter enacted for summary possession of the Demised Premises.
56. RESTRICTIVE COVENANT - FOOD SERVICE
-----------------------------------
56.1 Tenant hereby covenants and agrees (anything to the contrary
contained in this Lease, notwithstanding) that it shall not use the Demised
Premises or any portion thereof, for the service of food to anyone other than
Tenant's employees or guests, nor shall it maintain any facilities for the sale
or consumption of food to and by anyone other than Tenant's employees or guests
without, in each case, obtaining the prior written consent of the Landlord. The
consent of the Landlord required hereunder may be withheld for any reason or no
reason.
56.2 Landlord represents to Tenant, and Tenant acknowledges, that
pursuant to agreements made or to be made by and between the Landlord and third
parties for the operation of a restaurant, cafeteria, coffee-cart and similar
food services for this Building and/or other buildings in the office park in
which this Building is located, no tenant of this Building, including Tenant,
shall prepare, contract for, serve or otherwise make available a food service
facility in competition with such third parties. Any breach of this restriction
by the Tenant shall be deemed a material event of default under the terms of
this Lease, and Landlord may, in its discretion, exercise such remedies as it
may deem appropriate to terminate this Lease, prevent a violation of this
covenant, and recover any damages to which it may be exposed by virtue of a
breach by the Tenant.
56.3 Tenant shall not permit the consumption of food or drink in the
common areas of the Building.
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57. NOTICES
-------
57.1 All notices, demands and requests which may or are required to
be given by either party hereunder to the other, shall be in writing. All
notices, demands and requests by Landlord to Tenant shall be deemed to have been
properly given if sent by Landlord or its managing agent and mailed by
registered or certified mail, return receipt requested, postage prepaid,
addressed to Tenant at the Demised Premises with a copy to Edward J. Trawinski,
Esq., Schenck, Price, Smith & King, 10 Washington Street, P.O. Box 905,
Morristown, New Jersey 07963-0905 or to such other address as Tenant may from
time to time designate by written notice to Landlord.
All notices, demands and requests by Tenant to Landlord shall be
deemed duly given or served if, and shall not be deemed duly given or served
unless, sent by (i) registered or certified mail, return receipt requested,
postage prepaid, (ii) any nationally recognized overnight delivery service, or
(iii) via facsimile transmission with evidence of transmission, in each case
addressed to Landlord at:
LANDLORD: 6 Century Associates
c/o Bellemead Management Co., Inc.
280 Corporate Center
4 Becker Farm Road
Third Floor
Roseland, New Jersey 07068
Attention: Legal Department
or to such other address as Landlord may from time to time designate by written
notice to Tenant.
All notices referred to hereunder shall be deemed given and received
two days after the date said notice is mailed by United States registered or
certified mail as aforesaid, in any post office or branch post office regularly
maintained by the United States Government, unless said notice was personally
served upon an officer of Landlord or Tenant, in which case such notice shall be
deemed given when delivered.
58. INTERPRETATION
--------------
58.1 If any term or provisions of this Lease or the application
thereof to any party or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Lease or the application of such term or
provision to parties or circumstances other than to those with respect to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and enforced to the fullest
extent permitted by law.
58.2 Time is of the essence with respect to the Tenant's obligation
to pay Minimum Rent, Adjusted Minimum Rent and additional rent hereunder.
58.3 In any and all cases where Landlord's consent or approval is
required under this Lease, Tenant shall upon Landlord's demand reimburse
Landlord, as additional rent, for all reasonable costs and expenses, including
but now limited to architectural, engineering and legal fees, which Landlord
incurs in determining whether to grant its consent or approval.
58.4 Tenant shall pay all reasonable legal fees and expenses incurred
by Landlord (i) in interpreting, enforcing or modifying the terms of the Lease,
(ii) in commencing and prosecuting a suit for the recovery of the Demised
Premises, damages or any amounts owed to Landlord, (iii) in commencing and
prosecuting a declaratory action, (iv) in defending an action or counterclaim
brought by Tenant and (v) in preparing for or appearing in an arbitration,
mediation or other nonjudicial proceeding.
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58.5 This Lease shall be governed by and construed in accordance with
the laws of and enforced only in the courts of New Jersey. Tenant hereby
irrevocably submits itself to the jurisdiction of the courts of the State of New
Jersey and to the jurisdiction of the United States District Court for the
District of New Jersey for the purposes of any suit, action or other proceeding
brought by Landlord arising out of or based upon this Lease. Tenant hereby
waives and agrees not to assert, by way of motion, as a defense, or otherwise,
in any such suit, action or proceeding, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Lease may not be enforced in or by
such court.
58.6 This Lease shall be construed without regard to any presumption
or other rule requiring construction against the party causing this Lease to be
drafted. Text deleted from a prior draft of this Lease shall not be admissible
in an action or proceeding relating to the Lease for the purpose of altering or
limiting the meaning or effect of the Lease.
58.7 Tenant and Landlord each acknowledges and agrees that it has had
the assistance of counsel in the review, negotiation and execution of this Lease
or has waived its right to counsel.
59. NO OFFER OR AGREEMENT
---------------------
59.1 No broker or agent of any broker has authority to make or agree
to make a lease or any other agreement or undertaking in connection herewith,
including, but not limited to the modification, amendment of or cancellation of
a lease. The mailing or delivery of this document or any draft hereof by the
Landlord or its agent to Tenant, its agent or attorney shall not be deemed an
offer by the Landlord to lease the Demised Premises on the terms herein. This
Lease shall not be effective, nor shall Tenant have any rights with respect
thereto unless and until Landlord shall accept this Lease and execute and
deliver the same to Tenant.
60. DAMAGES
-------
60.1 Notwithstanding anything to the contrary contained in Article 18
hereof, if Landlord shall re-enter the Demised Premises under the provisions of
Article 18, or in the event of the termination of this Lease, or of re-entry, by
or under any summary dispossess or other proceeding or action of any provision
of law by reason of default hereunder on the part of Tenant, Tenant shall pay to
Landlord as damages, (i) a sum which at the time of such termination of this
Lease or at the time of any such re-entry by Landlord, as the case may be,
equals the aggregate Adjusted Minimum Rent payable hereunder which would have
been payable by Tenant (conclusively presuming that additional rent on account
of increases in Taxes and Building Operating Costs shall increase at the average
of the rates of increase thereof previously experienced by Landlord during the
period not to exceed 3 years prior to such termination) for the period
commencing with such earlier termination of this Lease or the date of such
re-entry, as the case may be, and ending with the Termination Date, had this
Lease not so terminated or had Landlord not so re-entered the Demised Premises
plus (ii) the expenses or re-letting, including altering and preparing the
Demised Premises for new tenants, brokers' commissions, attorney's fees and all
other expenses properly chargeable against the Demised Premises and the rental
thereof less any sums actually received by Landlord on account of such
re-letting. Any such re-letting may be for a period shorter or longer than the
remaining term of this Lease; but in no event shall Tenant be entitled to
receive any excess of such net rents over the sums payable by Tenant to Landlord
hereunder, or shall Tenant be entitled in any suit for the collection of damages
pursuant to this subsection of a credit in respect of any net rents from a
reletting. If the Demised Premises or any part thereof should be re-let in
combination with the other space, then proper
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apportionment on a square foot basis shall be made of the rent received from
such re-letting and of the expenses of re-letting.
60.2 Suit or suits for the recovery of such damages, or any
installments thereof, may be brought by Landlord from time to time at its
election, and nothing contained herein shall be deemed to require Landlord to
postpone suit until the date when the term of this Lease would have expired if
it had not been so terminated or had Landlord not re-entered the Demised
Premises. Nothing herein contained shall be construed to limit or preclude
recovery by Landlord against Tenant of any sums or damages to which, in addition
to the damages particularly provided above, Landlord may lawfully be entitled by
reason of any default hereunder on the part of Tenant. Any indemnity of Tenant
shall survive the expiration or earlier termination of this Lease. Nothing
herein contained shall be construed to limit or prejudice the right of Landlord
to prove for and obtain as liquidated damages by reason of the termination of
this Lease or re-entry of the Demised Premises for the default of Tenant under
this Lease, an amount equal to the maximum allowed by any statute or rule of law
governing the proceedings in which such damages are to be proved whether or not
such amount be greater, equal to, or less than any of the sums referred to in
Section 60.1.
61. BANKRUPTCY
----------
61.1 If, as a matter of law, Landlord has no right on the bankruptcy
of Tenant to terminate this Lease, then, if Tenant, as debtor, or its trustee
wishes to assume or assign this Lease, in addition to curing or adequately
assuring the cure of all defaults existing under this Lease on Tenant's part on
the date of filing of the proceeding (such assurances being defined below),
Tenant, as debtor, or the trustee or assignee, must also furnish adequate
assurances of future performance under this Lease (as defined below). Adequate
assurance of curing defaults means the posting with Landlord of a sum in cash
sufficient to defray the cost of such a cure. Adequate assurance of future
performance under this Lease means posting a deposit equal to three (3) months'
rent, including all other charges payable by Tenant hereunder, such as the
amounts payable pursuant to Article 36 hereof, and, in the case of an assignee,
assuring Landlord that the assignee is financially capable of assuming this
Lease, and that its use of the Demised Premises will not be detrimental to the
other tenants in the Building or Landlord. In a reorganization under Chapter 11
of the Bankruptcy Code, the debtor or trustee must assume this Lease or assign
it within one hundred twenty (120) days from the filing of the proceeding, or he
shall be deemed to have rejected and terminated this Lease.
61.2 If this Lease is assigned to any person or entity pursuant to
the provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the
"Bankruptcy Code"), any and all monies or other considerations to be delivered
in connection with the assignment shall be delivered to Landlord, shall be and
remain the exclusive property of Landlord and shall not constitute property of
Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code. Any
person or entity to which this Lease is assigned pursuant to the provisions of
the Bankruptcy Code shall be deemed to have assumed all of the obligations
arising under this Lease on and after the date of the assignment, and shall upon
demand execute and deliver to Landlord an instrument confirming that assumption.
62. SECURITY
--------
62.1 In the event Landlord applies or retains any portion or all of
the security deposited, Tenant shall forthwith restore the amount so applied or
retained so that at all times the amount deposited with Landlord shall be not
less than $17,504.38.
62.2 Landlord shall deposit any cash security received from Tenant on
the date hereof in an interest bearing account in a commercial banking
institution, subject to Landlord's right to
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apply the security as provided in Article 34 and subject to Tenant's obligation
to restore the amount of security should Landlord apply or utilize all or any
portion thereof. The interest bearing account in which the security is to be
deposited shall be in a commercial banking institution selected by Landlord and
may from time to time be transferred by Landlord to another commercial banking
institution of Landlord's choice. Any interest earned on the security shall be
earned for the account of Tenant and shall be held by Landlord as additional
security thereunder; except that Landlord may retain one percent (1%) of the
security annually as an administrative fee.
63. PARTNERSHIP TENANT
------------------
63.1 If Tenant is a partnership, joint venture or unincorporated
association (or is comprised of two (2) or more persons, individually and as co-
partners of a partnership) or if Tenant's interest in this Lease shall be
assigned to a partnership, joint venture or unincorporated association (or to
two (2) or more persons, individually and as co-partners of a partnership)
pursuant to Articles 11 and 48 (any such partnership and such persons are
referred to in this Section as "Partnership Tenant"), the following provisions
of this Section shall apply to such Partnership Tenant; (i) the liability of
each of the persons comprising Partnership Tenant shall be joint and several,
individually and as a partner, and (ii) each of the persons comprising
Partnership Tenant, whether or not such person shall be one of the persons
comprising Tenant at the time in question, hereby consents in advance to, and
agrees to be bound by, any written instrument which may hereafter be executed,
changing, modifying or discharging this Lease, in whole or in part, or
surrendering all or any part of the Demised Premises to Landlord, and by any
notices, demands, requests or other communications which may hereafter be given,
by Partnership Tenant or by any of the persons comprising Partnership Tenant,
and (iii) any bills, statements, notices, demands, requests or other
communications given or rendered to Partnership Tenant or to any of the persons
comprising Partnership Tenant shall be deemed given or rendered to Partnership
Tenant and to all such persons and shall be binding upon Partnership Tenant and
all such persons, and (iv) if Partnership Tenant shall admit new partners, all
of such new partners shall, by their admission to partnership Tenant, be deemed
to have assumed performance of all of the terms, covenants and conditions of
this Lease on Tenant's part to be observed and performed, and shall be liable
for such performance, together with all other partners, jointly or severally,
individually and as a partner, and (v) if any partners shall leave Partnership
Tenant, all of such departing partners shall nevertheless remain liable for
performance of all the terms, covenants, and conditions of this Lease on
Tenant's part to be observed and performed and shall continue to be liable for
such performance, together with all currently admitted partners, jointly or
severally, individually and as a partner, and (vi) Partnership Tenant shall give
prompt notice to Landlord of the admission of any such new partners, and upon
demand of Landlord, shall cause each such new partner to execute and deliver to
Landlord an agreement in form satisfactory to Landlord, wherein each such new
partner shall so assume performance of all of the terms, covenants and
conditions of this Lease on Tenant's part to be observed and performed (but
neither Landlord's failure to request any such agreement nor the failure of any
such new partner to execute or deliver any such agreement to Landlord shall
vitiate the provisions of subdivision (iv) of this Section).
64. LANDLORD'S WORK; LANDLORD'S WORK LETTER
---------------------------------------
64.1 Annexed hereto as Exhibit "B" and made a part hereof is Proposal
10196; SK-1 dated 10/12/93; SK-2 dated 10/12/93; SK-3 dated 10/12/93; TA-3c
dated 10/12/93; TA-3d dated 1/12/93 (collectively referred to as the "Work
Letter"). Tenant agrees that it shall provide to Landlord on or before November
1, 1993, such final drawings and specifications (which must first be approved in
writing by Landlord) for Tenant's layout, partitioning, electrical, reflecting
ceiling and other installations. Landlord shall furnish and install in
accordance with such final and approved drawings and specifications, so much of
the work described
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in said final and approved drawings and specifications and in the Work Letter as
allowed by a construction credit of $304,876.86 ("Construction Credit"). To the
extent Tenant's final and approved drawings and specifications require work, the
cost of which exceeds the Construction Credit, such work shall be reduced to an
"Extra" or "Change Order" to be executed by both Landlord and Tenant, which
shall indicate the work required, the cost thereof to be paid by Tenant upon
demand, and the additional time required, if any, for completion. Any or all of
the Construction Credit that remains unexpended as of the Commencement Date
shall be deemed null and void and forever forfeited. Tenant shall be responsible
for any delays in completing the Demised Premises by reason of Tenant's failure
to cooperate with Landlord, Tenant's delays in submitting any drawings or
specifications, or in supplying information, or in approving drawings,
specifications or estimates, or in giving authorizations, or by reason of any
"Extra" or "Change Order" designated by Tenant, or by reason of any changes by
Tenant in any designations previously made by Tenant, or by reason of any
similar acts or omissions of Tenant or by reason of any cause or factor beyond
Landlord's reasonable control, including but not limited to strikes or other
labour disputes, accidents, orders or regulations of any federal, state, country
or municipal authority, delays due to adjustment or insurance claims, lack of
availability of materials, parts or services, acts of God, fire, earthquake,
floods, explosion, action of the elements, war, hostilities, invasion,
insurrection, riot, mob violence, sabotage or by reason of any other cause,
whether similar or not to the foregoing, that is beyond the reasonable control
of Landlord. If the commencement Date does not occur on or before the Estimated
Commencement Date by virtue of any of the reasons set forth in the immediately
preceding sentence, then the Commencement Date shall be deemed, notwithstanding
anything contained to the contrary in Article 37, to have occurred on the
Estimated Commencement Date.
65. RENEWAL OPTION
--------------
65.1 Subject to the provisions of Section 65.2 below, Tenant shall
have the option to renew this Lease for an additional term of five (5) years
(the "Renewal Term"), which Renewal Term shall commence upon the expiration of
the term described in Article 37 of this Lease (the "Initial Term"). The terms,
covenants and conditions during the Initial Term, including but not limited to
the definitions of the First Tax Year and First Operating Year as set forth in
Article 36 hereof, shall be projected and carried over into the Renewal Term,
except as specifically set forth hereinafter.
(a) The Minimum Rent during the Renewal Term shall be the greater of
(i) Market Rent (as defined in clause (b) below) or (ii) the Adjusted Minimum
Rent as of the last day of the Initial Term.
(b) "Market Rent" shall mean the fair market rent for the Demised
Premises, as of the commencement date of the Renewal Term (the "Determination
Date"), based upon the rents generally in effect for comparable office space in
the area in which the Real Estate is located. Market Rent (for the purposes of
determining the Minimum Rent only during the Renewal Term) shall be determined
on what is commonly known as "gross" basis; that is, in computing Market Rent,
it shall be assumed that all real estate taxes and expenses for customary
services are included in such Market Rent and are not passed through to the
Tenant as separate additional charges. Notwithstanding the foregoing, the
Minimum Rent for the Renewal Term shall be thereafter increased form time to
time as provided in this Lease and the First Tax Year and First Operating Year
for the Renewal Term shall be defined as provided in Article 36 hereof.
(c) Landlord shall notify Tenant ("Landlord's Determination Notice")
of Landlord's determination of the Market Rent within sixty (60) days of the
Determination Date. If Tenant disagrees with Landlord's determination, Tenant
shall notify Landlord ("Tenant's Notice of Disagreement") within fifteen (15)
days of receipt of Landlord's Determination Notice. Time shall be
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of the essence with respect to Tenant's Notice of Disagreement, and the failure
of Tenant to give such notice within the time period set forth above shall
conclusively be deemed an acceptance by Tenant of the Market Rent as determined
by Landlord and a waiver by Tenant of any right to dispute such Market Rent. If
Tenant timely gives its Tenant's Notice of Disagreement, then the Market Rent
shall be determined as follows: Landlord and Tenant shall, within thirty (30)
days of the date on which Tenant's Notice of Disagreement was given, each
appoint an Appraiser (hereinafter defined) for the purpose of determining the
Market Rent. An Appraiser shall mean a duly qualified impartial real estate
appraiser having at least ten (10) years' experience in the area in which the
Demised Premises are located. In the event that the two (2) Appraisers so
appointed fail to agree as to the Market Rent within a period of thirty (30)
days after the appointment of the second Appraiser, such two (2) Appraisers
shall forthwith appoint a third Appraiser who shall make a determination within
thirty (30) days thereafter. If such two Appraisers fail to agree upon such
third Appraiser within ten (10) days following the last thirty (30) day period,
such third Appraiser shall be appointed by a presiding Judge of the Superior
Court of the State of New Jersey for the County in which the Real Estate is
located. Such two (2) Appraisers or three (3) Appraisers, as the case may be,
shall proceed with all reasonable dispatch to determine the Market Rent. The
decision of such Appraisers shall be final; such decision shall be in writing
and a copy shall be delivered simultaneously to Landlord and to Tenant. If such
Appraisers fail to deliver their decision as set forth above prior to the
commencement of the Renewal Term, Tenant shall pay Landlord the Adjusted Minimum
Rent at the rate as of the last day of the Initial Term, until such decision is
so delivered. If the Market Rent as determined above is in excess of the actual
rent paid, then Tenant, upon demand, shall pay to Landlord the difference
between the actual rent paid and the Market Rent from the commencement of the
Renewal Term. Landlord and Tenant shall each be responsible for and shall pay
the fee of the Appraiser appointed by them respectively, and Landlord and Tenant
shall share equally the fee of the third Appraiser. Promptly upon determination
of the Market Rent, Tenant shall execute and deliver a Lease amendment prepared
by Landlord setting forth the terms of the Renewal Term.
65.2 Tenant's option to renew, as provided in Section 65.1 above,
shall be strictly conditioned upon and subject to each of the following:
(a) Tenant shall notify Landlord in writing of Tenant's exercise of
its option to renew at least six (6) months, but not more than twelve (12)
months, prior to the expiration of the Initial Term;
(b) At the time Landlord receives Tenant's notice as provided in (a)
above, and at the expiration of the Initial Term, Tenant shall not have been in
default under the terms or provisions of this Lease and the Tenant named on the
first and last page of this Lease shall be in occupancy of the entire Demised
Premises;
(c) Tenant shall have no further renewal option other than the
option to extend for the one Renewal Term as set forth in Section 65.1 above;
(d) This option to renew shall be deemed personal to the Tenant
named on the first and last page of this Lease and may not be assigned;
(e) Landlord shall have no obligation to do any work or perform any
services for the Renewal Term with respect to the Demised Premises or the
Building which Tenant agrees to accept in their then "as is" condition; and
(f) No later than ten (10) days prior to the commencement of the
Renewal Term, Tenant shall deposit with Landlord such additional sums as may be
required to increase any security deposit then held by Landlord proportionate to
the increase in the Minimum Rent.
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66. ISRA COMPLIANCE
---------------
66.1 Tenant shall, at Tenant's own expense, comply with the
Industrial Site Recovery Act, (N.J.S.A. 13:1K-6 et seq.), the Comprehensive
Environmental Response, Compensation & Liability Act (42 U.S.C. 9601 et seq.)
and the Spill Compensation and Control Act (N.J.S.A. 58:10-23.11 et seq.) and
any and all environmental laws, amendments thereto and the regulations and
orders promulgated thereunder with respect to Tenant's use and occupancy of the
Demised Premises. Tenant shall, at Tenant's own expense, make all submissions
to, provide all information to, and comply with all requirements of, the Bureau
of Industrial Site Evaluation ("the Bureau") of the New Jersey Department of
Environmental Protection and Energy ("NJDEPE"). Should the Bureau or any other
division of NJDEPE determine that a cleanup plan be prepared and that a cleanup
be undertaken because of any spills or discharges of hazardous substances or
wastes in or about the Real Estate caused by Tenant which occur during the term
of this Lease, then Tenant shall, at Tenant's own expense, prepare and submit
the required plans and financial assurances, and carry out the approved plans.
Tenant's obligations under this Article shall arise if there is any closing,
terminating or transferring of operations of an industrial establishment
utilizing the Demised Premises or a transfer of the Real Estate or any portion
thereof which falls under the purview of the statutes hereinbefore referred.
66.2 At no expense to Landlord, Tenant shall promptly provide all
information requested by Landlord for preparation of non-applicability
affidavits and shall promptly sign such affidavits when requested by Landlord.
Tenant shall indemnify, defend and save harmless Landlord from all fines, suits,
procedures, claims and actions of any kind arising out of or in any way
connected with any spills or discharges of hazardous substances or wastes in or
about the Real Estate caused by Tenant which occur during the term of this
Lease; and from all fines, suits, procedures, claims and actions of any kind
arising out of Tenant's failure to provide all information, make all submissions
and take all actions required by the Bureau or any other division of NJDEPE.
Tenant's obligations and liabilities under this Article shall continue so long
as Landlord remains responsible for any spills or discharges of hazardous
substances or wastes in or about the Real Estate caused by Tenant which occur
during the term of this Lease. Tenant's failure to abide by the terms of this
Article shall be restrainable by injunction.
67. PREPAID RENT
------------
67.1 Tenant shall pay Landlord prepaid rent equal to the sum of five
(5) monthly installments of Minimum Rent, two (2) monthly installments of which
shall be due on the date hereof and three (3) monthly installments of which
shall be due on or before the Commencement Date. Said prepaid rent shall be
deposited in the same interest bearing account (described in Section 62.3
hereof) in which the security is deposited. All the prepaid rent [plus any
interest earned thereon less the one percent (1%) annual administrative fee
referred to in Section 62.3 hereof] actually received by Landlord on or before
the Commencement Date shall be applied by Landlord against (i) the monthly
installment of Minimum Rent due for the tenth (10th) Lease month of the term and
(ii) the consecutive monthly installments of Minimum Rent due for each Lease
month of the term thereafter until the prepaid rent [plus any interest earned
thereon less the one percent (1%) annual administrative fee referred to in
Section 62.3 hereof] is entirely expended.
68. RIGHT OF FIRST/SECOND OFFER
---------------------------
68.1 The following units of space currently exist on the second
(2nd) and third (3rd) floors of the Building: 1,926 rentable square feet of
vacant space on the third floor, 20,843 rentable square feet of leased spaced on
the third floor, 8,132 rentable square feet of vacant space on the second floor
(the "PC Strategies Space"), 2,558 rentable square feet of leased space on the
second floor and 9,900 rentable square feet of leased space on the second
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floor. All of the above-referenced premises are hereinafter collectively
referred to as the "Option Space". Landlord agrees that if all or any portion of
the Option Space shall become available during the term of this Lease, then in
any such case, before offering the available Option Space (other than the PC
Strategies Space) to any other party, Landlord will first offer to Tenant the
right to include the Option Space (other than the PC Strategies Space) within
the Demised Premises on the Inclusion Date (hereinafter defined) upon all of the
terms and conditions of this Lease, as if the Option Space had been part of the
Demised Premises on the Commencement Date, except as specifically set forth
hereinafter. With respect to the PC Strategies Space, Landlord agrees that if
the PC Strategies Space shall become available during the term of this Lease,
then, subject to the rights of PC Strategies & Solutions, Inc., Landlord will
offer to Tenant the right to include the PC Strategies Space within the Demised
Premises on the Inclusion Date upon all of the terms and conditions of this
Lease, as if the PC Strategies Space had been part of the Demised Premises on
the Commencement Date, except as specifically set forth hereinafter. The
Inclusion Date shall be the date on which Tenant exercises its option pursuant
to the terms of this Article.
(a) In the event Tenant exercises its option pursuant to the terms of this
Article within twelve (12) months from the Commencement Date (the "Anniversary
Date") the Minimum Rent payable with respect to the Option Space shall be $17.50
per rentable square foot and Tenant shall be entitled to a construction
allowance of $23.00 per rentable square foot (based on a five year term and
reduced on a pro-rata basis for any term less than five years) for work
performed by Landlord's affiliate, Bellemead Construction Corporation within the
Option Space. In the event Tenant exercises its option pursuant to the terms of
this Article at any time after the Anniversary Date, the Minimum Rent payable
with respect to the Option Space shall commence on the Inclusion Date and shall
be (i) the Market Rent (as defined in clause (b) below) which shall in no event
be less than (ii) the product of (1) the adjusted Minimum Rent per square foot
with respect to the Demised Premises on the date Landlord's offer is made and
(2) the rentable square foot area of the Option Space.
(b) "Market Rent" shall mean the fair market rent for the Option Space as
of the Inclusion Date based upon the rents generally in effect for comparable
office space in the area in which the Building is located. Market Rent (for the
purposes of determining the Minimum Rent for the Option Space only) shall be
determined on what is commonly known as "gross" basis; that is, in computing
Market Rent it shall be assumed that all real estate taxes and customary
services are included in such additional charges. Notwithstanding the foregoing,
the Minimum Rent for the option Space shall be thereafter increased from time to
time as provided in this Lease.
(c) Landlord shall notify Tenant ("Landlord's Determination Notice") of
Landlord's determination of the Market Rent on or before the Inclusion Date. If
Tenant disagrees with Landlord's determination, Tenant shall notify Landlord
("Tenant's Notice of Disagreement") within fifteen (15) days after receipt of
Landlord's Determination Notice. Time shall be of the essence with respect to
Tenant's Notice of Disagreement, and the failure of Tenant to give such notice
within the time period set forth above shall conclusively be deemed an
acceptance by Tenant of the Market Rent as determined by Landlord and a waiver
by Tenant of any right to dispute such Market Rent. If Tenant timely gives its
Tenant's Notice of Disagreement, then the Market Rent shall be determined as
follows: Landlord and Tenant shall, within thirty (30) days after the date on
which Tenant's Notice of Disagreement was given, each appoint an Appraiser
(hereinafter defined) for the purpose of determining the Market Rent. An
Appraiser shall mean a duly qualified impartial real estate appraiser having at
least ten (10) years experience in the area in which the Building is located. In
the event that the two (2) Appraisers so appointed fail to agree as to the
Market Rent within a period of thirty (30) days after the appointment of the
second Appraiser, such two (2) Appraisers shall
24
<PAGE>
forthwith appoint a third Appraiser who shall make a determination within
thirty (30) days thereafter. If such two (2) Appraisers so appointed fail to
agree upon such third Appraiser within ten (10) days following the last thirty
(30) day period, such third Appraiser shall be appointed by a presiding Judge of
the Superior Court of the State of New Jersey for the County in which the
Building is located. Such two (2) Appraisers or three (3) Appraisers, as the
case may be, shall proceed with all reasonable dispatch to determine the Market
Rent. The decision of such Appraisers shall be final; such decision shall be in
writing and a copy shall be delivered simultaneously to Landlord and to Tenant.
Tenant shall pay Landlord Adjusted Minimum Rent on the Option Space at the rate
set forth in Section 68.1(a) (ii) hereof until such decision is so delivered.
If the Market Rent as determined above is in excess of actual rent paid, then
Tenant, upon demand, shall pay to Landlord the difference between the actual
rent paid and the Market Rent from the Inclusion Date. Landlord and Tenant shall
each be responsible for and shall pay the fee of the Appraiser appointed by them
respectively, and Landlord and Tenant shall share equally the fee of the third
Appraiser. Promptly upon determination of the Market Rent, Tenant shall execute
and deliver a Lease amendment in a form satisfactory to Landlord reflecting the
inclusion of the Option Space within the Demised Premises on the Inclusion Date.
68.2 Landlord shall make the foregoing offer in writing, and Tenant shall
have the right to exercise such option with respect to the Option Space if
Tenant shall not have breached any term or provision of the Lease and the
Tenant named on the first and last page of the Lease is in occupancy of the
entire Demised Premises. Tenant may only exercise such option by written notice
received by Landlord within ten (10) days after Landlord makes such offer to
Tenant. For an option exercised after the Anniversary Date, Tenant shall accept
the Option Space in its "as is" physical condition as of the Inclusion Date and
agrees that Landlord will not be required to do any work or perform any services
therein. In addition to the foregoing, Tenant shall be prohibited from leasing
any of the Option Space for a term less than eighteen (18) months. If Tenant
does not accept the offer made by Landlord pursuant to the provisions of this
Article 68 with respect to the Option Space, Landlord shall be under no further
obligation to Tenant with respect to the Option Space or any part thereof and
Tenant shall have forever waived and relinquished its right to the Option Space
and any part thereof and Landlord shall at any and all times thereafter be
entitled to lease such space in whole or in part, or in whole or in parts in
conjunction with any other space, to others at such rental and upon such terms
and conditions as Landlord, in its sole discretion may desire whether such
rental terms, provisions and conditions are the same as those offered to Tenant
or more or less favorable. Tenant agrees not to acquire the Option Space
pursuant to this Article 68 for the primary purpose of subletting or otherwise
disposing of the same or any part thereof to others.
68.3 If the Option Space shall not be available for Tenant's occupancy on
the Inclusion Date for any reason including the holding over of the prior
tenant, then Landlord and Tenant agree that the failure to have such Option
Space available for occupancy by Tenant shall in no way affect the validity of
this Lease or the inclusion of the Option Space within the Demised Premises as
of the inclusion of the Option Space within the Demised Premises as of the
Inclusion Date or the obligations of Landlord and Tenant hereunder, nor shall
the same be construed in any way to extend the term of this Lease. Within ten
(10) days after Tenant's exercise of this option for the Option Space, Tenant
shall deposit with Landlord such additional sums as may be required by Landlord
to increase the security deposit, if any, then held by Landlord proportionate to
the increase in Minimum Rent. Tenant's rights under this Article shall be deemed
personal to the Tenant named on the first and last page of this Lease and may
not be assigned.
25
<PAGE>
IN WITNESS WHEREOF, Landlord has signed this Lease and this Rider, and
Tenant by its proper corporate officers has signed this Lease and this Rider
this 29th day of December, 1993.
LANDLORD:
ATTESTED BY: 6 CENTURY ASSOCIATES
By: 6 Century Corp.,
General Partner
/s/ Nancy Castellani By: /s/ Robert R. Martie
- ---------------------- ------------------------
NANCY CASTELLANI Robert R. Martie
Vice President
AGENT FOR LANDLORD:
ATTESTED BY: BELLEMEAD MANAGEMENT CO., INC.
/s/ Nancy Castellani By: /s/ Robert R. Martie
- ---------------------- ------------------------
NANCY CASTELLANI Robert R. Martie
Vice President
TENANT:
ATTESTED BY: HGB, INC.
/s/ Sherrin H. Baky By: /s/ Judith L. Hardardt
- ---------------------- ------------------------
Name: SHERRIN H. BAKY Name: Judith L. Hardardt
---------------- ----------------------
(Please Print) (Please Print)
Title: Corporate Secretary Title: President
APPLY CORPORATE SEAL HERE
26
<PAGE>
BASEMENT STORAGE LICENSE
------------------------
Licensor: CENTBURG REALTY ASSOCIATES, L.P.
Licensee: HGB, INC.
Premises: 4 Century Drive
Parsippany-Troy Hills, New Jersey
<PAGE>
BASEMENT STORAGE LICENSE
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PARAGRAPH PAGE
- --------- ----
<S> <C>
1. ANNUAL FEE.............................................................. 1
2. TERM.................................................................... 1
3. OCCUPANCY............................................................... 2
4. NO ALTERATIONS.......................................................... 2
5. MAINTENANCE............................................................. 2
6. PROPERTY LOSS AND DAMAGE................................................ 2
7. LICENSEE'S INDEMNIFICATION OF LICENSOR.................................. 2
8. DESTRUCTION, FIRE AND OTHER CASUALTY.................................... 3
9. ASSIGNMENT.............................................................. 3
10. ACCESS TO STORAGE AREA.................................................. 3
11. DEFAULT................................................................. 4
12. END OF TERM............................................................. 4
13. SERVICES PROVIDED BY LICENSOR........................................... 5
14. RULES AND REGULATIONS................................................... 5
15. LIABILITY INSURANCE..................................................... 5
16. FIRE INSURANCE - WAIVER OF SUBROGATION.................................. 5
17. ACCESS AND COMMON AREAS................................................. 6
18. RELOCATION OR CANCELLATION.............................................. 6
19. CLEANING................................................................ 6
20. ESTOPPEL CERTIFICATE.................................................... 6
21. LIMITATION OF LIABILITY................................................. 6
22. PERSONAL PROPERTY TAXES................................................. 7
23. NOTICES................................................................. 7
24. BROKER.................................................................. 7
25. REQUIRED APPROVAL....................................................... 7
SIGNATURE............................................................... 8
</TABLE>
<PAGE>
BASEMENT STORAGE LICENSE
LICENSE, made as of the 25th day of February, 1994 between CENTBURG REALTY
ASSOCIATES, L.P., a New Jersey limited partnership, with offices c/o Bellemead
Management Co., Inc., at 4 Becker Farm Road, Roseland, New Jersey, 07068,
hereinafter referred to as "Licensor", and HGB, INC., a New Jersey corporation
having an office address c/o The Hardardt Group, Village Road, New Vernon, New
Jersey 07976 hereinafter referred to as "Licensee".
W I T N E S S E T H
-------------------
WHEREAS, 6 Century Associates, a New Jersey limited partnership and an
affiliate of Licensor, as landlord and Licensee, as tenant, heretofore entered
into a lease dated December 29, 1993 (said lease, as the same may be amended
from time to time, is hereinafter called the "Lease") for premises on the third
(3rd) floor of the building known as and located at 6 Century Drive,
Parsippany-Troy Hills, New Jersey; and
WHEREAS, Licensee desires to hire from Licensor a portion of the basement
floor (the "Storage Area") deemed to contain a floor area of 579 rentable square
feet in the building known as and located at 4 Century Drive, Parsippany-Troy
Hills, New Jersey (the "Building"). The Storage Area is more particularly shown
on the Rental Plan annexed hereto and made a part hereof as Exhibit "A";
NOW, THEREFORE, for good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, it is mutually covenanted and
agreed as follows:
1. ANNUAL FEE
----------
1.1 The annual fee (the "Annual Fee") for the Storage Area through and
including the Termination Date (as hereinafter defined) shall be $4,053.00.
1.2 Licensee agrees to pay the above stated Annual Fee in lawful money of
the United States, which shall be legal tender in payment, in equal monthly
installments of $337.75 through and including the Termination Date, in advance,
on the first day of each month during said term, at the office of Licensor or
such other place as Licensor may designate, without any setoff or deduction
whatsoever, except that Licensee shall pay the first monthly installment of the
Annual Fee upon the execution of this License.
1
<PAGE>
2. TERM
----
2.1 The term of this License shall commence ("Commencement Date") on the
Commencement Date of the Lease (as such term is defined in the Lease) and shall
terminate on the Termination Date of the Lease (as such term is defined in the
Lease), ("Termination Date") unless sooner terminated as hereinafter provided.
3. OCCUPANCY
---------
3.1 Licensee shall use and occupy the Storage Area for dead storage of
personal property, including but not limited to files, and for no other purpose.
Licensee shall store no flammable, toxic or other potentially dangerous
materials or substances in the Storage Area.
3.2 Licensee shall not do or permit any act or thing to be done in or to
the Storage Area which is contrary to law or which will invalidate or be in
conflict with public liability, fire or other policies of insurance at any time
carried by or for the benefit of Licensor with respect to the Storage Area or
the Building or which shall or might subject Licensor to any liability or
responsibility to any person or for property damage, nor shall Licensee keep
anything in the Storage Area except as now or hereafter permitted by the Fire
Department, Board of Fire Underwriters, Fire Insurance Rating Organization or
other authority having similar jurisdiction, and then only in such manner and
such quantity so as not to increase the rate for fire insurance applicable to
the Building, nor use the Storage Area in a manner which would increase the
insurance rate for the Building or any property located therein over that in
effect prior to the commencement of Licensee's occupancy.
4. NO ALTERATIONS
--------------
4.1 Licensee shall make no changes in or to the Storage Area of any nature
including but not limited to attaching any item to or drilling into the walls of
the Storage Area.
5. MAINTENANCE
-----------
5.1 Licensee shall, throughout the term of this License, take good care of
the Storage Area and maintain it at Licensee's sole cost and expense in good
order and condition.
6. PROPERTY LOSS AND DAMAGE
------------------------
6.1 Licensor and Licensor's agents and employees shall have no
responsibility to handle or accept the property of Licensee. Licensor or its
agents or employees shall not be liable for any damage to property of Licensee,
or for loss of or damage to any property of Licensee by theft or otherwise, or
for any injury or
2
<PAGE>
damage to persons or property resulting from any cause of whatsoever nature,
unless caused by or due to the gross negligence or willful misconduct of
Licensor, its agents or employees.
7. LICENSEE'S INDEMNIFICATION OF LICENSOR
--------------------------------------
7.1 Licensee shall indemnify and save harmless Licensor against and from
all liabilities and expenses paid, suffered or incurred as a result of any
breach by Licensee of this License, including, without limitation attorneys'
fees and expenses for which Licensor is not reimbursed by insurance. Licensee's
indemnification of Licensor shall extend to all of Licensee's acts, including,
without limitation, the storage of goods or materials not permitted under this
License, or the carelessness, negligence or improper conduct of the Licensee,
Licensee's agents, contractors, employees, invitees or licensees. In case any
action or proceeding is brought against Licensor by reason of any such claim,
Licensee, upon written notice from Licensor, shall, at Licensee's expense,
resist or defend such action or proceeding by counsel approved by Licensor in
writing.
8. DESTRUCTION, FIRE AND OTHER CASUALTY
------------------------------------
8.1 Licensee shall give Licensor immediate notice in case of fire or other
casualty or accident in the Storage Area, or, if involving Licensee, its
servants, agents, employees, invitees or licensees, in the Building. If the
Storage Area or any part thereof shall be damaged by fire or other casualty,
this License shall immediately terminate.
9. ASSIGNMENT
----------
9.1 Licensee shall not assign or sublicense this License.
10. ACCESS TO STORAGE AREA
----------------------
10.1 Licensor and Licensor's agents and employees shall have the right (but
not be obligated) to enter the Storage Area in any emergency at any time and at
other reasonable times to examine the same and to make such repairs,
replacements and improvements as Licensor may deem necessary and reasonably
desirable to the Storage Area or to any other portion of the Building or which
Licensor may elect to perform following Licensee's failure, to make repairs or
for the purpose of complying with laws, regulations and other direction of
Governmental authorities. Licensee shall permit Licensor to use and maintain and
replace pipes and conduits in and through the Storage Area and to erect new
pipes and conduits therein. If Licensee is not present to open and permit entry
into the Storage Area, Licensor or Licensor's agents may enter the same whenever
such entry may be necessary or permissible by master key or forcibly, upon
reasonable notice to Licensor or, in an emergency, without notice, and provided
reasonable care is exercised to
3
<PAGE>
safeguard Licensee's property, such entry shall not render Licensor or its
agents liable therefor, nor in any event shall the obligations of Licensee
hereunder be affected. Licensee agrees to move its property as may be necessary
for Licensor to perform the work contemplated by this Paragraph 10.
11. DEFAULT
-------
11.1 If Licensee defaults in fulfilling any of the covenants of this
License then upon Licensor giving a written five (5) days' notice upon
Licensee specifying the nature of said default and upon the expiration of said
five (5) days if Licensee shall have failed to remedy such default, or if such
default cannot be cured within the five (5) day period, Licensee shall have
failed diligently and continuously to cure such default, Licensor may serve a
written three (3) days' notice of cancellation of this License upon Licensee,
and upon the expiration of said three (3) days, this License and the term
hereunder shall end and expire as fully and completely as if the expiration of
such three (3) day period were the day herein definitely fixed for the end and
expiration of this License and the term thereof, and Licensee shall remove its
property from the Storage Area and quit and surrender the Storage Area to
Licensor, but Licensee shall remain liable for damages suffered by Licensor. In
addition, Licensor may revoke this License at any time pursuant to law and shall
have the right to invoke against Licensee any remedy available at law or in
equity.
11.2 If the notice provided for in Section 11.1 hereof shall have been made
and the term shall expire as aforesaid, or is otherwise terminated, then without
notice Licensor may re-enter the Storage Area either by force or otherwise and
dispossess Licensee by summary proceedings or otherwise, and remove Licensee's
property found therein and hold the Storage Area as if this License had not been
made, and Licensee hereby waives the service of notice of intention to re-enter
or to institute legal proceedings to that end.
11.3 Any and all costs, including attorney's fees, incurred by Licensor by
reason of Licensee's breach of this License, shall be deemed to be additional
fees hereunder and shall be paid by Licensor to Licensee within ten (10) days of
rendition of a bill or statement to Licensee therefor. Licensee's obligation to
pay any fees required under this License shall survive the termination of this
License.
12. END OF TERM
-----------
12.1 Upon the expiration or other termination of this License, Licensee
shall quit and surrender to Licensor the Storage Area, broom clean, in good
order and condition, ordinary wear and casualty accepted, and Licensee shall
remove all its property therefrom. Licensee's obligation to observe or perform
this covenant shall survive the expiration or other termination of this License.
4
<PAGE>
12.2 In the event Licensee fails to remove its property from the Storage
Area in accordance with Section 12.1 above, Licensee's property shall be deemed
abandoned and Licensor shall have the right to dispose of Licensee's property,
store Licensee's property at Licensee's expense or to sell Licensee's property
at auction or otherwise.
13. SERVICES PROVIDED BY LICENSOR
-----------------------------
13.1 Licensor shall supply electric current required to provide the
Storage Area with overhead lighting. Licensor shall have no other obligations to
supply services to the Storage Area.
13.2 Licensor shall provide necessary elevator facilities on business days
from 8 a.m. to 6 p.m.
13.3 Licensor shall have no responsibility or liability for failure to
supply the services agreed to herein. Licensor reserves the right to stop any
services when necessary by reason of accident or for repairs, alterations,
replacements or improvements necessary or desirable in the judgement of Licensor
for as long as may be reasonably required by reason thereof or by reason of
strikes, accidents, acts of God, laws, orders or regulations or any other reason
beyond the control of Licensor.
14. RULES AND REGULATIONS
---------------------
14.1 Licensee and Licensee's servants, employees, agents, visitors and
licensees shall observe faithfully, and comply strictly with, such reasonable
written rules and regulations as Licensor or Licensor's agents may from time to
time adopt upon reasonable notice to Licensee. Licensor shall not be liable for
failure to enforce rules and regulations against other tenants of the Building.
15. LIABILITY INSURANCE
-------------------
15.1 Licensee shall maintain at all times during the term of this License
no less than $1,000,000.00 combined single limit per occurrence insurance
coverage under a comprehensive liability policy naming Licensor and Bellemead
Management Co., Inc., as additional insureds and confirming, among other things,
(i) personal injury coverage, (ii) coverage of Licensee's contractual duty of
indemnification under this License, (iii) a provision that such insurance shall
not be cancelled except upon thirty (30) days prior notice to Licensor, and (iv)
a provision that such insurance coverage is primary and noncontributing with any
insurance maintained by Licensor. Licensee shall furnish to Licensor at
Licensor's request a certificate evidencing such insurance coverage.
5
<PAGE>
16. FIRE INSURANCE; WAIVER OF SUBROGATION
-------------------------------------
16.1 Licensee releases Licensor, its respective officers, directors,
employees and agents from any and all liability or responsibility to the
Licensee or anyone claiming through or under Licensee by way of subrogation or
otherwise, for any loss or damage to property, caused by fire or any of the
extended coverage casualties. Licensee shall maintain a standard fire insurance
policy with extended coverage and vandalism with waiver of subrogation covering
the replacement value of all Licensee's property located in the Storage Area.
17. ACCESS AND COMMON AREAS
-----------------------
17.1 Licensee shall only use the elevator facilities for delivery or
removal of personal property to or from the Storage Area.
17.2 Licensee shall have the right of nonexclusive use, in common with
others, of the elevator facilities, subject to the terms and conditions of this
License and to rules and regulations for the use thereof as prescribed from time
to time by Licensor.
18. RELOCATION
----------
18.1 Licensor shall have the right, at its option, upon at least thirty
(30) days' written notice to Licensee to relocate Licensee and substitute for
the Storage Area other space in the basement of the Building containing as much
or less area as the original Storage Area. In the event Licensor substitutes
less area for the Storage Area the annual fee shall be adjusted on the basis of
the number of square feet substituted in proportion to the number of square feet
originally covered under this License.
19. CLEANING
--------
19.1 Licensee shall maintain the Storage Area in an orderly and broom
clean manner.
19.2 Licensee shall not dispose of any refuse or rubbish at the Building.
20. ESTOPPEL CERTIFICATE
--------------------
20.1 Licensor and Licensee agree at any time and from time to time, upon
not less than ten (10) days' prior written request, that Licensee shall execute,
acknowledge and deliver to Licensor, or its designee, a statement in writing
certifying that this License is unmodified and is in full force and effect.
6
<PAGE>
21. LIMITATION OF LIABILITY;
DEFINITION OF "LICENSOR"
------------------------
21.1 The term "Licensor" as used in this License means only the owner or
licensor for the time being of the Building, so that in the event of any
conveyance of such interest and the transfer to the transferee of any funds then
being held under this License by such owner, Licensor shall be and hereby is
entirely freed and relieved of any and all obligations of Licensor hereunder
thereafter accruing, and it shall be deemed without further agreement between
the parties and such grantee(s) that the grantee(s) has/have assumed and agreed
to observe and perform all obligations of Licensor hereunder.
22. PERSONAL PROPERTY TAXES
-----------------------
22.1 Licensee agrees to pay all taxes imposed on the personal property of
Licensee or its use and occupancy of the Storage Area and hold Licensor harmless
therefrom.
23. NOTICES
-------
23.1 All notices, demands and requests which may or are required to be
given by either party hereunder to the other, shall be in writing. All notices,
demands and requests shall be deemed to have been properly given if sent by
registered or certified mail, return receipt requested, postage prepaid to the
address first above written. Either party may change its address for notice by
giving notice of such change to the other party.
23.2 All notices referred to hereunder shall be deemed given and received
two (2) days after the date said notice is mailed postage prepaid by United
States registered or certified mail as aforesaid, in any post office or branch
post office regularly maintained by the United States Government in the
continental United States.
24. BROKER
------
24.1 Licensee represents that no real estate broker is responsible for
bringing about, or negotiating, this License and Licensee has not dealt with any
broker in connection with the Storage Area.
24.2 In accordance with the foregoing representation, Licensee agrees to
defend, indemnify and hold harmless the Licensor, its affiliates and/or
subsidiaries, partners and officers from and against any expense or liability
(including attorney's fees) arising out of any claim for commission by any
broker claiming or alleging to have acted on behalf of or to have dealt with
Licensee.
7
<PAGE>
25. REQUIRED APPROVAL
-----------------
25.1 This License is subject to the approval by the applicable governmental
agencies, including, but not limited to the Township of Parsippany building
inspector and fire inspector. In the event such approval is not received, this
License shall be null and void.
Licensor and Licensee have duly executed this License as of the date first
written above.
Licensor: CENTBURG REALTY ASSOCIATES, L.P.
By: Merchant Centburg, Inc.
General Partner
By: /s/ Sandra Mezzasalma
----------------------------------
Sandra Mezzasalma
Vice President and
Assistant Controller
Licensee: HGB, INC.
By: /s/ Judith Hardardt
----------------------------------
Name: JUDITH HARDARDT
---------------------------
(Please Print)
Title: PRESIDENT
--------------------------
(Please Print)
8
<PAGE>
EXHIBIT A
(Rental Plan)
9
<PAGE>
RENTAL PLAN
-----------
579 S.F.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[RENTAL PLAN APPEARS HERE]
OFFICE BUILDING - FOUR CENTURY DRIVE BASEMENT TENANT PLAN
--------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
LEASE AGREEMENT
LANDLORD: 525 VIRGINIA DRIVE ASSOCIATES LIMITED PARTNERSHIP
a Pennsylvania limited partnership
443 South Gulph Road
King of Prussia, Pennsylvania 19406
TENANT: BIO-PHARM PHARMACEUTICS SERVICES, INC.
a Delaware corporation
425 Delaware Drive
Fort Washington, Pennsylvania 19034-2703
PREMISES: 525 Virginia Drive
Fort Washington, Upper Dublin Township
Montgomery County, Pennsylvania.
DATE OF LEASE: December 3, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PREAMBLE........................................................................... 1
Basic Lease Provisions and Definitions........................................... 1
--------------------------------------
ARTICLE ONE........................................................................ 2
PREMISES AND TERM................................................................ 2
-----------------
Section 1.01. Grant of Lease.................................................. 2
--------------
Section 1.02. Term of Lease................................................... 3
-------------
ARTICLE TWO........................................................................ 4
RENT............................................................................. 4
----
Section 2.01. Fixed Basic Rent................................................ 4
----------
Section 2.02. Additional Rent................................................. 4
---------------
Section 2.03. Manner of Payment............................................... 4
-----------------
Section 2.04. Partial Months.................................................. 4
--------------
Section 2.05. Late Charge..................................................... 4
-----------
ARTICLE THREE...................................................................... 5
EXPENSES AND TAXES............................................................... 5
------------------
Section 3.01. Tenant's Obligations............................................ 5
--------------------
Section 3.02. Installment Payment............................................. 5
-------------------
Section 3.03. Apportionment of Taxes; Tenant's Proportionate Share of Taxes... 5
-------------------------------------------------------------
Section 3.04. Receipts........................................................ 5
--------
Section 3.05. Right to Contest Taxes.......................................... 5
----------------------
Section 3.06. Taxes and Impositions Payable by Landlord....................... 6
-----------------------------------------
Section 3.07. Utilities....................................................... 6
---------
Section 3.08. Insurance....................................................... 6
---------
ARTICLE FOUR....................................................................... 6
CONSTRUCTION OF IMPROVEMENTS..................................................... 6
----------------------------
Section 4.01. Landlord Improvements........................................... 6
---------------------
Section 4.02. Tenant Work..................................................... 7
-----------
Section 4.03. Time for Completion............................................. 8
-------------------
Section 4.04 Delays in Substantial Completion................................ 8
--------------------------------
Section 4.05. Signs........................................................... 9
-----
ARTICLE FIVE....................................................................... 9
USE AND COMPLIANCE WITH LAWS; ENVIRONMENTAL COVENANTS............................ 9
-----------------------------------------------------
Section 5.01. Use of Premises................................................. 9
---------------
Section 5.02. Compliance with Law............................................. 9
-------------------
Section 5.03. Right to Contest................................................ 9
----------------
ARTICLE SIX........................................................................ 10
REPRESENTATIONS AND WARRANTIES................................................... 10
------------------------------
Section 6.01. Landlord's Representations and Warranties....................... 10
-----------------------------------------
Section 6.02. Brokerage Commissions........................................... 11
---------------------
ARTICLE SEVEN...................................................................... 12
INDEMNIFICATION.................................................................. 12
---------------
Section 7.01. Tenant's Indemnity.............................................. 12
------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 7.02. Landlord's Indemnity........................................... 12
--------------------
ARTICLE EIGHT..................................................................... 13
MAINTENANCE AND REPAIRS......................................................... 13
-----------------------
Section 8.01. Tenant's Obligations........................................... 13
--------------------
Section 8.02. Landlord's Obligations......................................... 13
----------------------
Section 8.04 Access to Premises............................................. 13
------------------
Section 8.05. Landlord as Building Manager; Manager's Fee.................... 14
-------------------------------------------
ARTICLE NINE...................................................................... 14
ALTERATIONS..................................................................... 14
-----------
Section 9.01. Structural Alterations......................................... 14
----------------------
Section 9.02. Non-Structural Alterations..................................... 14
--------------------------
Section 9.03 Mechanics' Liens............................................... 14
----------------
Section 9.04. Status of Improvements; "As Built" Drawings.................... 15
-------------------------------------------
ARTICLE TEN....................................................................... 15
INSURANCE AND DAMAGE............................................................ 15
--------------------
Section 10.01. Insurance..................................................... 15
---------
Section 10.02. Damage or Casualty............................................ 15
------------------
Section 10.03. Cooperation in Actions........................................ 16
----------------------
Section 10.04. Notice of Casualty............................................ 16
------------------
Section 10.05. Waiver of Subrogation; Rights Under Insurance Policies........ 16
------------------------------------------------------
ARTICLE ELEVEN.................................................................... 17
CONDEMNATION.................................................................... 17
------------
Section 11.01. Condemnation.................................................. 17
------------
Section 11.02. Total Condemnation............................................ 17
------------------
Section 11.03. Partial Condemnation.......................................... 17
--------------------
ARTICLE TWELVE.................................................................... 18
DEFAULT......................................................................... 18
-------
Section 12.01. Events of Default; Termination................................ 18
------------------------------
Section 12.02. Remedies...................................................... 18
--------
Section 12.03. Non-Waiver.................................................... 19
----------
Section 12.04. Rights and Remedies Cumulative................................ 20
------------------------------
Section 12.05. Waiver of Trial by Jury....................................... 20
-----------------------
ARTICLE THIRTEEN.................................................................. 20
QUIET ENJOYMENT; SUBORDINATION.................................................. 20
------------------------------
Section 13.01. Quiet Enjoyment............................................... 20
---------------
Section 13.02. Subordination, Non-Disturbance and Attornment................. 20
---------------------------------------------
Section 13.03. Tenant Estoppel Certificate................................... 21
---------------------------
Section 13.04. Landlord's Lien Waiver........................................ 21
----------------------
ARTICLE FOURTEEN.................................................................. 21
OPTION TO RENEW LEASE........................................................... 21
---------------------
Section 14.01. Option to Renew............................................... 21
---------------
Section 14.02. Adjustment to Fixed Basic Rent................................ 21
------------------------------
ARTICLE FIFTEEN................................................................... 22
OPTION TO PURCHASE AND RIGHT OF FIRST REFUSAL................................... 22
---------------------------------------------
Section 15.01. Tenant's Option to Purchase................................... 22
---------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 15.02. Tenant's Right of First Refusal............................... 23
-------------------------------
Section 15.03. Memorandum of Lease and Option to Purchase.................... 24
------------------------------------------
ARTICLE SIXTEEN................................................................... 24
MISCELLANEOUS................................................................... 24
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Section 16.01. Assignment; Sublease.......................................... 24
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Section 16.02. Notice........................................................ 25
------
Section 16.03 Signage....................................................... 26
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Section 16.04. Survival of Valid Terms....................................... 26
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Section 16.05. Covenants to Bind and Benefit Respective Parties.............. 26
------------------------------------------------
Section 16.06. Captions and Headings......................................... 26
---------------------
Section 16.07. Governing Law................................................. 26
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Section 16.08 Confidentiality............................................... 26
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Section 16.09 Lease Guaranty................................................ 27
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Section 16.10 Counterparts.................................................. 27
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</TABLE>
iii
<PAGE>
LEASE AGREEMENT
---------------
THIS LEASE (the "Lease") is made as of the 3rd day of December, 1996
between 525 VIRGINIA DRIVE ASSOCIATES LIMITED PARTNERSHIP, a Pennsylvania
limited partnership (herein referred to as "Landlord") whose address is 443
South Gulph Road, King of Prussia, Pennsylvania 19406 and BIO-PHARM
PHARMACEUTICS SERVICES, INC., a Delaware corporation (herein referred to as
"Tenant") whose address is Four Valley Square, 512 Township Line Road, Blue
Bell, PA 19422.
PREAMBLE
Basic Lease Provisions and Definitions
--------------------------------------
In addition to other terms elsewhere defined in this Lease, the following
terms whenever used in this lease shall have only the meanings set forth in this
section, unless such meanings are expressly modified, limited or expanded
herein.
A. ADDITIONAL RENT shall mean any and all sums other than Fixed Basic
---------------
Rent which may be due from time to time from Tenant to Landlord pursuant to the
terms of the Lease.
B. BROKERS shall mean Preferred Real Estate Advisors, Inc. and Julien J.
-------
Studley, Inc.
C. BUILDING shall mean the commercial building situate at 525 Virginia
--------
Drive, Fort Washington, Upper Dublin Township, Montgomery County, Pennsylvania,
consisting of approximately 124,000 gross rentable square feet as shown on
Exhibit "A" attached hereto.
D. DEMISED PREMISES OR PREMISES shall mean for Lease Year 1:
----------------------------
approximately 40,000 square feet of the Building, as described in Exhibit "A"
and for Lease Year 2: approximately 80,000 square feet of the Building, as
described in Exhibit "A" and for the balance of the Term and any Renewal Term,
the entire Building.
E. EXHIBITS shall be the following, attached to this Lease, incorporated
--------
herein and made a part hereof:
Exhibit A Description of Building
Exhibit B-1 Plans and Specifications for Landlord Improvements
Exhibit B-2 Plans and Specifications for Tenant Work
Exhibit C Permitted Exceptions
Exhibit D Memorandum of Lease
Exhibit E Form of Lease Guaranty
1
<PAGE>
F. FIXED BASIC RENT shall mean: Twelve Million Three Hundred Seventy
----------------
Eight Thousand and 00/l00 Dollars ($12,378,000.00), for the Term, payable as
follows:
<TABLE>
<CAPTION>
Year Yearly Payments Equal Monthly Payments
---- --------------- ----------------------
<S> <C> <C>
Lease Year 1 $220,000.00 $18,333.34
Lease Year 2 $440,000.00 $36,666.67
Lease Year 3 - 4 $806,000.00 $67,166.67
Lease Year 5 - 6 $868,000.00 $72,333.34
Lease Year 7 - 15 $930,000.00 $77,500.00
</TABLE>
G. RENT COMMENCEMENT DATE is as defined in Section 1.02 hereof.
----------------------
H. PERMITTED USES is as defined in Section 5.01
--------------
I. PURCHASE OPTION is as defined in Article 15 hereof.
---------------
J. RENEWAL OPTION is as defined in Article 14 hereof.
--------------
K. SECURITY DEPOSIT shall be Zero and 00/100 Dollars ($0.00)
----------------
L. TERM is as defined in Section 1.02 hereof.
----
M. GUARANTOR shall mean I.B.A.H., INC., a Delaware corporation.
---------
For and in consideration of the covenants and mutual promises contained
herein, and upon the terms and conditions set forth herein, and intending to be
legally bound hereby, the parties hereby covenant and agree as follows:
ARTICLE ONE
Premises and Term
-----------------
Section 1.01. Grant of Lease. Landlord does hereby demise, lease and let
--------------
to Tenant and Tenant does hereby let from Landlord, upon and subject to all
terms, covenants and conditions herein contained, the Premises. Notwithstanding
that the Tenant shall not be occupying the entire Building until Lease Year 3,
Landlord shall have no right to use or occupy, or lease to any third party, any
portion of the Building, without Tenant's prior written consent in each
instance. In addition to the Premises, Tenant shall have the right and license,
to place or install temporary modular office and laboratory space on the grounds
surrounding the Building, at a location reasonably satisfactory to Landlord, and
provided that (i) Tenant has provided notice to Landlord of Tenant's intention
and identified the proposed location of such modular office and laboratory
space, and (ii) such temporary modular office and laboratory space is permitted
under and complies with all applicable federal, state and local laws,
regulations and code requirements and all of the terms of
2
<PAGE>
this Lease. Tenant and its contractors shall have access to the entire Premises
during Lease Year 1, at Tenant's sole risk, for the purposes of commencing
construction of improvements in anticipation of Tenant's occupancy and in
accordance with Section 4.02 hereof.
Section 1.02. Term of Lease. The term of this Lease ("Term") shall
-------------
include a preliminary term, as described in Section 1.02 (a) (the "Preliminary
Term"); an initial term, as described in Section 1.02(b) (the "Initial Term")
and certain Renewal Terms, as described in Article 14 hereof.
(a) Preliminary Term. The Preliminary Term shall commence on the date
----------------
this Lease is executed by all parties hereto, and shall terminate on the day
prior to the commencement of the Initial Term. All of the terms and conditions
set forth in this Lease shall apply during the Preliminary Term except for the
provisions of Articles 2 and 3, it being the intention of the parties that
during the Preliminary Term, Tenant shall have no obligation to pay Fixed Basic
Rent, Additional Rent or any other rent to Landlord. During the Preliminary
Term, Tenant shall be permitted to enter the Demised Premises solely for the
purpose of performing the Tenant Work (as defined below).
(b) Initial Term. The Initial Term of this Lease shall commence on
-------------
the later to occur of the following: (i) January 15, 1997 or (ii) a date which
is ten (10) days after the Landlord Improvements (as herein defined) have been
substantially completed in accordance with Article 4 hereof. The Initial Term
as determined above shall be set forth on a written notice from Landlord to
Tenant, and the Initial Term of this Lease shall continue for a period of
fifteen years, unless this Lease shall be renewed by the Tenant in accordance
with Article 14 hereof or sooner terminated as hereinafter provided. (The date
upon which the Initial Term commences is referred to hereinafter as the "Rent
Commencement Date").
(c) Renewal Terms. Tenant shall have two consecutive options to
-------------
extend the Initial Term of this Lease, in accordance with the provisions of
Article 14 hereof.
(d) Lease Year. The Lease Year 1 of the Term shall commence on the
----------
Rent Commencement Date and shall end (i) on the day immediately preceding the
first anniversary of the Rent Commencement Date, if the Rent Commencement Date
is the first day of the month, or (ii) on the last day of the month in which the
first anniversary of the Rent Commencement Date occurs, if the Rent Commencement
Date is any day other than the first day of a calendar month. Each subsequent
lease year shall be a period of twelve (12) months commencing on the day
immediately following the expiration of the prior lease year and expiring on the
day immediately preceding the anniversary of the commencement of such lease
year.
3
<PAGE>
ARTICLE TWO
Rent
----
Section 2.01. Fixed Basic Rent. Except as hereinafter provided, the
----------------
minimum annual rent for such Lease Years is in the amounts set forth in the
Preamble as "Fixed Basic Rent." The Fixed Basic Rent shall be payable during the
Initial Term, in advance, without notice or demand, in equal monthly
installments of one-twelfth of the annual amount, on the first day of each month
during the Initial Term.
Section 2.02. Additional Rent. All other amounts payable by Tenant
---------------
hereunder, whether payable to Landlord or to third parties, including without
limitation, Taxes pursuant to Section 3.01, insurance premiums, and utility
charges, shall be considered additional rent ("Additional Rent") payable by
Tenant hereunder. Tenant's obligation for the payment of Additional Rent shall
commence upon the Rent Commencement Date.
Section 2.03. Manner of Payment. All amounts payable under Section 2.01
-----------------
of this Lease, as well as all other amounts payable by Tenant to Landlord under
the terms of this Lease, shall be paid, at the office of Landlord set forth
above, or at such other place as Landlord shall from time to time designate by
notice to Tenant. Tenant's obligation to pay the Fixed Basic Rent and Additional
Rent shall survive the expiration of the Term.
Section 2.04. Partial Months. In the event that the Rent Commencement Date
--------------
is a day other than the first day of a calendar month, Fixed Basic Rent for the
month in which the first anniversary of the Rent Commencement Date occurs shall
be prorated such that the monthly payment of Fixed Basic Rent for such month
shall be equal to the sum of (i) the monthly installment payment that is due
during Lease Year 1, as set forth in Section F of the Preamble hereof divided by
thirty (30) and multiplied by the number of days in such month prior to the
anniversary of the Rent Commencement Date, plus (ii) the monthly installment
payment that is due during Lease Year 2, as set forth in Section F of the
Preamble hereof, divided by thirty (30) and multiplied by the number of days
remaining in such month on and after the Rent Commencement Date..
Section 2.05. Late Charge. Landlord shall be entitled to receive from
-----------
Tenant a late charge equal to five percent (5%) of the amount of any payment or
installment of Fixed Basic Rent and Additional Rent, or any portion thereof, if
not received within ten (10) days of the date when due. The acceptance of any
such payment by Landlord shall not be deemed to be a waiver of any other rights
which Landlord may have under the provisions of this Lease or as provided by
law.
4
<PAGE>
ARTICLE THREE
Taxes; Utility Charges
----------------------
Section 3.01. Tenant's Obligations. Tenant will pay and discharge,
--------------------
punctually as and when the same shall become due and payable, but in any event
not later than five (5) business days before any fine, penalty, interest or cost
may be added thereto for nonpayment, all real estate taxes water charges and
sewer charges (each such tax, water charge and sewer charge hereinafter
sometimes called a "Tax").
Section 3.02. Installment Payment. If by law any Tax is payable, or may
-------------------
at the option of the taxpayer be paid, in installments, Tenant may, whether or
not interest shall accrue on the unpaid balance thereof, pay the same, and any
accrued interest or any unpaid balance thereof, in installments as each
installment becomes due and payable, but in any event not later than five (5)
business days before any fine, penalty, interest or cost may be added thereto
for nonpayment of any installment or interest.
Section 3.03. Apportionment of Taxes; Tenant's Proportionate Share of
-------------------------------------------------------
Taxes. Any Tax, a part of which is within the Term and a part of which is
- -----
subsequent to the Term, shall be apportioned and adjusted between Landlord and
Tenant as of the expiration of the Term so that Landlord shall pay the amount of
the Tax due after the expiration of the Term, and Tenant shall pay the remainder
thereof. With respect to any Tax for public improvements or benefits which by
law is payable in installments, a part of which is within the Term and a part of
which is subsequent to the Term, Landlord shall pay the installments thereof
which become due and payable with respect to periods of time subsequent to the
expiration of the Term, and Tenant shall pay all such installments which become
due and payable with respect to periods of time prior to the expiration of the
Term.
Section 3.04. Receipts. Tenant shall furnish to Landlord reasonable
--------
evidence of payment of any Tax, including official receipts from the appropriate
taxing authority evidencing payment or other proof satisfactory to Landlord, not
later than five (5) business days prior to the date that such Tax would have
become delinquent or within ten (10) days after receipt by Tenant of such
receipt or other evidence from the tax authority, whichever is earlier.
Section 3.05. Right to Contest Taxes. Notwithstanding anything to the
----------------------
contrary herein contained, if Tenant deems any Tax excessive or illegal, Tenant,
upon prior written notice to Landlord, may defer payment thereof so long as (a)
the validity or the amount thereof is contested by Tenant with diligence and in
good faith, and (b) no tax sale or other action in connection therewith against
the Premises or Landlord is threatened. So long as Tenant is not in default
under this Lease, and in good faith and by appropriate legal action shall
contest the validity of any Tax, and shall have established by deposit of cash
with Landlord, or other securities satisfactory to Landlord, a reserve for the
payment thereof in such amount as shall be subject to such contest, the Tenant
shall not be required to pay the contested Tax or produce the required receipt
while the reserve is maintained and so long as the contest that operates to
prevent collection is maintained and prosecuted with diligence, and shall not
have been terminated or discontinued adversely to
5
<PAGE>
Tenant. Any such cash held in reserve with Landlord shall be deposited by
Landlord with a federally insured financial institution in a separate escrow or
trust account, and such funds shall not be co-mingled with other monies of the
Landlord.
Section 3.06. Taxes and Impositions Payable by Landlord. Tenant shall not
-----------------------------------------
be required to pay any of the following Taxes which shall be imposed against
Landlord by any governmental authority, whether federal, state, county, city,
municipal, or otherwise:
(a) any estate, inheritance, succession, transfer, legacy or gift tax
which may be imposed upon or with respect to any transfer of Landlord's interest
in the Premises;
(b) any capital stock tax or other tax imposed against Landlord for
the privilege or franchise of doing business; and
(c) any federal, state or local income tax levied upon or against the
income of Landlord.
Section 3.07. Utilities. Tenant shall timely pay or cause to be paid all
---------
charges for gas, electricity, light, heat, power, water, telephone or other
communication service or other utility or service used, rendered or supplied to,
upon or in connection with the Premises throughout the Term.
Section 3.08. Insurance. Tenant shall pay or cause to be paid all
---------
insurance premiums for the coverages required to be purchased and maintained by
Tenant in accordance with Article 10 of this Lease.
ARTICLE FOUR
Construction of Improvements
----------------------------
Section 4.01. Landlord Improvements. Landlord, at Landlord's sole cost
---------------------
and expense, shall cause to be completed upon the Premises in accordance with
all applicable federal, state and local laws, regulations, and code
requirements, including all applicable zoning, building, electrical, health,
safety, or fire code requirements, the code requirements and standards
established in the most recent editions of "The BOCA National Building Code,"
and the federal law known as The Americans with Disabilities Act
("ADA")(collectively, the "Laws") affecting the Premises, and in a good and
workmanlike manner, the following work (collectively, the "Landlord
Improvements"), all in accordance with the plans and specifications attached
hereto as Exhibit "B-2" (the "Plans and Specifications for Landlord
Improvements" or the "Plans and Specifications"):
(a) demolition of all interior improvements currently existing in the
Premises, including but not limited to, the removal of any asbestos containing
materials, polychlorinated biphenyls, underground storage tanks, and any
"Hazardous Substances" or "Hazardous Waste" as
6
<PAGE>
defined under any "Environmental Laws" (defined below), and all partitions,
ceiling and floor coverings, walls (except for structural or load bearing
walls), and the removal of the rooftop HVAC units;
(b) installation of new asphalt paving and striping of the existing
parking lot, entrances and exits resulting in a total of 360 parking spaces on
the Premises;
(c) installation of new exterior lighting;
(d) landscaping around the entire Building;
(e) painting and stucco repair and/or replacement of the entire
exterior of the Building; and
(f) replacement of the entire roof on the Building; and
Section 4.02. Tenant Work. Tenant shall cause to be completed upon the
-----------
Premises in accordance with applicable Laws, those improvements, other than the
Landlord improvements, which are necessary or desirable to Tenant in order to
make the Premises suitable for Tenant's use and occupancy ("Tenant Work").
Tenant Work shall be subject to the following conditions:
(a) Not later than ten (10) days prior to commencing the Tenant Work,
Tenant shall provide Landlord with plans and specifications of the Tenant Work,
and the identity of the general contractor engaged by Tenant to perform the
Tenant Work. Attached to this Lease as Exhibit "B-2" are any plans and
specifications of the Tenant Work that Tenant has completed prior to the date
hereof.
(b) Tenant or Tenant's contractor shall, throughout the period of
construction, procure and maintain builder's risk insurance coverage in an
amount sufficient to cover the cost of Tenant Work, and naming the Tenant and
Landlord as additional insureds, as their interests may appear.
(c) Tenant shall promptly pay and discharge all costs, expenses,
damages and other liabilities which may arise in connection with or by reason of
the Tenant Work.
(d) Tenant shall not permit the filing of any mechanic's lien and,
within thirty (30) days after written notice of its existence thereof from
Landlord shall discharge or bond over any mechanic's lien for material or labor
claimed to have been furnished to the Premises on Tenant's behalf (except for
work contracted for by Landlord). Prior to commencing any of the Tenant Work,
Tenant shall (i) file waivers on behalf of each contractor waiving such
contractor's right to file for or claim a mechanic's lien under Pennsylvania's
Mechanic's Lien Law, and (ii) provide to Landlord a time-stamped copy of such
filings.
7
<PAGE>
(e) The Tenant Work shall be completed in accordance with a the plans
and specifications and construction schedule prepared by Tenant and attached
hereto or provided to Landlord, subject to changes as may be approved by Tenant
pursuant to a written change order signed by Tenant. Tenant shall provide
Landlord with a copy of any change orders approved by Tenant, and any
modification or revision to the plans and specifications resulting therefrom
prior to commencing any change in the Tenant Work pursuant thereto, unless the
change is of an urgent nature or if the prior delivery of such documentation to
Landlord is otherwise not reasonably practicable under the circumstances and in
such cases Tenant shall provide a copy of any such change orders, and any such
modifications to plans and specifications to the Landlord, promptly following
the execution of any such change orders or the completion of any such revised
plans and specifications.
(f) The Tenant Work will not weaken or impair the structural integrity
or lessen the value of the Premises or any part thereof.
(g) Not later than two (2) business days prior to commencement of the
Tenant Work, Tenant shall obtain, at Tenant's sole cost and expense, all permits
and approvals necessary for construction of the Tenant Work and shall provide a
copy of same to Landlord promptly upon receipt.
Section 4.03. Time for Completion. Subject only to delays caused by
-------------------
Tenant's actions, or delays caused by events wholly beyond the control of
Landlord, the Landlord Improvements described in clauses (a) and (f) (except
with respect to the portion of the roof above the office spaces in the Building)
of Section 4.01 shall be substantially completed on or before the January 15,
1997. The Landlord Improvements pertaining to the removal and replacement of the
roof above the office spaces in the Building shall be finally completed by no
later than January 31, 1997. The Landlord Improvements described in clauses (b),
(c), (d) and (e) of Section 4.01, and any minor or cosmetic repairs that have
not been completed by January 15, 1997, shall be finally completed by no later
than May 31, 1997.
For purposes of Section 1.02 (b), and the last sentence of Section 4.04, the
Landlord Improvements shall be deemed "substantially completed" when the
Landlord Improvements described in clauses (a) and (f) (except with respect to
the portion of the roof above the office spaces in the Building) have been
completed, except for any minor or cosmetic repairs.
Section 4.04 Delays in Substantial Completion. If the Landlord is
--------------------------------
delayed for reasons other than those described in this Section 4.03, and fails
to achieve substantial completion of the Landlord Improvements, or final
completion of the Landlord Improvements, within the times provided herein, then
the Tenant's sole and exclusive remedy for such failure shall be to recover from
the Landlord the sum of $150.00 for each such calendar day substantial
completion or final completion, as the case may be, is so delayed by Landlord
and provided that such delay continues for five (5) business days following
written notice by Tenant of such failure. The parties acknowledge and agree that
it would be extremely difficult and impracticable under the presently known and
anticipated circumstances to ascertain and fix the actual damages that the
Tenant would incur should Landlord delay in achieving completion of the Landlord
8
<PAGE>
Improvements within the times provided herein, and that the aforesaid stipulated
liquidated damages is not punitive, but represents an acceptable sum to
compensate Tenant for all such damages and losses. In accordance with Section
1.02(b), Tenant shall have no obligation to pay Fixed Basic Rent and Additional
Rent or other charges payable by Tenant hereunder, and all such rent and other
charges shall be abated, and the Rent Commencement Date shall not occur, until
the Landlord Improvements have been substantially completed.
Section 4.05. Signs. Tenant shall not place, erect, construct, or install
-----
any signs on the exterior of the Premises or Building, except in accordance with
applicable Laws. Tenant shall provide Landlord with a copy of all plans and
specifications pertaining to any such exterior signs. Tenant shall be solely
responsible for all costs and expenses associated with the construction or
installation of any signs installed by Tenant. Any signs erected by Tenant shall
remain the property of Tenant, who shall have the right to remove same upon the
expiration of the Term, provided that the Premises shall be restored to its
present condition, reasonable wear and tear excepted.
ARTICLE FIVE
Use and Compliance With Laws; Environmental Covenants
-----------------------------------------------------
Section 5.01. Use of Premises. Tenant shall use and occupy the Premises as
---------------
space for its offices, laboratories, and warehouse use in connection with the
conduct of Tenant's business of manufacturing, testing and analyzing, packaging,
and distribution of pharmaceutical products, and in support of Tenant's clinical
research divisions, in accordance with Section 5.02 hereof, and for no other
purpose. Tenant shall not place any weights in any portion of the Premises in
excess of the floor load limits, as estimated by Tenant's engineer.
Section 5.02. Compliance with Law. Tenant shall comply in all material
-------------------
aspects with all Laws respecting the occupancy, use, enjoyment, maintenance,
management, improvement, repair, or alteration of the Premises, provided,
however, that such obligation shall not include making any structural or system
repairs to the Building, except for the Tenant Work or structural or system
repairs to the Building required to correct damage caused by Tenant or Tenant's
invitees. Tenant shall not be deemed to have violated this covenant solely
because of non-compliance or alleged non-compliance with any regulation, order,
direction or rule issued by the U.S. Food and Drug Administration, or any state
agency or department with jurisdiction over Tenant's business operations,
provided any such non-compliance does not impair or affect, in Landlord's
reasonable judgment, in any material aspect, Tenant's ability to perform its
other obligations under this Lease.
Section 5.03. Right to Contest. Tenant shall have the right, upon prior
----------------
written notice to Landlord, to contest by appropriate legal proceedings, without
cost or expense to Landlord, the validity of any Laws so long as (a) such
contest is prosecuted in good faith, and (b) no sale or other action in
connection therewith is threatened against the Premises or Landlord. If at any
time, such a sale or other action against the Premises or Landlord is
threatened, then Tenant either (i) shall
9
<PAGE>
comply with the Laws, or (ii) post such bonds or other security with the court
or appropriate governmental authority in either event in sufficient time and
amount to prevent such threat. Tenant agrees to indemnify and hold harmless
Landlord against any and all liability, loss, damage, cost and expense which
Landlord may sustain during the Term by reason of Tenant's contest, including
but not limited to any penalties which may be levied or assessed against the
Landlord or the Premises. In the event that any such contest by Tenant involves
the dispute over the payment of any fine, penalty, or other charge, and so long
as Tenant is not in default under this Lease, and in good faith and by
appropriate legal action shall contest the validity of any such fine, penalty or
charge, and shall have established by deposit of cash with Landlord, or other
securities satisfactory to Landlord, a reserve for the payment thereof in such
amount shall be subject to such contest , the Tenant shall not be required to
pay the contested item or produce the required receipt while the reserve is
maintained and so long as the contest that operates to prevent collection is
maintained and prosecuted with diligence, and shall not have been terminated or
discontinued adversely to Tenant. Any such cash held in reserve with Landlord
shall be deposited by Landlord with a federally insured financial institution in
a separate escrow or trust account, and such funds shall not be co-mingled with
other monies of the Landlord.
ARTICLE SIX
Representations and Warranties
------------------------------
Section 6.01. Landlord's Representations and Warranties. Landlord hereby
-----------------------------------------
represents and warrants to Tenant as follows:
(a) Landlord has or shall obtain good and indefeasible fee title to
the Premises, subject only to those matters set forth on Exhibit "C" attached
hereto (the "Permitted Exceptions") which matters do not adversely interfere
with or prohibit Tenant's proposed use of the Premises. Tenant's obligations
under this Lease are contingent upon Landlord first acquiring such title to the
Premises with thirty (30) days of the date of this Lease. In the event that
Landlord fails to obtain such title within such thirty (30) day period Tenant
may elect to terminate this Lease upon written notice to Landlord of such
election. Notwithstanding whether Tenant elects to terminate, Landlord shall
indemnify, defend, and hold Tenant harmless from and against any liability,
loss, cost and expense incurred by Tenant as a result of Landlord failing to
acquire such title as aforesaid.
(b) There is no claim, litigation, proceeding or governmental
investigation pending, or, so far as is known to you, threatened, against or
relating to the Premises, nor is there any basis known to Landlord for any such
action.
(c) The Premises comply, and upon completion the Landlord Improvements
and Tenant Work, will comply, with all Laws, and are not in violation of any
covenants, conditions or restrictions affecting the Premises.
10
<PAGE>
(d) There are no outstanding violations of any Laws respecting the
Premises. Landlord covenants that it shall be solely responsible for
alterations, construction, and improvements to the Landlord Improvements, as may
be required by any applicable Laws.
(e) The Leased Premises shall be ready for use and occupancy by
Tenant, and all systems and improvements, including, but not limited to the
roof, exterior walls, foundation, structural frame, water supply system, sewage
disposal system, and electrical system shall be in good operating condition and
repair at the Rent Commencement Date, except to the extent that any such systems
or improvements are altered or modified by the Tenant Work.
(f) To the best of Landlord's knowledge, based on the following
environmental reports: (i) "Facility Closure Assessment and Remediation
Activities Report Tele-Dynamics Division of Hamilton Standard Fort Washington,
Pennsylvania," submitted by Baker Environmental, Inc., dated February, 1993,"
(ii) "Environmental Site Assessment Update of the Tele-Dynamics Facility Fort
Washington, Pennsylvania," prepared by Baker Environmental, Inc., dated April,
1995," (iii) "(Draft) Phase I Environmental Site Assessment of the former Tele-
Dynamics Facility Fort Washington, PA, TSD Job No. CRW96003" prepared by TSD
Environmental Services, Inc., dated April, 1996, and (iv) "Underground Storage
Tank Closure Assessment at the Hamilton Standard Division of UTC Tele-Dynamics
Facility Ft. Washington, Pennsylvania," prepared by Baker Environmental, Inc.,
dated February, 1993," (collectively, the reports described in clauses (i)
through (iv) are referred to herein as the "Environmental Assessment Reports"),
and without any further investigation by Landlord, (A) neither Landlord, nor any
prior owner, tenant, or operator of the Building has performed any activities
which would subject the Building to liability under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq.
------ -- ---
("CERCLA"), or any other environmental or quasi-environmental law, statute, act,
rule, regulation or ordinance enacted by a municipal, county, state or federal
governmental entity or agency (all of the foregoing along with any and all
amendments thereof and supplements thereto, are hereinafter referred to
individually as an "Environmental Law" and collectively as the "Environmental
Laws"); (B) the Building is not now and has never been in violation of any
Environmental Law; and (C) neither Landlord, nor any prior owner, tenant, or
operator of the Building have used the Building to refine, produce, store,
handle, transfer, process, transport or dispose of any "Hazardous Substances" or
"Hazardous Waste" as defined under any Environmental Laws, except strictly in
accordance with all such Environmental Laws. Landlord acknowledges that Tenant
has not undertaken any independent environmental assessment of the Premises, and
has executed and accepted the Lease in reliance upon the Environmental
Assessment Reports provided by Landlord and above representations and warranty
of Landlord.
Section 6.02. Brokerage Commissions. Landlord and Tenant warrant to each
---------------------
other that neither has dealt with any broker or other intermediary with respect
to this transaction or the Premises in any manner which would create a right to
a commission other than with the Brokers, whose compensation Landlord has
separately agreed to pay. Landlord authorizes and directs Preferred Real Estate
Advisors, Inc. to share its commissions on the rent paid by Tenant to Landlord
with Julien J. Studley, Inc., acting as agent for Tenant.
11
<PAGE>
ARTICLE SEVEN
Indemnification
---------------
Section 7.01. Tenant's Indemnity. Subject to Section 10.05 hereof, Tenant
------------------
will protect, indemnify and hold harmless Landlord and its agents, affiliates,
subsidiaries, parent companies and the officers and directors thereof, from and
against any and all claims, actions, damages, liability and expense (including
fees of attorneys, investigators and experts) in connection with loss of life,
personal injury or damage to property in or about the Premises or arising out of
the occupancy or use of the Premises by Tenant or its Agents or occasioned
wholly or in part by any act or omission of Tenant or its Agents, whether during
the Term, except to the extent such loss, injury or damage was caused by the
negligence or willful misconduct of Landlord or its agents. In case any action
or proceeding is brought against Landlord and/or its agents, affiliates, parent
companies, officers, directors by reason of the foregoing, Tenant, at its
expense, shall resist and defend such action or proceeding, or cause the same to
be resisted and defended by counsel (reasonably acceptable to Landlord and its
Agents) designated by the insurer whose policy covers such occurrence or by
counsel designated by Tenant and approved by Landlord. Tenant's obligations
pursuant to this Section 7.01 shall survive the expiration or termination of
this Lease.
Section 7.02. Landlord's Indemnity. Subject to Section 10.05 hereof,
--------------------
Landlord will protect, indemnify and hold harmless Tenant and its agents,
affiliates, subsidiaries, parent companies, and the officers and directors
thereof, from and against any and all claims, actions, damages, liability and
expense (including fees of attorneys, investigators and experts) in connection
with loss of life, personal injury or damage to property in or about the
Premises occasioned wholly or in part by any act or omission of Landlord or its
agents, during the Term, except to the extent such loss, injury or damage was
caused by the negligence or willful misconduct of Tenant or its agents. In case
any action or proceeding is brought against Tenant and/or its agents,
affiliates, parent companies, officers, directors by reason of the foregoing,
Landlord, at its expense, shall resist and defend such action or proceeding, or
cause the same to be resisted and defended by counsel (reasonably acceptable to
Tenant and its agents) designated by the insurer whose policy covers such
occurrence or by counsel designated by Landlord and approved by Tenant.
Landlord's obligations pursuant to this Section 7.02 shall survive the
expiration or termination of this Lease. Landlord agrees that Landlord shall be
solely responsible for and shall indemnify and defend and save Tenant harmless
from any loss, damage, or liability caused by the presence of any asbestos
containing materials, polychlorinated biphenyls, underground storage tanks, or
any "Hazardous Substances" or "Hazardous Waste" that were refined, produced,
stored, handled, transferred, processed, transported or disposed of on the
Premises prior to the Rent Commencement Date.
12
<PAGE>
ARTICLE EIGHT
Maintenance and Repairs
-----------------------
Section 8.01. Tenant's Obligations. Subject to Landlord's obligations set
--------------------
forth in this Lease, Tenant shall, throughout the Term, keep the Premises in
good working order and condition, at Tenant's sole cost and expense, including
all driveways, parking areas, curbs, landscaped areas, and sidewalks, and other
improvements now or hereafter erected thereon, including but not limited to the
roof, HVAC equipment, finishes, plumbing, lighting and other improvements now or
hereafter located upon the Building, or any part of the Premises. Tenant shall,
at Tenant's sole cost and expense, during the entire Term, engage a reputable
and licensed mechanical contractor to provide routine preventive maintenance
service on the heating, ventilation and air conditioning equipment ("HVAC")
pursuant to a written service contract, and shall provide a copy of same to
Landlord promptly following receipt of same. Tenant shall also provide Landlord
with a list of contractors whom Tenant has engaged pursuant to a written
agreement for scheduled maintenance or routine repairs of the Premises, or the
systems or equipment therein. At the expiration of the Term, Tenant shall
deliver the Premises in broom clean condition, reasonable wear and tear
excepted.
Section 8.02. Landlord's Obligations. Landlord shall be responsible for
----------------------
and covenants and agrees to maintain in good condition all structural and weight
bearing elements of the Building, and shall make all structural repairs to the
Building, including but not limited to the external walls, weight-bearing
elements and base flooring (below floor covering). Notwithstanding anything to
the contrary contained in this Section 8.02, Landlord shall not be responsible
for repairs or replacements necessary to correct damage caused by Tenant or
Tenant's invitees.
Section 8.03 Access to Premises. Landlord may enter upon the Premises
------------------
during normal business hours, upon 48 hours prior verbal notice to Tenant's
designated representative (except no notice shall be required in the case of
emergency), and accompanied by an employee of Tenant, and further provided that
the individual or individuals seeking access on behalf of Landlord shall have
executed a confidentiality agreement satisfactory to Tenant, for the following
purposes:
(a) to inspect the condition of the Premises;
(b) to make repairs to the Building or Premises pursuant to the terms
of the Lease, provided that Landlord shall make every reasonable effort to
minimize any interference with Tenant's use of the Premises, and so long as
Landlord is using reasonable efforts to minimize interference, there will be no
liability or abatement of Fixed Basic Rent or Additional Rent while such repairs
are being undertaken, and
(c) to show the Premises to prospective purchasers, mortgagees, or
other persons having a legitimate interest in viewing the same, and, at any time
within nine (9) months
13
<PAGE>
prior to the expiration of the Term for the Premises, to brokers or persons
wishing to rent the Premises;
Section 8.04. Landlord as Building Manager; Manager's Fee. Tenant shall
-------------------------------------------
pay Landlord, or at Landlord's direction, to Landlord's agent, a fee of $400.00
per month, as Additional Rent in accordance with Section 2.02 hereof (the
"Manager's Fee").
ARTICLE NINE
Alterations
-----------
Section 9.01. Structural Alterations. Except as provided in Section 9.02
----------------------
hereof, and other than the Tenant Work, Tenant will make no other structural
alterations to the Premises or any part thereof , without the prior written
consent of Landlord, which consent will not be unreasonably withheld,
conditioned, or delayed. Landlord shall not withhold, its consent unless such
structural alterations would materially change the character, appearance or use
of the Premises, or would weaken or impair the structural integrity or lessen
the value of the Premises or any part thereof. Any such permitted alterations
shall be performed in accordance with plans and specifications, and a
construction schedule, previously approved in writing Landlord. Nevertheless,
Tenant shall be permitted to install roof top HVAC units in accordance with
plans and specifications previously approved in writing by Landlord. The
location of such roof top HVAC units shall be subject to Landlord's reasonable
discretion, and such installation shall be performed by a licensed mechanical
contractor, which contractor shall be subject to Landlord's approval, which
approval shall not be unreasonably withheld, conditioned or delayed. Any such
structural alterations to the Premises shall be subject to the same conditions
as apply to the Tenant Work pursuant to Section 4.02 hereof.
Section 9.02. Non-Structural Alterations. Tenant may, at its sole cost,
--------------------------
and without the prior written consent of Landlord, make such interior
nonstructural alterations, additions, and improvements in and to the Premises as
it may deem desirable for its use, provided that Tenant notifies Landlord of
Tenant's intention to perform such alterations, additions and improvements and
provides Landlord with a copy of any plans and specifications relating thereto.
Any such non-structural alterations to the Premises shall be subject to the same
conditions as apply to the Tenant Work pursuant to Section 4.02 hereof.
Section 9.03 Mechanics' Liens. Tenant shall not, in the making of any
----------------
repairs or alterations pursuant to the provision of this Lease, suffer or permit
any mechanic's, laborer's or materialmen's lien to be filed against the
Premises, Building, or any part thereof by reason of labor or materials supplied
or claimed to have been supplied to Tenant; and if any such lien shall be filed,
Tenant, within forty-five days after notice of filing, shall cause it to be
discharged of record. In the event that Tenant fails to discharge any such lien
as aforesaid, then Landlord may, but shall not be required to, cause such lien
to be discharged. Any such payments or expenses incurred by Landlord in
connection therewith, shall constitute Additional Rent hereunder and shall be
due and payable with the next monthly installment of Fixed Basic Rent. Tenant
shall
14
<PAGE>
provide Landlord with copies of the praecipe or other record evidencing the
discharge of such lien promptly following receipt of same.
Section 9.04. Status of Improvements; "As Built" Drawings. Any
-------------------------------------------
alterations or improvements made pursuant to this Lease shall remain on the
Premises at the expiration of the Term, unless Landlord and Tenant shall agree
otherwise in writing; provided, however, that Tenant shall, at its option, have
the right to remove Tenant's trade fixtures, equipment, furnishings or personal
property, provided that if damage is caused by such removal, the damage shall be
repaired by Tenant by the expiration of the Term.
ARTICLE TEN
Insurance and Damage
--------------------
Section 10.01. Insurance. Tenant, at Tenant's sole cost and expense,
---------
shall keep or cause the Premises to be kept continuously insured during the
Term, under policies providing the following insurance coverages: (i) commercial
general liability insurance on an occurring basis with a combined single limit
for bodily injury and property damage of not less than $2,000,000.00, including
the broad form general liability endorsement, contract liability, and products
liability coverage; and (ii) a policy of standard fire, extended coverage and
special extended coverage insurance (all risks), including a vandalism and
malicious mischief endorsement, in an amount equal to the full replacement value
of the Premises, new and without deduction for depreciation of fixtures,
furniture and improvements. On or before the Rent Commencement Date, Tenant
shall provide Landlord with satisfactory evidence that such insurance is in full
force and effect or effectively renewed and that the insurance premiums for such
insurance have been paid for the first year of the term. Tenant's obligation to
carry or maintain any insurance required to be maintained by Tenant under the
Lease may be satisfied by Tenant by providing such coverages under Tenant's
existing blanket insurance policy. Such liability policy shall name Landlord as
an additional insured, and such casualty policy shall name Landlord as the loss
payee, and shall provide for at least thirty (30) days' prior notice of
cancellation or modification to Landlord. Upon the execution of this Lease,
Tenant shall deposit certificates evidencing such insurance coverages with
Landlord, and thereafter shall deposit with Landlord certificates evidencing
renewal of such coverages at least fifteen (15) days prior to the expiration
thereof. In the event that Tenant shall fail to maintain any such required
insurance coverages during the Term, Landlord may, but shall not be obligated
to, procure and obtain such insurance coverages and Landlord's costs for such
insurance shall constitute Additional Rent hereunder and shall be due and
payable with the next monthly installment of Fixed Basic Rent.
Section 10.02. Damage or Casualty.
------------------
(a) In case the Premises or any portion thereof shall be totally or
partially damaged or destroyed by fire or by any other casualty whatsoever, then
Landlord and Tenant shall proceed with reasonable promptness, and in accordance
with paragraph (c) below, to repair
15
<PAGE>
and restore the Premises to at least as good a condition as that which existed
immediately prior to such fire or other casualty and during such repair period,
there shall be an abatement of rent. In the event Landlord receives any
insurance proceeds from the property insurance maintained by Tenant pursuant to
Section 10.01, Landlord shall turn such proceeds over to Tenant for the purpose
of making such repairs.
(b) In the event that any of the insurance monies paid by the
insurance companies to Tenant shall remain after the completion of such repairs,
restoration or reconstruction, the excess shall be paid to or retained by
Tenant, as Tenant's property. In the event that the proceeds of any insurance
policies are insufficient to restore the Premises to the condition that they
were in prior to the occurrence of the casualty, either party hereto may
terminate this Lease upon ten (10) days prior written notice to the other party
of such election, and the Lease shall terminate on the date set forth in such
notice unless the other party shall elect and agree to pay any short fall
necessary to effect the required repairs, restoration or reconstruction, and in
which case the insurance proceeds shall be apportioned between the parties
hereto in the same proportion as the cost of the Tenant Work bears to the
aggregate of the cost of the Landlord Improvements plus (i) the actual cost to
Landlord to acquire the Building (exclusive of the land and appurtenances) or
(ii) $1,800,000, whichever is less.
(c) All repairs, restoration and reconstruction to the interior of the
Building, or other portions of the Premises comprising the Tenant Work shall be
performed by Tenant subject to the conditions set forth in Section 4.02 and
Section 9.01 hereof. All repairs, restoration and reconstruction to the
exterior of the Building, or other exterior improvements to the Premises shall
be performed by Landlord. The parties shall cooperate with one another and
shall have mutual responsibility for the adjustment of all insurance claims.
Section 10.03. Cooperation in Actions. Landlord and Tenant each will
----------------------
cooperate with the other, to such extent as such other party may reasonably
require, in connection with the prosecution or defense of any action or
proceeding arising out of, or for the collection of any insurance monies that
may be due in the event of, any loss or damage, and each will execute and
deliver to such other party such instruments as may be required to facilitate
the recovery of any insurance monies.
Section 10.04. Notice of Casualty. Tenant shall give prompt written and
------------------
verbal notice to Landlord with respect to all fires or other casualties
occurring upon the Premises.
Section 10.05. Waiver of Subrogation; Rights Under Insurance Policies.
------------------------------------------------------
Each of the parties hereto hereby release the other, to the extent of the
releasing party's insurance coverage, from any and all liability for any loss or
damage which may be inflicted upon the Premises of such party even if such loss
or damage shall be brought about by the fault or negligence of the other party,
its agents or employees; provided, however, that this release shall be effective
only with respect to loss or damage occurring during such time as the
appropriate policy of insurance shall contain a clause to the effect that this
release shall not affect said policy or the right of the insured to recover
thereunder. If any policy does not permit such a waiver, and if the party to
16
<PAGE>
benefit therefrom requests that such a waiver be obtained, the other party
agrees to obtain an endorsement to its insurance policies permitting such waiver
of subrogation if it is available and if such policies do not provide therefor.
If an additional premium is charged for such waiver, the party benefiting
therefrom, if it desires to have the waiver, agrees to pay to the other the
amount of such additional premium promptly upon being billed therefor.
ARTICLE ELEVEN
Condemnation
------------
Section 11.01. Condemnation. In the event that the Premises, or any part
------------
thereof, shall be taken in condemnation proceedings or by exercise of any right
of eminent domain or by agreement between Landlord, Tenant and those authorized
to exercise such right (hereinafter collectively called "Condemnation
Proceedings"), Tenant shall have the right to make a claim against the condemnor
for moving expenses, business dislocation damages or damages to Tenant's
business and personal property owned by Tenant, including but not limited to
those items constituting Tenant Work. The parties agree to execute any and all
further documents that may be required in order to facilitate collection of any
such award or awards.
Section 11.02. Total Condemnation. If title to the fee of the whole or
------------------
materially all of the Premises shall be taken by Condemnation Proceedings, for
any public or quasi-public use, this Lease shall cease and terminate, and all
Fixed Basic Rent, Additional Rent and other charges paid or payable by Tenant
hereunder shall be apportioned, as of the date possession of the Premises must
be delivered to the condemning authority, and the total award, except for any
award specifically to Tenant as described in Section 11.01 above, shall be
retained by Landlord. For the purposes of this Section, a taking of the whole or
materially all of the Premises shall be deemed to have occurred if the portion
of the Premises not so taken, in Landlord's reasonable, good faith judgment,
cannot be reconstructed or repaired so as to constitute a facility usable by
Tenant for the purposes which the Premises were being used by Tenant immediately
prior to such taking.
Section 11.03. Partial Condemnation. Unless otherwise required by any
--------------------
mortgage lender of Landlord, if at any time during the term of this Lease, title
to less than the whole or materially all of the Premises shall be taken in
Condemnation Proceedings, all the award or proceeds collected by Landlord
pursuant to Section 11.01 hereof shall be held by Landlord and applied and paid
over toward the cost of demolition, repair and restoration, substantially in the
same manner and subject to the same conditions as those provided in Section
10.03 hereof with respect to insurance and other monies and provided no Event of
Default shall have occurred. Any balance remaining in the hands of Landlord
after payment of such costs of demolition, repair and restoration as
aforementioned shall be the sole property of Landlord. This Lease shall continue
in full force and effect; provided however, the Fixed Basic Rent shall be
reduced by the proportion that the square footage of the Building taken in
condemnation bears to the total square footage of the Building.
17
<PAGE>
ARTICLE TWELVE
Default
-------
Section 12.01. Events of Default; Termination. The occurrence of each of
------------------------------
the following shall be an "Event of Default" hereunder:
(a) if Tenant shall make an assignment of a material portion of its
assets for the benefit of its creditors, or if a material portion of Tenant's
assets shall become subject to a levy or attachment by any judgment creditors or
governmental authorities and such attachment or levy is not discharged or
dissolved within forty-five (45) days after the date of such attachment or levy;
or
(b) if Tenant indicates an intention to file a petition or if any
petition shall be filed by or against Tenant in any court, whether or not
pursuant to any statute of the United States or of any State, in any bankruptcy,
reorganization, composition, extension, arrangement or insolvency proceedings,
and in the case of an involuntary bankruptcy petition such proceedings shall not
be dismissed within ninety (90) days after the institution of the same; or
(c) if, in any proceeding, a receiver or trustee be appointed for all
or any portion of Tenant's property, and such receivership or trustee shall not
be vacated or set aside within ninety (90) days after the appointment of such
receiver or trustee; or
(d) if Tenant shall fail to pay any installment of Fixed Basic Rent
or Additional Rent, or any part thereof, when the same shall become due and
payable for a period of ten (10) business days after written notice to Tenant
from Landlord; or
(e) if Tenant shall abandon the Premises, without the prior consent
of Landlord, by removing all or substantially all of Tenant's furniture,
equipment and personal property from the Premises, provided that Tenant shall
also be delinquent in the payment of Fixed Basic Rent or fail to obtain any
additional insurance coverage that may be required by Tenant's insurance carrier
in order to insure a vacant building; or
(f) if Tenant shall fail to perform or observe any other material
provision, condition or requirement of this Lease (not hereinbefore in this
Section 12.01 specifically referred to) on the part of Tenant to be performed or
observed, and such failure shall continue for thirty (30) days after notice
thereof from Landlord to Tenant, or, if such Event of Default is of such a
nature that it cannot, with due diligence, be cured within a period of thirty
(30) days, if Tenant shall have failed to commence the curing of such default
within the period of thirty (30) days referred to above and shall thereafter
fail to continue with all due diligence to complete the curing of such default
and completes such cure in any event within ninety (90) days after notice
thereof.
Section 12.02. Remedies. Upon the occurrence of an Event of Default, and
--------
at any time thereafter, Landlord shall have the following rights and may elect
any one or more of the following remedies:
18
<PAGE>
(a) To accelerate the whole or any part of the Fixed Basic Rent for
the remainder of the Term (the "Accelerated Rent"), which Accelerated Rent shall
be discounted to present value on the basis of a discount rate equal to the
prime rate offered by CoreStates Bank, N.A., applied and calculated on the date
of receipt by Landlord of such Accelerated Rent; and shall be deemed due and
payable as if, by the terms and provisions of this Lease, such Accelerated Rent
was on that date payable in advance.
(b) Without waiving Landlord's right to recover the Accelerated Rent
as herein provided, Landlord may re-enter the Premises, and, at the option of
Landlord, remove all persons and all or any property therefrom, either by
summary dispossess proceedings or by any suitable action or proceeding at law or
by force or otherwise, without being liable for prosecution or damages therefor,
and repossess and enjoy the Premises. Upon recovering possession of the
Premises by reason of an Event of Default, Landlord may, at Landlord's option,
either terminate this Lease or make such alterations and repairs as may be
necessary in order to relet the Premises and relet the Premises or any part or
parts thereof, either in Landlord's name or otherwise, for a term or terms which
may, at Landlord's option, be less than or exceed the period which would
otherwise have constituted the balance of the Term of and at such rent or rents
and upon such other term and conditions as in Landlord's sole discretion may
seem advisable and to such person or persons as may in Landlord's discretion
seem best; upon each such reletting all rents received by Landlord from such
reletting shall be applied: first, to the payment of any costs and expenses of
such reletting, including brokerage fees and attorney's fees and all costs of
such alterations and repairs; second, to the payment of any indebtedness other
than Fixed Basic Rent due hereunder from Tenant to Landlord; third, to the
payment of Additional Rent due and unpaid hereunder; and the residue, if any,
shall be held by Landlord and applied in payment of future rent as it may become
due and payable hereunder. If such rentals received from such reletting during
any month shall be less than that to be paid during that month by Tenant, Tenant
shall pay any such deficiency to Landlord. Such deficiency shall be calculated
and paid monthly. No such re-entry or taking possession of the Premises or the
making of alterations or improvements thereto or the reletting thereof shall be
construed as an election on the part of Landlord to terminate this Lease unless
written notice of such intention be given to Tenant. Landlord shall in no event
be liable in any way whatsoever for failure to relet the Premises, or in the
event that the Premises or any portion thereof is relet, for failure to collect
the rent thereof under such reletting. Notwithstanding any such reletting
without termination, Landlord may at any time thereafter elect to terminate this
Lease for such previous breach.
(c) Without waiving Landlord's right to recover the Accelerated Rent
as herein provided, Landlord may terminate the Lease and thereupon all rights of
Tenant under this Lease shall expire and terminate and Tenant shall forthwith
quit and surrender possession of the Premises in the condition specified in
Section 8.01 hereof.
Section 12.03. Non-Waiver. No waiver by Landlord of any breach by Tenant
----------
or any of Tenant's obligations, agreements or covenants herein shall be a waiver
of any subsequent breach,
19
<PAGE>
nor shall any forbearance by Landlord to seek a remedy for any breach by Tenant
be a waiver by Landlord of any rights and remedies with respect to any
subsequent breach.
Section 12.04. Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to Landlord is intended to be exclusive of any
other right or remedy provided herein or by law, but each shall be cumulative
and in addition to every other right or remedy given herein or now or hereafter
existing at law or in equity or by statute.
Section 12.05. Waiver of Trial by Jury. LANDLORD AND TENANT HEREBY
-----------------------
IRREVOCABLY AGREE TO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER ON ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OF OR OCCUPANCY OF THE
PREMISES AND/OR ANY CLAIM OF INJURY OR DAMAGE OR REMEDY.
ARTICLE THIRTEEN
Section 13.01. Quiet Enjoyment. Tenant, upon paying the rent herein
---------------
reserved, and performing and observing the covenants, conditions and agreements
hereof upon the part of Tenant to be performed and observed, shall and may
peaceably hold and enjoy the said Premises during the term hereof, without any
interruption or disturbance from Landlord or anyone claiming by, through or
under Landlord, subject, however, to the terms of this Lease and subject to all
matters which now affect the Premises and subject to the rights of Landlord's
mortgage lenders under all present and future mortgages of Landlord covering the
Premises. This covenant shall be construed as running with the land to and
against subsequent owners and successors in interest, and is not, nor shall it
operate or be construed as, a personal covenant of Landlord, except to the
extent of Landlord's interest in said Premises and only so long as such interest
shall continue, and thereafter this covenant shall be binding only upon such
subsequent owners and successors in interest, to the extent of their respective
interests, as and when they shall acquire the same, and only so long as they
shall retain such interest.
Section 13.02. Subordination, Non-Disturbance and Attornment. This Lease,
---------------------------------------------
and Tenant's rights hereunder, including, without limitation the Option granted
pursuant to Article 15 hereof, shall not be subject or subordinate to the lien
of any mortgage, ground lease, or other encumbrance, encumbering the Premises,
unless Tenant and such encumbrancer execute an agreement, certificate or other
writing, which contains a provision that so long as Tenant shall not be in
default under the terms of the Lease, the Lease, the Option and all of Tenant's
other rights hereunder, and Tenant attorns to such encumbrancer, the Lease shall
remain in full force and effect regardless of any event of foreclosure or
termination upon any such mortgage, ground lease or other encumbrance. Such
agreement shall also contain a provision, which obligates Tenant,
notwithstanding any claim, defense or right of setoff that otherwise may be
available to
20
<PAGE>
Tenant in the event that Landlord is in default under the terms of this Lease,
to make payments of Fixed Basic Rent to such encumbrancer, and provides any
claim, defense or right of setoff that Tenant may have under applicable law
would only apply to such portion of the Fixed Basic Rent that exceeds the amount
of Landlord's regular monthly installment payment of debt service to such
encumbrancer.
Section 13.03. Tenant Estoppel Certificate. Tenant shall, within ten
---------------------------
(10) days following request of Landlord, execute an estoppel certificate or
similar writing, certifying to Landlord's mortgagee or purchaser such facts, if
true, and agreeing to such notice provisions and other matters as such mortgagee
or purchaser may reasonably require in connection with Landlord's present or
future financing or sale of the Building.
Section 13.04. Landlord's Lien Waiver. Within thirty (30) days following
----------------------
the written request of Tenant, Landlord shall execute a waiver or similar
writing, as may be reasonably required in connection with any present or future
financing provided to Tenant by any creditor, in order to evidence that Landlord
waives, releases and relinquishes any and all rights (including the right to a
landlord's lien), interest, or claim, if any, in or to all equipment, trade
fixtures, goods, inventory, accounts, or accounts receivable (as those terms are
defined under the Uniform Commercial Code), which are now or hereafter located
or stored on, or otherwise do now or hereafter pertain to, the Premises, and
which are subject to a security interest or lease agreement granted or entered
into by Tenant in favor of any creditor of Tenant (collectively, such items are
referred to as the "Collateral").. Landlord shall not take custody or possession
of the Collateral, or distrain or remove any of the Collateral from the
Premises, or interfere with the shipment, removal or delivery of any Collateral
to or from the Premises by Tenant (or any third party acting with Tenant's
permission), without having first provided thirty (30) days written notice of
such proposed action to any such creditor of Tenant to whom Landlord shall have
previously delivered a waiver or similar writing.
ARTICLE FOURTEEN
Option to Renew Lease
--------------------
Section 14.01. Option to Renew. Provided that this Lease has not been
---------------
sooner terminated or expired as provided for herein and that no Event of Default
shall have occurred and be continuing on the date of the exercise of the option
to renew, Tenant shall have two consecutive options to extend the term (the
"Renewal Options") of this Lease beyond the initial term for five year periods
each. Such option shall be exercised by Tenant giving its written notice to
Landlord at least one hundred and eighty (180) days prior to the expiration of
the then current term of this Lease (collectively, the "Renewal Terms" and in
the case of the first five year renewal term, the "First Renewal Term" and in
the case of the second five year renewal term, the "Second Renewal Term").
Section 14.02. Adjustment to Fixed Basic Rent. Adjustment to In the event
------------------------------
Tenant elects to exercise such option to extend the term of this Lease, the
Fixed Basic Rent during the Renewal Terms
21
<PAGE>
shall be as follows: (a) during the First Renewal Term, the Fixed Basic Rent
shall be $930,000.00 per annum, payable in equal monthly installments of
$77,500.00 each (the "First Renewal Fixed Basic Rent") and (b) during the Second
Renewal Term, the Fixed Basic Rent shall be as follows:
<TABLE>
<CAPTION>
Year Yearly Payments Monthly Payments
---- --------------- ----------------
<S> <C> <C>
Lease Year 21 $ 957,900.00 $79,825.00
Lease Year 22 $ 986,637.00 $82,219.75
Lease Year 23 $1,016,236.11 $84,686.35
Lease Year 24 $1,046,723.19 $87,226.93
Lease Year 25 $1,078,124.89 $89,843.74
</TABLE>
All other terms of the Lease shall remain the same.
ARTICLE FIFTEEN
Option to Purchase and Right of First Refusal
---------------------------------------------
Section 15.01. Tenant's Option to Purchase. In consideration of
---------------------------
Tenant's acceptance of this Lease, Tenant is hereby granted the exclusive right
and option to purchase the Building, together with all of all those certain
parcels and tracts of land on which the Building is situate, and all of
Landlord's estate, right, title and interest thereto, including all easements
and appurtenances thereto (collectively, the "Real Estate"), at any time prior
to Lease Year 3, provided the Lease is then in full force and effect (the
"Option"). The Option is to be exercised by Tenant's giving written notice of
its intention to purchase the Real Estate to Landlord not less than sixty (60)
days prior to Lease Year 3. This Lease and the aforesaid notice of Tenant's
exercise of the Option shall constitute an agreement of sale between the
parties, whereby Landlord agrees to sell and Tenant agrees to purchase the Real
Estate upon the following terms and conditions:
(a) Settlement for the purchase of the Real Estate shall be on the
earlier of (i) the date designated in Tenant's notice, which date shall be not
less than thirty (30) days after the date such notice is delivered to Landlord,
or (ii) the commencement date of Lease Year 3. Settlement shall occur in the
office of Tenant's title insurance company, on such date as shall be designated
in the aforesaid notice from Tenant to Landlord.
(b) In the event that Tenant effectively exercises the Option, the
purchase price for the Real Estate shall be equal to the sum of $6,500,000.00,
plus $21,000.00 multiplied by the number of full calendar months occurring after
the first full calendar month of Lease Year 1 and before the calendar month
during which settlement occurs, but including a pro rated portion of the $21,000
for the calendar month during which settlement occurs; provided however, that in
the event that settlement is delayed through no fault of Tenant, the purchase
22
<PAGE>
price shall be calculated as if settlement had occurred on the date designated
in Tenant's notice; and provided further that in no event shall the purchase
price exceed the sum of $7,000,000.00.
(c) The purchase price, computed as above provided, shall be payable
by Tenant to Landlord, or to Landlord's mortgage lender if required by such
lender, at the time of settlement, by title company check, cashier's check,
certified check, or other immediately available funds.
(d) Tenant and Landlord shall each pay fifty percent (50%) of all
realty transfer taxes, documentary stamp taxes or other taxes and charges
imposed by the federal, state or local authorities upon the conveyance.
(e) Landlord shall convey to Tenant a good and marketable fee simple
title to the Real Estate, free and clear of all liens, encumbrances, easements,
restrictions or other exceptions or objections, except for the Permitted
Exceptions, and except as have been created or consented to by Tenant during the
term of this Lease. Tenant's title shall be insurable as such at ordinary rates
by Commonwealth Land Title Insurance Company or such other title insurance
company selected by Tenant. Except for Landlord's special warranty contained in
the deed conveying the Real Estate to Tenant, which warranty shall be subject to
the aforesaid permitted exceptions, Landlord shall make no representations or
warranties regarding the Real Estate.
(f) Tenant acknowledges that Tenant's obligation to purchase the Real
estate following the effective exercise of the Option shall not be subject to
Tenant's ability to obtain purchase money financing or any other contingency,
except for Landlord's obligation to deliver title to the Real estate as
aforesaid. In the event Tenant fails to complete settlement for any reason
whatsoever, this Lease shall remain in full force and effect in accordance with
its terms, including the right to exercise the Renewal Options. In the event
that Tenant is in default of its obligation to purchase the Real Estate, when
and as required hereunder, and such default is not cured within ten (10) days of
the date of such default, Tenant shall reimburse Landlord for Landlord's
reasonable costs and expenses actually incurred by Landlord in anticipation of
completing settlement, but in no event shall Tenant be obligated to reimburse
Landlord for more than $5,000.00.
Section 15.02. Tenant's Right of First Refusal. Tenant's Landlord hereby
-------------------------------
grants to Tenant an exclusive right of first refusal to purchase the Real Estate
on the terms set forth in this Section 15.02. In the event that at any time
during the Term, and provided the Lease is then in full force and effect,
Landlord shall receive a bona fide offer to purchase all or any part of the Real
Estate, and desires to accept such offer, then Landlord shall promptly notify
Tenant in writing of such offer, such notice to specify the price, payment and
other material terms of such offer, and Landlord shall first offer to sell the
Real Estate or such portion of the Real Estate which is the subject of such
offer to Tenant on the same such terms. Tenant may accept such offer by written
notice to Landlord within fifteen (15) business days following the receipt of
Landlord's notice to Tenant. Upon Tenant's acceptance of such offer, closing
shall occur in accordance with the terms of the offer provided to Tenant by
Landlord. If Tenant does not agree to purchase the Real Estate
23
<PAGE>
or the subject portion thereof, Landlord shall have the right to proceed to sell
the Real Estate, or the subject portion thereof, pursuant to the terms of such
offer or on other terms no more favorable to the purchaser than were presented
to Tenant, subject to this Lease, the Option, and the other rights of Tenant
hereunder, and provided such sale is completed within the later of (i) 120 days
from the date Tenant gives notice that it does not elect to purchase the Real
Estate, or (ii) the period of time set forth in such offer. Notwithstanding
anything set forth herein to the contrary, Landlord shall not be permitted to
sell or convey the Real Estate during the first two years of the Term to anyone
but Tenant, except for a conveyance to a partnership, trust, or other legal
entity in which Brian O'Neill, an individual who presently owns an interest in
Landlord, shall continue to own a legal or beneficial interest, and with respect
to such conveyance Tenant's right of first refusal granted under this Section
shall not be deemed to be extinguished and the deed or other writing evidencing
such conveyance shall expressly provide that the conveyance and the grantee's
rights with respect thereto are and shall be subject to this Lease.
Section 15.03. Memorandum of Lease and Option to Purchase. Concurrently
------------------------------------------
with the execution hereof, the parties hereto shall execute and deliver a
memorandum of this lease and option to purchase in the form attached hereto as
Exhibit "D," which memorandum shall thereafter be promptly recorded in the
Office of the Recorder of Deeds of Montgomery County, Pennsylvania. The
memorandum shall indicate the terms by which the lease and option to purchase
granted herein shall expire.
ARTICLE SIXTEEN
Miscellaneous
-------------
Section 16.01. Assignment; Sublease.
--------------------
(a) Except as provided in paragraph (b) below, Tenant shall not
assign or sublet the Premises or any part thereof without Landlord's prior
written approval, which approval shall not be unreasonably withheld, conditioned
or delayed. If Tenant desires to assign this Lease or sublet any or all of the
Premises, Tenant shall give Landlord written notice prior to the anticipated
effective date of the assignment or sublease, and shall provide Landlord with a
written sublease or assignment, signed by each of Tenant and Tenant's assignee
or subtenant, and a copy of the most recently available financial statement for
such assignee or subtenant. Landlord shall then have a period of ten (10) days
following receipt of such notice to notify Tenant in writing that Landlord
elects either (1) to terminate this Lease as to the space so affected as of the
date so requested by Tenant, or (2) to permit Tenant to assign this Lease or
sublet such space. If Landlord shall fail to notify Tenant in writing of such
election within such period, Landlord shall be deemed to have approved such
assignment or sublease.
(b) Notwithstanding anything to the contrary contained in paragraph
(a) above, Tenant may assign or sublet all or any portion of the Premises if
either (A) (1) Tenant is not in default of any its obligations under this Lease,
(2) Tenant remains obligated hereunder, (3)
24
<PAGE>
the proposed use of the Premises is in compliance with all applicable Laws
pertaining to the Premises, and does not violate any restrictive covenant to
which the Landlord may be bound, and (4) the prospective assignee or subtenant
has signed a written sublease or assignment with Tenant and therein agrees to be
bound by all the terms and conditions of the Lease respecting the portion of the
Premises that is the subject of the assignment or sublease, or (B) (1) such
assignee or subtenant is a subsidiary or an affiliate of Tenant, or owns or
controls Tenant, (2) acquires all or substantially all of the assets of Tenant,
or (3) acquires all or a majority of the capital stock of Tenant, Landlord shall
consent and approve the proposed assignment or sublease within ten (10) days of
Tenant's notice and shall not be permitted to withhold or condition such
approval and consent.
(c) Any rent or other consideration realized by Tenant under any such
sublease or assignment in excess of Fixed Basic Rent payable hereunder, net of
the reasonable cost of any improvements which Tenant has made for the purpose of
assigning or subletting all or a part of the Premises and other expenses
incurred by Tenant associated with such assignment or subletting, including,
without limitation, brokerage commissions and legal fees, shall be divided and
paid, ten percent (10%) to Tenant, and ninety percent (90%) to Landlord.
(d) No assignment or subletting by Tenant shall relieve Tenant of any
obligations under this Lease. Any assignment of subletting which conflicts with
the provisions hereof shall be void.
Section 16.02. Notice. All notices, requests and other communications
------
under this Lease shall be in writing and shall either be sent by registered or
certified mail, return receipt requested, postage prepaid, by an overnight
courier guaranteeing next day delivery (e.g., Federal Express, Purolator, UPS),
in each instance addressed, as follows:
To Landlord: 525 VIRGINIA DRIVE ASSOCIATES LIMITED PARTNERSHIP
443 South Gulph Road
King of Prussia, Pennsylvania 19406
Attention:
With Copy to: Kevin W. Walsh, Esquire
Adelman, Lavine, Gold & Levin
1900 Two Penn Center Plaza
Philadelphia, PA 19102
25
<PAGE>
To Tenant: BIO-PHARM PHARMACEUTICS SERVICES, INC.
425 Delaware Drive
Fort Washington, Pennsylvania 19034-2703
Attention: John Santoro
With Copy to: Linda Ann Galante, Esquire
Stradley, Ronon, Stevens & Young. LLP
30 Valley Stream Parkway
Malvern, PA 19355
or at such other address of which Seller or Purchaser shall have given notice as
herein provided. All such notices, requests and other communications shall be
deemed to have been sufficiently given for all purposes hereon on the second
(2nd) day after the date of mailing thereof, or one day after overnight
delivery, and may be given on behalf of any party by its counsel.
Section 16.03 Signage. During the last nine (9) months of the term,
-------
Landlord may place and maintain a "For Rent" or "For Sale" sign in or on the
Premises, subject to Upper Dublin Township regulations.
Section 16.04. Survival of Valid Terms. Survival of Valid If any term or
-----------------------
provision of this Lease or the application thereof to any person or
circumstances, shall to any extent be invalid or unenforceable, the remainder of
this Lease, or the application of such term or provision to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby, and each term and provision of this Lease shall be
valid and be enforced to the fullest extent permitted by law.
Section 16.05. Covenants to Bind and Benefit Respective Parties 16.05.
------------------------------------------------------
The terms, conditions, covenants, provisions and agreements herein contained
shall be binding upon and inure to the benefit of Landlord and Tenant, their
successors and assigns.
Section 16.06. Captions and Headings. The captions and headings
---------------------
throughout this Lease are for convenience and reference only and the words
contained therein shall in no way be held or deemed to define, limit, describe,
or add to the interpretation, construction or meaning of any provision of or the
scope or intent of this Lease.
Section 16.07. Governing Law. This Lease and the relative rights,
-------------
privileges, duties and obligations of the parties hereunder shall be governed by
the Laws of the Commonwealth of Pennsylvania.
Section 16.08 Confidentiality.
---------------
(a) Landlord acknowledges that in the course of managing the Building
Landlord may gain access to information or materials that are confidential or
proprietary to Tenant, including information or materials pertaining to Tenant's
business operations or information or materials with respect to which Tenant may
be under an obligation of
26
<PAGE>
confidentiality to third parties ("Confidential Information"). Additionally the
names, terms, conditions, facts, or other information pertaining to this Lease
shall be deemed Confidential Information. Landlord shall keep all Confidential
Information in strict confidence under appropriate safeguards. Except as may be
required by judicial process, neither Landlord nor any employee, officer,
director, agent or attorney of Landlord shall (i) disclose or reveal any
Confidential Information, except with respect to the terms and conditions of
this Lease, which may be disclosed to a limited group of the Landlords'
officers, agents, and attorneys, who are actively participating in the
negotiation, approval and execution of the Lease ("Party Representatives"), each
of whom shall be informed of the confidential nature of the Lease; or (b) use
any confidential Information in any way that could be detrimental to Tenant.
This Section 16.08 shall be binding upon and inure to the benefit of all parties
hereto and to each of their respective Party Representatives.
Section 16.09 Lease Guaranty. Contemporaneously with the execution of
--------------
this Lease by Tenant, Guarantor shall execute and deliver to Landlord a guaranty
in the form attached hereto as Exhibit "E".
Section 16.10 Counterparts. This Lease may be executed by the parties
------------
in any number of counterparts, each of which so executed shall be deemed an
original; and such counterparts shall together constitute but one and the same
Lease.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be duly
executed as of the day and year first above written.
525 VIRGINIA DRIVE ASSOCIATES
LIMITED PARTNERSHIP, a Pennsylvania limited
partnership, by its sole general partner 525
VIRGINIA DRIVE ASSOCIATES ACQUISITION CORPORATION,
a Pennsylvania corporation
By:_________________________________
President
BIO-PHARM PHARMACEUTICS SERVICES, INC.,
a Delaware corporation
By:_________________________________
Vice President
28
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION OF THE PREMISES
29
<PAGE>
EXHIBIT "B-1"
PLANS AND SPECIFICATIONS FOR LANDLORD IMPROVEMENTS
(Comprised of the HSC Work Letter, as amended, the roofing contractor's letter,
the artist's rendering, landscaping plan, and the parking plan, all to be
attached hereto).
30
<PAGE>
EXHIBIT "B-2"
PLANS AND SPECIFICATIONS FOR TENANT WORK
(Comprised of any available plans and specifications that may have been approved
by Tenant prior to the execution of the Lease, if any, to be attached hereto).
31
<PAGE>
EXHIBIT "C"
PERMITTED EXCEPTIONS
32
<PAGE>
EXHIBIT "D"
MEMORANDUM OF LEASE
33
<PAGE>
EXHIBIT "E"
FORM OF LEASE GUARANTY
34
<PAGE>
STOCK PURCHASE AGREEMENT
among
IBAH, INC.
(a Delaware Corporation),
CATAPULT PTY., LTD.
(an Australian Corporation),
PHILLIP ALTMAN
(a resident of Australia)
and
JUANITA ALTMAN
(a resident of Australia)
with respect to
PHARMACO US
(a Delaware Corporation)
<PAGE>
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
Section Page
1. Definitions.......................................................... 1
2. Purchase and Sale of Shares.......................................... 7
3 Closing.............................................................. 9
4. Representations and Warranties of the Selling Parties................ 9
5. Representations and Warranties of IBAH............................... 21
6. Payment of Tax Liabilities........................................... 22
7. Other Covenants...................................................... 23
8. Conditions Precedent to Obligations of IBAH.......................... 23
9. Conditions Precedent to Obligations of the Selling Parties........... 24
10. Competition and Confidentiality...................................... 24
11. Indemnification...................................................... 25
12. Contents of Agreement................................................ 28
13. Amendment, Parties in Interest, Assignment, Etc...................... 28
14. Interpretation....................................................... 28
15. Remedies............................................................. 28
16. Notices.............................................................. 29
17. Governing Law........................................................ 30
18. Counterparts......................................................... 30
Exhibits Schedules
A Escrow Agreement 4.3 Required Consents
B Altman Employment Agreement 4.4 Capitalization and Stock Ownership
C Registration Rights Agreement 4.6 Encumbrances
4.7 Real Property
4.9 Non-Real Estate Leases
4.12 Liabilities
4.15 Litigation; Governmental Permits
4.16 Contracts
4.17 Insurance
4.18 Intellectual Property
4.19 Employee Relations
4.20 Benefit Plans
4.22 Payments to Affiliates
4.24 Customers and Suppliers
4.26 Additional Information
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of February
28, 1997 by and among IBAH, Inc., a Delaware corporation ("IBAH"), Catapult
Pty., Ltd., an Australian corporation (the "Seller" ), Phillip Altman, a
resident of Australia and Juanita Altman, a resident of Australia (together,
the "Altmans" ). Certain other terms are used herein as defined below in
Section 1 or elsewhere in this Agreement.
Background
As of the date of the Closing, the Seller shall form Pharmaco U.S., a
Delaware corporation (the "US Company" ) as a wholly-owned subsidiary of the
Seller. The Seller conducted its entire Business, including all of its
operations, assets and liabilities (the "Business"), through Pharmaco Pty.
Ltd., an Australian corporation ( "Pharmaco" ). As of the date of Closing, the
Seller will transfer all of the issued and outstanding shares of capital stock
of Pharmaco to the US Company, the Seller will own all of the capital stock of
the US Company, the Altmans will own all of the capital stock of the Seller,
and the US Company will own all of the capital stock of Pharmaco. The Seller
desires to sell, and IBAH desires to buy, all of the stock of the US Company in
accordance with the terms of this Agreement.
Witnesseth
NOW, THEREFORE, in consideration of the respective covenants contained
herein and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Definitions.
For convenience, certain terms used in more than one part of this
Agreement are listed in alphabetical order and defined or referred to below
(such terms as well as any other terms defined elsewhere in this Agreement shall
be equally applicable to both the singular and plural forms of the terms
defined).
"Action" is defined in Section 10.4.
"Accounts Receivable" means, as of any date any trade accounts
receivable, notes receivable, bid or performance deposits, employee advances and
other miscellaneous receivables included in the Assets of the Company.
"Affiliates" means, with respect to a particular party, persons or
entities controlling, controlled by or under common control with that party, as
well as any officers, directors and majority-owned entities of that party and of
its other Affiliates.
"Agreement" means this Agreement and the exhibits and schedules hereto.
"Altmans" is defined above in the Preamble.
"Altman Employment Agreement" means the Employment Agreement between the
Company and Phillip Altman, in the form of Exhibit "B" hereto.
<PAGE>
"Assets" means, with respect to a particular Person, all of the assets,
properties, goodwill and rights of every kind and description, real and
personal, tangible and intangible, that are owned or possessed by such Person.
It is understood by the parties that Active Acne Tea Tree Oil Gel, Virasolve
Cold Sore Cream and SCF tablets are not and never have been assets of the
Company.
"Balance Sheet Date" is defined in Section 4.5.
"Benefit Plans" means all employee benefit plans of the US Company or the
Seller within the meaning of Section 3(3) of ERISA and any related or separate
Contracts, plans, trusts, programs, policies, arrangements, practices, customs
and understandings, in each case whether formal or informal, that provide
benefits of economic value to any present or former employee of the US Company,
or present or former beneficiary, dependent or assignee of any such employee or
former employee.
"Business" means, with respect to a particular Person, the entire
business, operations, and facilities of such Person.
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Claim Notice" is defined in Section 10.3
"Claim Response" is defined in Section 10.3
"Closing" is defined in Section 3.1.
"Closing Date" is defined in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means (i) the US Company, (ii) Pharmaco and (iii) if the
context requires, any predecessor of the US Company or Pharmaco.
"Company Balance Sheet" is defined in Section 4.5.
"Company Common Stock" means the Common Stock, par value $0.01 per share,
of the US Company.
"Company Consolidated Financial Statements" is defined in Section 4.5 and
6.7.
"Confidential Information" means information, including a formula,
pattern, compilation, program, device, method, technique or process that (a)
derives independent economic value, actual or potential, from not being
generally known to the public or to other Persons who can obtain economic value
from its disclosure or use; and (b) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
"Consolidated Financial Statements" is defined in Section 4.5
<PAGE>
"Contract" means any written or oral contract, agreement, lease,
instrument or other commitment that is binding on any person or its property
under applicable law.
"Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
"Court Order" means any judgment, decree, injunction, order or ruling of
any federal, state, local or foreign court or governmental or regulatory body or
authority that is binding on any person or its property under applicable law.
"Damages" is defined in Section 10.1.
"Default" means (a) a breach, default or violation, (b) the occurrence of
an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or (c) with respect to any
Contract, the occurrence of an event that with or without the passage of time or
the giving of notice, or both, would give rise to a right of termination,
renegotiation or acceleration or a right to receive damages or a payment of
penalties.
"Dollar" or "$" means the currency of the United States of America,
unless otherwise noted.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest.
"Environmental Condition" is defined in Section 4.15(b).
"Environmental Law" is defined in Section 4.15(b).
"Escrow Agent" means PNC Bank, National Association.
"Escrow Agreement" means the Escrow Agreement among IBAH, the Seller, the
Altmans and the Escrow Agent, in the form of Exhibit "A" hereto and entered into
as of the date hereof.
"Escrow Funds" is defined in Section 2.1(c)(iii).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means U.S. generally accepted accounting principles.
"Governmental Permits" is defined in Section 4.15(d).
"Hazardous Substances" means any gaseous, liquid or solid material or
waste that may or could pose a hazard to the environment or human health or
safety including (i) any hazardous substances as defined by the federal
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
(S)(S)9601 et seq., (ii) any extremely hazardous substance, hazardous chemical,
or toxic chemical as those terms are defined by the federal Emergency Planning
and Community Right-to-Know Act, 42 U.S.C. (S)(S)11001 et seq., (iii) any
hazardous waste, as defined under the federal Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act, 42 U.S.C. (S)(S)6901 et
seq., (iv) any pollutant, as defined under the federal Water Pollution Control
Act, 33 U.S.C. (S)(S)1251 et seq., as any of such laws in clauses (i) through
(iv) may be amended from time to time, and (v) any regulated substance or waste
under any Laws or Court Orders that currently exist or that may be enacted,
promulgated or
<PAGE>
issued in the future by any federal, state or local governmental authorities
concerning protection of the environment.
"IBAH" is defined above in the preamble.
"IBAH Common Stock" means IBAH's Common Stock, par value $0.01 per share.
"IBAH Financial Statements" is defined in Section 5.6.
"Immaterial Lease" is defined in Section 4.9.
"Indemnified Party" is defined in Sections 10.1 and 10.2.
"Indemnitor" is defined in Section 10.3.
"Intellectual Property" means any Copyrights, Patents, Trademarks,
technology rights and licenses, trade secrets, franchises, know-how, inventions
and other intellectual property.
"Inventory" means all inventory, including raw materials, supplies, work
in process, backlog and finished goods.
"Law" means any statute, law, ordinance, regulation, order or rule of any
federal, state, local, foreign or other governmental agency or body or of any
other type of regulatory body, including those covering environmental, energy,
safety, health, transportation, bribery, recordkeeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Liquidated Claim Notice" is defined in Section 10.3.
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or inquiry.
"Material Adverse Effect" means a material adverse effect on the Business,
Assets, financial condition, results of operations, liquidity, products,
competitive position, customers or customer relations of the Company, and when
used with respect to representations, warranties or conditions, means the
individual effect of the situation to which it relates and also the aggregate
effect of all similar situations unless the context indicates otherwise.
"Minor Contracts" is defined in Section 4.16(a).
"Non-Real Estate Leases" is defined in Section 4.9.
"Ordinary course" or "ordinary course of business" means the ordinary
course of business that is consistent with past practices.
"Patents" means all patents and patent applications.
"Permitted Encumbrances" means those Encumbrances that are designated as
Permitted Encumbrances on Schedule 4.6.
"Person" means any natural person, corporation, partnership,
proprietorship, association, trust or other legal entity.
<PAGE>
"Pharmaco" is defined in the Background section.
"Pharmaco US" means the US, Delaware subsidiary of Seller that Buyer is
purchasing from Seller.
"Prime Rate" means the prime lending rate as announced from time to time
in The Wall Street Journal.
"Purchase Price" is defined in Section 2.1(a).
"Real Property" is defined in Section 4.7.
"Registration Rights Agreement" means the Registration Rights Agreement
between IBAH and the Seller, in the form of Exhibit C hereto and entered into as
of the date hereof.
"Required Consents" is defined in Section 4.3.
"Response Period" is defined in Section 10.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" is defined above in the preamble.
"Selling Party" means (i) the Altmans, (ii) the Seller and (iii) the US
Company and Pharmaco prior to the Transactions.
"Selling Party's knowledge" or "knowledge of a Selling Party" means the
actual knowledge of any director, officer or supervisory employee of the Seller
the Company or Pharmaco.
"Shares" is defined in Section 2.1.
"Taxes" means all taxes, duties, charges, fees, levies or other
assessments imposed by any taxing authority including, without limitation,
income, gross receipts, value-added, excise, withholding, personal property,
real estate, sale, use, ad valorem, license, lease, service, severance, stamp,
transfer, payroll, employment, customs, duties, alternative, add-on minimum,
estimated and franchise taxes (including any interest, penalties or additions
attributable to or imposed on or with respect to any such assessment).
"Trademarks" means registered trademarks, registered service marks,
trademark and service mark applications and unregistered trademarks and service
marks.
"Transaction Documents" means this Agreement, the Escrow Agreement, the
Altman Consulting Agreement and the Registration Rights Agreement.
"Transactions" means the purchase and sale of the Shares and the other
transactions contemplated by the Transaction Documents.
"Unliquidated Claim" is defined in Section 10.3.
"US Company" is defined in the Background.
2. Purchase and Sale of Shares.
2.1 Purchase Price; Shares.
<PAGE>
(a) At the Closing, IBAH shall buy from the Seller, and the Seller
shall sell to IBAH, all of the shares of the Company's Common Stock (the
"Shares") for an aggregate purchase price (the "Purchase Price") equal to US$3.8
million (subject to adjustment pursuant to section 2.1(b)) in the form of IBAH
Common Stock as calculated pursuant to subsection (b), (c) and (d) hereto.
(b) Adjustments to Purchase Price. As soon as practicable, but in any
event at least 7 days prior to the Closing Date, the Seller shall deliver to
IBAH the Closing financial statements of the Company, which will include a
balance sheet as of January 31, 1997, and an income statement for the seven-
month period then ended (or in the event that the Closing Date is after March
15, 1997, a balance sheet as of February 28, 1997, and an income statement for
the eight-month period then ended) (the "Final Financial Statements"). For
purposes of the representations and warranties contained herein, the Final
Financial Statements shall be deemed to be included in the Company Consolidated
Financial Statements. If the Final Financial Statements reflect a net loss for
the period ended January 31, 1997, at IBAH's option, IBAH and the Seller will
reduce the Purchase Price by such amount that is mutually agreed upon by such
parties. For the period after delivery of the Final Financial Statements and
prior to the Closing Date, the Seller will give IBAH and its agents and
representatives access to its books and records in order for IBAH to confirm the
information contained in the Final Financial Statements.
(c) IBAH shall pay the Purchase Price to the Seller as set forth
below:
(i) at the Closing, IBAH shall issue a certificate for the number
of shares of IBAH Common Stock required by Section 2.1(d) below; and
(ii) at the Closing, IBAH shall deliver to the Escrow Agent a
certificate for the number of shares of IBAH Common Stock which represent 9.9%
of the Purchase Price, to be held pursuant to the Escrow Agreement (the "Escrow
Funds").
(d) The number of shares of IBAH Common Stock to be issued to the
Seller and the Escrow Agent as the Purchase Price have been determined by
dividing (i) US$3.8 million (subject to adjustment pursuant to section 2.1(b))
by (ii) the average of the bid and ask prices of the IBAH Common Stock for the
ten trading days prior to the Closing Date as reported on the Nasdaq National
Market.
2.2 Escrow Account. At the Closing, the Seller and IBAH shall enter into
the Escrow Agreement with the Escrow Agent under which the Escrow Agent shall
hold the Escrow Shares for possible claims against the Seller under Section 10.
3. Closing
3.1 Date and Location. Subject to the terms and conditions of this
Agreement, the closing of the Transactions (the "Closing") shall take place at
the offices of IBAH, Four Valley Square, 512 Township Line Road, Blue Bell, PA
19422 at 10:00 a.m.e.s.t. on the second business day after the conditions to the
Closing set forth in Sections 7 and 8 of this Agreement shall have been
satisfied or waived (to the extent permissible), or such other time as IBAH and
the Seller together agree in writing. The date on which the Closing shall occur
is hereinafter referred to as the "Closing Date."
3.2 Deliveries. At the Closing,
(a) IBAH shall pay the Purchase Price as provided in clauses
(i) and (ii) of Section 2.1(c);
(b) the Seller shall deliver to IBAH certificates for the Shares,
either duly endorsed for transfer to IBAH or accompanied by
appropriate stock powers;
<PAGE>
(c) the Seller and IBAH shall cause the US Company to issue to IBAH
a new certificate for the Shares, in due and proper form and
registered in the name of IBAH; and
(d) the parties shall also deliver to each other the Transaction
Documents, legal opinions and other documents and instruments
specified in Sections 7 and 8 and such other items as may be
reasonably requested.
4. Representations and Warranties of the Selling Parties.
Except as disclosed in the Disclosure Schedule, the Selling Parties hereby
jointly and severally represent and warrant to IBAH as follows and, specifically
with regard to Pharmaco, as set forth on Appendix A attached hereto and
incorporated by reference herein:
4.1 Corporate Status. Each of the US Company and Pharmaco is or will be
as of the Closing Date corporation duly organized, validly existing and in good
standing under the laws under which it was incorporated and is qualified to do
business as a foreign corporation in any jurisdiction where it is required to be
so qualified, except where the failure to so qualify would not have a Material
Adverse Effect. The Charter Documents and bylaws of each of the US Company and
Pharmaco that have been delivered to IBAH are effective under applicable Laws
and are current, correct and complete.
4.2 Authorization. The Company has the requisite power and authority to
own its Assets and to carry on its Business. The Seller has the requisite power
and authority to execute and deliver each Transaction Document to which he is a
party and to perform the Transactions performed or to be performed by him. Each
Transaction Document executed and delivered by the Seller constitutes a valid
and binding obligation of the Seller, enforceable against him in accordance with
its terms.
4.3 Consents and Approvals. Except for the consents specified on
SCHEDULE 4.3 (the "Required Consents"), neither the execution and delivery by
the Seller of the Transaction Documents to which it is a party, nor the
performance of the Transactions to be performed by the Seller, will require any
filing, consent or approval, constitute a Default or cause any payment
obligation to arise under (a) any Law or Court Order to which any Selling Party
is subject, (b) the Charter Documents or bylaws of the Company or (c) any
Contract, Government Permit or other document to which the Seller or the Company
is a party or by which the properties or other assets of the Company may be
subject.
4.4 Capitalization and Stock Ownership. The total authorized capital
stock of the US Company will consist of 1,000 shares of the Company Common
Stock,1,000 shares of which will be issued and outstanding. The Seller will be
the sole record and beneficial owner of all of the 1,000 shares of the Company
Common Stock which are to be issued and outstanding, and the Seller will own all
of the Shares free and clear of any encumbrances. The Shares of Company Common
Stock to be transferred to IBAH hereunder will comprise all of such issued and
outstanding shares of the US Company. Pharmaco has an authorized capital of
100,000 shares, of which 2 shares are issued, at $ AUS 1.00 each (the "Pharmaco
Common Stock" ). The US Company is the registered holder and beneficial owner
of all of the issued capital of Pharmaco being AUS$2.00 comprising two issued
shares of AUS$1.00 each. There are no existing, and will be none as of the
Closing Date, options, warrants, calls, commitments or other rights of any
character (including conversion or preemptive rights) relating to the
acquisition of any issued or unissued capital stock or other securities of the
US Company or of Pharmaco. All of the Shares and the shares of Pharmaco Common
Stock outstanding are and will be duly and validly authorized and issued, fully
paid and non-assessable. Each of the US Company and Pharmaco has and will
comply with all applicable Laws in connection with the issuance of the
outstanding shares of its capital stock, and none of the Shares or the
outstanding shares of Pharmaco Common Stock were issued in violation of any
Contract binding upon the US Company or Pharmaco. Upon completion of the
Transactions at the Closing, IBAH shall receive valid title to all
<PAGE>
of the Shares, free and clear of all Encumbrances. The Altmans are the sole
record and beneficial owners of all of the shares of the Seller's capital stock
which are issued and outstanding, and the Altmans own all of such shares free
and clear of any encumbrances.
4.5 Financial Statements. The Seller has delivered to IBAH correct and
complete copies of the unaudited monthly consolidated financial statements of
the Company consisting of a balance sheet of the Company as of the end of
January 1997 and the related statement of income, changes to stockholders
equity and cash flows for the periods then ended and a complete copy of the
unaudited financial statement of the Company for the fiscal year ended June 30,
1996. The Seller has also delivered to IBAH correct and complete copies of
consolidated financial statements consisting of a consolidated balance sheet of
the Company as of June 30, 1993, 1994 and 1995 and the related consolidated
statements of income, retained earnings and cash flows for the years then ended
(the "Consolidated Financial Statements"). All such unaudited consolidated
financial statements and the Consolidated Financial Statements and all notes
thereto are referred to herein collectively as the "Company Consolidated
Financial Statements." The Company Consolidated Financial Statements are
consistent with the books and records of the Company, and there have not been
and will not be any material transactions that have not been recorded in the
accounting records underlying the Company's Consolidated Financial Statements.
Except as specified on SCHEDULE 4.5, the Company Consolidated Financial
Statements have been prepared in accordance with GAAP consistently applied
(subject in the case of the unaudited statements to year-end adjustments and the
absence of notes to the financial statements) and present accurately the
financial position and assets and liabilities of the Company as of the dates
thereof, and the results of its operations for the periods then ended. The
balance sheet of the Company as of June 30, 1996 that is included in the Company
Consolidated Financial Statements is referred to herein as the "Company Balance
Sheet," and the date thereof is referred to as the "Balance Sheet Date."
4.6 Title to Assets and Related Matters. The Company has good and
marketable title to, or valid leasehold interests in, all of its Assets
(including the Real Property identified in Section 4.7), free from any
Encumbrances except those specified on SCHEDULE 4.6. The use of the Assets is
not subject to any Encumbrances (other than those specified in the preceding
sentence), and such use does not materially encroach on the property or rights
of anyone else. All Real Property and tangible personal property (other than
Inventory) of the Company are suitable for the purposes for which they are used,
in good working condition and reasonable repair, free from any known defects.
4.7 Real Property. SCHEDULE 4.7 describes all real estate owned by the
Company used in the operation of its Business as well as any other real estate
that is in the possession of or leased by the Company and the improvements
(including buildings and other structures) located on such real estate
(collectively, the "Real Property"), and lists any leases under which any such
Real Property is possessed (the "Real Estate Leases"). Schedule 4.7 also
describes any other real estate previously owned, leased or otherwise operated
by the Company or any predecessor thereof and the time periods of any such
ownership, lease or operation. The Real Property is zoned commercial. The
Company has obtained all licenses and rights-of-way from governmental entities
or private parties that are necessary to ensure vehicular and pedestrian ingress
and egress to and from the Real Property.
4.8 Certain Personal Property. The Company has delivered to IBAH a
complete fixed asset schedule, describing and specifying the location of all
items of tangible personal property that were included in the Company Balance
Sheet. Since the Balance Sheet Date, the Company has not acquired any items of
tangible personal property that have, in each case, a carrying value in excess
of $10,000, or an aggregate carrying value of $25,000. All of such personal
property (a) is in operating condition, reasonable wear and tear excepted, (b)
is usable in the ordinary course of business and (c) conforms with any
applicable Laws relating to its construction, use and operation. Except for
those items subject to the Non-Real Estate Leases (defined below), no Person
other than the Company owns any vehicles, equipment or other tangible Assets
located on the Real Property that are used by the Company in its Business (other
than immaterial items of
<PAGE>
personal property owned by the Company's employees) or that are necessary for
the operation of its Business.
4.9 Non-Real Estate Leases. SCHEDULE 4.9 lists all assets and property
(other than Real Property) that have been used in the operation of the Business
and that are possessed by the Company under an existing lease, including all
trucks, automobiles, forklifts, machinery, equipment, furniture and computers,
except for any lease under which the aggregate annual payments are less than
$10,000 (each, an "Immaterial Lease"). SCHEDULE 4.9 also lists the leases under
which such assets and property listed on SCHEDULE 4.9 are possessed. All of
such leases (excluding Immaterial Leases) are referred to herein as the "Non-
Real Estate Leases."
4.10 Accounts Receivable. The Accounts Receivable of the Company are
bona fide Accounts Receivable created in the ordinary course of business.
Except for Accounts Receivable for which reserves have been established, all of
the Accounts Receivable included in the Assets of the Company are collectible
within 90 days from the respective dates of sale. The Company does not know of
any facts or circumstances (other than general economic conditions) that are
likely to result in any material increase in the uncollectibility of such
Accounts Receivable in excess of any reserves therefor set forth in the Company
Balance Sheet.
4.11 Inventory. All Inventory of the Company consists of items saleable
in the ordinary course, and the aggregate market value of the Inventory included
in the Company Balance Sheet is at least equal to the value specified therefor
in the Company Balance Sheet. The Inventory records of the Company have been
delivered to IBAH and are accurate with respect to the data contained therein.
4.12 Liabilities. Except as disclosed on SCHEDULE 4.12, the Company does
not have any Liabilities, and none of the Assets of the Company is subject to
any Liabilities, except (a) as specifically disclosed on the Company Balance
Sheet (except as heretofore paid or discharged), (b) Liabilities incurred in the
ordinary course since the date thereof that, individually or in the aggregate,
are not material to the Business or the Assets, or (c) Liabilities of the
Company under any Contracts specifically disclosed on any Schedule (or not
required to be disclosed because of the term or amount involved) that were not
required under GAAP to have been specifically disclosed or reserved for on the
Company Balance Sheet.
4.13 Taxes. The Company has duly filed all returns for taxes that are
required to be filed and that were due prior to the Closing Date, and has paid
all material Taxes and assessments shown as being due pursuant to such returns
or pursuant to any assessment received. All Taxes and other assessments and
levies that the Company has been required by law to withhold or to collect have
been duly withheld and collected and have been paid over to the proper
governmental authorities or are properly held by each Company for such payment.
There are no proceedings or other actions, nor is there any basis for any
proceedings or other actions, for the assessment and collection of additional
Taxes of any kind for any period for which returns have or should have been
filed.
4.14 Subsidiaries. The US Company does not own, directly or indirectly,
any interest or investment (whether equity or debt) in any corporation,
partnership, business, trust, joint venture or other legal entity other than
Pharmaco. Pharmaco does not own, directly or indirectly, any interest or
investment (whether equity or debt) in any corporation, partnership, business,
trust, joint venture or other legal entity.
4.15 Legal Proceedings and Compliance with Law.
(a) Except as disclosed on SCHEDULE 4.15, there is no Litigation that
is pending or, to any Selling Party's knowledge, threatened against or related
to the Company. There has been no Default under any Laws applicable to the
Company, including Laws relating to pollution or protection of the environment,
and no Company has received any notices from any
<PAGE>
governmental entity regarding any alleged Defaults under any Laws. There has
been no Default with respect to any Court Order applicable the Company.
(b) Without limiting the generality of Section 4.15(a), except as
described on SCHEDULE 4.15, there has not been any Environmental Condition
(defined below) (i) at the premises at which the Business of the Company has
been conducted, (ii) at any property owned, leased or operated at any time by
the Company, any Person controlled by any Affiliate of the Company or any
predecessor thereof, or (iii) at any property at which wastes have been
deposited or disposed by or at the behest or direction of any of the foregoing,
nor has the Company received written notice of any such Environmental Condition.
"Environmental Condition" means any condition or circumstance, including the
presence or release of Hazardous Substances, whether created by the Company or
any third party, at or relating to any such property or premises that (i)
requires investigation, monitoring, abatement or correction under an
Environmental Law (defined below), (ii) gives rise to any civil or criminal
liability under an Environmental Law, or (iii) has created a public or private
nuisance. "Environmental Law" means all Laws and Court Orders relating to
pollution or protection of the environment as well as any principles of common
law under which a party may be held liable for the release or discharge of any
materials into the environment.
(c) The Company has delivered to IBAH correct and complete copies of
any written reports, studies or assessments in the possession or control of any
Selling Party that relates to any Environmental Condition.
(d) Except in those cases where the failure would have a Material
Adverse Effect, (i) the Company has obtained and is in full compliance with all
governmental permits, licenses, registrations, certificates of occupancy,
approvals and other authorizations (the "Governmental Permits"), all of which
are listed in SCHEDULE 4.15 along with their respective expiration dates, that
are required for the complete operation of the Business of the Company as
currently operated, (ii) all of the Governmental Permits are currently valid and
in full force and (iii) the Company has filed such timely and complete renewal
applications as may be required with respect to its Governmental Permits. To
any Selling Party's knowledge, no revocation, cancellation or withdrawal thereof
has been threatened.
4.16 Contracts.
(a) SCHEDULE 4.16 lists each Contract of the following types to which
the Company is a party, or by which it is bound, as of the date hereof, except
for any Contract that may be terminated by the Company on not more than 30 days'
notice without any Liability and any Contract under which the executory
obligation of the Company involves an amount of less than $10,000 (such excepted
Contracts are referred to collectively as "Minor Contracts"):
(i) Contracts with any present or former stockholder, director,
officer, employee, partner or consultant of the Company or any Affiliate
thereof;
(ii) Contracts for the future purchase of, or payment for,
supplies or products, or for the lease of any Asset from or the performance of
services by a third party, in excess of $10,000 in any individual case, or any
Contracts for the sale of Inventory or products that involve an amount in excess
of $10,000 with respect to any one supplier or other party;
(iii) Contracts to sell or supply products or to perform services
that involve an amount in excess of $25,000 in any individual case;
(iv) Contracts to lease to or to operate for any other party any
Asset that involve an amount in excess of $25,000 in any individual case (other
than Real Estate Leases and Non-Real Estate Leases identified on other
SCHEDULES);
<PAGE>
(v) Any notes, debentures, bonds, conditional sale agreements,
equipment trust agreements, letter of credit agreements, reimbursement
agreements, loan agreements or other Contracts for the borrowing or lending of
money (including loans to or from the Seller or any officers, directors,
partners, stockholders or Affiliates of the Company or any members of their
immediate families), agreements or arrangements for a line of credit or for a
guarantee of, or other undertaking in connection with, the indebtedness of any
other Person;
(vi) Any Contracts under which any Encumbrances exist with respect
to any Assets; and
(vii) Any other Contracts (other than Minor Contracts and those
described in any of (i) through (vi) above) not made in the ordinary course of
business.
(b) No Company is in Default under any Contract (including any Real
Estate Leases and Non-Real Estate Leases), which Default could result in a
Liability on the part of the Company in excess of $10,000 in any individual
case, and the aggregate Liabilities that could result from all such Defaults do
not exceed $25,000. No Company has received any communication from, or given
any communication to, any other party indicating that the Company or such other
party, as the case may be, is in Default under any Contract where such Default
could have a Material Adverse Effect. To the knowledge of any Selling Party,
none of the other parties in any such Contract to which the Company is a party
is in Default thereunder.
4.17 Insurance. SCHEDULE 4.17 lists all policies or binders of insurance
held by or on behalf of the Company, specifying with respect to each policy the
insurer, the amount of the coverage, the type of insurance, the risks insured,
the expiration date, the policy number and any pending claims thereunder. There
is no Default with respect to any such policy or binder, nor has there been any
failure to give any notice or present any claim under any such policy or binder
in a timely fashion or in the manner or detail required by the policy or binder.
There is no notice of nonrenewal or cancellation with respect to, or
disallowance of any claim under, any such policy or binder that has been
received by the Company.
4.18 Intellectual Property and Software Products.
(a) No Company currently uses nor has the Company previously used in
the development, production or marketing of its products and services any
Copyrights, Patents or Trademarks except for those listed on SCHEDULE 4.18. The
Company owns or has the lawful right to use all Intellectual Property that is
used in the operation of its Business in the ordinary course or otherwise. All
of the Intellectual Property listed on SCHEDULE 4.18 is owned by such listed
Company free and clear of any Encumbrances, or used pursuant to an agreement
that is described on SCHEDULE 4.18. No Company infringes upon or unlawfully or
wrongfully uses any Intellectual Property rights owned or claimed by another
Person. No Company is in Default, nor has the Company received any notice of
any claim of infringement or any other claim or proceeding, with respect to any
such Intellectual Property. No current or former employee of the Company and no
other Person owns or has any proprietary, financial or other interest, direct or
indirect, in whole or in part, and including any right to royalties or other
compensation, in any of the Intellectual Property, or in any application
therefor.
(b) All employees and consultants of the Company who are involved in
the design, review, evaluation or development of Intellectual Property have
executed a nondisclosure and assignment of inventions agreement
("Confidentiality Agreement") sufficient to protect the confidentiality and
value of such items and to vest in the Company exclusive ownership thereof. To
any Selling Party's knowledge, (i) none of the Confidential Information has been
used, divulged or appropriated (A) for the benefit of any Person other than the
Company or a customer thereof or (B) otherwise to the detriment of the Company,
(ii) none of such employees or consultants of the Company is subject to any
contractual or legal restrictions that might interfere with the use of his best
efforts to promote the interests of the Company, (iii) no employee or consultant
of the Company has used any other Person's trade secrets or other information
that is confidential in the
<PAGE>
course of his or her work for the Company, and (iv) no employee or consultant of
the Company is, or is currently expected to be, in Default under any term of any
employment contract, agreement or arrangement relating to the Intellectual
Property, or any Confidentiality Agreement or any other Contract or any
restrictive covenant relating to the Intellectual Property, or the development
or exploitation thereof.
4.19 Employee Relations. Except as described on SCHEDULE 4.19, no Company
is (a) a party to, involved in or, to any Selling Party's knowledge, threatened
by, any labor dispute or unfair labor practice charge, or (b) currently
negotiating any collective bargaining agreement, and no Company has experienced
any work stoppage during the last three years. The Seller has delivered to IBAH
a complete and correct list of the names and salaries, bonus and other cash
compensation of all employees (including officers) of the Company whose total
cash compensation for 1996 exceeded, or whose total cash compensation for 1997
is expected to exceed, $60,000.
4.20 ERISA.
(a) SCHEDULE 4.20 contains a complete list of all Benefit Plans
sponsored or maintained by the US Company or under which the US Company may be
obligated. The Seller has delivered to IBAH (i) accurate and complete copies of
all Benefit Plan documents and all other material documents relating thereto,
including (if applicable) all summary plan descriptions, summary annual reports
and insurance contracts, (ii) accurate and complete detailed summaries of all
unwritten Benefit Plans, (iii) accurate and complete copies of the most recent
financial statements and actuarial reports with respect to all Benefit Plans for
which financial statements or actuarial reports are required or have been
prepared and (iv) accurate and complete copies of all annual reports for all
Benefit Plans (for which annual reports are required) prepared within the last
three years. Each Benefit Plan providing benefits that are funded through a
policy of insurance is indicated by the word "insured" placed by the listing of
the Benefit Plan on SCHEDULE 4.20.
(b) All Benefit Plans conform (and at all times have conformed) in
all material respects to, and are being administered and operated (and have at
all times been administered and operated) in material compliance with, the
requirements of ERISA, the Code and all other applicable Laws. All returns,
reports and disclosure statements required to be made under ERISA and the Code
with respect to all Benefit Plans have been timely filed or delivered. There
have not been any "prohibited transactions," as such term is defined in Section
4975 of the Code or Section 406 of ERISA involving any of the Benefit Plans,
that could subject the US Company to any material penalty or tax imposed under
the Code or ERISA.
(c) Any Benefit Plan that is intended to be qualified under Section
401(a) of the Code and exempt from tax under Section 501(a) of the Code has been
determined by the Internal Revenue Service to be so qualified, and such
determination remains in effect and has not been revoked. Nothing has occurred
since the date of any such determination that is reasonably likely to affect
adversely such qualification or exemption, or result in the imposition of excise
taxes or income taxes on unrelated business income under the Code or ERISA with
respect to any Benefit Plan.
(d) The US Company does not sponsor a defined benefit plan subject to
Title IV of ERISA, nor does the US Company have a current or contingent
obligation to contribute to any multiemployer plan (as defined in Section 3(37)
of ERISA), and neither the US Company nor any of its predecessors have ever
contributed to a multiemployer plan. The US Company does not have any liability
with respect to any employee benefit plan (as defined in Section 3(3) of ERISA)
other than with respect to the Benefit Plans.
(e) There are no pending or, to the knowledge of any Selling Party,
threatened claims by or on behalf of any Benefit Plans, or by or on behalf of
any individual participants or beneficiaries of any Benefit Plans, alleging any
breach of fiduciary duty on the part of the US Company or any of its officers,
directors or employees under ERISA or any other applicable
<PAGE>
regulations, or claiming benefit payments other than those made in the ordinary
operation of such plans, nor is there, to the knowledge of any Selling Party,
any basis for such claim. The Benefit Plans are not the subject of any pending
(or to the knowledge of a Selling Party, any threatened) investigation or audit
by the Internal Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation ("PBGC").
(f) The Company has timely made any and all required contributions
under the Benefit Plans including the payment of any premiums payable to the
PBGC and other insurance premiums.
(g) With respect to any Benefit Plan that is an employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) (a "Welfare Plan"),
(i) each Welfare Plan for which contributions are claimed as deductions under
any provision of the Code is in material compliance with all applicable
requirements pertaining to such deduction, (ii) with respect to any welfare
benefit fund (within the meaning of Section 419 of the Code) related to a
Welfare Plan, there is no disqualified benefit (within the meaning of Section
4976(b) of the Code) that would result in the imposition of a tax under Section
4976(a) of the Code, (iii) any Benefit Plan that is a group health plan (within
the meaning of Section 4980B(g)(2) of the Code) complies, and in each and every
case has complied, with all of the material requirements of Section 4980B of the
Code, ERISA, Title XXII of the Public Health Service Act and the applicable
provisions of the Social Security Act, and (iv) all Welfare Plans may be amended
or terminated at any time on or after the Closing Date. Except as specified on
SCHEDULE 4.20, no Benefit Plan provides any health, life or other welfare
coverage to employees of the Company beyond termination of their employment with
the Company by reason of retirement or otherwise, other than coverage as may be
required under Section 4980B of the Code or Part 6 of ERISA, or under the
continuation of coverage provisions of the laws of any state or locality.
(h) Except as otherwise set forth in the SCHEDULE 4.20, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment to be made by
the Company (including, without limitation, severance, unemployment
compensation, golden parachute (as defined in Code Section 280G or otherwise))
becoming due to any employee or former employee, officer or director, or (ii)
increase or vest any benefits payable under any Benefit Plan.
(i) Except as otherwise set forth in the Schedule 4.20, any amount
that could be received (whether in cash or property or the vesting of property)
as a result of any of the transactions contemplated by this Agreement by any
employee, officer or director of the Company who is a disqualified individual
(as such term is defined in proposed Treasury Regulation Section 1.280G-1) under
any employment, severance or termination agreement, other compensation
arrangement or Benefit Plan currently in effect would not be characterized as an
excess parachute payment (as such term is defined in Section 280(b)(1) of the
Code).
4.21 Corporate Records. The minute books of the US Company and Pharmaco
contain complete, correct and current copies of their respective Charter
Documents and bylaws and of all minutes of meetings, resolutions and other
proceedings of each company s Board of Directors and stockholders. The stock
record book of the US Company and Pharmaco is complete, correct and current.
4.22 Absence of Certain Changes. Except as specified on SCHEDULE 4.22 and
as otherwise contemplated by this Agreement, since the Balance Sheet Date, the
Company has conducted its Business in the ordinary course and there has not been
with respect to the Company:
(a) a change in its business that has had or is reasonably likely to
have a Material Adverse Effect;
<PAGE>
(b) any distribution or payment declared or made in respect of its
capital stock by way of dividends, purchase or redemption of
shares or otherwise;
(c) any increase in the compensation payable or to become payable to
any director, officer, employee or agent, except for increases
for non-officer employees made in the ordinary course of
business, nor any other change in any employment or consulting
arrangement;
(d) any sale, assignment or transfer of Assets, or any additions to
or transactions involving any Assets, other than those made in
the ordinary course of business;
(e) other than in the ordinary course of business, any waiver or
release of any claim or right or cancellation of any debt held;
or
(f) any payments to any Affiliate of the Company.
4.23 Previous Sales; Warranties. All goods sold or distributed and all
services performed by the Company were of merchantable quality, and no Company
has breached any express or implied warranties in connection with the sale or
distribution of such goods.
4.24 Customers and Suppliers. The Company has used its reasonable business
efforts to maintain and currently maintains, good working relationships with all
of its customers and suppliers. SCHEDULE 4.24 contains a list of the names of
each of the ten customers that, in the aggregate, for the three years ending
December 31, 1994, 1995 and 1996, were the largest dollar volume customers of
products or services, or both, sold by the Company. Except as specified on
SCHEDULE 4.24, none of such customers has given the Company notice terminating,
canceling or threatening to terminate or cancel any Contract or relationship
with the Company SCHEDULE 4.24 also contains a list of the ten suppliers that,
in the aggregate, for the three years ending December 31, 1994, 1995 and 1996
were the largest dollar volume suppliers of supplies used by the Company. None
of such suppliers has given the Company notice terminating, canceling or
threatening to terminate or cancel any Contract or relationship with the
Company.
4.25 Finder's Fees. No Person retained by any Selling Party is or will
be entitled to any commission or finder's or similar fee in connection with the
Transactions.
4.26 Additional Information. SCHEDULE 4.26 accurately lists the
following:
(a) the names of all officers and directors of each of the US
Company and Pharmaco;
(b) the names and addresses of every bank or other financial
institution in which the Company maintains an account (whether
checking, saving or otherwise), lock box or safe deposit box,
and the account numbers and names of Persons having signing
authority or other access thereto;
(c) the names of all Persons authorized to borrow money or incur or
guarantee indebtedness on behalf of the Company;
(d) the names of any Persons holding powers of attorney from the
Company and a summary statement of the terms thereof; and
(e) all names under which the Company has conducted any Business or
which it has otherwise used at any time during the past five
years.
4.27 IBAH Common Stock
<PAGE>
(a) The Seller is receiving the shares of IBAH Common Stock solely
for investment purposes, with no present intention of
distributing or reselling any of the IBAH Common Stock or any
interest therein. The Seller acknowledges that the IBAH Common
Stock has not been registered under the Securities Act.
(b) The Seller is aware of the applicable limitations under the
Securities Act relating to a subsequent sale, transfer, pledge,
mortgage, hypothecation, gift, assignment or other encumbrance of
the IBAH Common Stock. The Seller further acknowledges that the
IBAH Common Stock must be held indefinitely unless it is
subsequently registered under the Securities Act and applicable
state securities laws or an exemption from such registration is
available.
(c) The Seller has received from IBAH adequate access to financial
and other information concerning IBAH and the IBAH Common Stock,
and the Seller has had the opportunity to ask questions of and
receive answers from IBAH concerning the IBAH Common Stock and to
obtain therefrom any additional information necessary to make an
informed decision regarding the acquisition of the IBAH Common
Stock.
(d) The Seller has such knowledge and experience in financial and
business matters that they are capable of evaluating the merits
and risks of the acquisition of the IBAH Common Stock.
(e) The Seller realizes that IBAH is relying on the validity of his
representations and agreements contained herein and in the other
Transaction Documents in issuing the IBAH Common Stock to them
without registration under the Securities Act.
(f) The Seller is an "accredited investors" as that term is defined
in Regulation D under the Securities Act.
4.28 Transactions in Capital Stock, Accounting Treatment. No option,
warrant, call, subscription right, conversion right or other contract or
commitment of any kind exists which may obligate either the US Company or
Pharmaco to issue, sell or otherwise become outstanding any shares of capital
stock. Neither the US Company nor Pharmaco has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof. Neither the voting stock structure of the US Company or
Pharmaco nor the relative ownership of shares among any of its stockholders has
been altered or changed in contemplation of the sale of Shares to IBAH. Except
as set forth on SCHEDULE 4.29, there has been no transaction or action taken
with respect to the equity ownership of the Company within the preceding two
years.
4.29 No Bonus Shares. None of the shares of Company Common Stock was
issued pursuant to awards, grants or bonuses.
4.30 Predecessor Status; etc.. SCHEDULE 4.31 hereto sets forth a listing
of all names of all predecessor companies of the US Company and Pharmaco,
including without limitation the names of any entities from whom the Company or
Pharmaco has acquired material assets. Neither the Company nor Pharmaco has at
any time been a subsidiary or division of another corporation, other than the
Seller or the US Company, or a part of an acquisition which was later rescinded.
4.31 Spin-off by the Company. There has not been any sale or spin-off of
material assets of the Company or any Affiliate within the preceding two years.
<PAGE>
4.32 Treatment as a Pooling Transaction. The Selling Parties acknowledge
that they understand the requirements for a transaction to be treated as a
pooling of interests as defined under GAAP, and the Selling Parties have not
engaged in any actions that would result in the Transactions not being treated
as a pooling of interests. Provided that the entry into and performance of the
Transaction in the Transaction Document will not be taken to constitute a
breach of this warranty.
4.33 Accuracy of Information. No representation or warranty by any Selling
Party in any Transaction Document, and no information contained herein or
therein, including the Consolidated Financial Statements and the due diligence
materials given to IBAH, contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements
contained herein or therein not misleading.
4.34 Representations. The representations and warranties of the Selling
Parties contained in this Agreement, disregarding all qualifications and
exceptions herein relating to materiality or Material Adverse Effect, are true
and correct.
5. Representations and Warranties of IBAH.
IBAH hereby represents and warrants to the Seller as follows:
5.1 Corporate. IBAH is a corporation duly organized, validly existing and
in good standing under the laws under which it was incorporated and is qualified
to do business as a foreign corporation in any jurisdiction where it is required
to be so qualified, except where the failure to so qualify would not have a
Material Adverse Effect. IBAH has the requisite power and authority to execute
and deliver the Transaction Documents to which it is a party and to perform the
Transactions to be performed by it, and such execution, delivery and performance
by IBAH have been duly authorized by all necessary corporate action.
5.2 Authorization. IBAH has the requisite power and authority to own its
Assets and to carry on its Business. IBAH has the requisite power and authority
to execute and deliver the Transaction Documents to which it is a party and to
perform the Transactions performed or to be performed by it. Such execution,
delivery and performance by IBAH has been duly authorized by all necessary
corporate action, other than approval by the stockholders of IBAH. Each
Transaction Document executed and delivered by IBAH has been duly executed and
delivered by, and constitutes a valid and binding obligation of IBAH,
enforceable against IBAH in accordance with its terms.
5.3 IBAH Disclosure Documents. IBAH has filed all required forms,
reports, statements, schedules and other documents with the SEC since the date
when it became subject to the reporting requirements under the 1934 Act
(collectively, the IBAH Disclosure Documents"). IBAH has furnished to the
Selling Parties its Registration Statement on Form S-2, as amended, and the
final prospectus dated April 16, 1995 and Exhibits with respect to such
Registration Statement, its Registration Statement on Form S-3, as amended, and
the final prospectus dated December 16, 1996 and Exhibits with respect to such
Registration Statement as well as IBAH's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, and its Quarterly Reports on Form 10-Q for
the periods ending March 31, 1996, June 30, 1996 and September 30, 1996, IBAH s
Current Report on Form 8-K, as amended, filed on October 9, 1996 and IBAH s
Proxy Statement dated December 30, 1996, all of which are part of the IBAH
Disclosure Documents. Each of such IBAH Disclosure Documents, at the time it
was filed, complied in all material respects with all applicable requirements of
the 1933 Act and the 1934 Act, and with the forms, rules and regulations of the
SEC promulgated thereunder, and did not contain at the time filed any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
<PAGE>
5.4 Consents and Approvals. Neither the execution and delivery by IBAH
of the Transaction Documents to which it is a party, nor the performance of the
Transactions by IBAH, will require any filing, consent or approval or constitute
a Default under (a) any Law or Court Order to which IBAH is subject, (b) the
Charter Documents or bylaws of IBAH or (c) any Contract, Government Permit or
other document to which IBAH is a party or by which the properties or other
assets of such may be subject.
5.5 Capitalization and Stock Ownership. The total authorized capital
stock of IBAH consists of 50,000,000 shares of Common Stock, par value $0.01 per
share, approximately 22,141,562 shares of which are issued and outstanding and
2,000,000 shares of Series A Convertible Preferred Stock, par value $0.01 per
share, 749,665 of which are issued and outstanding. Except for management
options issued in February 1997 pursuant to a management option plan, there are
no existing options, warrants, calls, commitments or other rights of any
character (including conversion or preemptive rights) relating to the
acquisition of any issued or unissued capital stock or other securities of IBAH.
All of the issued and outstanding capital stock of IBAH is owned of record and
beneficially by IBAH. The IBAH Common Stock to be issued to Seller at the
Closing will be duly authorized, validly issued, fully paid and non-assessable.
5.6 Financial Statements. IBAH has delivered to the Seller correct and
complete copies of consolidated financial statements consisting of a balance
sheet of IBAH as of December 31, 1994 and 1995, and the related consolidated
statements of income, changes to stockholders equity and cash flows for the
years then ended. In addition, IBAH has delivered to the Seller correct and
complete copies of IBAH's unaudited monthly consolidated financial statements as
of the end of each month from July 1996 through September 1996. The financial
statements as of and for the years ended December 31, 1994 and 1995 have been
audited by Arthur Andersen & Co LLP. All of such audited and unaudited
financial statements, together with the notes to the audited financial
statements, are referred to herein as the "IBAH Financial Statements." The IBAH
Financial Statements are consistent with the books and records of IBAH, and
there have not been any material transactions that have not been recorded in the
accounting records underlying the IBAH Financial Statements. The IBAH Financial
Statements have been prepared in accordance with GAAP consistently applied
(subject in the case of the unaudited statements to year-end adjustments and the
absence of notes to the financial statements) and present accurately the
financial position and assets and liabilities of IBAH as of the dates thereof,
and the results of its operations for the periods then ended.
5.7 Finder's Fees. No Person retained by IBAH is or will be entitled to
any commission or finder's or similar fee in connection with the Transactions.
5.8 Accuracy of Information. No representation or warranty by IBAH in any
Transaction Document, and no information contained therein or otherwise
delivered to the Seller or in connection with the Transactions, contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained herein or therein not
misleading.
6. Covenants.
6.1 Conduct of Business. Except as contemplated or otherwise consented
to by IBAH in writing, Seller shall cause the Company to (a) carry on the
Business in the ordinary course and substantially the same manner as heretofore
carried on, and refrain from the following actions in furtherance of and in
addition to such restriction: selling or otherwise disposing of any Assets
except for sales and other dispositions in the ordinary course of business;
entering into any contract or otherwise incurring any Liability, in the ordinary
course or otherwise, if the executory obligation in any such individual case, or
series of related cases, would (i) exceed $5,000 or (ii) cause the sum of all
such executory obligations to exceed $25,000; discharging or satisfying any
Encumbrance or paying or satisfying any material Liability except pursuant to
the terms thereof or compromising, settling or otherwise modifying any material
claim or litigation. Nothing in this
<PAGE>
Agreement shall be construed to limit the Seller's discretion to operate the
Business in the ordinary course, or shall give IBAH any ownership of the Company
before the Closing Date.
6.2 Access, Information and Documents. Seller shall, and shall cause the
Company to, give IBAH and its representatives (including IBAH's accountants,
counsel and employees), upon reasonable notice and during normal business hours,
full access to the properties, contracts, books, records and affairs of Seller
and the Company. Seller shall cause its officers and employees, and the
officers and employees of the Company, to furnish to IBAH all documents, records
and information (and copies thereof) relating solely to the Business as IBAH may
reasonably request; it being understood that (a) Seller, in its sole discretion,
may deny or restrict any access (i) involving possible breaches of applicable
confidentiality agreements with third parties, environmental reviews the written
work plan for which had not been previously approved by Seller in its sole
discretion or possible waivers of any applicable attorney-client privileges or
(ii) in the event IBAH is in breach of this Agreement, (b) such investigations
shall not under any circumstances interfere in any material respect with the
Company's operations, activities or employees, and (c) such investigations shall
not be of a nature which in the opinion of Seller may violate applicable
antitrust or similar laws.
6.3 Payment of Expenses. Each of the parties hereto shall pay their own
expenses for lawyers, accountants, consultants, investment bankers, brokers,
finders and other advisors with respect to the Transactions.
6.4 Lock-up. The Seller will not sell, transfer, pledge, donate, assign,
mortgage, hypothecate or otherwise encumber the IBAH Common Stock for the 180-
day period after the Closing Date, and thereafter will not sell, transfer,
pledge, donate, assign, mortgage, hypothecate or otherwise encumber the IBAH
Common Stock unless it is registered under the Securities Act or IBAH is given
an opinion of counsel (which may be an opinion of counsel to IBAH), acceptable
to IBAH, that such registration is not required under the Securities Act.
6.5 In General. The parties mutually covenant and agree, as applicable,
to use commercially reasonable efforts to obtain promptly the satisfaction of
the conditions to the Closing of the Transactions to the extent that such
conditions are within their respective control.
6.6 FIRB . Seller shall co-operate with IBAH in all reasonable ways in
connection with any application, notification, or filing of IBAH pursuant to the
Australian Foreign Investment Review Board in relation to either the Foreign
Acquisitions and Takeovers Act 1975 (Cwth) or the Australian Government's
Foreign Investment Policy.
6.7 Updated Financial Statements. Seller shall deliver to IBAH as soon
as practicable unaudited financial statements with respect to the Company as of
the end of each month after the date hereof (and for the period then ended) that
precedes the Closing, and such financial statements shall be of the same type as
and shall be deemed to be included in the Company Consolidated Financial
Statements shall be updated by those most recent financial statements.
6.8 Maintenance of the Assets. Seller shall cause the Company to maintain
and service the Assets consistent with past practice.
6.9 Employees and Business Relations. Seller shall cause the Company to
use commercially reasonable efforts to keep available the services of its
current employees and agents and to maintain its relations and goodwill with its
suppliers, customers, distributors and any others having business relations with
it.
6.10 Litigation During Interim Period. Seller shall promptly advise IBAH
in writing of the threat or commencement of any litigation or proceeding against
or involving the Company.
6.11 Disclosure of Certain Matters. Seller shall give IBAH prompt written
notice of any event or development that occurs that (a) had it existed or been
known on the date hereof would
<PAGE>
have been required to be disclosed under this Agreement, (b) would cause any of
the representations and warranties of Seller contained herein to be inaccurate
or otherwise misleading, or (c) gives any Seller Party any reason to believe
that any of the conditions set forth herein will not be satisfied prior to the
Termination Date (defined below).
6.12 Pooling. The Seller shall not take any actions or fail to take any
actions, and shall cause the US Company and Pharmaco not to take any actions or
fail to take any actions that would result in the Transactions not being treated
as a pooling of interests. Provided that the entry into and performance of the
Transaction in the Transaction Documents will not be taken to constitute a
breach of this warranty.
7. Conditions Precedent to Obligations of IBAH.
All obligations of IBAH to consummate the Transactions are subject to the
satisfaction (or waiver by IBAH) prior thereto of each of the following
conditions:
7.1 Performance of Agreements; Representations and Warranties. Each
Seller Party shall have performed or complied in all material respects with all
agreements, covenants and conditions required by this Agreement to be performed
or complied with by it at or prior to the Closing, provided that the aggregate
effect of any failures to perform or comply shall not constitute a Material
Adverse Effect; the representations and warranties set forth in this Agreement
made by the Seller Parties shall have been (i) true and correct in the case of
any representation or warranty containing a materiality qualification and (ii)
true and correct in all material respects in the case of any representation or
warranty without any materiality qualification, in each case, when made and also
on and as of the Closing Date with the same effect as if repeated on the Closing
Date, except for changes expressly contemplated by this Agreement; and Buyer
shall have been furnished with a certificate of Phillip Altman, dated the
Closing Date, certifying to the foregoing.
7.2 Required Consents. The Company shall have obtained the Required
Consents without any modification that IBAH deems unacceptable.
7.3 Directors. All directors of the US Company and Pharmaco shall have
tendered their resignations as directors, effective as of the Closing, and the
Persons designated by IBAH shall have been elected to the Board of Directors of
the Company and Pharmaco.
7.4 Certificate. Each Selling Party shall have tendered a certificate by
which he certifies to IBAH that the conditions set forth in this Section 7 have
been satisfied, and such certificate shall be deemed to be a representation of
such Selling Party hereunder.
7.5 Ancillary Documents. IBAH shall have received executed copies of
the Altman Consulting Agreement, the Escrow Agreement and the Registration
Rights Agreement.
7.6 Legal Opinion. The Seller shall have tendered a legal opinion of
Kevin Munro & Associates, counsel to the Selling Parties, in a form that is
acceptable to IBAH.
7.7 Foreign Investment Review Board. The occurrence of any of the
following events:
(a) the Treasurer of the Commonwealth of Australia giving an approval to
the acquisition by IBAH of the Shares under the Foreign Acquisitions and
Takeovers Act 1975 (Cwth) ("FATA") (the approval to be subject to no
conditions or only to those conditions that IBAH considers (in its
absolute discretion) to be acceptable),
(b) the expiration of the relevant period following the giving of notice
relating to the acquisition by IBAH of the Shares under section 26 of the
FATA without any order of prohibition being made under the FATA; and
<PAGE>
(c) the Treasurer of the Commonwealth of Australia indicating to IBAH that
there is no objection in terms of the Foreign Investment Policy of the
Federal Government of Australia to the acquisition by IBAH of the Shares.
7.8 Injunction. No statute, rule or regulation or order of any court or
Authority shall be in effect which prohibits the transactions contemplated by
this Agreement.
7.9 Pooling. IBAH has received a letter or other confirmation acceptable
to IBAH from Arthur Andersen & Co. LLP that the Transactions may be treated as a
pooling of interests.
7.10 Final Financial Statements. Both parties mutually agree on an
Adjusted Purchase Price if IBAH elects to reduce the Purchase Price pursuant to
Section 2(b).
7.11 IBAH Stock Price. If the average IBAH Common Stock price, as set
forth in Section 2.1(d) is below $7.25. __
8. Conditions Precedent to Obligations of the Selling Parties.
All obligations of the Selling Parties to consummate the Transactions are
subject to the satisfaction (or waiver by the Selling Party to which the
condition relates) prior thereto of each of the following conditions:
8.1 Performance of Covenants. IBAH shall have performed in all material
respects all covenants and agreements that are to be performed by it under this
Agreement on the Closing Date, including delivery of the payments specified in
Section 2, and shall have delivered to the Seller evidence, in form and
substance reasonably satisfactory to counsel to the Selling Parties, that such
covenants and agreements have been so performed.
8.2 Certificate. IBAH shall have tendered a certificate by which it
certifies to the Selling Parties that the conditions set forth in this Section 8
have been satisfied, and such certificate shall be deemed to be a representation
of IBAH hereunder.
8.3 Ancillary Documents. The Selling Parties shall have received
executed copies of the Altman Consulting Agreement, the Escrow Agreement and the
Registration Rights Agreement, to the extent that they are to be parties
thereto.
8.4 Legal Opinion. IBAH shall have tendered a legal opinion of Jane H.
Hollingsworth, General Counsel to IBAH, that is acceptable to the Seller.
9. Competition and Confidentiality by Selling Parties.
9.1 Each of the Selling Parties covenants with IBAH that it will not
without the prior written consent of IBAH within any of the following periods:
(a) at any time until the Closing Date;
(b) for a period of twelve months after the Closing Date;
(c) for a period of twelve months after the first anniversary of the
Closing Date;
(d) for a period of twelve months after the second anniversary of the
Closing Date;
and within:
(i) the states of :
<PAGE>
(a) New South Wales;
(b) Victoria;
(c) Queensland;
(d) the Australian Capital Territory;
(e) Western Australia;
(f) South Australia;
(g) Tasmania;
(h) the Northern Territory.
(ii) anywhere else in the Commonwealth of Australia;
(iii) New Zealand;
(iv) Papua New Guinea;
(v) Pacific Islands;
(vi) Southeast Asia;
(vii) Asia;
(viii)United States of America;
do any one or more of the following:
A. be directly or indirectly engaged, concerned or interested whether
on its own account or as a member, shareholder, consultant, agent,
beneficiary, trustee or otherwise in any enterprise, corporation,
firm, trust, joint venture or syndicate which is engaged, concerned or
interested in or carrying on any Clinical Research Organisation.
B. on its own account or for any person, enterprise, firm, trust,
joint venture or syndicate entice away from IBAH any customer who has
done business with IBAH or any Related Corporation at any time;
C. on its own account or for any person, enterprise, firm, trust,
joint venture or syndicate entice away from IBAH any supplier to the
Company;
D. on its own account or for any person, enterprise, firm, trust,
joint venture or syndicate induce or attempt to induce or entice any
employee of IBAH or any Related Corporation to leave his employment or
to enter into employment with any other person, firm or company; or
E. personally or by his employees or agents or by circulars, letters
or advertisements whether on its own account or for any other person,
enterprise, firm, trust, joint venture or syndicate interfere with the
business of the Company or divulge to any person any information
including but not limited to Confidential Information concerning the
business of IBAH or any Related Corporation or any of their respective
dealings, transactions or affairs;
save that the foregoing shall not restrict the Selling Parties from holding or
acquiring (either directly or indirectly) in aggregate not more than 10% of the
issued ordinary shares in the capital of any body corporate listed on any stock
exchange, excluding, however the acquisition of shares, through whatever means,
in any CRO company.
<PAGE>
9.2 The Selling Parties will at the request and cost of IBAH enter into a
direct agreement or undertaking with any Related Corporation of IBAH
whereby they will each accept restrictions corresponding with the
restrictions contained in this caluse (or such of them as may be
appropriate in the circumstances) which such Related Corporation may
reasonably require for the protection of its legitimate interests.
9.3 Severability
The Selling Parties acknowledge that each of the prohibitions and
restrictions contained in the foregoing provisions of this clause:
(a) shall be read and construed and shall have effect as a separate
severable and independent prohibition or restriction and shall be
enforceable accordingly;
(b) is reasonable as to period, territorial limitation and subject matter;
and
it being the intention of the parties that all combinations of such
prohibitions and restrictions shall apply and be enforceable provided that
if any of such prohibitions and restrictions is adduced by any court of
competent jurisdiction to be void or unenforceable but would otherwise be
valid if part of the wording of this clause was deleted and/or the
restrain period was reduced, those restrictions are intended to apply with
such modifications as may be necessary to make this clause valid and
effective.
9.4 Injunctive Relief
In the event of any breach by the Selling Parties of the Selling Parties'
obligations under this clause then, in addition, and without prejudice to
any other remedy which IBAH may have, IBAH shall be entitled to seek and
obtain injunctive relief in any Court of competent jurisdiction.
9.5 Clause may be read down
If a Court of competent jurisdiction should declare the prohibitions and
restrictions contained in Clause 9.1 to be unenforceable or an
unreasonable restraint of trade the Selling Parties and IBAH hereby
acknowledged and agree that such Court shall be empowered to amend or
reform Clause 9.1 so that it becomes enforceable.
10. Indemnification.
10.1 By the Selling Parties. From and after the Closing Date, to the
extent provided in this Section 10, each of the Selling Parties shall, jointly
and severally, indemnify and hold harmless IBAH and each of its successors and
assigns, and each of its officers, directors, employees, stockholders, agents,
affiliates and any Person who controls IBAH within the meaning of the Securities
Act or the Exchange Act (each, an "Indemnified Party") from and against any
liabilities, claims, demands, judgments, losses, costs, damages or expenses
whatsoever (including attorneys', consultants' and other professional fees and
disbursements of every kind, nature and description incurred by such Indemnified
Party in connection therewith) (collectively, "Damages") that such Indemnified
Party may sustain, suffer or incur and that result from, arise out of or relate
to:
(a) any breach of any representation or warranty of a Selling Party
set forth in any Transaction Document or any certificate or other writing
delivered by a Selling Party in connection herewith;
<PAGE>
(b) any nonfulfillment of any covenant or agreement on the part of
a Selling Party in any Transaction Document;
(c) the assertion against IBAH of any liability or obligation
relating to or arising out of the Business, operations or assets of the
Company prior to the Closing Date, other than those liabilities or
obligations that are disclosed in the Company Consolidated Financial
Statements, or incurred other than the ordinary course of business between
the date of the last Company Consolidated Financial Statements as
determined under Clause 6.7 and the Closing Date; or
(d) any liability or obligation which relates to, or which involves
a claim, liability or obligation which arises out of or is based upon, any
Environmental Law to the extent that such liability or obligation relates
to or arises out of, in whole or in part, any activity occurring,
condition existing, omission to act or other matter existing prior to the
Closing Date; and
(e) any and all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments, costs and other expenses
(including without limitation reasonable attorneys' fees and expenses)
incident to any of the foregoing or to the enforcement of this Section
10.1.
10.2 By IBAH. From and after the Closing Date, to the extent provided in
this Section 10, IBAH shall indemnify and hold harmless the Seller, his
successors and assigns (each, an "Indemnified Party") from and against any
Damages that such Indemnified Party may sustain, suffer or incur and that result
from, arise out of or relate to any breach of any representation, warranty,
covenant or agreement of IBAH contained in this Agreement.
10.3 Procedure for Claims.
(a) An Indemnified Party that desires to seek indemnification under
any part of this Section 10 shall give notice (a "Claim Notice") to each party
responsible or alleged to be responsible for indemnification hereunder (an
"Indemnitor"). Such notice shall briefly explain the nature of the claim and
shall specify the amount thereof. If the matter to which a claim relates shall
not have been resolved as of the date of the Claim Notice, the Indemnified Party
shall estimate the amount of the claim in the Claim Notice, but also specify
therein that the claim has not yet been liquidated (an "Unliquidated Claim").
If an Indemnified Party gives a Claim Notice for an Unliquidated Claim, the
Indemnified Party shall also give a second Claim Notice (the "Liquidated Claim
Notice") within 60 days after the matter giving rise to the claim becomes
finally resolved, and the Second Claim Notice shall specify the amount of the
claim. Each Indemnitor to which a Claim Notice is given shall respond to any
Indemnified Party that has given a Claim Notice (a "Claim Response") within 20
days (the "Response Period") after the later of (i) the date that the Claim
Notice is given or (ii) if a Claim Notice is first given with respect to an
Unliquidated Claim, the date on which the Liquidated Claim Notice is given. Any
Claim Notice or Claim Response shall be given in accordance with the notice
requirements hereunder, and any Claim Response shall specify whether or not the
Indemnitor giving the Claim Response disputes the claim described in the Claim
Notice. If any Indemnitor fails to give a Claim Response within the Response
Period, such Indemnitor shall be deemed not to dispute the claim described in
the related Claim Notice. If any Indemnitor elects not to dispute a claim
described in a Claim Notice, whether by failing to give a timely Claim Response
or otherwise, then the amount of such claim shall be conclusively deemed to be
an obligation of such Indemnitor.
(b) If any Indemnitor shall be obligated to indemnify an Indemnified
Party hereunder, such Indemnitor shall pay to such Indemnified Party within 30
days after the last day of the Claim Response Period the amount to which such
Indemnified Party shall be entitled. If IBAH shall be the Indemnified Party,
it shall first request payment of the related Damages under the Escrow
Agreement, but only to the extent that Escrow Funds are then being held by the
Escrow Agent and are not subject to other claims for indemnification, and
thereafter IBAH shall seek
<PAGE>
indemnification directly from the Selling Parties, including the offset of any
payments payable to Phillip Altman pursuant to the terms of the Altman
Employment Agreement. If there shall be a dispute as to the amount or manner of
indemnification under this Section 10, the Indemnified Party may pursue whatever
legal remedies may be available for recovery of the Damages claimed from any
Indemnitor. If any Indemnified Party fails to receive all or part of any
indemnification obligation when due, then such Indemnified Party shall also be
entitled to receive from the applicable Indemnitor or, if applicable, the Escrow
Agent, interest on the unpaid amount for each day during which the obligation
remains unpaid at an annual rate equal to the Prime Rate, and the Prime Rate in
effect on the first business day of each calendar quarter shall apply to the
amount of the unpaid obligation during such calendar quarter.
10.4 Third Party Claims. An Indemnified Party that desires to seek
indemnification under any part of this Section 10 with respect to any actions,
suits or other administrative or judicial proceedings (each, an "Action") that
may be instituted by a third party shall give each Indemnitor prompt notice of a
third party's institution of such Action. After such notice, any Indemnitor
may, or if so requested by such Indemnified Party, any Indemnitor shall,
participate in such Action or assume the defense thereof, with counsel
satisfactory to such Indemnified Party; provided, however, that such Indemnified
Party shall have the right to participate at its own expense in the defense of
such Action; and provided, further, that the Indemnitor shall not consent to the
entry of any judgment or enter into any settlement, except with the written
consent of such Indemnified Party (which consent shall not be unreasonably
withheld), that (a) fails to include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of any such Action or (b) grants the claimant or plaintiff
any injunctive relief against the Indemnified Party. Any failure to give prompt
notice under this Section 10.4 shall not bar an Indemnified Party's right to
claim indemnification under this Section 10, except to the extent that an
Indemnitor shall have been harmed by such failure.
10.5 Survival of Representations and Warranties. The representations and
warranties given or made by the Selling Parties and IBAH in this Agreement or in
any certificate or other writing furnished in connection herewith shall survive
the Closing indefinitely. Each party shall be entitled to rely upon the
representations and warranties of the other party or parties set forth herein
regardless of any investigation or audit conducted before or after the Closing
Date or the decision of any party to complete the Closing.
11. Termination.
11.1 When Agreement May be Terminated. This Agreement may be terminated:
(i) by mutual written consent of IBAH and Seller at any time prior to
Closing;
(ii) by Seller or IBAH if the other party has failed to perform in any
material respect its covenants or agreements contained herein required to be
performed on or prior to the Closing Date and such failure has not been cured
within five Business Days after written notice of such failure from the non-
breaching party;
(iii) by IBAH if there is a net loss reflected in the Closing
Financial Statements and the parties have not been able to reach mutual
agreement on the amount of the reduction of the Purchase Price; or
(iv) by IBAH, if there shall have been a change in the Company's
Business that has had a Material Adverse Effect on the Company.
11.2 Effect of Termination. In the event of termination of this Agreement
by either IBAH or Seller, this Agreement shall immediately terminate and be of
no further force and effect. Any party may pursue any legal or equitable
remedies that may be available if such termination is based on a breach of
another party.
<PAGE>
12. Contents of Agreement.
This Agreement, together with the other Transaction Documents, sets forth
the entire understanding of the parties hereto with respect to the Transactions
and supersedes all prior agreements or understandings among the parties
regarding those matters.
13. Amendment, Parties in Interest, Assignment, Etc.
This Agreement may be amended, modified or supplemented only by a written
instrument duly executed by each of the parties hereto. If any provision of this
Agreement shall for any reason be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision hereof, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective heirs, legal representatives, successors and
permitted assigns of the parties hereto. No party hereto shall assign this
Agreement or any right, benefit or obligation hereunder. Any term or provision
of this Agreement may be waived at any time by the party entitled to the benefit
thereof by a written instrument duly executed by such party. The parties hereto
shall execute and deliver any and all documents and take any and all other
actions that may be deemed reasonably necessary by their respective counsel to
complete the Transactions.
14. Interpretation.
Unless the context of this Agreement clearly requires otherwise, (a)
references to the plural include the singular, the singular the plural, the part
the whole, (b) "or" has the inclusive meaning frequently identified with the
phrase "and/or," (c) "including" has the inclusive meaning frequently identified
with the phrase "but not limited to" and (d) references to "hereunder" or
"herein" relate to this Agreement. The section and other headings contained in
this Agreement are for reference purposes only and shall not control or affect
the construction of this Agreement or the interpretation thereof in any respect.
Section, subsection, schedule and exhibit references are to this Agreement
unless otherwise specified. Each accounting term used herein that is not
specifically defined herein shall have the meaning given to it under GAAP.
15. Remedies.
None of the specific remedies provided in this Agreement for any party is
the exclusive remedy of such party for any breach of this Agreement. In
addition to any specific remedy provided herein, any party shall be entitled to
such rights and remedies as such party may have at law or in equity or otherwise
for any breach of this Agreement, including the right to seek specific
performance, rescission or restitution and to set-off against any obligations
owed, none of which rights or remedies shall be affected or diminished by the
remedies provided hereunder.
16. Notices.
All notices that are required or permitted hereunder shall be in writing
and shall be sufficient if personally delivered or sent by mail, facsimile
message or Federal Express or other delivery service. Any notices shall be
deemed given upon the earlier of the date when received at, or the third day
after the date when sent by registered or certified mail or the day after the
date when sent by Federal Express to, the address or fax number set forth below,
unless such address or fax number is changed by notice to the other party
hereto:
If to IBAH:
Jane Hollingsworth
General Counsel
IBAH, Inc.
<PAGE>
Four Valley Square
512 Township Line Road
Blue Bell, Pennsylvania 19422
Fax: 215-542-2726
If to a Selling Party:
Dr Phillip Altman
Managing Director
Pharmaco Pty Ltd
Ground Floor, Building 1
Pymble Corporate Centre
20 Bridge Street
Pymble NSW 2072
Ph: (02) 9983 0999
Fax: (02) 9983 0900
17. Governing Law.
This Agreement shall be construed and interpreted in accordance with the
laws of the State of Delaware without regard to its provisions concerning
conflict of laws.
18. Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be binding as of the date first written above, and all of which shall
constitute one and the same instrument. Each such copy shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first written above.
IBAH, INC.
By:______________________________
Name:
Title:
CATAPULT PTY., LTD.
By:______________________________
Name:
Title:
________________________________
PHILLIP ALTMAN
____________________________
JUANITA ALTMAN
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of February 28, 1997 by and among IBAH, Inc., a
Delaware corporation (the "Company") and Catapult Pty., Ltd., an Australian
company (the "Holder").
Background
The Holder is acquiring on the date of Closing the number of shares of
Common Stock, par value $0.01 per share, of the Company (the "Common Stock")
required by Section 2.1 (d) of the Stock Purchase Agreement (defined below). The
Company has agreed to provide the registration rights provided for in this
Agreement as an inducement for the Holder to sell all of the capital stock of
Pharmaco US to the Company pursuant to the Stock Purchase Agreement, dated
February 28, 1997, by and among the Company, the Holder and Phillip Altman and
Juanita Altman (the "Stock Purchase Agreement"), and to enter into other
agreements contemporaneously with this Agreement.
Witnesseth:
The parties hereto, each intending to be legally bound and in exchange for
the mutual covenants herein, agree as follows:
1. Inclusion in Offerings. If, during the period beginning the date hereof and
ending 12 months from the date hereof (the "First Registration Period"), the
Company or any security holder of the Company files a registration statement
with the Securities and Exchange Commission to register the Company's Common
Stock (a "Registration"), other than (i) a registration statement on Form S-4,
(ii) a registration statement on Form S-8 or (ii) a registration statement in
connection with an underwritten public offering, the Company shall ensure that
all Registrable Securities shall be included in such Registration if so
requested by the Holders owning such Registrable Securities; provided, however,
that the Holders shall not be entitled under this Section 1 to have included in
a Registration Registrable Securities with a value (as determined by the price
at which such Registrable Securities are to be offered) greater than 25% of the
total number of the securities registered in such Registration.
2. Demand Registrations.
(a) Requests for Registration. For the period beginning immediately
following the expiration of the First Registration Period and ending 12 months
thereafter, the Holders may demand registration (a "Demand Registration") under
the Securities Act of 1933, as amended (the "1933 Act"), of all or any part of
the Registrable Securities owned by such Holders. In order to accomplish such
demand, the Holder shall send written notice of the demand to the Company, and
such notice shall specify the number of Registrable Securities sought to be
registered. The Company shall only be required to effect one Demand
Registration.
(b) Priority on Demand Registrations. If a Demand Registration is
underwritten and the managing underwriters advise the Company in writing that in
their opinion the number of Registrable Securities requested to be included
exceeds the number that can be sold in such offering, at a price reasonably
related to fair value, the Company will
<PAGE>
include in such Demand Registration (i) first, the Registrable Securities
requested to be included in such Demand Registration by the Holder; (ii) second,
any securities that the Company desires to include on its own behalf; and (iii)
third, any shares of Common Stock held by any other stockholder of the Company
to whom registration is offered.
(c) Selection of Underwriters. If any Demand Registration is underwritten,
the selection of investment banker(s) and manager(s) and the other decisions
regarding the underwriting arrangements for the offering will be made by the
Company and the Holders participating in the Demand Registration.
(d) Restrictions on Demand Registrations. The Company will not be obligated
to effect any Demand Registration within six months after the effective date of
a previous registration of securities of the Company in an underwritten
offering.
3. Registration and Offering Expenses. In connection with all registrations
and Offerings of Registrable Securities under this Agreement, the Company shall
pay the Registration Expenses (defined below) related to the Registrable
Securities of the Holders, but the Holders shall pay the Underwriting
Commissions (defined below), if any, related to their Registrable Securities.
4. Holdback Agreements. The Holders shall not effect any public sale or
distribution of equity securities of the Company or any securities convertible
into or exchangeable or exercisable for such securities during a period prior to
and after any underwritten offering is consummated (except as part of such
Offering) that is determined by the underwriters of such offering.
5. Indemnification.
(a) The Company shall indemnify, to the extent permitted by law, each
Holder, its officers and directors, and each person who controls such holder
(within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as
amended ("the 1934 Act")) (each, a "Holder Indemnitee"), against all losses,
claims, damages, liabilities and expenses arising out of or resulting from any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading except insofar as the
same are caused by or contained in any information furnished in writing to the
Company by such Holder Indemnitee, acting in its capacity as a stockholder (or
an officer, director or controller of a stockholder) expressly for use therein
or by any such Holder Indemnitee's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such Holder Indemnitee with a sufficient number of copies
of the same.
(b) In connection with any registration statement in which a Holder is
participating, each such Holder shall furnish to the Company in writing such
information as is reasonably requested by the Company for use in any such
registration statement or prospectus and shall indemnify, to the extent
permitted by law, the Company, its directors and officers and each person who
controls the Company (within the meaning of the 1933 Act or the 1934 Act)
against any losses, claims, damages, liabilities and expenses resulting from any
untrue or alleged untrue statement of material fact or any omission or alleged
omission of a material fact required to be stated in the registration statement
or
<PAGE>
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in information so furnished in writing by
such Holder (i) specifically for use in preparing the registration statement and
(ii) in such Holder's capacity as a stockholder of the Company, and not in such
Holder s capacity as an officer, director or employee of the Company.
(c) Any person entitled to indemnification hereunder shall (i) give prompt
notice to the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) unless in such indemnified party's reasonable judgment
a conflict of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the indemnified
party. If such defense is assumed, the indemnifying party shall not be subject
to any liability for any settlement made without its consent (but such consent
will not be unreasonably withheld). An indemnifying party who is not entitled,
or elects not, to assume the defense of a claim shall not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
6. Definitions.
(a) The term "Registrable Securities" means (i) the shares of Common Stock
registered in the names of the Holders and listed beside each Holder's name on
Appendix A hereto and (ii) any securities issued or to be issued with respect to
the securities referred to above by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular Registrable Securities, such
securities will cease to be Registrable Securities when they have been (A)
effectively registered under the 1933 Act and disposed of in accordance with the
registration statement covering them, or (B) transferred pursuant to Rule 144
(or any similar provision then in force).
(b) The term "Registration Expenses" means all expenses incident to the
Company's performance of or compliance with this Agreement, including all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, expenses and
fees for listing the securities to be registered on exchanges on which similar
securities issued by the Company are then listed, and fees and disbursements of
counsel for the Company and of all independent certified public accountants,
underwriters (other than Underwriting Commissions) and other persons retained by
the Company.
(c) The term "Underwriting Commissions" means all underwriting discounts or
commissions relating to the sale of securities of the Company, but excludes any
expenses reimbursed to underwriters.
7. Miscellaneous.
(a) Notices. Any notices required hereunder shall be deemed to be given
upon the earlier of the date when received at, or the seventh day after the date
when sent by certified or registered mail to, the address of the Company's
corporate headquarters in the
<PAGE>
case of any notice to the Company, and until changed by notice to the Company,
the respective addresses of the Holders on file with the Company in the case of
any notice to the Holders.
(b) Amendments and Waivers. The provisions of this Agreement may be
amended or terminated and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, if approved in
writing by the Holders that own beneficially two-thirds of the Registrable
Securities.
(c) Binding Effect. This Agreement will bind and inure to the benefit of
the respective successors (including any successor resulting from a merger or
similar reorganization), assigns, heirs, and personal representatives of the
parties hereto.
(d) Governing Law. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the internal law, not the
law of conflicts, of Delaware.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered to be an original instrument and
to be effective as of the date first written above. Each such copy shall be
deemed an original, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart.
(f) Interpretation. Unless the context of this Agreement clearly requires
otherwise, (a) references to the plural include the singular, the singular the
plural, the part the whole, (b) references to one gender include all genders,
(c) "or" has the inclusive meaning frequently identified with the phrase
"and/or" and (d) "including" has the inclusive meaning frequently identified
with the phrase "but not limited to." The section and other headings contained
in this Agreement are for reference purposes only and shall not control or
affect the construction of this Agreement or the interpretation thereof in any
respect.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto duly executed this Agreement the day and year first written above.
IBAH, INC.
By:_______________________________
Name:
Title:
CATAPULT PTY., LTD.
By:_______________________________
Name:
Title:
<PAGE>
AGREEMENT OF MERGER
-------------------
This Agreement of Merger (the "Agreement") is made and entered into as of
July 18, 1996, by and between Resource Biometrics, Inc., a California
corporation ("RBI") and IBAH Acquisition Company, a California corporation
("IBAH"), and IBAH, Inc., a Delaware corporation ("IBAH, Inc.").
R E C I T A L S
---------------
A. Prior to the execution of this Agreement, IBAH, IBAH, Inc., and RBI
have entered into an Agreement and Plan of Merger dated July 18, 1996, (the
"Plan") providing for, among other things, the execution and delivery of this
Agreement, the merger of RBI with and into IBAH, and for the issuance of shares
of the Common stock of IBAH, Inc. ("IBAH, Inc. Common Stock") upon the terms set
forth in the Plan and this Agreement.
B. The respective Boards of Directors of IBAH, RBI, and IBAH, Inc. and
the shareholders of RBI have determined that it is in the best interests of
their respective corporations that RBI be merged with and into IBAH in a
statutory merger pursuant to the Plan and this Agreement and in accordance with
California law and that upon the effective date of such merger (the "Merger")
the outstanding shares of RBI Common Stock shall be converted into shares of
IBAH, Inc. Common Stock pursuant to the terms and conditions of this Agreement
and the Plan.
C. The parties intend the Plan and Merger to qualify as a tax free plan
of reorganization pursuant to the provisions of Section 368(a)(2)(D) of the
Internal Revenue Code of 1954, as amended.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements, representations, and warranties contained herein, the parties agree
as follows:
1. Effective Date of Merger. The Merger shall become effective when this
------------------------
Agreement and the Officer's Certificates of the Corporations are filed with the
Secretary of State of the State of California as required by Section 1103 of the
California Corporations Code. The date on which the merger shall become
effective is referred to herein as "the Effective Date."
2. Effect of Merger. On the Effective Date, RBI shall be merged with and
----------------
into IBAH pursuant to the terms and conditions of this Agreement and in
accordance
-1-
<PAGE>
with the applicable provisions of California law and IBAH shall continue in
existence as the surviving corporation (the "Surviving Corporation"). The
corporate identity, existence, purposes, powers, rights, and immunities of IBAH
as the Surviving Corporation shall continue unaffected and unimpaired by the
Merger. The separate existence and corporate organization of RBI shall cease on
the Effective Date and IBAH shall succeed to and possess all the properties,
rights, privileges, powers, franchises, immunities and purposes, and be subject
to all the debts, liabilities, obligations, restrictions, disabilities,
penalties and duties of Subsidiary, by operation of law without further act or
deed.
3. Further Acts. Notwithstanding the above, after the Effective Date the
------------
proper officers and directors of RBI may perform any acts necessary of desirable
to vest or confirm IBAH's possession of and title to any property or rights of
RBI, or otherwise carry out this Agreement's purposes. This shall include
execution and delivery of documents, assurances, assignments, or other
instruments.
4. Articles of Incorporation. From and after the Effective Date, the
-------------------------
articles of incorporation of IBAH in effect immediately prior to the Effective
Date shall be the articles of incorporation of the Surviving Corporation. The
shareholder(s) and director(s) of IBAH shall amend the articles of incorporation
to change the name of the Surviving Corporation to Resource Biometrics, Inc.
5. Bylaws. From and after the Effective Date, the Bylaws of IBAH in
------
effect immediately prior to the Effective Date shall be the Bylaws of the
Surviving Corporation.
6. Conversion of Shares.
---------------------
a. Conversion of RBI Common and Preferred Stock. Prior to the
--------------------------------------------
issuance of any shares of IBAH Common Stock to be issued in connection with the
Merger Consideration to holders of RBI Common Stock, each share of RBI Series A
Preferred Stock that is issued and outstanding on the Effective Date shall, by
virtue of the Merger and without further action, cease to exist and shall be
converted into 0.151689 shares of IBAH, Inc. Common Stock. Following the
issuance of IBAH Common Stock to the holders of RBI Series A Preferred Stock,
the remaining shares of IBAH Common Stock to be issued in connection with the
Merger Consideration shall be issued pro rata among the holders of shares of RBI
Common Stock and RBI Series A Preferred Stock on ratio of one (1) IBAH Common
Stock share for each 13.12 shares of RBI Common Stock or RBI Series A Preferred
Stock; provided, however, that the holders of RBI Series A Preferred Stock shall
receive a maximum value of $3.00 of IBAH Common Stock in the aggregate.
-2-
<PAGE>
b. Surrender and Exchange of Outstanding Certificates of RBI Common
----------------------------------------------------------------
Stock; Status of Outstanding Certificates. The conversion of shares of RBI
- -----------------------------------------
Common Stock as provided for by this Agreement shall occur automatically upon
the Effective Date without further action by the holders thereof. Each holder of
a certificate or certificates theretofore representing a share or shares of RBI
Common Stock shall surrender his, her, or its share certificate or certificates
to the transfer agent appointed by the Surviving Corporation and upon such
surrender shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of shares of IBAH, Inc. Common Stock into
which his, her, or its shares of RBI Common Stock shall have been converted. All
shares of IBAH, Inc. Common Stock to be received by RBI shareholders pursuant to
the Merger shall be issued directly from IBAH, Inc. to such RBI shareholders.
c. Fractional Shares. No certificates or scrip representing
-----------------
fractional shares of IBAH, Inc. Common Stock shall be issued upon the surrender
for exchange of certificates representing RBI Common Stock. In the event of
fractions, the number of shares of IBAH, Inc. Common Stock to be distributed to
any shareholder of RBI pursuant to the Merger shall be rounded to the nearest
whole number of shares, with one-half being rounded up.
7. Abandonment of Merger. Any time prior to the Effective Date, this
---------------------
merger may be abandoned without further obligation or liability by action of the
Board of Directors of either of the Corporations, notwithstanding approval of
the merger by their shareholders.
8. Successors and Assigns. All the terms and provisions of this
----------------------
Agreement shall be binding upon and insure to the benefit of and be enforceable
by the respective successors in interest of the parties hereto.
9. Governing Law. This Agreement shall be construed and interpreted
-------------
according to the laws of the State of California.
10. Headings. The headings in the sections of this Agreement are inserted
--------
for convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
duly executed as of the date and year first above written.
-3-
<PAGE>
Resource Biometrics, Inc., a California IBAH Acquisition Company, a
corporation California corporation
by: ___________________________________ by: /s/ Geraldine A. Henwood,
--------------------------
John T. Brega, Chief Executive Geraldine A. Henwood, Chief
Officer Executive Officer
by: ___________________________________ by: /s/ Jane Holmes Hollingsworth
--------------------------------
John T. Brega, Secretary Jane Holmes Hollingsworth,
Secretary
IBAH, Inc., a Delaware corporation
by: /s/ Geraldine A. Henwood,
--------------------------
Geraldine A. Henwood, Chief
Executive Officer
by: /s/ Jane Holmes Hollingsworth
--------------------------------
Jane Holmes Hollingsworth,
Secretary
-4-
<PAGE>
Exhibit 21.1
List of Subsidiaries of IBAH, Inc.
Company Where Incorporated
------- ------------------
Euro Bio-Pharm Clinical Services GmbH Germany
Euro Bio-Pharm Clinical Services, Inc. Delaware
Euro Bio-Pharm, Limited United Kingdom
Bio-Pharm International, Inc. Delaware
Euro Bio-Pharm-ATS, Inc. Delaware
Bio-Pharm Pharmaceutics Services, Inc. Delaware
Eurobiopharm (Schweiz), AG Switzerland
Euro Bio-Pharm, S.L. Spain
Euro Bio-Pharm Holdings, BV The Netherlands
The Hardardt Group, Inc. Delaware
Resource Biometrics, Inc. New Jersey
Euro Bio-Pharm A/S Denmark
Euro Bio-Pharm, OY Finland
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statements File Nos. 33-84738, 33-90700, 33-97898, 333-2832,
333-17527 and 333-74274.
ARTHUR ANDERSEN LLP
March 27, 1997
Philadelphia, Pa.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
INFORMATION FOR ANNUAL 10-K
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS AS
OF, AND FOR THE YEAR ENDED, DECEMBER 31, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 5,235
<RECEIVABLES> 28,138
<ALLOWANCES> 524
<INVENTORY> 0
<CURRENT-ASSETS> 49,305
<PP&E> 13,998
<DEPRECIATION> 6,199
<TOTAL-ASSETS> 92,126
<CURRENT-LIABILITIES> 40,099
<BONDS> 1,885
0
7
<COMMON> 220
<OTHER-SE> 49,329
<TOTAL-LIABILITY-AND-EQUITY> 92,126
<SALES> 0
<TOTAL-REVENUES> 62,156
<CGS> 0
<TOTAL-COSTS> 30,960
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 329
<INCOME-PRETAX> 1,040
<INCOME-TAX> 60
<INCOME-CONTINUING> 980
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 980
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
