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Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
Commission file number 000-20699
COLLABORATIVE CLINICAL RESEARCH, INC.
- --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1685364
- -------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20600 Chagrin Boulevard
Cleveland, Ohio 44122
- ---------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
(216) 491-9930
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(Registrants telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X Yes No
--- ---
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practical date.
The number of Common Shares, without par value, outstanding as of July 31, 1996
was 6,304,789.
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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
COLLABORATIVE CLINICAL RESEARCH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Unaudited) (Note A)
June 30, December 31,
1996 1995
------------ -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,412,349 $ 1,156,925
Short-term investments 28,779,535 1,854,396
Accounts receivable, less allowances 6,394,478 2,936,119
Prepaid expenses 847,505 715,101
------------ -----------
Total current assets 41,433,867 6,662,541
Property and equipment, at cost
net of accumulated depreciation and amortization 1,117,039 298,814
Goodwill, less accumulated amortization 5,706,474 --
Other assets 173,652 63,755
------------ -----------
Total assets $ 48,431,032 $ 7,025,110
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,214,131 $ 2,696,746
Accrued expenses 790,299 445,859
Deferred revenue 1,030,665 559,213
------------ -----------
Total current liabilities 5,035,095 3,701,818
Shareholders' equity:
Serial preferred shares, without par value, 1,000,000 shares
authorized, none issued -- --
Series A, B, and C convertible preferred shares:
$.001 par value, authorized 2,860,000 shares; issued
and outstanding 2,182,353 as of December 31, 1995
(none as of June 30, 1996) -- 2,182
Additional paid-in capital -- 4,847,885
Common shares, without par value, authorized 15,000,000
shares; issued and outstanding 402,500 shares as of
December 31, 1995 (5,898,539 as of June 30,1996) 44,663,046 84,011
Accumulated deficit (1,267,109) (1,610,786)
------------ -----------
Total shareholders' equity 43,395,937 3,323,292
------------ -----------
Total liabilities and shareholders' equity $ 48,431,032 $ 7,025,110
============ ===========
Note A: The balance sheet at December 31, 1995 has been derived from
the audited financial statements at that date, but does not
include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements.
</TABLE>
See notes to condensed consolidated financial statements.
2
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<TABLE>
COLLABORATIVE CLINICAL RESEARCH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ --------------------------------
1996 1995 1996 1995
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 6,842,221 $ 2,115,742 $ 12,144,437 $ 4,035,518
Direct costs 4,830,545 1,757,691 8,843,152 3,208,900
----------- ----------- ------------ -----------
Gross profit 2,011,676 358,051 3,301,285 826,618
Selling, general and administrative expenses 1,520,903 680,527 2,613,516 1,321,950
Depreciation and amortization 143,755 15,000 243,193 26,500
----------- ----------- ------------ -----------
Income (loss) from operations 347,018 (337,476) 444,576 (521,832)
Other income (expense):
Interest income 86,624 50,446 104,517 108,740
Interest expense (57,349) -- (93,616) --
Income from joint venture 7,219 -- 2,700 --
----------- ----------- ------------ -----------
Income (loss) before income taxes 383,512 (287,030) 458,177 (413,092)
Income tax expense 95,800 -- 114,500 --
----------- ----------- ------------ -----------
Net income (loss) $ 287,712 ($ 287,030) $ 343,677 ($ 413,092)
=========== =========== ============ ===========
Net income (loss) per share $ 0.08 ($ 0.09) $ 0.10 ($ 0.13)
=========== =========== ============ ===========
Weighted average common shares outstanding 3,770,558 3,106,068 3,433,942 3,106,356
=========== =========== ============ ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
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<TABLE>
COLLABORATIVE CLINICAL RESEARCH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended June 30,
-------------------------------------
1996 1995
------------ -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 343,677 $ (413,092)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 243,193 26,500
Other (21,385) (19,303)
Changes in operating assets and liabilities:
Accounts receivable (2,258,821) 240,699
Accounts payable and accrued expenses 397,328 919,629
Other 259,937 265,054
------------ -----------
Net cash provided by (used in) operating activities (1,036,071) 1,019,487
INVESTING ACTIVITIES
Purchases of property and equipment (384,840) (188,981)
Purchase of businesses (net of cash acquired) (4,022,044) --
Maturities of short term investments 1,858,178 1,255,000
Purchases of short term investments (28,715,003) (751,423)
Investment in HRI (27,225) (59,205)
------------ -----------
Net cash provided by (used in) investing activities (31,290,934) 255,391
FINANCING ACTIVITIES
Borrowings on line of credit 1,271,111 --
Payments on line of credit (2,402,520) --
Proceeds from issuance of stock and exercise of
common stock options and warrants 38,550,915 --
Accrued Initial Public Offering expenses (837,077) --
------------ -----------
Net cash provided by financing activities 36,582,429 --
------------ -----------
Increase in cash and cash equivalents 4,255,424 1,274,878
Cash and cash equivalents at beginning of period 1,156,925 1,116,815
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,412,349 $ 2,391,693
============ ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
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COLLABORATIVE CLINICAL RESEARCH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended June
30, 1996 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Registrant's registration statement on Form S-1 filed March 8, 1996 as amended
May 10, 1996 and June 10, 1996 (File No. 333-2140).
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
might affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
2. ACQUISITION
Effective January 31, 1996, the Company acquired GFI Pharmaceutical
Services, Inc. (GFI), located in Evansville, Indiana, which has been accounted
for under the purchase method. The purchase price was $6.0 million and
consisted $2.0 million each of cash, Common Shares and notes payable. The notes
payable plus accrued interest, at prime plus 1%, were paid during June 1996.
Unaudited pro forma data as though the Company had acquired GFI as of January 1,
1995 are set forth below:
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1996 June 30, 1995
----------------------- ---------------------
<S> <C> <C>
Revenue $ 12,660,263 $ 7,250,927
Net income (loss) $ 261,743 $ (499,035)
Net income (loss) per share $ .07 $ (.15)
</TABLE>
The pro forma operating results are not necessarily indicative of the operating
results that would have been achieved had the acquisition actually occurred at
the beginning of each period presented, nor do they purport to indicate the
results of future operations.
5
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COLLABORATIVE CLINICAL RESEARCH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
JUNE 30, 1996
(UNAUDITED)
3. CAPITAL STOCK CHANGES
On June 5, 1996, a total of 136,000 common share warrants were exercised. On
June 11, 1996, the Company issued 3,000,000 common shares at $13.50 per share in
connection with an initial public offering. A portion of the proceeds from the
stock issuance were used to repay $3,250,000 of outstanding indebtedness. Upon
the closing of the initial public offering, the Company issued 148,148 common
shares to the former shareholders of GFI and all of the Company's outstanding
series A, B and C convertible preferred shares were automatically converted into
a total of 2,201,133 common shares. Subsequent to June 30, 1996, an additional
400,000 common shares were sold at $13.50 per share to cover underwriting
over-allotments from the initial public offering.
4. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is determined by dividing net income (loss)
applicable to common shares by the weighted average number of common shares and
common share equivalents outstanding during the period. Common share equivalents
consist of convertible preferred shares (all of which converted, according to
their terms, upon completion of the Company's initial public offering) and
common shares which are issuable upon exercise of outstanding options and
warrants to purchase common shares. The dilutive effect of all options and
warrants outstanding was calculated using the treasury stock method. See Exhibit
11 for further information on the computation of earnings per common share. The
Company's stock is quoted on the Nasdaq National Market under the symbol "CCLR".
5. COMMITMENTS AND CONTINGENCIES
On June 28, 1996, the Company and Integrated Systems Solutions Corporation, a
wholly-owned subsidiary of IBM Corporation, signed an exclusive ten-year
technology alliance agreement to develop and market an electronic data
collection and project management system for use in clinical trials.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information set forth and discussed below for the three months and
six months ended June 30, 1996 is derived from the Condensed Consolidated
Financial Statements included elsewhere herein. The financial information set
forth and discussed below is unaudited but, in the opinion of management,
reflects all adjustments (consisting of normal recurring accruals) necessary for
a fair presentation of such information. The Company's results of operations for
a particular quarter may not be indicative of results expected during the other
quarters or for the entire year.
GENERAL
The Company provides a full range of clinical research services to
sponsors of clinical research (primarily pharmaceutical and biotechnology and,
in selected cases, contract research organizations ("CROs") - collectively,
"Sponsors") through its network of over 430 multi-therapeutic clinical research
sites ("Affiliated Sites"). Revenue is derived principally from the
identification, placement, monitoring and management of clinical trial programs,
and health-economic data evaluations within the Company's network of Affiliated
Sites. The Company continues to expand its Affiliated Site network in the United
States, Canada and Europe.
The Company commenced operations in July 1991 and has achieved its
growth through internal development and one acquisition. In January 1996, the
Company acquired GFI Pharmaceutical Services, Inc. ("GFI"), which conducts Phase
I through Phase IV clinical research and provides clinical reference laboratory
and Institutional Review Board ("IRB") services. This acquisition has been
accounted for under the purchase method, and GFI's results have been
consolidated with those of the Company from the effective date of the
acquisition.
The Company's quarterly results can fluctuate as a result of a number
of factors, including the Company's success in attracting new business, the size
and duration of the clinical trials in which the Company and members of its
network of Affiliated Sites participate, the timing of Sponsor decisions to
conduct new clinical trials or cancellation or delays of ongoing trials,
acquisitions and other factors, many of which are beyond the Company's control.
The Company's clinical research service contracts generally have terms
ranging from several months to several years. A portion of the contract fee is
generally payable upon execution of the contract, with the balance payable in
installments over the life of the contract. Revenue and related direct costs of
revenue are recognized as specific contract terms are fulfilled under the
percentage of completion method utilizing units of delivery. The Company's
contracts are broken down into discrete units of deliverable services for which
a fixed fee for each unit is established. Pass-through costs that are paid
directly by the Company's Sponsors, and for which the Company does not bear the
risk of economic loss, are excluded from revenue. These costs can include
investigator meeting fees, IRB fees and travel costs. The termination of a
contract results in no material adjustments to revenue or direct costs
previously recognized, and the Company is entitled to payment for all work
performed through the date of notice of termination and all costs associated
with termination of a study.
7
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The Company's contracts generally may be terminated by the Sponsor with
or without cause. Clinical trials may be terminated or delayed for several
reasons, including unexpected results or adverse patient reactions to the drug,
inadequate patient enrollment or investigator recruitment, manufacturing
problems resulting in shortages of the drug or decisions by the Sponsor to
deemphasize or terminate a particular trial or development efforts on a
particular drug. Depending on the size of the trial in question, a Sponsor's
decision to terminate or delay a trial in which the Company participates could
have a materially adverse effect on the Company's backlog, future revenue and
profitability.
The Company's backlog consists of anticipated revenue from letters of
intent and signed contracts that have not been completed. In certain cases, the
Company will begin work on a project prior to executing a letter of intent or
contract. Backlog excludes anticipated revenue for projects for which the
Company has commenced work but for which a definitive letter of intent or
contract has not been executed. The Company believes that its backlog as of any
date is not necessarily a meaningful predictor of future results. There can be
no assurance that the Company will be able to realize revenue included in
backlog. Delayed contracts remain in the Company's backlog pending determination
of whether to continue, modify or cancel the contract. At June 30, 1995 and June
30, 1996 the Company's backlog was $14.0 million and $20.3 million,
respectively.
RESULTS OF OPERATIONS
Three months ended June 30, 1996 compared with three months ended June
30, 1995
Revenue for the three months ended June 30, 1996 increased 223.8% to
$6.8 million as compared to $2.1 million in the three month period ended June
30, 1995. Of the $4.7 million increase, $1.8 million of this increase was due to
the acquisition of GFI and $2.9 million was due to growth in the number and size
of Collaborative's ongoing and new clinical trials. Approximately $2.5 million,
of the $2.9 million, related to a full service clinical trial which began in the
fourth quarter of 1995. On a pro forma basis, accounting for the acquisition of
GFI as though it occurred on January 1, 1995, actual revenue for the three
month period ended June 30, 1996 increased 78.9% from pro forma revenue of
$3.8 million for the three month period ended June 30, 1995.
Direct costs include compensation and related fringe benefits for
non-administrative employees and other expenses directly related to contracts,
which are generally subcontracted to the Affiliated Sites and other vendors,
such as investigator payments. These costs increased by $3.0 million, or 166.7%,
from $1.8 million to $4.8 million for the three months ended June 30, 1995 and
1996, respectively. As a percentage of revenue, direct costs decreased from
85.7% during the three months ended June 30, 1995 to 70.6% during the three
months ended June 30, 1996. Of the $3.0 million increase, $1.0 million was due
to the acquisition of GFI and $2.0 million was due to growth in number and size
of Collaborative's ongoing and new clinical trials. Direct costs for
Collaborative's ongoing and new clinical trials, conducted at the Company's
Affiliated sites, decreased from 83.1% to 75.1% as a percentage of revenue for
the three months ended June 30, 1995 and 1996, respectively. This reflects the
effects of pricing changes implemented by the Company during the second half of
1995 intended to increase prices for certain services and include charges for
certain administrative contract costs that had previously been absorbed. As a
percentage of revenue, Collaborative's higher direct costs at its Affiliated
Sites were offset by the GFI subsidiary's lower direct costs.
8
<PAGE> 9
Selling, general and administrative expenses include all administrative
personnel costs, business and Affiliated Site development costs, and all other
expenses not directly chargeable to a specific contract. Selling, general and
administrative costs for the three month period ended June 30, 1996 increased
120.6% to $1.5 million as compared to $680,000 during the three months ended
June 30, 1995. Of the $820,000 increase, $552,000 was due to the acquisition of
GFI, $70,000 reflects compensation expense associated with a contractual bonus
obligation to a Vice President of the Company and the remainder was due to the
Company's internal growth. As a percentage of revenue, selling, general and
administrative expenses decreased from 32.4% to 22.1% for the three months ended
June 30, 1995 and 1996, respectively. The decrease in selling, general and
administrative expenses as a percentage of revenue reflects improved absorption
of fixed costs resulting from the increase in the Company's revenue.
Depreciation and amortization expense increased from $15,000 in the
three month period ended June 30, 1995 to $144,000 during the three months ended
June 30, 1996. Of the $129,000 increase, $48,000 resulted from the acquisition
of GFI's assets, $73,000 resulted from the amortization of goodwill due to the
GFI acquisition and $8,000 resulted from the Company's increased capital
expenditures.
Other income decreased $14,000 from $50,000 in the three month period
ended June 30, 1995 to $36,000 in the three month period ended June 30, 1996.
This was the result of a $36,000 increase in interest income caused by the
investment of funds from the Company's initial public offering in June 1996 and
a $57,000 increase in interest expense due to the issuance of notes payable to
the former shareholders of GFI, and borrowings against the Company's line of
credit. The Company also recorded $7,000 of income as its share of Health
Research Innovations, L.L.C. (HRI's) net income for the three months ended June
30, 1996. HRI, formed through the Company's joint venture with Pharmaceutical
Marketing Services, Inc. ("PMSI"), contracts with the Company to use its
Affiliated Site network for the collection of outcomes assessment,
health-economic and disease management data. For financial reporting purposes,
the Company records its share of the net income or loss from HRI using the
equity method.
As a result of the Company's net operating loss carryforwards of $1.4
million for federal income tax purposes, the Company's effective tax rate for
1996 is estimated to be 25% of pre-tax income. This effective tax rate is
reflected in the Company's Condensed Consolidated Statement of Operations for
the three months ended June 30,1996.
Six months ended June 30, 1996 compared with six months ended June 30,
1995
Revenue for the six months ended June 30, 1996 increased 202.5% to
$12.1 million as compared to $4.0 million in the six month period ended June 30,
1995. Of the $8.1 million increase, $2.7 million of this increase was due to the
acquisition of GFI and $5.4 million was due to growth in the number and size of
Collaborative's ongoing and new clinical trials. On a pro forma basis,
accounting for the acquisition of GFI as though it occurred on January 1, 1995,
pro forma revenue for the six month period ended June 30, 1996, of $12.7
million, increased 74.0% from pro forma revenue of $7.3 million for the six
month period ended June 30, 1995.
Direct costs increased by $5.6 million, or 175.0%, from $3.2 million to
$8.8 million for the six months ended June 30, 1995 and 1996, respectively. As a
percentage of revenue, direct costs decreased from 80.0% during the six months
ended June 30, 1995 to 72.7% during the six months ended June 30, 1996. Of the
$5.6 million increase, $1.5 million was due to the acquisition of GFI and $4.1
million was due to growth of Collaborative's clinical trials. Direct costs for
Collaborative's ongoing and new clinical trials, conducted at the Company's
Affiliated Sites, decreased from 79.5% to 77.8% as a percentage of revenue for
the six months ended June
9
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30, 1995 and 1996, respectively. This reflects the effects of pricing changes
implemented by the Company during the second half of 1995 intended to increase
prices for certain services and include charges for certain administrative
contract costs that had previously been absorbed. As a percentage of revenue,
Collaborative's higher direct costs at its Affiliated Sites were offset by the
GFI subsidiary's lower direct losts.
Selling, general and administrative costs for the six month period
ended June 30, 1996 increased 100.0% to $2.6 million as compared to $1.3 million
during the six months ended June 30, 1995. Of the $1.3 million increase,
$874,000 was due to the acquisition of GFI, $70,000 reflects compensation
expense associated with a contractual bonus obligation to a Vice President of
the Company and the remainder was due the Company's internal growth. As a
percentage of revenue, selling, general and administrative expenses decreased
from 32.5% to 21.5% for the six months ended June 30, 1995 and 1996,
respectively. The decrease in selling, general and administrative expenses as a
percentage of revenue reflects improved absorption of fixed costs resulting from
the increase in the Company's revenue.
Depreciation and amortization expense increased from $27,000 in the six
month period ended June 30, 1995 to $243,000 during the six months ended June
30, 1996. Of the $216,000 increase, $78,000 resulted from the acquisition of
GFI's assets, $121,000 is the result of amortization of goodwill due to the GFI
acquisition and $17,000 is due to the Company's increased capital expenditures.
Other income decreased $95,000 from $109,000 in the six month period
ended June 30, 1995 to $14,000 in the six month period ended June 30, 1996. This
was the result of a $4,000 decrease in interest income caused by a reduction in
cash and cash equivalents required for the GFI acquisition and a $94,000
increase in interest expense due to the issuance of notes payable to the former
shareholders of GFI and borrowings against the Company's line of credit.
As a result of the Company's net operating loss carryforwards of $1.4
million for federal income tax purposes, the Company's effective tax rate for
1996 is estimated to be 25% of pre-tax income. This effective tax rate is
reflected in the Company's Condensed Consolidated Statement of Operations for
the six months ended June 30,1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's contracts usually require a portion of the contract
amount to be paid at the time the contract is initiated. Additional payments are
generally made upon completion of negotiated performance requirements throughout
the life of the contract. Cash receipts do not necessarily correspond to costs
incurred and revenue recognized (revenue recognition is based on the
units-of-delivery method of percentage of completion accounting). The Company
typically receives a low volume of large-dollar receipts. As a result, the
number of days outstanding in accounts receivable will fluctuate due to the
timing and size of cash receipts. Accounts receivable (net of allowance for
doubtful accounts) was $6.4 million at June 30, 1996 and $2.9 million at
December 31, 1995. On a pro forma basis, after giving effect to the GFI
acquisition, accounts receivable (net of allowance for doubtful accounts) would
have been $3.8 million at December 31, 1995. Deferred revenue was $1.0 million
at June 30, 1996 and $559,000 at December 31, 1995. On a pro forma basis, after
giving effect to the GFI acquisition, deferred revenue would have been $578,000
at December 31, 1995. The number of days outstanding in accounts receivable (net
of unearned revenue) was 58 days at June 30, 1996 and 52 days at December 31,
1995 (48 days on a pro forma basis).
10
<PAGE> 11
Cash and cash equivalents increased $4.3 million during the six months
ended June 30, 1996. This was the result of $36.6 million being provided by
financing activities, offset by $1.0 million and $31.3 million being used in
operating and investing activities, respectively. Financing activities consisted
of net proceeds of $37.7 million from the Company's initial public offering, and
net borrowings and (repayments) of ($1.1 million) against the Company's and
GFI's lines of credit. Cash used for operating activities resulted primarily
from cash used to fund working capital needs. Investing activities included
$28.7 million used to purchase short-term investments, $4.0 million used to
purchase GFI, $385,000 used to purchase property and equipment, and by $1.9
million provided by the maturity of short - term investments.
The Company's principal cash needs on both a short and long-term basis
are for the funding of its operations, strategic acquisitions and capital
expenditure requirements. On June 28, 1996, the Company and Integrated Systems
Solutions Corporation (ISSC), a wholly-owned subsidiary of IBM Corporation,
signed an exclusive ten-year technology alliance agreement to develop and market
an electronic data collection and project management system for use in clinical
trials. As part of the technology alliance agreement, ISSC will fund the
development of the electronic data collection and project management system. The
Company expects to continue expanding its operations through internal growth,
strategic acquisitions, joint ventures and alliances. The Company expects such
activities will be funded from existing cash and cash equivalents and cash flow
from operations.
The Company has a line of credit with a commercial bank providing a
maximum credit facility of $5.0 million, that bears interest at rates not to
exceed 1% above the bank's prime rate. Amounts outstanding under the line of
credit are collateralized by substantially all Company assets, and are payable
on demand. There were no borrowings under the line at June 30, 1996. The line of
credit is subject to renewal at September 30, 1996.
The Company believes that cash generated from operations, amounts
available under its line of credit and the proceeds from its initial public
offering will be sufficient to fund its working capital and capital expenditure
requirements for the foreseeable future. However, selective acquisitions of
research organizations are anticipated to play an important role in the
Company's growth strategy. The Company has engaged in preliminary discussions
with several potential acquisition candidates. To the extent that the Company is
successful in its efforts to acquire additional research organizations, it may
require additional capital prior to that time. There can be no assurance as to
the Company's ability to obtain additional financing, based upon its current
financial condition.
11
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See the Index to Exhibits at page E - 1 of this Form
10 - Q.
(b) Reports on Form 8-K
None
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Collaborative Clinical Research, Inc.
--------------------------------------------
Registrant
Date: August 5, 1996 /s/ Jeffrey A. Green
--------------------- --------------------------------------------
Jeffrey A. Green,
President and Chief Executive Officer and a
Director
(Principal Executive Officer)
Date: August 5, 1996 /s/ Terry C. Black
--------------------- --------------------------------------------
Terry C. Black,
Vice President of Finance, Chief Financial
Officer,
Treasurer and Assistant Secretary
(Principal Financial Officer)
13
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EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 Fifth Amended and Restated Articles of Incorporation.
3.2 Third Amended and Restated Code of Regulations.
4.1 Specimen Certificate of the Company's Common Shares, without
par value, is incorporated by reference to Exhibit 4.1 of
the Company's Form S-1 Registration Statement (Registration
Statement No. 333-2140).
4.2 Demand Promissory Note, dated as of January 19, 1996,
payable to the order of Society National Bank is
incorporated by reference to Exhibit 4.3 of the Company's
Form S-1 Registration Statement (Registration Statement No.
333-2140).
4.3 Second Amended and Restated Registration Agreement, dated
July 15, 1994, as amended on June 1, 1995 and February 5,
1996, is incorporated by reference to Exhibit 4.10 of the
Company's Form S-1 Registration Statement (Registration
Statement No. 333-2140).
10.1 1994 Directors' Share Option Plan is incorporated by
reference to Exhibit 10.1 of the Company's Form S-1
Registration Statement (Registration Statement No.
333-2140).
10.2 Form of 1996 Outside Directors' Stock Option Plan is
incorporated by reference to Exhibit 10.2 of the Company's
Form S-1 Registration Statement (Registration Statement No.
333-2140).
10.3 1992 Share Incentive Plan is incorporated by reference to
Exhibit 10.3 of the Company's Form S-1 Registration
Statement (Registration Statement No. 333-2140).
10.4 Form of 1996 Key Employees' and Consultants Stock Option
Plan is incorporated by reference to Exhibit 10.4 of the
Company's Form S-1 Registration Statement (Registration
Statement No. 333-2140).
10.5 Form of Affiliation Agreement by and among the Company and
physicians is incorporated by reference to Exhibit 10.5 of
the Company's Form S-1 Registration Statement (Registration
Statement No. 333-2140).
10.6 Form of Affiliation Agreement by and among the Company and
research institutions is incorporated by reference to
Exhibit 10.6 of the Company's Form S-1 Registration
Statement (Registration Statement No. 333-2140).
E-1
<PAGE> 15
EXHIBIT NO. DESCRIPTION
----------- -----------
10.7 Form of Indemnification Agreement is incorporated by
reference to Exhibit 10.7 of the Company's Form S-1
Registration Statement (Registration Statement No.
333-2140).
10.8 Limited Liability Company Agreement, dated as of June 1,
1995, by and among the Company and PMSI is incorporated by
reference to Exhibit 10.9 of the Company's Form S-1
Registration Statement (Registration Statement No.
333-2140).
10.9 Employment Agreement between the Company and Debra S.
Adamson, dated February 1, 1996, is incorporated by
reference to Exhibit 10.10 of the Company's Form S-1
Registration Statement (Registration Statement No.
333-2140).
10.10 Employment Agreement between the Company and Mary L.
Westrick, dated February 1, 1996, is incorporated by
reference to Exhibit 10.11 of the Company's Form S-1
Registration Statement (Registration Statement No.
333-2140).
10.11 Employment Agreement between the Company and Richard J.
Kasmer, dated June 14, 1994, is incorporated by reference to
Exhibit 10.12 of the Company's Form S-1 Registration
Statement (Registration Statement No. 333-2140).
10.12 Employment Agreement between the Company and Jeffrey A.
Green, dated July 1, 1994, is incorporated by reference to
Exhibit 10.13 of the Company's Form S-1 Registration
Statement (Registration Statement No. 333-2140).
10.13 Employment Agreement between the Company and William H.
Stigelman, Jr., dated July 15, 1994, is incorporated by
reference to Exhibit 10.14 of the Company's Form S-1
Registration Statement (Registration Statement No.
333-2140).
10.14 Employment Agreement between the Company and Terry C. Black,
dated July 20, 1994, is incorporated by reference to Exhibit
10.15 of the Company's Form S-1 Registration Statement
(Registration Statement No. 333-2140).
10.15 Employment Agreement between the Company and Nathan F.
Messinger, dated December 10, 1993, is incorporated by
reference to Exhibit 10.16 of the Company's Form S-1
Registration Statement (Registration Statement No.
333-2140).
E-2
<PAGE> 16
EXHIBIT NO. DESCRIPTION
----------- -----------
10.16 GFI Pharmaceutical Services, Inc. Associates' Profit Sharing
and 401(k) Plan is incorporated by reference to Exhibit
10.18 of the Company's Form S-1 Registration Statement
(Registration Statement No. 333- 2140).
10.17 Lease Agreement between St. Mary's Medical Center of
Evansville, Inc. and GFI Pharmaceutical Services, Inc.,
dated January 5, 1996, is incorporated by reference to
Exhibit 10.19 of the Company's Form S-1 Registration
Statement (Registration Statement No. 333-2140).
10.18 Supplemental Lease Agreement between St. Mary's Medical
Center of Evansville, Inc. and GFI Pharmaceutical Services,
Inc., dated June 28, 1996.
10.19 Employment Agreement between the Company and Steven E.
Linberg, dated June 3, 1996
11 Statement re Computation of Net Income (Loss) Per Common
Share.
15 Independent Accountant's Review Report.
27 Financial Data Schedule.
99.1 Director and Officer Liability Insurance Policy.
E-3
<PAGE> 1
FIFTH AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
COLLABORATIVE CLINICAL RESEARCH, INC.
ARTICLE I
---------
The name of the Corporation is Collaborative Clinical
Research, Inc.
ARTICLE II
----------
The place in the State of Ohio where its principal office is
located is Beachwood, Cuyahoga County.
ARTICLE III
-----------
The purpose or purposes for which, or for any of which, the
Corporation is formed are to enter into, promote or conduct any kind of
business, contract or undertaking permitted to corporations for profit organized
under the General Corporation Laws of the State of Ohio, to engage in any lawful
act or activity for which corporations may be formed under Sections 1701.01 to
1701.98, inclusive, of the Revised Code of Ohio, and, in connection therewith,
to exercise all express and incidental powers normally permitted such
corporations.
ARTICLE IV
----------
The authorized number of shares of capital stock of the
Corporation shall consist of 18,860,000 shares, of which 15,000,000 shall be
Common Shares, without par value, 540,000 shall be designated Series A Preferred
Shares, $.001 par value per share ("Series A Preferred Shares"), 70,000 Series B
Preferred Shares, $.001 par value per share ("Series B Preferred Shares"), and
2,250,000 Series C Preferred Shares, $.001 par value per share ("Series C
Preferred Shares") (collectively, the Series A Preferred Shares, Series B
Preferred Shares and Series C Preferred Shares are hereinafter referred to as
the "Existing Preferred Shares") and 1,000,000 shall be Serial Preferred Shares,
without par value.
<PAGE> 2
Subdivision A
Provisions Applicable to Existing Preferred Shares
- --------------------------------------------------
1. Definitions.
------------
For purposes of this Subdivision A, Article IV, the following definitions shall
apply:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Corporation" shall mean Collaborative Clinical Research, Inc.
(c) "Original Issue Date" for (i) the Series A Share shall mean March
25, 1992, (ii) for the Series B Shares shall mean the date on which the first
Series B Share was issued, and (iii) for the Series C Shares shall mean the date
on which the first Series C Share is issued.
(d) "Subsidiary" shall mean any corporation at least 50% of whose
outstanding voting shares shall at the time be owned directly or indirectly by
the Corporation or by one or more Subsidiaries.
(e) The term "Additional Shares" as used herein shall mean all Common
Shares, or any securities convertible into or exchangeable for Common Shares,
issued or deemed issued by the Corporation after an Original Issue Date, whether
or not subsequently reacquired or retired by the Corporation , other than (i)
Common Shares issued upon conversion of Existing Preferred Shares, (ii) up to
500,000 Common Shares (as adjusted for all stock dividends, stock splits,
subdivisions and combinations) issued to employees, officers, directors,
consultants or other persons performing services for the Corporation (if so
issued solely because of any such person's status as an officer, director,
employee, consultant or other person performing services for the Corporation and
not as part of any offering of the Corporation 's securities) pursuant to any
stock option plan, stock purchase plan or management incentive plan, agreement
or arrangement approved by the Board, (iii) Common Shares issued or deemed
issued to non-employee directors of the Corporation pursuant to a non-employee
director stock option plan approved by the Board and the shareholders of the
Corporation, (iv) as to each holder of Existing Preferred Shares, Common Shares
which are purchased by such holder, (v) Common Shares issued or deemed issued in
lieu of cash as dividends on Existing Preferred Shares, or (vi) Common Shares
issued or issuable with respect to the securities referred to in (i), (ii),
(iii), (iv) or (v) by way of stock split or stock dividend or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization.
2
<PAGE> 3
2. Dividends.
----------
(a)(1) From and after the second anniversary of the Original
Issue Date of the Series A Shares through the third anniversary of the Original
Issue Date of the Series A Shares, the holders of record of the then outstanding
Series A Shares shall be entitled to receive quarterly, commencing on the date
which is 90 days after the second anniversary of the Original Issue Date of the
Series A Shares, cumulative dividends at the annual rate of $.10 per Series A
Share, accruing from day to day and payable in Series A Shares (in lieu of cash)
at an annual rate of 0.08 Series A Shares for each Series A Share then
outstanding.
(a)(2) From and after the third anniversary of the Original
Issue Date of the Series A Shares, dividends shall accrue on the outstanding
Series A Shares, and from and after the Original Issue Date of the Series C
Shares, dividends shall accrue on the outstanding Series C Shares (in each case,
at the rates hereinafter set forth) cumulatively on a daily basis, whether or
not funds are legally available therefor and whether or not declared by the
Board of Directors. Dividends shall accrue (i) in the case of the Series A
Shares at the annual rate of $.10 per Series A Shares and (ii) in the case of
the Series C Shares at the annual rate of $.24 per Series C Share. Such
dividends shall be payable when and as declared by the Board and shall be paid
in cash or, in the Board's discretion, by the issuance, to each holder of
Existing Preferred Shares on which dividends have accrued, of the number of
Series C Shares determined by dividing the aggregate amount of such dividends
due to such holder of Existing Preferred Shares by the Share Price (as
hereinafter defined) then in effect. As used herein, the term "Share Price"
shall mean (i) until July 31, 1995, $3.00 and (ii) from and after August 1,
1995, the fair market value of a Series C Share as determined by the Board,
exercising its good faith judgment.
(b) Subject to the provisions of this paragraph 1, the
Corporation may, in the Board's discretion, declare and pay dividends or
distributions, or make provision for the payment thereof, on any equity security
of the Corporation, but only if all accrued dividends and distributions on the
Existing Preferred Shares shall have been paid and made in full prior to the
date of any such declaration, payment, provision or distribution.
(c) Notwithstanding any of the foregoing provisions to the
contrary, no dividends shall be declared paid or distributed, or provision
therefor made, on any Common Shares or any other equity securities of the
Corporation, unless simultaneously therewith there also shall be declared, paid
or distributed, or provision therefor made, as the case may be, a dividend or
distribution in like amount (on an as-converted basis as described in
subparagraph (d) of this paragraph 2) on each then outstanding Existing
Preferred Share to each holder thereof.
3. Liquidation Rights.
-------------------
(a) In the event of any liquidation dissolution or winding up
of the affairs of the Corporation, whether voluntary or involuntary, after
payment or provision for payment of the debts and other liabilities and
obligations of the Corporation, each holder of Existing Preferred Shares then
outstanding shall be entitled to be paid out of the net assets of the
Corporation
3
<PAGE> 4
available for distribution to its shareholders, if any, prior and in preference
to any payment or declaration and setting apart for payment of any amount in
respect of Common Shares, an amount equal to the sum of the follows: (i)(A)
$1.20 per Series A Share held by such holder, (B) $1.50 per Series B Share held
by such holder, and (C) $3.00 per Series C Share held by such holder, (ii) an
amount equal to all accrued and unpaid dividends thereon; whether or not earned
or declared, to and including the date full payment shall be tendered to the
holders of the Existing Preferred Shares with respect to such liquidation,
dissolution or winding up, and (iii) the fair market value, reasonably
determined in good faith by the Board, of the evidences of indebtedness, assets
and securities referred to in paragraph 5(f) of this Subdivision A to which such
holders would have been entitled to receive upon conversion of their Existing
Preferred Shares (clauses (i) through (iii), collectively the "Liquidation
Preference"); if upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed to
the holders of the Existing Preferred Shares shall be insufficient to permit the
payment to such holders of the full Liquidation Preference, then all of the net
assets of the Corporation available for distribution to its shareholders shall
be distributed ratably among the holders of the Existing Preferred Shares in
proportion to the then applicable Liquidation Preference with respect to each
Existing Preferred Share.
(b) Upon the completion of the distribution required by
subparagraph (a), if assets of the Corporation remain to be distributed each
holder of Existing Preferred Shares shall be entitled to be paid out of the
remaining assets of the Corporation, as and when distributed, pro rata with the
holders of Common Shares, on each Existing Preferred Share deemed to be
outstanding. For purposes of the foregoing, the number of Existing Preferred
Shares deemed to be outstanding with respect to each such holder shall be equal
to the maximum number of Common Shares into which such holder's Existing
Preferred Shares would then be convertible upon exercise of the Conversion
Rights described in paragraph 5 of this Subdivision A.
(c) A consolidation or merger of the Corporation or sale of
all or substantially all of the assets or capital stock of the Corporation shall
be treated as a liquidation, dissolution or winding up of the affairs of the
Corporation within the meaning of this paragraph 3. In such event, each holder
of Existing Preferred Shares then outstanding shall have the right to elect the
benefits of the provisions of paragraph 5(h) of this Subdivision A in lieu of
receiving payment of the Liquidation Preference and other payments pursuant to
this paragraph 3.
(d) Written notice of any such liquidation, dissolution or
winding up, stating a payment date, the place where such payment shall be made,
an estimate of the net value that would be received by each such holder if all
such holders converted all of their Existing Preferred Shares immediately prior
to such liquidation, dissolution or winding up of the Corporation, and
containing a statement of or reference to applicable conversion rights, shall be
given by first-class mail, postage prepaid, not less than thirty (30) days prior
to the payment date stated therein, to each holder of record of the Existing
Preferred Shares at such holder's address as shown in the records of the
Corporation.
4
<PAGE> 5
(e) Whenever the distribution provided for in this paragraph 3
shall be payable in property other than cash, the value of such distribution
shall be the fair market value of such property as determined in good faith by
the Board.
4. VOTING RIGHTS. Except as otherwise expressly provided herein or as
required by law, the holders of Existing Preferred Shares shall be entitled to
vote on all matters upon which holders of Common Shares have a the right to vote
and, with respect to such vote, shall be entitled to notice of any shareholders'
meeting in accordance with the code of regulations of the Corporation, and shall
be entitled to a number of votes equal to the number of Common Shares into which
such Existing Preferred Shares could then be converted, upon conversion pursuant
to the Conversion Rights described in paragraph 5 of this Subdivision A, at the
record date for the determination of shareholders entitled to vote on such
matters or, if no such record date is established, at the date such vote is
taken or any written consent of shareholders is solicited. Except as otherwise
expressly provided herein, or to the extent class or series voting is otherwise
required by law or agreement, the holders of Existing Preferred Shares and
Common Shares shall vote together as a single class and not as separate classes.
5. CONVERSION. The holders of the Existing Preferred Shares shall
have the following conversion rights (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each Existing Preferred Share shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such shares, at the office of the Corporation or any transfer agent
for the Existing Preferred Shares or Common Shares, into fully paid and
nonassessable Common Shares, at the applicable Conversion Price (as hereafter
defined) therefor in effect at the time of conversion determined as provided
herein, and prior to the closing date for any underwritten public offering of
Common Shares pursuant to an effective registration statement under the
Securities Act of 1933, as amended, the gross proceeds of which to the
Corporation and/or selling shareholders (if any) are at least $10 million,
provided that the public offering price per share (before deducting any
underwriting fee or selling commissions but adjusted equitably whenever there
shall occur a stock split, combination, reclassification or other similar event
involving the Common Shares) is at least $9.00 (a "Public Offering")(but the
right to convert shall not expire upon such occurrence unless an automatic
conversion shall have occurred as set forth in paragraph 5(c) of this
Subdivision A).
(b) CONVERSION PRICES. (i) Each Series A Share shall be
convertible into the number of Common Shares that results from dividing $1.20 by
the conversion price per share (the "Series A Conversion Price") in effect at
the time of conversion of such Series A Shares. The Series A Conversion Price
for each Series A Share at the Original Issue Date for the Series A Shares shall
be $1.20 and shall be subject to adjustment from time to time as provided
herein.
(ii) Each Series B Shares shall be convertible into
the number of Common Shares that results from dividing $1.50
by the conversion price per share (the "Series B Conversion
Price") in effect at the time of conversion of such Series B
Shares. The Series B Conversion Price for each Series B Share
at the
5
<PAGE> 6
Original Issue Date for the Series B Shares shall be $1.50 and
shall be subject to adjustment from time to time as provided
herein.
(iii) Each Series C Share shall be convertible into
the number of Common Shares that results from dividing $3.00
by the conversion price per share (the "Series C Conversion
Price") in effect at the time of conversion of such Series C
Share. The Series C Conversion Price for each Series C Share
at the Original Issue Date for the Series C Shares shall be
$3.00 and shall be subject to adjustment from time to time as
provided herein.
(The Series A Conversion Price, the Series B Conversion Price, and the Series C
Conversion Price are sometimes collectively referred to herein as "Conversion
Prices".)
(c) AUTOMATIC CONVERSION.
(i) Each Preferred Share which remains outstanding
on the closing date for a Public Offering (the "Registration
Date") shall automatically and without any action on the part
of the holder thereof or the Corporation, except as provided
in clause (A) below, be converted on the same basis and at the
same Conversion Price as if each holder thereof had properly
exercised his right under subparagraph 5(a) to convert on the
day next preceding the Registration Date; provided, that (A)
each holder of Existing Preferred Shares shall have received
written notice of the proposed Public Offering at least 30
days prior to the date the registration statement relating to
that Public Offering becomes effective, (B) such conversion
shall be effective at the close of business on the
Registration Date, and (C) the Corporation shall have no
obligation to issue and deliver to any such holder of Existing
Preferred Shares on such date a certificate for the number of
Common Shares to which such holder shall be entitled until
such time as such holder has surrendered his certificate or
certificates for his Existing Preferred Shares, duly endorsed,
at the office of the Corporation or any transfer agent for the
Common Shares, or the holder notifies the Corporation that
such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in
connection therewith. All rights with respect to Existing
Preferred Shares outstanding on the Registration Date shall
forthwith after the Registration Date terminate, except only
the right of the holders of such shares to receive Common
Shares upon surrender of their certificates for the Existing
Preferred Shares and their rights with respect to unpaid
dividends described in paragraph 5(d) of this Subdivision A.
(ii) Notwithstanding the foregoing provisions of
this paragraph 5(c), in the event of a Public Offering, then
as a condition to the consummation of the Public Offering and
the automatic conversion set forth in paragraph 5(c), there
shall be paid in full to all holders of the Existing Preferred
Shares to be so converted, all accrued and unpaid dividends
and distributions with respect to such Existing Preferred
Shares; provided, however, if a majority of the Board shall so
6
<PAGE> 7
direct, the payment required by this subparagraph may be made
by the issuance to each holder of Existing Preferred Shares of
the number of Series C Shares determined by dividing the
aggregate amount of such dividends and distributions due to
such holder of Existing Preferred Shares by the Shares Price
then in effect, which Series C shares shall immediately be
converted into Common Shares as provided in this paragraph
5(c)(ii).
(d) MECHANICS OF CONVERSION, UNPAID DIVIDENDS. Before any
holder of Existing Preferred Shares shall be entitled to convert the same into
Common Shares, such holder shall either (i) surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Existing Preferred Shares or Common Shares, or (ii)
deliver an affidavit in favor of the Corporation stating that such certificates
have been lost, stolen or destroyed and containing an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith, and shall give written notice by mail, postage prepaid, to
the Corporation at such office that such holder elects to convert the same and
shall state therein the number of Existing Preferred Shares being converted and
the name or names in which the certificate or certificates for Common Shares are
to be issued. Thereupon the Corporation shall promptly issue and deliver at such
office to such holder of Existing Preferred Shares or to the nominee or nominees
of such holder a certificate or certificates for the number of Common Shares to
which such holder shall be entitled. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the Existing Preferred Shares to be converted, and the person or
persons entitled to receive the Common Shares issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such Common
Shares on such date. All dividends accrued and unpaid prior to surrender of
Existing Preferred Shares surrendered for conversion shall at the option of the
holder of Existing Preferred Shares, either (i) be subtracted from the aggregate
Conversion Price as in effect at the time of conversion or (ii) constitute a
debt of the Corporation payable to the converting shareholder, and no dividend
or other distribution shall be paid on, declared or set apart for any Common
Shares until such debt is fully paid or sufficient funds set apart for the
payment thereof; provided, however, that with respect to the conversion of
Existing Preferred Shares pursuant to paragraph 5(c) above, accrued and unpaid
dividends and distributions with respect to such Existing Preferred Shares may
be made by the issuance of Series C Shares in accordance with the provisions of
paragraph 5(c)(ii) above.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision or combination of any outstanding Common Shares, the
applicable Conversion Price then in effect immediately before that subdivision
or combination shall be proportionately adjusted by multiplying the then
effective applicable Conversion Price by a fraction, (i) the numerator of which
shall be the number of Common Shares issued and outstanding immediately prior to
such subdivision or combination, and (ii) the denominator of which shall be the
number of Common Shares issued and outstanding immediately after such
subdivision or combination. The number of Common Shares outstanding at any time
shall, for the purposes of this paragraph 5(e), include the number of Common
Shares into which any convertible securities of the Corporation may be
converted, or for which any warrant, option or rights of the Corporation may be
exchanged. Any adjustment
7
<PAGE> 8
under this paragraph 5(e) shall become effective at the close of business on the
date the subdivision or combination becomes effective.
(f) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the determination of holders
of Common Shares entitled to receive, a dividend or other distribution payable
in (i) evidences of indebtedness of the Corporation, (ii) assets of the
Corporation (other than cash), or (iii) securities of the Corporation other than
Common Shares, then and in each such event provision shall be made so that the
holders of Existing Preferred Shares shall receive upon conversion thereof, in
addition to the number of Common Shares receivable thereupon, the amount of such
evidences, assets or securities that they would have received had they held, on
such record date, the maximum number of Common Shares into which their Existing
Preferred Shares could then have been converted.
(g) ADJUSTED FOR RECLASSIFICATION, EXCHANGE OR SUBSTITUTION.
If the Common Shares issuable upon the conversion of the Existing Preferred
Shares shall be changed into the same or a different number of shares of any
class or classes of stock, whether by capital reorganization, reclassification
or otherwise (other than a subdivision or combination of shares or stock
dividend provided for above, or a reorganization, merger, consolidation or sale
of assets provided for elsewhere in this paragraph 5), then and in each such
event the holder of each Existing Preferred Share shall have the right
thereafter to convert each such share into the kind and amounts of shares of
stock and other securities and property receivable upon such reorganization,
reclassification or other change, by holders of the maximum number of Common
Shares into which such Existing Preferred Shares could have ben converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
(h) REORGANIZATION, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS
OR CAPITAL STOCK. If at any time or from time to time there shall be a capital
reorganization of the Common Shares (other than a subdivision, combination,
reclassification or exchange or shares provided for elsewhere in this paragraph
5) or a merger or consolidation of the Corporation with or into another
corporation, or the sale of all or substantially all of the Corporation's
properties and assets or capital stock to any other person, then, as a part of
such reorganization, merger, consolidation or sale, provision shall be made so
that the holders of the Existing Preferred Shares shall thereafter be entitled
to receive, upon conversion of the Existing Preferred Shares, the number of
shares of stock or other securities or property of the Corporation, or of the
successor corporation resulting from such merger or consolidation or sale. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this paragraph 5 with respect to the rights of the holders of the
Existing Preferred Shares after the reorganization, merger, consolidation or
sale to the end that the provisions of this paragraph 5 (including adjustment of
the applicable Conversion Price then in effect and the number of shares
purchasable upon conversion of the Existing Preferred Shares) shall be
applicable after that event as nearly equivalent as may be practicable. Each
holder of Existing Preferred Shares upon the occurrence of a capital
reorganization, merger or consolidation of the Corporation or the sale of all or
substantially all its assets and properties or capital stock as such events are
more fully set forth
8
<PAGE> 9
in this paragraph 5(h) shall have the option of electing treatment of such
holder's Existing Preferred Shares under either this paragraph 5(h) or paragraph
3 of this Subdivision A, notice of which election shall be submitted in writing
to the Corporation at its principal office no later then ten days before the
effective date of such event.
(i) SALES OF SHARES BELOW CONVERSION PRICE.
(i) If, at any time or from time to time after the
Original Issue Date for the Series A Shares, the Corporation
shall issue or sell Additional Shares (as hereinafter
defined), other than as a dividend and other than upon a
subdivision or combination of Common Shares as provided in
paragraph 5(e) above, for no consideration or for
consideration per share less than the then existing Series A
Conversion Price, then and in each case the then applicable
Series A Conversion Price shall be reduced, as of the opening
of business on the date of such issue or sale, to the price
(calculated to the nearest cent) equal to the product
determined by multiplying the Series A Conversion Price in
effect immediately prior thereto by a fraction, (A) of which
the numerator shall be (1) the total number of Common Shares
outstanding immediately prior to the time of such issue or
sale, plus (2) the number of additional Common Shares which
the aggregate consideration, if any, received by the
Corporation for the total number of Common Shares so issued or
sold would purchase at the Series A Conversion Price in effect
immediately prior to such issuance or sale, and (B) of which
the denominator shall be (1) the total number of Common Shares
outstanding immediately prior to such issuance or sale, plus
(2) the number of Additional Shares so issued or sold. For
purposes of the foregoing sentence, the total number of Common
Shares outstanding shall be deemed to include the number of
Common Shares which would be outstanding if all outstanding
securities exercisable for or convertible into Common Shares
were so exercised or converted.
(ii) If, at any time or from time to time after the
Original Issue Date for the Series B Shares, the Corporation
shall issue or sell Additional Shares, other than as a
dividend and other than upon a subdivision or combination of
Common Shares as provided in paragraph 5(e) above, for no
consideration or for consideration per share less than the
then existing Series B Conversion Price, then and in each case
the then applicable Series B Conversion Price shall be
reduced, as of the opening of business on the date of such
issue or sale, to the price (calculated to the nearest cent)
equal to the product determined by multiplying the Series B
Conversion Price in effect immediately prior thereto by a
fraction, (A) of which the numerator shall be (1) the total
number of Common Shares outstanding immediately prior to the
time of such issue or sale, plus (2) the number of additional
Common Shares which the aggregate consideration, if any,
received by the Corporation for the total number of Additional
Shares so issued or sold would purchase at the Series B
Conversion Price in effect immediately prior to such issuance
or sale, and (B) of which the denominator shall be (1) the
total number of Common Shares outstanding immediately prior to
such issuance or sale, plus
9
<PAGE> 10
(2) the number of Additional Shares so issued or sold. For
purposes of the foregoing sentence, the total number of Common
Shares outstanding shall be deemed to include the number of
Common Shares which would be outstanding if all outstanding
securities exercisable for or convertible into Common Shares
were so exercised or converted.
(iii) If, at any time or from time to time after the
Original Issue Date for the Series C Shares, the Corporation
shall issue or sell Additional Shares, other than as dividend
and other than upon a subdivision or combination of Common
Shares as provided in paragraph 5(e) above, for no
consideration or for consideration per share less than the
then existing Series C Conversion Price, then and in each case
the then applicable Series C Conversion Price shall be
reduced, as of the opening of business on the date of such
issue or sale, to the price (calculated to the nearest cent)
equal to the product determined by multiplying the Series C
Conversion Price in effect immediately prior thereto by a
fraction, (A) of which the numerator shall be (1) the total
number of Common Shares outstanding immediately prior to the
time of such issue or sale, plus (2) the number of additional
Common Shares which the aggregate consideration, if any,
received by the Corporation for the total number of Additional
Shares so issued or sold would purchase at the Series C
Conversion Price in effect immediately prior to such issuance
or sale, and (B) of which the denominator shall be (1) the
total number of Common Shares outstanding immediately prior to
such issuance or sale, plus (2) the number of Additional
Shares so issued or sold. For purposes of the foregoing
sentence, the total number of Common Shares outstanding shall
be deemed to include the number of Common Shares which would
be outstanding if all outstanding securities exercisable for
or convertible into Common Shares were so exercised or
converted.
(iv) For the purpose of making any adjustment in the
applicable Conversion Price or number of Common Shares
deliverable on conversion of Existing Preferred Shares as
provided above, the consideration received by the Corporation
for any issue or sale of securities shall:
(A) to the extent it consists of cash, be
computed at the net amount of cash received by the
Corporation after deduction of any underwriting or
similar commissions, concessions or compensation paid
or allowed by the Corporation in connection with such
issue or sale;
(B) to the extent it consists of services or
property other than cash, be computed at fair value
of such services or property as reasonably determined
in good faith by the Board; and
(C) if Additional Shares, Convertible
Securities (as hereinafter defined), or rights or
options to purchase either Additional Shares or
Convertible Securities are issued or sold together
with other shares or
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<PAGE> 11
securities or other assets of the Corporation for a
consideration that covers both, be computed as the
portion of the consideration so received that may be
reasonably determined in good faith by the Board to
be allocable to such Additional Shares, Convertible
Securities or rights or options.
(v) For the purpose of any adjustment provided in
subsection (i) of this paragraph 5(i), if at any time or from
time to time after the applicable Original Issue Date for any
Existing Preferred Share the Corporation shall issue any
rights or options for the purchase of, or stock or other
securities convertible into, Additional Shares (such
convertible stock or securities being hereinafter referred to
as "Convertible Securities"), then, in each case, if the
5(i)(v) Effective Price (as hereinafter defined) of such
rights, options or Convertible Securities shall be less than
the then existing applicable Conversion Price for the Series A
Shares, Series B Shares or Series C Shares, as the case may
be, the Corporation shall be deemed to have issued at the time
of the issuance of such rights or options or Convertible
Securities the maximum number of Additional Shares issuable
upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares an amount equal
to the total amount of the consideration, if any, received by
the Corporation for the issuance of such rights or options or
Convertible Securities, plus, in the case of such options or
rights, the minimum amounts of consideration, if any, payable
to the Corporation upon exercise or conversion of such options
or rights. For purposes of this subsection (v) of this
paragraph 5(i), "5(i)(v) Effective Price" shall mean the
quotient determined by dividing the total of all such
consideration by such maximum number of Additional Shares. No
further adjustment of either Conversion Price adjusted upon
the issuance of such rights, options or Convertible Securities
shall be made as a result of the actual issuance of Additional
Shares on the exercise of any such rights or options or the
conversion of any such Convertible Securities. If any such
rights or options or the conversion privilege represented by
any such Convertible Securities shall expire without having
been exercised, either Conversion Price adjusted upon the
issuance of such rights, options or Convertible Securities
shall be readjusted to the Conversion Price that would have
been in effect had an adjustment been made on the basis that
the only Additional Shares so issued were the Additional
Shares, if any, actually issued or sold on the exercise of
such rights or options or rights of conversion of such
Convertible Securities, and such Additional Shares, if any,
were issued or sold for the consideration actually received by
the Corporation upon such exercise, plus the consideration, if
any, actually received by the Corporation for the granting of
all such rights or options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible
Securities actually converted plus the consideration, if any,
actually received by the Corporation on the conversion of such
Convertible Securities.
(vi) For the purpose of any adjustment provided for
in subsection (i) of this paragraph 5(i), if at any time or
from time to time after an Original Issue Date the Corporation
shall issue any rights or options for the purchase of
Convertible
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<PAGE> 12
Securities, then, in each such case, if the 5(i)(vi) Effective
Price (as hereinafter defined) thereof is less than either
then current Conversion Price, the Corporation shall be deemed
to have issued at the time of the issuance of such rights or
options the maximum number of Additional Shares issuable upon
conversion of the total amount of Convertible Securities
covered by such rights or options and to have received as
consideration for the issuance of such Additional Shares an
amount equal to the amount of consideration, if any, payable
to the Corporation upon the conversion of such Convertible
Securities. For purposes of the foregoing, "5(i)(vi) Effective
Price" for purposes of this subsection (vi) of this paragraph
5(i) shall mean the quotient determined by dividing the total
amount of such consideration by such maximum number of
Additional Shares. No further adjustment of such Conversion
Price adjusted upon the issuance of such rights or options
shall be made as a result of the actual issuance of the
Convertible Securities upon the exercise of such rights or
options or upon the actual issuance of Additional Shares upon
the conversion of such Convertible Securities.
The provisions of subsection (v) above for the readjustment of
either Conversion Price upon the expiration of rights or options or the rights
of conversion of Convertible Securities, shall apply mutatis mutandis to the
rights, options and Convertible Securities referred to in this subsection (vi).
(j) NOTICES OF RECORD DATE. In the event of (i) any taking by
the Corporation of a record of the holders of any class or series of securities
for the purpose of determining the holders thereof who are entitled to receive
any dividend or other distribution, or (ii) any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, or any transfer of all or substantially all of
the assets or capital stock of the Corporation to any other corporation, entity
or person, or any voluntary or involuntary dissolution, liquidation or winding
up of the affairs of the Corporation, the Corporation shall mail to each holder
of Existing Preferred Shares at least 30 days prior to the record date specified
therein, a notice specifying (A) the date on which any such record is to be
taken for the purpose of such dividend or distribution and a description of such
dividend or distribution, (B) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, and (C) the time, if any is to be
fixed, as to when the holders of record of other securities of the Corporation
shall be entitled to exchange such other securities for securities or other
property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, dissolution, liquidation or winding up.
6. Mandatory Redemption Of Preferred Shares.
-----------------------------------------
(a)(i) On March 25, 1999, the Corporation shall redeem from
each holder of Existing Preferred Shares thirty-three and one-third percent
(33-1/3%) of the number of Existing Preferred Shares held by such holder on such
date, (ii) on March 24, 2000, the Corporation shall redeem from each holder of
Existing Preferred Shares fifty percent (50%) of the number of Existing
Preferred Shares held by such holder on such date, and (iii) on March 23, 2001,
the
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<PAGE> 13
company shall redeem from each holder of Existing Preferred Shares all Existing
Preferred Shares held by such holder on such date. Each of March 25, 1999, March
24, 2000 and March 23, 2001 are referred to herein as a "Redemption Date" and
collectively as the "Redemption Dates." Each Existing Preferred Share to be
redeemed on any Redemption Date is referred to herein as a "Redemption Share."
The redemption price per Redemption Share shall be an amount (the "Redemption
Price") equal to the sum of (i) the Liquidation Preference per Redemption Share
which would be payable on each respective Redemption Date if the Liquidation
Preference were then payable, and (ii) the amount per Redemption Share that
would be distributed to the holder of Redemption Shares pursuant to paragraph
3(b) of this Subdivision A if the Corporation were to be liquidated on the
Redemption Date. The Redemption Price shall be determined by an investment
banker appointed as set forth below. As a condition to the payment of each
respective Redemption Price on each Redemption Date, the Redemption Shares to be
redeemed shall be surrendered to the Corporation in the manner and at the time
and place set therefor by the Corporation in the Redemption Notice (as defined
below).
(b) One hundred eighty days prior to each Redemption Date, the
Corporation shall notify all holders of Redemption Shares. Within seven days
from the date of receipt by the last of such holders to receive such notice, the
holders of a majority of the Redemption Shares and the Corporation shall appoint
as an appraiser a mutually acceptable investment banker to determine the
Redemption Price payable on each respective Redemption Date. If the parties
cannot agree on an appraiser within such seven-day period, each shall appoint an
independent investment banker within seven days of the expiration of such
period, and the investment bankers so appointed shall determine the Redemption
Price payable on each respective Redemption Date. If such investment bankers
cannot agree within 14 days of the last of them to be appointed, then such
appraisers shall appoint another independent appraiser within seven days
thereof, whose decision shall be final. The Corporation shall pay all costs and
expenses incurred by the parties in appointing and compensating the foregoing
appraisers.
(c) Upon surrender of the certificates as aforesaid, each
holder of Redemption Shares shall be entitled to receive, and the Corporation
shall immediately pay to each holder in cash, the aggregate Redemption Price.
(d) Not less than 10 days nor more than 60 days prior to the
Redemption Date, written notice (the "Redemption Notice") shall be mailed,
postage prepaid, to each holder of record of Redemption Shares at such holder's
post office address last shown on the records of the Corporation. The Redemption
Notice shall state:
(i) The total number of Redemption Shares to be
redeemed and the number of Redemption Shares held by such
holder to be redeemed;
(ii) The Redemption Date and the Redemption Price;
(iii) The date upon which the holders' Conversion
Rights as to such Redemption Shares terminate; and
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<PAGE> 14
(iv) That the holder is to surrender to the
Corporation, at the principal place of business of the
Corporation, such holder's certificate or certificates
representing the Redemption Shares to be redeemed.
(e) If the Redemption Notice shall have been duly given, and
if on the Redemption date the Redemption Price shall have been paid in full to a
holder of Redemption Shares, then all dividend and voting rights with respect to
such Redemption Shares shall terminate as of the applicable Redemption Date.
(f) If the Corporation for any reason fails to redeem any
Redemption Shares in accordance with this paragraph 6 on or prior to the
Redemption Dates specified herein, then, notwithstanding anything to the
contrary contained in these Articles, such Existing Preferred Shares shall
remain outstanding and the holders of such Existing Preferred Shares shall
continue to have all of the rights (including, without limitation, the
Conversion Rights and the dividend and voting rights) thereunto pertaining until
such time as such Existing Preferred Shares are redeemed. So long as any
Existing Preferred Shares required to be redeemed remain outstanding after the
Redemption Dates specified, the Corporation may not incur any indebtedness for
borrowed money (unless the proceeds of such incurrence of indebtedness are used
to make all overdue redemptions) or borrow or reborrow any amounts under any
lines of credit which it may then have outstanding without the prior written
consent of the holders of not less than sixty-six and two-thirds percent
(66-2/3%) in voting power of the then outstanding Existing Preferred Shares. If
funds of the Corporation legally available for redemption of Redemption Shares
on a Redemption Date are insufficient to redeem the total number of Redemption
Shares pro rata from among all holders of Redemption Shares on the basis of the
aggregate number of Redemption Shares held by each such holder on such
Redemption Date. At any time thereafter when additional funds of the Corporation
are legally available for the redemption of Redemption Shares, such funds will
be set aside and used, 30 days after the end of the next succeeding fiscal
quarter, following giving of a new Redemption Notice, to redeem the balance of
such Redemption Shares, or such portion thereof for which funds are then legally
available.
7. Restrictions And Limitations.
-----------------------------
So long as any Series A Shares or Series C Shares remain
outstanding, the Corporation shall not, and shall not permit any Subsidiary to,
without the vote or written consent by the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the then outstanding Series A Shares and Series
C Shares voting as a single class:
(a) Redeem, purchase or otherwise acquire for value, any
Existing Preferred Shares otherwise than by redemption in accordance with
paragraph 6 of this Subdivision A;
(b) Purchase, redeem or otherwise acquire (or pay into or set
aside for a sinking fund for such purpose), any of the Common Shares; provided,
however, that this restriction shall not apply to the repurchase of Common
Shares from employees, officers, directors, consultants or other persons
performing services for the Corporation or any Subsidiary
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<PAGE> 15
pursuant to agreements under which the Corporation has the option or is
obligated to repurchase such shares upon the occurrence of certain events, such
as the termination of employment;
(c) Effect any sale, lease, assignment, transfer or other
conveyances of all or substantially all of the assets of the Corporation or any
of its Subsidiaries, or any consolidation or merger involving the Corporation or
any of its Subsidiaries, or any reclassification or other change of any stock,
or any recapitalization of the Corporation, or liquidation or winding up of the
affairs of the Corporation;
(d) Permit any Subsidiary to issue or sell, or obligate itself
to issue or sell, except to the Corporation or any other wholly owned
Subsidiary, any stock of such Subsidiary;
(e) Increase or decrease (other than by redemption or
conversion) the total number of authorized Existing Preferred Shares;
(f) Amend these Articles of Incorporation or the code of
regulations of the Corporation; or
(g) Authorize or issue any equity security or warrants,
options or other rights to purchase such securities or any securities
convertible into or exchangeable for such securities (collectively, the "New
Securities"); provided, however, that "New Securities" do not include:
(i) securities issued in connection with any stock
splits, stock dividends or other distributions payable pro
rata to all holders of Common Shares (except to the extent
such shares are restricted from being issued pursuant to any
other provision of these Articles of Incorporation);
(ii) the Existing Preferred Shares, any warrant,
option or other right to purchase Existing Preferred Shares or
Common Shares issued upon the conversion of the Existing
Preferred Shares (as adjusted for all subsequent stock
dividends, subdivisions and combinations, the "Conversion
Shares") or any Common Shares issued upon conversion of any
other security so long as such other security was itself a New
Security;
(iii) warrants, options or other rights to purchase
Common Shares or securities convertible into or exchangeable
for such shares, the aggregate of which shares shall not
exceed 500,000 Common Shares (as adjusted for all stock
dividends, subdivisions and combinations), issued to
employees, officers, directors, consultants or other persons
performing services for the Corporation (if so issued solely
because of any such person's status as an officer, employee,
director, consultant or other person performing services for
the Corporation, and not as part of any other offering of
Corporation securities) pursuant to any stock option plan,
stock purchase plan or management incentive plan, agreement or
arrangement adopted by the Board and approved by the holders
of a majority of the issued and outstanding Preferred Shares;
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<PAGE> 16
(iv) options or other rights to purchase Preferred
Shares or Common Shares issued to non-employee directors of
the Corporation pursuant to a non-employee directors' stock
option plan adopted by the Board and approved by the
shareholders of the Corporation and by the holders of a
majority of the issued and outstanding Existing Preferred
Shares;
(v) Common Shares issued upon the exercise of any
warrant, option or other right to purchase Common Shares so
long as such warrant, option or other right was itself a New
Security or was excluded from the definition of New Security
pursuant to clauses (iii) or (iv) above;
(vi) Common Shares sold to the public pursuant to a
Public Offering; and
(vii) any securities issued after the Registration
Date of a Public Offering.
8. STATUS OF PREFERRED SHARES. No Existing Preferred Shares acquired by
the Corporation by reason of redemption, purchase, conversion or otherwise shall
be reissued, and all such shares shall be cancelled, retired and eliminated from
the shares which the Corporation shall be authorized to issue, except for the
pledge of such shares upon redemption thereof pursuant to an agreement to which
the Corporation is a party for the purpose of securing repayment of amounts
owing with respect to such redemption.
B. Miscellaneous.
--------------
1. ACCOUNTANTS' CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of either Conversion Price for the number of Common
Shares or other securities issuable upon conversion of the Series A Shares,
Series B Shares or Series C Shares, the Corporation, at its expense, shall cause
independent certified public accountants of recognized standing selected by the
Corporation (who may be the independent certified public accountants then
reviewing or auditing the books of the Corporation) to compute such adjustment
or readjustment in accordance herewith and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first-class
mail, postage prepaid, to each registered holder of the Existing Preferred
Shares, at the holder's address as shown in the Corporation's books. The
certificate shall set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based including a
statement of (i) if appropriate, the consideration received or to be received by
the Corporation for any Additional Shares issued or sold or deemed to have been
issued or sold, (ii) the Conversion Price at the time in effect for each series
of the Existing Preferred Shares, and (iii) the number of Additional Shares and
the type and amount, if any, of other property which at the time would be
received upon conversion of the Series A Shares, Series B Shares or Series C
Shares.
2. FRACTIONAL SHARES. No fractional Common Shares shall be issued upon
conversion of Existing Preferred Shares. In lieu of any fractional shares to
which the holder would otherwise
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<PAGE> 17
be entitled, the Corporation shall pay cash equal to the product of such
fraction multiplied by the fair market value of one Common Share on the date of
conversion, as reasonably determined in good faith by the Board. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of Existing Preferred Shares the holder is at the time
converting into Common Share and the number of Common Shares issuable upon such
aggregate conversion.
3. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
Common Shares, solely for the following purposes, (i) such number of Common
Shares required to pay all dividends payable in Common Shares which the
Corporation by agreement is obligated, or may choose, to pay, (ii) such number
of Common Shares as may from time to time be required, at such time, to be
issued by the Corporation upon exercise of all then-exercisable warrants and
options to purchase Common Shares or the right to convert other convertible
securities into Common Shares, and (iii) such number of its Common Shares as
shall from time to time be sufficient to effect the conversion of all
outstanding Existing Preferred Shares. As a condition precedent to the taking of
any action which would cause an adjustment to either Conversion Price, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued Common Shares to
such number of shares as shall be sufficient in order that it may validly and
legally issue the Common Shares issuable based upon such adjusted Conversion
Price.
4. NOTICES. Any notice required by the provisions of this paragraph 4
to be given to any holder of the Existing Preferred Shares shall be deemed given
when personally delivered to such holder or five business days after the same
has been deposited in the United States mail, certified or registered mail,
return receipt requested, postage prepaid, and addressed to each holder of
record at his address appearing on the books of the Corporation.
5. PAYMENT OF TAXES. The Corporation will pay all taxes and other
governmental charges (other than taxes measured by the revenue or income of the
holders of Existing Preferred Shares) that may be imposed in respect of the
issue or delivery of Common Shares upon conversion of Existing Preferred Shares.
6. NO IMPAIRMENT. The Corporation shall not amend these Articles of
Incorporation or participate in any reorganization, recapitalization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation.
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Subdivision B
Provisions Applicable to Serial Preferred Shares
------------------------------------------------
1. General.
--------
(a) The Serial Preferred Shares may be issued, from time to
time, in one or more series, with such designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issue of such series adopted by the Board of
Directors. The Board of Directors, in such resolution or resolutions (a copy of
which shall be filed and recorded as required by law), is also expressly
authorized to fix:
(i) The distinctive serial designations and the division of
such shares into series and the number of shares of a particular
series, which may be increased or decreased, but not below the number
of shares thereof then outstanding, by a certificate made, signed,
filed and recorded as required by law;
(ii) The annual dividend rate for the particular series, and
the date or dates from which dividends on all shares of such series
shall be cumulative, if dividends on shares of the particular series
shall be cumulative;
(iii) The redemption price or prices, if any, for the
particular series;
(iv) The right, if any, of the holders of a particular series
to convert such stock into other classes of shares, and the terms and
conditions of such conversions; and
(v) The obligation, if any, of the Corporation to purchase and
retire and redeem shares of a particular series as a sinking fund or
redemption or purchase account, the terms thereof and the redemption
price or prices per share for such series redeemed pursuant to the
sinking fund or redemption or purchase account.
(b) All shares of any one series of Serial Preferred Shares
shall be alike in every particular and all series shall rank equally and be
identical in all respects except insofar as they may vary with respect to the
matters which the Board of Directors is hereby expressly authorized to determine
in the resolution or resolutions providing for the issue of any series of the
Serial Preferred Shares.
2. Rights on Liquidation.
----------------------
In the event of any liquidation, dissolution or winding up of
the affairs of the Corporation, before any distribution or payment shall have
been made to the holders of the
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<PAGE> 19
Common Shares, the holders of the Serial Preferred Shares of each series shall
be entitled to be paid, or to have set apart in trust for payment, an amount
from the net assets of the Corporation equal to that stated and expressed in the
resolution or resolutions adopted by the Board of Directors which provide for
the issue of such series, respectively. The remaining net assets of the
Corporation shall be distributed solely among the holders of the Common Shares
according to their respective shares.
3. Voting
------
(a) The holders of Serial Preferred Shares shall be entitled
to one vote for each Serial Preferred Share upon all matters presented to the
shareholders, and, except as otherwise provided by these Articles of
Incorporation or required by law, the holders of Serial Preferred Shares and the
holders of Common Shares shall vote together as one class on all matters. No
adjustment of the voting rights of holders of Serial Preferred Shares shall be
made in the event of an increase or decrease in the number of Common Shares
authorized or issued or in the event of a stock split or combination of the
Common Shares or in the event of a stock dividend on any class of stock payable
solely in Common Shares.
(b) The affirmative vote of the holders of at least two-thirds
of the Serial Preferred Shares at the time outstanding, given in person or by
proxy at a meeting called for the purpose at which the holders of Serial
Preferred Shares shall vote separately as a class, shall be necessary to adopt
any amendment to the Articles of Incorporation (but so far as the holders of
Serial Preferred Shares are concerned, such amendment may be adopted with such
vote) which:
(i) changes issued shares of Serial Preferred Shares of all
series then outstanding into a lesser number of shares of the
Corporation of the same class and series or into the same or a
different number of shares of the Corporation of any other class or
series; or
(ii) changes the express terms of the Serial Preferred Shares
in any manner substantially prejudicial to the holders of all series
thereof then outstanding; or
(iii) authorizes shares of any class, or any security
convertible into shares of any class, ranking prior to the Serial
Preferred Shares; or
(iv) changes the express terms of issued shares of any class
ranking prior to the Serial Preferred Shares in any manner
substantially prejudicial to the holders of all series of Serial
Preferred Shares then outstanding;
and the affirmative vote of the holders of at least two-thirds of each affected
series of Serial Preferred Shares at the time outstanding, given in person or by
proxy at a meeting called for the purpose at which the holders of each affected
series of Serial Preferred Shares shall vote separately as a series, shall be
necessary to adopt any amendment to the Articles of Incorporation
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<PAGE> 20
(but so far as the holders of each such series of Serial Preferred Shares are
concerned, such amendment may be adopted with such vote) which:
(i) changes issued shares of Serial Preferred Shares of one or
more but not all series then outstanding into a lesser number of shares
of the Corporation of the same series or into the same or a different
number of shares of the Corporation of any other class or series; or
(ii) changes the express terms of any series of the Serial
Preferred Shares in any manner substantially prejudicial to the holders
of one or more but not all series thereof then outstanding; or
(iii) changes the express terms of issued shares of any class
ranking prior to the Serial Preferred Shares in any manner
substantially prejudicial to the holders of one or more but not all
series of Serial Preferred Shares then outstanding.
4. Ranking.
--------
(a) Whenever reference is made herein to shares "ranking prior to the
Serial Preferred Shares," such reference shall mean and include all shares of
the Corporation in respect of which the rights of the holders thereof either as
to the payment of dividends or as to distributions in the event of a voluntary
or involuntary liquidation, dissolution or winding up of the Corporation are
given preference over the rights of the holders of Serial Preferred Shares;
whenever reference is made to shares "on a parity with the Serial Preferred
Shares," such reference shall mean and include all shares of the Corporation in
respect of which the rights of the holders thereof (i) neither as to the payment
of dividends nor as to distributions in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation are given preference
over the rights of the holders of Serial Preferred Shares and (ii) either as to
the payment of dividends or as to distributions in the event of a voluntary or
involuntary liquidation, dissolution or winding up of the Corporation rank
equally (except as to the amounts fixed therefor) with the rights of the holders
of Serial Preferred Shares; and whenever reference is made to shares "ranking
junior to the Serial Preferred Shares," such reference shall mean and include
all shares of the Corporation in respect of which the rights of the holders
thereof both as to the payment of dividends and as to distribution in the event
of a voluntary or involuntary liquidation, dissolution or winding up of the
Corporation are junior and subordinate to the rights of the holders of the
Serial Preferred Shares.
Subdivision C
Provisions Applicable to Common Shares
--------------------------------------
The Common Shares shall be subject to the express terms of the
Existing Preferred Shares and the Serial Preferred Shares and of any series
thereof and shall have the following
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<PAGE> 21
voting powers, designations, preferences and relative, participating, optional
and other special rights, and qualifications, limitations or restrictions
thereof:
1. Dividends.
----------
Whenever the full dividends upon any outstanding Serial
Preferred Shares for all past dividend periods shall have been paid and the full
dividends thereon for the then current respective dividend periods shall have
been paid, or declared and a sum sufficient for the respective payments thereof
set apart, the holders of the Common Shares shall be entitled to receive such
dividends and distributions, payable in cash or otherwise, as may be declared
thereon by the Board of Directors from time to time out of assets or funds of
the Corporation legally available therefor.
2. Rights On Liquidation.
----------------------
In the event of any liquidation, dissolution or winding-up of
the Corporation, whether voluntary or involuntary, after the payment or setting
apart for payment to the holders of any outstanding Serial Preferred Shares of
the full preferential amounts to which such holders are entitled as herein
provided or referred to, all of the remaining assets of the Corporation shall
belong to and be distributable in equal amounts per share to the holders of the
Common Shares. For purposes of this paragraph 2, a consolidation or merger of
the Corporation with any other corporation, or the sale, transfer or lease of
all or substantially all its assets shall not constitute or be deemed a
liquidation, dissolution or winding up of the Corporation.
3. Voting.
-------
Each Common Share shall entitle the holder thereof to one
vote.
ARTICLE V
---------
1. Number and Classification of Directors.
---------------------------------------
(a) The Board of Directors shall consist of not less than
three nor more than 15 members and shall be divided into three classes, Class I,
Class II and Class III, which shall be as nearly equal in number as possible.
Subject to the foregoing limitations, the number of Directors shall be fixed by,
or in the manner provided in, the Code of Regulations of the Corporation. In the
event that the total number of Directors is not divisible by three, an extra
Director shall be assigned to Class I if there is one extra Director to be
assigned among the classes, and an extra director shall be assigned to each of
Classes I and II if there are two extra Directors to be assigned among the
classes. The Directors to be elected at each annual meeting of Shareholders
shall be only the members of the class whose term of office then expires. The
term of office of the initial Directors in each respective class shall be as
follows: (a) Directors in Class I shall hold office until the annual meeting of
Shareholders held in 1997; (b) Directors in Class II shall hold office until the
annual meeting of Shareholders in 1998; and (c) Directors in Class III shall
hold office until the annual meeting of Shareholders in 1999. Each Director
21
<PAGE> 22
elected at any shareholders' meeting commencing with the 1996 annual meeting
shall serve for a term ending on the date of the third annual meeting of
shareholders following the meeting at which such Director was elected.
(b) In the event of any increase or decrease in the authorized
number of Directors, each Director then serving as such shall nevertheless
continue as a Director of the class of which he or she is a member until the
expiration of his or her current term, or his or her prior death, retirement,
resignation or removal, and the newly created or eliminated directorships
resulting from such increase or decrease shall be apportioned by the Board of
Directors among the three classes of Directors as provided above in this Article
V.
(c) Notwithstanding any of the foregoing provisions of this
Article, each Director shall serve until his or her successor is elected and
qualified or until his or her prior death, retirement, resignation or removal.
No Director may be removed except for cause and (in addition to the affirmative
vote which may be required of the holders of any series of Preferred Shares
which may then be outstanding) by the affirmative vote of the holders of at
least a majority of the outstanding Common Shares of the Corporation entitled to
vote thereon. Should a vacancy occur or be created, whether arising through
death, resignation or removal of a Director or through an increase in the number
of Directors, such vacancy shall be filled by a majority vote of the Directors
then in office, or by the sole remaining Director if only one Director remains
in office. A Director so elected to fill a vacancy shall serve for the remainder
of the present term of office of the class to which he or she was elected.
ARTICLE VI
----------
The Corporation may purchase, from time to time, and to the
extent permitted by the laws of Ohio, shares of any class of stock issued by it.
Such purchases may be made either in the open market or at private or public
sale, and in such manner and amounts, from such holder or holders of outstanding
shares of the Corporation and at such prices as the Board of Directors of the
Corporation shall from time to time determine, and the Board of Directors is
hereby empowered to authorized such purchases from time to time without any vote
of the holders of any class of shares now or hereafter authorized and
outstanding at the time of any such purchase.
ARTICLE VII
-----------
The preemptive right to purchase additional shares or any
other securities of the Corporation is expressly denied to all shareholders of
all classes.
ARTICLE VIII
------------
The right of shareholders to vote cumulatively in the election
of Directors of the Corporation is expressly denied to all shareholders of all
classes.
22
<PAGE> 23
ARTICLE IX
----------
Notwithstanding any provisions of the laws of the State of
Ohio now or hereafter in force requiring for any action the affirmative vote of
the holders of shares entitling them to exercise a designated proportion (but
less than all) of the voting power of the Corporation or of any class or classes
of shares thereof, such action may be taken by the affirmative vote of the
holders of shares entitling them to exercise a majority of the voting power of
the Corporation or of such class or classes, except that no amendment of these
Fifth Amended and Restated Articles of Incorporation shall be effective to
amend, alter, repeal or change the effect of any of the provisions of Articles
V, VII, VIII, IX or X hereof unless such amendment shall receive the affirmative
vote of the holders of at least eighty percent of the outstanding Common Shares
of the Corporation entitled to vote thereon and at least a majority of the
Common Shares entitled to vote thereon held by shareholders none of whom is as
of the record date fixed for such vote, a Related Person (as hereinafter
defined), affiliate of a Related Person, or an associate of a Related Person;
provided, however, that such voting requirement shall not be applicable to the
approval of such an amendment if such amendment shall have been proposed and
authorized by action of a majority of the Disinterested Directors (as
hereinafter defined) of the Corporation.
ARTICLE X
---------
1. VOTING REQUIREMENTS FOR CERTAIN BUSINESS COMBINATIONS
INVOLVING A RELATED PERSON
(a) In addition to the affirmative vote which may be required
of the holders of any series of Preferred Shares which may then be outstanding,
the affirmative vote of the holders of not less than eighty percent (80%) of the
outstanding Common Shares of the Corporation, which shall include the
affirmative vote of at least a majority of the outstanding Common Shares held by
shareholders other than the "Related Person" (as hereinafter defined), shall be
required for the approval or authorization of any "business combination" (as
hereinafter defined) of the Corporation with any Related Person; provided,
however, that such voting requirements shall not be applicable if the
shareholders are asked to approve or authorize a particular business combination
which has been authorized and proposed to the shareholders by action of the
Board of Directors of the Corporation by the affirmative vote of a majority of
the Directors then in office and by the affirmative vote of a majority of
Disinterested Directors then in office, or if the shareholders are asked to
approve or authorize a particular business combination as to which both of the
following conditions are satisfied:
(i) the aggregate amount of the cash and the fair
market value of the consideration other than cash to be
received per share by the holders of the Common Shares of the
Corporation in such business combination is at least equal to
the greater of (1) the highest price per share (including any
brokerage commissions, transfer taxes and soliciting dealer's
fees) paid or agreed to be paid by the Related Person to
acquire beneficial ownership of any Common Shares (with
appropriate adjustments for recapitalizations, and for stock
splits, stock
23
<PAGE> 24
dividends and like distributions), (2) the highest price per
share (including any brokerage commissions, transfer taxes and
soliciting dealer's fees) paid by any person to acquire
beneficial ownership of any Common Shares on the open market
at any time during the twenty-four month period immediately
prior to the taking of such vote, or (3) the per share book
value of such Common Shares at the end of the calendar quarter
immediately preceding the taking of such vote; and
(ii) the consideration to be received by holders of
Common Shares in such business combination shall be in the
same form and of the same kind as the most favorable form and
kind of consideration paid by the Related Person in acquiring
beneficial ownership of any of the Common Shares already held,
directly or indirectly, by it.
The determination of a majority of the Disinterested Directors of the
Corporation, made in good faith and based upon information known to them after
reasonable inquiry, shall be conclusive as to all facts necessary for compliance
with this Article, including without limitation (A) whether any person,
partnership, corporation or firm is a Related Person or affiliate or associate
as defined herein, and (B) the most favorable form and kind of consideration
paid by the Related Person in acquiring beneficial ownership of Common Shares.
2. Definitions
-----------
(a) For the purposes of these Articles of Incorporation:
(i) The term "business combination" shall mean (1)
any merger or consolidation of the Corporation with or into a
Related Person, (2) any sale, lease, exchange, transfer or
other disposition, including, without limitation, a mortgage
or any other security device, of all or any substantial part
of the assets of the Corporation (including, without
limitation, any voting securities of a subsidiary) or of a
subsidiary, to a Related Person, (3) any merger or
consolidation of a Related Person with or into the Corporation
or a subsidiary of the Corporation, (4) any sale, lease,
exchange, transfer or other disposition of all or any
substantial part of the assets of a Related Person to the
Corporation or a subsidiary of the Corporation, (5) the
reclassification of the shares of stock of the Corporation
generally possessing voting rights in elections for directors,
the purchase by the Corporation of such shares, or the
issuance by the Corporation of shares of any securities
convertible thereto or exchangeable therefor which in any such
case has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation which are
directly or indirectly owned by any Related Person, or (6) any
agreement, contract or other arrangement providing for any of
the transactions described in this definition of business
combination.
(ii) The term "Related Person" shall mean and include
any individual, corporation, partnership or other person or
entity which, together with its
24
<PAGE> 25
"affiliates" and "associates," "beneficially" owns (as those
terms are defined in the Securities Exchange Act of 1934 and
in the rules thereunder), in the aggregate, 15% or more of the
outstanding Common Shares of the Corporation, and any
"affiliate" or "associate" of any such individual,
corporation, partnership or other person or entity; provided
that shares held or over which such entity has the power to
vote or otherwise control as a trustee, plan administrator,
officer of the Corporation or in a similar capacity under an
employee benefit plan of the Corporation or an employee
benefit plan of an affiliate of the Corporation shall not be
deemed to be beneficially owned for purposes of this
definition.
(iii) The term "substantial part" shall mean more
than ten percent (10%) of the total consolidated assets of the
Corporation as of the end of its most recent fiscal year
ending prior to the time the determination is made.
(iv) Without limitation, any Common Shares of the
Corporation which any Related Person has the right to acquire
pursuant to any agreement, or upon exercise of conversion
rights, warrants or options, or otherwise, shall be deemed
beneficially owned by such Related Person.
(v) The term "consideration other than cash" shall
include, without limitation, outstanding Common Shares of the
Corporation retained by its existing shareholders in the event
of a business combination with a Related Person in which the
Corporation is the surviving corporation.
(vi) The term "Disinterested Director" means any
member of the Board of Directors of the Corporation who is not
the Related Person or an affiliate or associate of the Related
Person and was a member of the Board prior to the time that
the Related Person became the Related Person, and any
successor of a Disinterested Director who is not the Related
Person or an affiliate or associate of the Related Person and
is recommended to succeed a Disinterested Director by a
majority of the Disinterested Directors then in office.
ARTICLE XI
----------
These Amended and Restated Articles of Incorporation supersede
and take the place of the existing Amended and Restated Articles of
Incorporation of the Corporation.
25
<PAGE> 1
Exhibit 3.2
THIRD AMENDED AND RESTATED
--------------------------
CODE OF REGULATIONS
-------------------
OF
--
COLLABORATIVE CLINICAL RESEARCH, INC.
-------------------------------------
Adopted May 2, 1996
ARTICLE I
---------
Fiscal Year
-----------
The fiscal year of the Corporation shall be such period as the
Board of Directors may designate by resolution from time to time.
ARTICLE II
----------
Shareholders
------------
Section 1. Meetings of Shareholders.
---------- -------------------------
(a) ANNUAL MEETING. The annual meeting of the Shareholders of
this Corporation, for the election of Directors, the consideration of financial
statements for the most recently concluded fiscal year and other reports, and
the transaction of such other business as may properly be brought before such
meeting, shall be held at such date after the annual financial statements of the
Corporation have been prepared as the Board of Directors shall determine from
time to time. Upon due notice there may also be considered and acted upon at an
annual meeting any matter which could properly be considered and acted upon at a
special meeting, in which case and for which purpose the annual meeting shall
also be considered as, and shall be, a special meeting. In the event that the
annual meeting is not held or if Directors are not elected thereat, a special
meeting may be called and held for that purpose.
(b) SPECIAL MEETING. Special meetings of the Shareholders may
be held on any business day when called by any person or persons who may be
authorized by law to do so. Calls for special meetings shall specify the purpose
or purposes thereof, and no business shall be considered at any such meeting
other than that specified in the call therefor.
(c) PLACE OF MEETINGS. Any meeting of Shareholders may be held
at such place within or without the State of Ohio as may be designated in the
Notice of said meeting.
1
<PAGE> 2
(d) Notice of Meeting and Waiver of Notice.
---------------------------------------
(1) NOTICE. Written notice of the time, place and purposes of
any meeting of Shareholders shall be given to each Shareholder entitled to vote
on a matter to come before the meeting not less than seven (7) days nor more
than sixty (60) days before the date fixed for the meeting and as prescribed by
law. Such notice shall be given either by personal delivery or by mail. If such
notice is mailed, it shall be directed, postage prepaid, to the Shareholders at
their respective addresses as they appear upon the records of the Corporation,
and notice shall be deemed to have been given on the day so mailed. If any
meeting is adjourned to another time or place, no notice as to such adjourned
meeting need be given other than by announcement at the meeting at which such an
adjournment is taken. No business shall be transacted at any such adjourned
meeting except as might have been lawfully transacted at the meeting at which
such adjournment was taken.
(2) NOTICE TO JOINT OWNERS. All notices with respect to any
shares to which persons are entitled by joint or common ownership may be given
to that one of such persons who is named first upon the books of this
Corporation, and notice so given shall be sufficient notice to all the holders
of such shares.
(3) WAIVER. Notice of any meeting, however, may be waived in
writing by any Shareholder either before or after any meeting of Shareholders,
or by attendance at such meeting without protest prior to the commencement
thereof.
(e) RECORD DATE. If a record date shall not be fixed or the
books of the Corporation shall not be closed against transfers of shares
pursuant to statutory authority, the record date for the determination of
Shareholders entitled to vote at any meeting of Shareholders shall be the date
next preceding the day on which notice is given or the date next preceding the
day on which the meeting is held, as the case may be, and only Shareholders of
record as of the close of business on such record date shall be entitled to vote
at such meeting. Such record date shall continue to be the record date for all
adjournments of such meeting unless a new record date shall be fixed and notice
thereof and of the date of the adjourned meeting be given to all Shareholders
entitled to notice in accordance with the new record date so fixed.
(f) QUORUM. At any meeting of Shareholders, the holders of
shares entitling them to exercise a majority of the voting power of the
Corporation, present in person or by proxy, shall constitute a quorum for such
meeting; provided, however, that no action required by law, the Articles of
Incorporation, or these Code of Regulations to be authorized or taken by the
holders of a designated proportion of the shares of the Corporation may be
authorized or taken by a lesser proportion. The Shareholders present in person
or by proxy, whether or not a quorum be present, may adjourn the meeting from
time to time without notice other than by announcement at the meeting.
2
<PAGE> 3
(g) Organization of Meetings:
-------------------------
(1) PRESIDING OFFICER. The Chairman of the Board, or, in his
or her absence, the President, or in the absence of both of them, a Vice
President of the Corporation shall call all meetings of the Shareholders to
order and shall act as Chairman thereof. If all are absent, the Shareholders
shall select a Chairman.
(2) MINUTES. The Secretary of the Corporation, or, in his or
her absence, an Assistant Secretary, or, in the absence of both, a person
appointed by the Chairman of the meeting, shall act as Secretary of the meeting
and shall keep and make a record of the proceedings thereat.
(h) ORDER OF BUSINESS. The order of business at all meetings
of the Shareholders shall be as determined by the Chairman of the meeting.
(i) VOTING. Except as provided by law or in the Articles of
Incorporation, every Shareholder entitled to vote shall be entitled to cast one
vote on each proposal submitted to the meeting for each share held of record by
him or her on the record date for the determination of the Shareholders entitled
to vote at the meeting. At any meeting at which a quorum is present, all
questions and business which may come before the meeting shall be determined by
a majority of votes cast, except when a greater proportion is required by law,
the Articles of Incorporation, or these Code of Regulations.
(j) PROXIES. A person who is entitled to attend a
Shareholders' meeting, to vote thereat, or to execute consents, waivers and
releases, may be represented at such meeting or vote thereat, and execute
consents, waivers, and releases, and exercise any of his or her rights, by proxy
or proxies appointed by a writing signed by such person, or by his or her duly
authorized attorney, as provided by the laws of the State of Ohio.
(k) LIST OF SHAREHOLDERS. At any meeting of Shareholders a
list of Shareholders, alphabetically arranged, showing the number and classes of
shares held by each on the record date applicable to such meeting shall be
produced on the request of any Shareholder.
Section 2. Action of Shareholders Without a Meeting.
---------- -----------------------------------------
Any action which may be taken at a meeting of Shareholders may
be taken without a meeting if authorized by a writing or writings signed by all
of the holders of shares who would be entitled to notice of a meeting for such
purpose, which writing or writings shall be filed or entered upon the records of
the Corporation.
3
<PAGE> 4
ARTICLE III
-----------
Directors
---------
Section 1. General Powers.
---------- ---------------
The business, power and authority of this Corporation shall be
exercised, conducted and controlled by a Board of Directors, except where the
law, the Articles of Incorporation or these Code of Regulations require action
to be authorized or taken by the Shareholders.
Section 2. Election Number and Qualification of Directors.
---------- -----------------------------------------------
(a) ELECTION. The Directors of the appropriate class shall be
elected at the annual meeting of Shareholders, or if not so elected, at a
special meeting of Shareholders called for that purpose. At any meeting of
Shareholders at which Directors are to be elected, only persons nominated as
candidates shall be eligible for election, and the candidates receiving the
greatest number of votes shall be elected.
(b) NUMBER. The Board of Directors shall have a minimum of
three and a maximum of 15 members, the number within such limits to be fixed
from time to time by resolution of the Board adopted by the affirmative vote of
a majority of the entire Board.
(c) QUALIFICATION. Directors need not be Shareholders of the
Corporation.
Section 3. Meetings of Directors.
---------- ----------------------
(a) REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held immediately following the adjournment of the annual
meeting of the Shareholders or a special meeting of the Shareholders at which
Directors are elected. The holding of such Shareholders' meeting shall
constitute notice of such Directors' meeting and such meeting may be held
without further notice. Other regular meetings shall be held at such other times
and places as may be fixed by the Directors.
(b) SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time upon call of the Chairman of the Board, the
President, any Vice President, or any two Directors.
(c) PLACE OF MEETING. Any meeting of Directors may be held at
any place within or without the State of Ohio in person and/or through any
communications equipment if all persons participating in the meeting can hear
each other.
(d) NOTICE OF MEETING AND WAIVER OF NOTICE. Notice of the time
and place of any regular or special meeting of the Board of Directors (other
than the regular meeting of Directors following the adjournment of the annual
meeting of the Shareholders or following any
4
<PAGE> 5
special meeting of the Shareholders at which Directors are elected) shall be
given to each Director by personal delivery, telephone, mail, telegram or
cablegram at least forty-eight (48) hours before the meeting, which notice need
not specify the purpose of the meeting. Such notice, however, may be waived in
writing by any Director either before or after any such meeting, or by
attendance at such meeting (including attendance (presence) by means of
participation through any communications equipment as above provided) without
protest prior to the commencement thereof.
Section 4. Quorum and Voting.
---------- ------------------
At any meeting of Directors, no fewer than one-half of the
whole authorized number of Directors must be present, in person and/or through
any communications equipment, to constitute a quorum for such meeting, except
that a majority of the remaining Directors in office constitutes a quorum for
filling a vacancy in the Board. At any meeting at which a quorum is present, all
acts, questions and business which may come before the meeting shall be
determined by a majority of votes cast by the Directors present at such meeting,
unless the vote of a greater number is required by the Articles of Incorporation
or these Code of Regulations.
Section 5. Committees.
---------- -----------
(a) APPOINTMENT. The Board of Directors may from time to time
appoint certain of its members (but in no event less than three) to act as a
committee or committees in the intervals between meetings of the Board and may
delegate to such committee or committees powers to be exercised under the
control and direction of the Board. Each such committee and each member thereof
shall serve at the pleasure of the Board.
(b) EXECUTIVE COMMITTEE. In particular, the Board of Directors
may create from its membership and define the powers and duties of an Executive
Committee. During the intervals between meetings of the Board of Directors the
Executive Committee shall possess and may exercise all of the powers of the
Board of Directors in the management and control of the business of the
Corporation to the extent permitted by law. All action taken by the Executive
Committee shall be reported to the Board of Directors at its first meeting
thereafter.
(c) COMMITTEE ACTION. Unless otherwise provided by the Board
of Directors, a majority of the members of any committee appointed by the Board
of Directors pursuant to this Section shall constitute a quorum at any meeting
thereof and the act of a majority of the members present at a meeting at which a
quorum is present shall be the act of such committee. Action may be taken by any
such committee without a meeting by a writing signed by all its members. Any
such committee shall prescribe its own rules for calling and holding meetings
and its method of procedure, subject to any rules prescribed by the Board of
Directors, and shall keep a written record of all action taken by it.
5
<PAGE> 6
Section 6. Action of Directors Without a Meeting.
---------- --------------------------------------
Any action which may be taken at a meeting of Directors may be
taken without a meeting if authorized by a writing or writings signed by all the
Directors, which writing or writings shall be filed or entered upon the records
of the Corporation.
Section 7. Compensation of Directors.
---------- --------------------------
The Board of Directors may allow compensation for attendance
at meetings or for any special services, may allow compensation to members of
any committee, and may reimburse any Director for his or her expenses in
connection with attending any Board or committee meeting.
Section 8. Attendance at Meetings of Persons Who Are Not
---------- ---------------------------------------------
Directors.
----------
Unless waived by a majority of Directors in attendance, not
less than twenty-four (24) hours before any regular or special meeting of the
Board of Directors any Director who desires the presence at such meeting of not
more than one person who is not a Director shall so notify all other Directors,
request the presence of such person at the meeting, and state the reason in
writing. Such person will not be permitted to attend the Directors' meeting
unless a majority of the Directors in attendance vote to admit such person to
the meeting. Such vote shall constitute the first order of business for any such
meeting of the Board of Directors. Such right to attend, whether granted by
waiver or vote, may be revoked at any time during any such meeting by the vote
of a majority of the Directors in attendance.
ARTICLE IV
----------
Officers
--------
Section 1. General Provisions.
---------- -------------------
The Board of Directors shall elect a President, a Secretary
and a Treasurer, and may elect a Chairman of the Board, one or more
Vice-Presidents, and such other officers and assistant officers as the Board may
from time to time deem necessary. The Chairman of the Board shall be a Director,
but no one of the other officers need be a Director. Any two or more offices may
be held by the same person, but no officer shall execute, acknowledge or verify
any instrument in more than one capacity if such instrument is required to be
executed, acknowledged or verified by two or more officers.
Section 2. Powers And Duties.
---------- ------------------
All officers, as between themselves and the Corporation, shall
respectively have such authority and perform such duties as are customarily
incident to their respective offices, and as may be specified from time to time
by the Board of Directors, regardless of whether such authority and duties are
customarily incident to such office. In the absence of any officer of the
6
<PAGE> 7
Corporation, or for any other reason the Board of Directors may deem sufficient,
the Board of Directors may delegate for the time being, the powers or duties of
such officer, or any of them, to any other officer or to any Director. The Board
of Directors may from time to time delegate to any officer authority to appoint
and remove subordinate officers and to prescribe their authority and duties.
Since the lawful purposes of this Corporation include the acquisition and
ownership of real property, personal property and property in the nature of
patents, copyrights, and trademarks and the protection of the Corporation's
property rights in its patents, copyrights and trademarks, each of the officers
of this Corporation is empowered to execute any power of attorney necessary to
protect, secure, or vest the Corporation's interest in and to real property,
personal property and its property protectable by patents, trademarks and
copyright registration and to secure such patents, copyrights and trademark
registrations.
Section 3. Term of Office and Removal.
---------- ---------------------------
(a) TERM. Each officer of the corporation shall hold office at
the pleasure of the Board of Directors until his or her successor has been
elected or until his or her earlier resignation, removal from office or death.
It shall not be necessary for the officers of the corporation to be elected
annually. The election or appointment of an officer for a given term, or a
general provision in the Articles of Incorporation or Code of Regulations with
respect to term of office, shall not be deemed to create contract rights.
(b) REMOVAL. Any officer may be removed, with or without
cause, by the Board of Directors without prejudice to the contract rights, if
any, of such officer.
(c) VACANCIES. The Board of Directors may fill any such
vacancy in any office occurring for whatever reason.
Section 4. Compensation of Officers.
---------- -------------------------
Unless compensation is otherwise determined by a majority of
the Directors at a regular or special meeting of the Board of Directors, or
unless such determination is delegated by the Board of Directors to a Committee
of the Board of Directors or another officer or officers, the President of the
Corporation from time to time shall determine the compensation to be paid to all
officers and other employees for services rendered to the Corporation.
ARTICLE V
---------
Indemnification of Directors and Officers
-----------------------------------------
(a) MANDATORY INDEMNIFICATION. The Corporation shall
indemnify, to the fullest extent now or hereafter permitted by law, any Director
or officer who was or is a party or is threatened to be made a party to, or is
involved in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereafter, a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a Director or officer of the
Corporation, or is or was serving at the
7
<PAGE> 8
request of the Corporation as a director, officer, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
Director, officer, partner, trustee, employee or agent or in any other capacity
while serving as a Director, officer, partner, trustee, employee or agent,
against all expense, liability and loss (including attorneys' fees, judgments,
fines, excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a Director,
officer, partner, trustee, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators, provided, however, that, except
as provided in Subsection (d) of this Section, the Corporation shall indemnify
any such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
(b) PERMISSIVE INDEMNIFICATION. The Corporation may indemnify
any employee or agent of the Corporation to an extent greater than that required
by law only if and to the extent that the Directors may, in their discretion, so
determine.
(c) PAYMENT OF EXPENSES. Expenses, including attorneys' fees,
incurred by a Director or officer of the Corporation in defending any proceeding
referred to in Subsection (a) of this Article V, shall be paid by the
Corporation, in advance of the final disposition of such proceeding upon receipt
of an undertaking by or on behalf of the Director or officer to repay such
amount unless it shall ultimately be determined that he or she is entitled to be
indemnified by the Corporation as authorized in this Article V; which
undertaking may be secured or unsecured, at the discretion of the Corporation.
(d) ACTION TO COMPEL PAYMENT. If a claim under Subsection (a)
of this Article V is not paid in full by the Corporation within thirty (30) days
after a written claim therefor has been received by the Corporation, the
claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Ohio General Corporation Laws for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
Shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Ohio General Corporation Laws, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
Shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
8
<PAGE> 9
(e) NON-EXCLUSIVE REMEDY. The indemnification and advancement
of expenses provided under this Article V shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any law, these Articles of Incorporation of the
Corporation, the Code of Regulations, any agreement, vote of Shareholders or of
disinterested Directors or otherwise, both as to action in their official
capacity and as to action in another capacity while holding such office.
(f) CONTRACTUAL OBLIGATION. This Article V shall be deemed to
be a contract between the Corporation and each Director or officer of the
Corporation, or individual who is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, who
serves in such capacity at any time while this Article V is in effect, and any
repeal, amendment or other modification of this Article V shall not affect any
rights or obligations then existing with respect to any state of facts then or
theretofore existing or any action, suit or proceeding theretofore or thereafter
brought or threatened based in whole or in part upon any such state of facts.
(g) SAVINGS CLAUSE. If this Article V or any portion thereof
shall be invalidated or found unenforceable on any ground by any court of
competent jurisdiction, then the Corporation shall nevertheless indemnify each
Director, officer, employee or agent of the Corporation against expenses
(including attorneys' fees), judgments, fines, excise taxes, penalties and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, to the full extent
permitted by any applicable portion of this Article V that shall not have been
invalidated or found unenforceable, or by any other applicable law.
(h) INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and on behalf of any Director, officer, employee or
agent of the Corporation or individual serving at the request of the Corporation
as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under the
Ohio General Corporation Laws.
ARTICLE VI
----------
Securities Held by the Corporation
----------------------------------
Section 1. Transfer of Securities Owned by the Corporation.
---------- ------------------------------------------------
All endorsements, assignments, transfers, stock powers, share
powers or other instruments of transfer of securities standing in the name of
the Corporation shall be executed for and in the name of the Corporation by the
President, by a Vice President, by the Secretary or by the Treasurer or by any
other person or persons as may be thereunto authorized by the Board of
Directors.
9
<PAGE> 10
Section 2. Voting Securities Held by the Corporation.
---------- ------------------------------------------
The Chairman of the Board, President, any Vice President,
Secretary or Treasurer, in person or by another person thereunto authorized by
the Board of Directors, in person or by proxy or proxies appointed by him, shall
have full power and authority on behalf of the Corporation to vote, act and
consent with respect to any securities issued by other corporations which the
Corporation may own.
ARTICLE VII
-----------
Share Certificates
------------------
Section 1. Transfer and Registration of Certificates.
---------- ------------------------------------------
The Board of Directors shall have authority to make such rules
and regulations, not inconsistent with law, the Articles of Incorporation or
these Code of Regulations, as it deems expedient concerning the issuance,
transfer and registration of certificates for shares and the shares represented
thereby and may appoint transfer agents and registrars thereof.
Section 2. Substituted Certificates.
---------- -------------------------
Any person claiming that a certificate for shares has been
lost, stolen or destroyed, shall make an affidavit or affirmation of that fact
and, if required, shall give the Corporation (and its registrar or registrars
and its transfer agent or agents, if any) a bond of indemnity, in such form and
with one or more sureties satisfactory to the Board, and, if required by the
Board of Directors, shall advertise the same in such manner as the Board of
Directors may require, whereupon a new certificate may be executed and delivered
of the same tenor and for the same number of shares as the one alleged to have
been lost, stolen or destroyed.
ARTICLE VIII
------------
Seal
----
The Directors may adopt a seal for the Corporation which shall
be in such form and of such style as is determined by the Directors. Failure to
affix any such corporate seal shall not affect the validity of any instrument.
ARTICLE IX
----------
Consistency with Articles of Incorporation
------------------------------------------
If any provision of these Code of Regulations shall be
inconsistent with the Corporation's Articles of Incorporation (and as they may
be amended from time to time), the Articles of Incorporation (as so amended at
the time) shall govern.
10
<PAGE> 11
ARTICLE X
---------
Section Headings
----------------
The headings contained in this Code of Regulations are for
reference purposes only and shall not be construed to be part of and/or shall
not affect in any way the meaning or interpretation of this Code of Regulations.
ARTICLE XI
----------
Amendments
----------
This Code of Regulations of the Corporation (and as it may be
amended from time to time) may be amended or added to by the affirmative vote of
the Shareholders of record entitled to exercise a majority of the voting power
of the Corporation, except that the affirmative vote of the Shareholders
entitled to exercise two-thirds of the voting power of the Corporation shall be
necessary to amend, alter, repeal or change the effect of any of the provisions
of Article V hereof.
11
<PAGE> 1
Exhibit 10.18
SUPPLEMENTAL LEASE AGREEMENT
----------------------------
THIS SUPLEMEMTAL LEASE AGREEMENT is made and entered in this 26th day
of June, 1996, by and between ST. MARY'S MEDICAL CENTER OF EVANSVILLE, INC., an
Indiana not-for-profit corporation with its principal place of business in
Evansville, Indiana (herein the "Lessor"), and GFI PHARMACEUTICAL SERVICES,
INC., an Indiana corporation with its principal place of business in
Evansville, Indiana (herein the "Tenant").
WHEREAS, on the 28th day of June, 1996, the Lessor and the Tenant
entered into a lease agreement (the "Lease Agreement"), under the term of which
the Lessor leased to the Tenant space in the Lessor's building commonly known
as The Manor at 800 St. Mary's Drive, Evansville, Indiana (the "Building"); and
WHEREAS, the Tenant has requested the Lessor to lease additional space
in the Building to the Tenant and the Lessor is willing to lease such
additional space to the Tenant; and
WHEREAS, to accommodate the lease of such additional space by the Lessor
to the Tenant, the parties desire to supplement the Lease Agreement.
NOW, THEREFORE, in consideration of the parties' mutual covenants and
agreements contained herein and in the Lease Agreement, the parties hereto do
hereby agree as follows:
1. Effective as of the 1st day of June, 1996 (the "Additional
Space Commencement Date") the Leased Premises described in Section 1 of the
Lease Agreement shall also include part of the first floor (consisting of 1,110
square feet of space) in the northeast corner of the Building, as set forth on
the floor plans, a copy of which is attached hereto and marked
<PAGE> 2
Supplemental Lease Agreement Exhibit "A" and the Lessor hereby lets and demises
to the Tenant such additional space (the "Additional Space").
2. Effective as of the Additional Space Commencement Date, the
monthly installments of rent set forth in Section 3 A of the Lease Agreement
shall be increased to Twenty-Eight Thousand Nine Hundred Ninety-Eight Dollars
and Sixty Cents ($28,998.60) per month, and the annual rental described in
Section 3 shall be increased by adding Eighteen Thousand One Hundred Fifteen
Dollars and Twenty Cents ($18,115.20) [arrived at by multiplying 1,110 square
feet of Additional Space times Sixteen Dollars and Thirty-Two Cents ($16.32)
per square foot of Additional Space] to Three Hundred Twenty-Nine Thousand
Eight Hundred and Sixty-Eight ($329,868.00) dollars for annual rental of Three
Hundred Forty-Seven Thousand Nine Hundred Eighty-Three Dollars and Twenty Cents
($347,983.20)
3. Effective as of the Additional Space Commencement Date, Section
3 D is modified to read as follows:
"Notwithstanding any provision of this Section 3 to the
contrary, the annual rental to be paid by the Tenant to the Lessor
for the twelve month period from July 1, 1997 to June 30, 1998 and each
subsequent twelve month period (July 1 through June 30) shall never be
less than Three Hundred Forty-Seven Thousand Nine Hundred Eighty-Three
Dollars and Twenty Cents ($347,983.20) and the annual rental for the
twelve month period from July 1, 1997 to June 30, 1998 and each
subsequent twelve month period (June 1 through June 30) of the lease
term or any extension of the lease term shall not be increased by more
than Seventy-Five Cents (75 cents) per square foot of space in the
Leased Premises per year."
2
<PAGE> 3
4. Effective as of the Additional Space Commencement Date, Section 4 of
the Lease Agreement is amended by adding the following parenthetical language
following the words "May 1996"
"(as to the Additional Space, beginning with the first installment
of real estate taxes for 1996 due and payable in May 1997)".
5. The Lease Agreement is modified by eliminating Schedule D from
Exhibit "B" effective as of the date of this Supplemental Lease Agreement.
6. The parties hereto agree that except as herein or otherwise
expressly supplemented or modified in writing, the terms and conditions of the
Lease Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals the day and year first above written.
ST. MARY'S MEDICAL CENTER
OF EVANSVILLE, INC.
By: /s/ Richard C. Breon
--------------------------------------
Richard C. Breon, President & CEO
"Lessor"
GFI PHARMACEUTICAL SERVICES, INC.
By: /s/ Debra S. Adamson
--------------------------------------
Its: Vice President
-------------------------------------
"Tenant"
3
<PAGE> 4
SUPPLEMENTAL LEASE AGREEMENT EXHIBIT "A"
[FLOOR PLAN DEPICTING AREA SUBJECT TO SUPPLEMENTAL LEASE AGREEMENT]
<PAGE> 1
Exhibit 10.19
EMPLOYMENT AGREEMENT
--------------------
SECTION 1 - PARTIES. This employment agreement is between COLLABORATIVE
CLINICAL RESEARCH, INC., an Ohio corporation (the "Corporation"), and Steven
Linberg, Ph.D. ("Employee"). The Corporation is engaged in the business of
conducting biopharmaceutical and medical device clinical research projects. The
Corporation employs Employee on the terms set forth in this Agreement.
SECTION 2 - EMPLOYMENT AND DUTIES. During the term of this Agreement,
Employee shall, under the general supervision of the Corporation's Chief
Executive Officer or Chief Operating Officer, serve as Vice President For
Clinical Program Development, and devote his skill and experience to serving the
interests of the Corporation, to include overall responsibility for directing
the Company's Clinical Program Development area and its growth and profitability
and such other duties consistent with his position as may be determined by the
Chief Executive Officer or Chief Operating Officer of the Corporation from time
to time. The parties hereby acknowledge and agree that during the term of this
Agreement Employee will devote his full time and efforts toward the success of
the Corporation.
Section 3 - COMPENSATION AND BENEFITS.
--------- --------------------------
3.1 BASE SALARY. During the term of this Agreement, which will
commence on December 1, 1995, the Corporation shall pay
Employee an annual base salary (base salary) of $110,000 to be
paid in equal monthly installments on the last business day of
each month. The Employee will be entitle to a monthly car
allowance of $350. Employee's base salary shall be reviewed at
least annually by the Compensation Committee of the
Corporation's Board of Directors, and Employee may receive
such base salary increases as may be determined by the
Compensation Committee, in its sole discretion.
3.2 BONUS. The Corporation will pay the Employee a
non-discretionary bonus of $28,500 on each of the following
dates:
November 30, 1996
November 30, 1997
November 30, 1998
November 30, 1999
The total non-discretionary bonus will not exceed $114,000.
This payment may be in the form of cash, stock or stock
options to purchase common stock as the parties agree upon at
the time of each payment. If the parties can not agree, then
employee will receive this non-discretionary bonuses in the
form of cash. The Employee must be an employee of the
Corporation or one of its subsidiaries on the date of each
payment of the non-discretionary bonus to be eligible to
receive the non-discretionary bonus. Once Employee ceases to
be an employee of the Corporation or one of its subsidiaries,
the Corporation will have no obligation to make future
non-discretionary bonus payments.
1
<PAGE> 2
B. The Employee will be entitled to receive a one time sign-on
bonus of $200,000 that will be paid throughout 1996 starting
with the signing of this agreement. This sign-on bonus will be
paid out in full on or before December 31, 1996. The Employee
will also earn a bonus in 1996 payable before February 15,
1997 equal to 2 times the 1996 net income (using generally
accepted accounting principles) earned on contracts brought to
the Corporation in 1996 as a result of the Employees efforts.
The contracts to be included for the calculation of this bonus
must result solely from the Employee's efforts and contracts.
Any contracts obtained by the Employee where the Corporation
already has a working relationship with the Sponsor's Project
Director or leader will be excluded from this bonus
calculation.
C. The Corporation may also pay Employee additional
compensation in the form of a discretionary bonus. The
discretionary bonus structure is open-ended and the bonus
amount in any given year shall be determined from time to time
by the Compensation Committee of the Corporation's Board of
Directors. At the discretion of said Committee, any
discretionary bonus offered may be paid in cash, stock options
for the purchase of Common Shares of the Corporation, or a
combination of both.
3.3 BENEFITS. During the term of this Agreement, the Corporation
shall provide Employee with such benefits as are provided for
its other management executives and/or employees, subject to
all eligibility requirements, including health insurance under
the Corporation's regular group policy and participation in
any pension and profit-sharing plans which may be established.
Any of the foregoing benefits which are provided for all of
the Corporation's management executives and/or employees may
be modified or terminated at any time as to all of such
management executives and/or employees by the Corporation's
Board of Directors.
3.4 EXPENSES. During the term of this Agreement, Employee shall be
reimbursed for expenses reasonably incurred in connection with
the business of the Corporation, subject to approval of the
Chief Executive Officer or the Chief Operating Officer.
SECTION 4 - VACATION. Employee shall earn and be entitled to paid vacation
during each fiscal year of the Corporation and such additional time as the Chief
Executive Officer or Chief Operating Officer approves. The amount of paid
vacation will be as outlined in the Company's Employee Handbook, but will not be
less than 3 weeks per year. Vacations shall be scheduled, and Employee shall
make his request for vacation periods, reasonably in advance. Vacation time
accrued in any fiscal year but not taken in that year shall carry over as
provided in the Collaborative Clinical Research Employee Handbook.
Section 5 - TERMINATION.
--------- ------------
2
<PAGE> 3
5.1 DEATH. If Employee dies while employed by the Corporation, his
employment shall terminate and (i) his base salary shall
continue through the last day of the month following death,
(ii) he shall be entitled to a discretionary bonus, if any is
determined to be paid under Section 3.3 for such year, pro
rated to the last day of the month following death based upon
the actual bonus which would have been earned for the entire
year, and (iii) he shall be entitled to any accrued and unpaid
expense reimbursement and earned vacation benefits as of the
date of death. Any payments to be made hereunder by the
Corporation after Employee's death shall be payable to
Employee's widow if living or if not then to Employee's
estate.
5.2 DISABILITY. Employee shall be considered absent from
employment because of disability if, as a result of disease,
mental or emotional illness or physical injury (i) he becomes
unable, or (ii) he is deemed by the Board of Directors, in its
judgment reasonably and in good faith exercised, to have
become unable, during the term of this Agreement, to perform
his duties and responsibilities hereunder for a period of at
least one hundred twenty (120) consecutive days, or for an
aggregate of at least one hundred eighty (180) days, whether
or not consecutive, during any twelve (12) month period. In
the event of such disability, the Corporation shall have the
right, subject to the other obligations of the Corporation as
set forth herein and upon thirty (30) days advance written
notice, to terminate Employee's employment. In the event of
such termination, Employee shall be entitled to (a) his base
salary through the date of such termination, (b) a
discretionary bonus, if any is determined to be paid under
Section 3.3 for such year, pro rated to the date of such
termination based upon the actual bonus which would have been
earned for the entire year, and (c) any accrued and unpaid
expense reimbursement and earned vacation benefits as of the
date of termination.
5.3 TERMINATION FOR CAUSE. The Corporation may terminate
Employee's employment hereunder at any time during the term of
this Agreement in the event Employee is convicted of a felony
or if the Board determines, in its judgment reasonably and in
good faith exercised, that Employee was engaged in: (i) fraud;
(ii) a breach of the material provisions of this Agreement; or
(iii) a willful failure to perform his duties as required
under this Agreement; PROVIDED, HOWEVER, that in the case of
(ii) or (iii) above, the Corporation shall first give written
notice to Employee of such breach or failure to perform and
thereafter Employee shall have a period of not less than
thirty (30) days to cure such breach or to perform. In the
event of such termination, Employee shall be entitled to (a)
his base salary through the date of such termination and (b)
any accrued and unpaid expense reimbursement as of the date of
termination. Any termination under this Section 5.3 shall not
affect any vested vacation, pension or profit-sharing benefits
or any conversion privileges which Employee might have under
benefit programs in which he is a participant.
3
<PAGE> 4
In the event this Agreement is terminated pursuant to this
Section 5.3, the Corporation shall have the right, at its
option, to acquire some or all of the applicable percentage of
shares of capital stock and exercisable options or exercisable
rights to acquire shares of capital stock of the Corporation
then held by Employee (the "Subject Shares") set forth below:
<TABLE>
<CAPTION>
If termination % of Shares
takes place before subject to repurchase
------------------ ---------------------
<S> <C>
January 1, 1997 50%
January 1, 1998 25%
January 1, 1999 0%
</TABLE>
The price at which the Subject Shares shall be subject to
repurchase shall be the fair market value of the Subject
Shares, in the case of Subject Shares which are exercisable
options or exercisable rights to purchase held by Employee,
net of the exercise price payable under such options or rights
to be repurchased. The fair market value shall be determined
in accordance with the provisions of paragraph [4(a) (ii)] of
the Shareholder's Agreement between the Corporation and its
shareholders (the "Shareholders' Agreement").
The Corporation must exercise its option to purchase all
subject shares held by Employee within 45 days after the
Employee's termination.
5.4 TERMINATION BY THE CORPORATION OTHER THAN FOR CAUSE. The
Corporation may, at any time during the term of this
Agreement, terminate Employee's duties and positions hereunder
for reasons other than cause or disability, as defined in this
Agreement, by giving him at least thirty (30) days advance
written notice to that effect. In the event of such
termination, Employee shall be entitled to receive (i) his
base salary for one (1) year and (ii) any accrued and unpaid
expense reimbursement and earned vacation benefits as of the
date of termination.
4
<PAGE> 5
5.5 SALE OF THE CORPORATION. If during Employee's employment by
the Corporation (i) a majority of the outstanding shares of
capital stock of the Corporation entitled to vote are sold
and/or transferred in a single transaction or a series of
related transactions, (ii) all or substantially all of the
assets of the Corporation are sold and/or transferred (other
than to an affiliate of the Corporation) in a single
transaction or a series of related transactions, or (iii) a
merger or consolidation having either of the effects described
in clauses (i) and (ii) above is effected, and Employee's
employment is not continued by the purchaser or successor,
Employee shall be entitled to receive (a) his current salary
for one (1) year following the date of Employee's termination
following the sale of the Corporation, and (b) any accrued and
unpaid expense reimbursement as of the date of termination.
If upon a sale of the Corporation to a third party leads to a
change in Employee's position that significantly diminishes
Employee's responsibilities, duties, powers or authority,
Employee will be entitled to voluntarily terminate his
employment and receive at the Employee's discretion:
A) one (1) year of his current salary at that time or
B) be released from the Non-Competition Clause under
Section 7.
5.6 VOLUNTARY TERMINATION. Employee may terminate his employment
with the Corporation at any time after the first anniversary
of this Agreement upon at least ninety (90) days advance
written notice to such effect to the Corporation. In the event
of such termination, Employee shall be entitled to receive his
base salary through the date of termination.
5.7 EFFECT OF TERMINATION. Except for (i) the rights of the
Corporation to enforce the covenants of Employee under Section
7 below, which covenants shall survive the termination of
employment in accordance with the terms thereof, and (ii) the
obligations of the Corporation under this Section 5 and under
other benefit plans, policies and programs with respect to
which Employee is a participant, the Corporation will have no
further rights or obligations under this Agreement and after
the termination date of Employee's employment. Except for (a)
Employee's rights under this Section 5 and Employee's rights
to receive all other benefits in accordance with the terms of
the plans, policies and programs providing such benefits, and
(b) the covenants of Employee under Section 7 hereof, which
covenants shall survive the termination of employment in
accordance with the terms thereof, Employee will have no
further rights or obligations under this Agreement from and
after the termination date of Employee's employment.
SECTION 6 - TERM OF EMPLOYMENT. Except as otherwise provided herein,
this Agreement shall become effective as of December 1, 1995 and shall continue
for a term of four (4) years. This Agreement shall automatically renew for
successive additional one (1) year terms
5
<PAGE> 6
unless either party gives notice of non-renewal at least one hundred twenty
(120) days prior to the commencement of such a renewal term.
Section 7 - NON-COMPETITION.
--------- ----------------
7.1 NON-COMPETITION. Employee agrees that should he elect to
terminate his employment under Section 5.6, or if such
employment is terminated by the Corporation pursuant to
Section 5.3, he shall not for a period of eighteen (18) months
from his last date of employment with the Corporation (the
"Non-competition Period") (i) enter into the employment of
another clinical research network; (ii) develop or start-up
another clinical research network that would compete with the
Corporation; or (iii) join an already existing Contract
Research Organization (CRO) for the express purpose of
establishing a clinical research network that would solicit
business in direct competition with the Corporation.
Employee agrees not to initiate or support a proposal for any
new contracts on behalf of either himself or a new employer,
for a client who was introduced to Employee by the Corporation
or its successors or for a client that Employee was working
for on behalf of Corporation or its successors for a period of
one (1) year following any sort of disengagement with the
Corporation as a full-time employee. Clients that the
corporation did not have prior to the date of this agreement
that have been brought to the Corporation by the employee, as
a result of the Employees efforts or contacts, are exempt from
this non-compete clause.
Should the Corporation exercise its termination privileges
under Section 5.4, or Employee not be retained under
circumstances described in Section 5.5, Employee shall be
released from all non-competition restrictions and the
Corporation shall hold no claim or rights to interfere with
Employee's employment or business interests.
7.2 CONFIDENTIALITY AND WORK PRODUCT. Employee acknowledges that
during his employment with the Corporation he has had and will
have access to confidential information, knowledge and data
regarding the business of the Corporation and any parent or
subsidiary of, or entity controlling, controlled by or under
common control with, the Corporation ("Corporation
Affiliates"), whether received, acquired or developed by him
or otherwise, including, without limitation, trade secrets,
design information, research methods and techniques,
scientific data and formulae, pricing data, customer
information and all other information or data relevant to the
business of the Corporation (collectively, "Proprietary
Information"). Employee further acknowledges that in the
course of his employment he may be producing designs,
analyses, recommendations, reports, compilations, studies and
other work product, acquiring information on behalf of the
Corporation and may conceive of ideas, innovations, processes
and improvements relating to the business of the Corporation
(collectively, "Work
6
<PAGE> 7
Product"). As to the ownership, disclosure and use of
Proprietary Information and Work Product, Employee agrees
that, on and after the date hereof:
(i) he will promptly disclose in writing to
the Corporation all Work Product;
(ii) all Proprietary Information, all Work
Product and all rights therein are and shall be the
sole and exclusive property of the Corporation and
are hereby assigned to the Corporation, and Employee
will cooperate with and assist the Corporation from
time to time, in any manner reasonably requested by
the Corporation, in obtaining title or ownership
therein or evidence thereof;
(iii) he shall not divulge, disclose or
communicate to any third party in any manner,
directly or indirectly, Proprietary Information or
Work Product;
(iv) he will not use for his own benefit or
purposes or for the benefit or purposes of any third
party or permit or assist, by acquiescence or
otherwise, any third party to use in any manner,
directly or indirectly, Proprietary Information or
Work Product, except such Proprietary Information as
is at the time generally known to the public and
which did not become generally known through the
breach of any provision hereof; and
(v) upon the termination of this employment,
he will promptly deliver to the Corporation all
Proprietary Information and Work Product, including,
without limitation, any reproductions, copies,
abstracts, summaries or other documents or records of
Proprietary Information or Work Product.
7.3 NO INTERFERENCE. During the Non-competition Period, Employee
agrees that he shall not:
(i) take any action which would:
(a) interfere with the contractual
relationships of the Corporation, any Corporation
Affiliate, customers, suppliers, employees or others
which relate to the business of the Corporation or
any Corporation Affiliate; or
(b) induce any employee or
representative of the Corporation or any Corporation
Affiliate not to continue as an employee or
representative of the Corporation or any Corporation
Affiliate;
7
<PAGE> 8
(ii) make remarks or take any other action
which disparages or diminishes the reputation of the
Corporation or any Corporation Affiliate;
(iii) without limiting the generality of the
foregoing, without the prior written consent of the
Board of Directors of the Corporation, directly or
indirectly employ, whether as an employee, officer,
director, agent, consultant or independent
contractor, any person who was an employee,
representative, officer or director of the
Corporation or any Corporation Affiliate at any time
during the six-month period prior to the date of such
proposed employment; PROVIDED, HOWEVER, that the
covenants contained in this clause (iii) shall not
apply with respect to such person terminated by
action of the Corporation or any Corporation
Affiliate.
7.4 INJUNCTIVE RELIEF. Both parties hereto recognize that the
services to be rendered by Employee to the Corporation are
special, unique and of extraordinary character, and that if
Employee hereafter fails to comply with the restrictions and
obligations imposed upon him hereunder, the Corporation may
not have an adequate remedy at law. Accordingly, the
Corporation, in addition to any other rights which it may
have, shall be entitled to seek injunctive relief to enforce
such restrictions and obligations without the necessity of
posting any bond.
Section 8 - MISCELLANEOUS.
- --------- --------------
8.1 PARTIES BOUND. This Agreement shall be binding upon and be for
the benefit of the Corporation and its successors and assigns.
It shall be binding upon and be for the benefit of Employee
and his personal representatives, executors, administrators
and heirs, but the right and responsibility to render services
shall be personal to Employee.
8.2 ENTIRE AGREEMENT AND AMENDMENT. This Agreement is the entire
employment agreement between the parties and shall be modified
only by written amendment signed by the party or parties upon
whom the amendment imposes or may impose any additional duties
or obligations. Such amendment may be in the form of minutes
of a meeting of the Board of Directors; PROVIDED, that such
minutes are signed by at least two duly authorized officers of
the Corporation and are also signed by Employee if additional
obligations are imposed upon Employee or Employee's
compensation or benefits are reduced.
8.3 TAXES. The Corporation shall have the right to withhold any
federal, state and local taxes from any compensation of any
nature paid to Employee.
8.4 APPLICABLE LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Ohio.
8
<PAGE> 9
8.5 CONSTRUCTION. The captions preceding the Sections in this
Agreement have been inserted for convenience only and shall
not be used to modify, expand or construe the provisions of
this Agreement.
8.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and each of such an original and all of such
counterparts shall for all purposes be deemed to be an
original and all of such counterparts shall constitute one and
the same instrument.
EXECUTED at Cleveland, Ohio the 3rd day of June 1996.
COLLABORATIVE CLINICAL RESEARCH, INC.,
an Ohio Corporation
By: /s/ Jeffrey A. Green
---------------------------------------------
Its: President and Chief Executive Officer
---------------------------------------------
"Corporation"
/s/ Steven E. Linberg
---------------------------------------------
"Employee"
9
<PAGE> 1
Exhibit 11
COLLABORATIVE CLINICAL RESEARCH, INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION
OF NET INCOME (LOSS) PER SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------------------- ---------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) $ 288 $ (287) $ 344 $ (413)
======== ======== ======== ========
Weighted average common shares outstanding 3,306 2,463 2,960 2,463
Net effect of dilutive common share options
and dilutive common share warrants - Note A 465 505 474 505
Net effect of preferred share dividends - Note B - 138 - 138
-------- -------- -------- --------
Shares used in calculation of net income
(loss) per common share 3,771 3,106 3,434 3,106
======== ======== ======== ========
Net income (loss) per common share - Note C $ 0.08 $ (0.09) $ 0.10 $ (0.13)
======== ======== ======== ========
<FN>
NOTE A - Common share options and warrants granted within a twelve month
period preceding the proposed filing date of the Company's initial
public offering are included as if they were outstanding for all
periods presented. The dilutive effect of all options outstanding was
calculated using the treasury stock method.
NOTE B - Preferred share dividends declared within a twelve month period
preceding the proposed filing date of the Company's initial public
offering are included as if they were outstanding for all periods
presented. Preferred shares are convertible into common shares upon
completion of the initial public offering.
NOTE C - Fully diluted net income (loss) per common share has not presented
because it is immaterial.
</TABLE>
Page 1
<PAGE> 1
Exhibit 15
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors and Shareholders
Collaborative Clinical Research, Inc.
We have reviewed the accompanying condensed balance sheet of Collaborative
Clinical Research, Inc. and subsidiaries (the Company) as of June 30, 1996, and
the related condensed consolidated statements of income for the three-month and
the six-month periods ended June 30, 1996, and the condensed consolidated
statement of cash flows for the six-month period ended June 30, 1996. These
financial statements are the responsibility of the Company's management. We did
not make a similar review of the condensed consolidated statements of income for
the three-month and six-month periods ended June 30, 1995 and the condensed
consolidated statement of cash flows for the six-month period ended June 30,
1995.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements at June 30, 1996 and for the
three-month and six-month periods then ended for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Collaborative Clinical Research,
Inc. and subsidiaries as of December 31, 1995, and the consolidated statements
of income, shareholders' equity and cash flows for the year then ended, not
presented herein, and in our report dated January 31, 1996, except as to Note 6
and 11 as to which the date was June 10, 1996, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1995 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
Cleveland, Ohio ERNST & YOUNG LLP
July 19, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 34,191,884
<SECURITIES> 0
<RECEIVABLES> 6,577,978
<ALLOWANCES> 183,500
<INVENTORY> 0
<CURRENT-ASSETS> 41,433,867
<PP&E> 1,379,386
<DEPRECIATION> 262,347
<TOTAL-ASSETS> 48,431,032
<CURRENT-LIABILITIES> 5,035,095
<BONDS> 0
<COMMON> 44,663,046
0
0
<OTHER-SE> (1,267,109)
<TOTAL-LIABILITY-AND-EQUITY> 48,431,032
<SALES> 0
<TOTAL-REVENUES> 12,144,437
<CGS> 0
<TOTAL-COSTS> 8,843,152
<OTHER-EXPENSES> 2,822,209
<LOSS-PROVISION> 34,500
<INTEREST-EXPENSE> 93,616
<INCOME-PRETAX> 458,177
<INCOME-TAX> 144,500
<INCOME-CONTINUING> 343,677
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 343,677
<EPS-PRIMARY> 0.100
<EPS-DILUTED> 0.100
</TABLE>
<PAGE> 1
POLICY NUMBER:
483-15-97
RENEWAL OF:
[LOGO] American International Companies
DIRECTORS, OFFICERS AND CORPORATE LIABILITY INSURANCE POLICY
<TABLE>
<CAPTION>
<S> <C>
/ / AIU Insurance Company / / Illinois National Insurance Company
/ / American International South Insurance Company /X/ National Union Fire Insurance Company of Pitts.,
PA(R)
/ / Birmingham Fire Insurance Company of Penns. / / National Union Fire Insurance Company of Louisiana
/ / Granite State Insurance Company / / New Hampshire Insurance Company
(each of the above being a capital stock company)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTICE: EXCEPT TO SUCH EXTENT AS MAY OTHERWISE BE PROVIDED HEREIN, THE
COVERAGE OF THIS POLICY IS GENERALLY LIMITED TO LIABILITY FOR ONLY THOSE
CLAIMS THAT ARE FIRST MADE AGAINST THE INSUREDS DURING THE POLICY PERIOD
AND REPORTED IN WRITING TO THE INSURER PURSUANT TO THE TERMS HEREIN.
PLEASE READ THE POLICY CAREFULLY AND DISCUSS THE COVERAGE THEREUNDER WITH
YOUR INSURANCE AGENT OR BROKER.
NOTICE: THE LIMIT OF LIABILITY AVAILABLE TO PAY JUDGMENTS OR SETTLEMENTS
SHALL BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE. AMOUNTS INCURRED
FOR LEGAL DEFENSE SHALL BE APPLIED AGAINST THE RETENTION AMOUNT.
NOTICE: THE INSURER DOES NOT ASSUME ANY DUTY TO DEFEND; HOWEVER, THE
INSURER MUST ADVANCE DEFENSE COSTS PAYMENTS PURSUANT TO THE TERMS HEREIN
PRIOR TO THE FINAL DISPOSITION OF A CLAIM.
DECLARATIONS
ITEM 1. NAMED CORPORATION: COLLABORATIVE CLINICAL RESEARCH INC
MAILING ADDRESS: 20500 CHAGRIN BOULEVARD
SUITE 1050
CLEVELAND, OH 44122
STATE OF INCORPORATION OF THE NAMED CORPORATION:
Ohio
ITEM 2. SUBSIDIARY COVERAGE: any past, present or future Subsidiary of
the Named Corporation
ITEM 3. POLICY PERIOD: From: May 14, 1996 To: May 14, 1997
(12:01 A.M. standard time at the address stated in Item 1.)
ITEM 4. LIMIT OF LIABILITY: $ $5,000,000
aggregate for Coverages A and B combined (including Defense
Costs)
<PAGE> 2
<TABLE>
<CAPTION>
ITEM 5. RETENTION:
SECURITIES CLAIMS:
-----------------
<S> <C> <C>
Judgments & Settlements (all coverages) None
Defense Costs (non-Indemnifiable Loss) None
Defense Costs (Coverage B(i) and
Indemnifiable Loss) $ $200,000
-------------------------
for Loss arising from
Claims alleging the same
Wrongful Act or related
Wrongful Acts (waivable
under Clause 6 in certain
circumstances)
OTHER CLAIMS:
------------
Judgments, Settlements and Defense
Costs (non-Indemnifiable Loss) None
Judgments, Settlements and Defense
Costs (Indemnifiable Loss) $ $100,000
--------------------------
for Loss arising from
Claims alleging the same
Wrongful Act or related
Wrongful Acts
ITEM 6. CONTINUITY DATES:
A. Coverages A and B(ii): May 14, 1993
--------------------------
B. Coverage B(i): May 14, 1996
--------------------------
C. Coverages A and B:
Outside Entity Coverage (Per Outside Entity)
See Endorsement #62790
ITEM 7. PREMIUM: $ $360,559
--------------------------
</TABLE>
ITEM 8. NAME AND ADDRESS OF INSURER ("Insurer"):
(This policy is issued only by the insurance company indicated
below.)
National Union Fire Insurance Company of Pittsburgh, Pa.
-------------------------------------------------------------------
70 Pine Street
-------------------------------------------------------------------
New York, NY 10270
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
<PAGE> 3
IN WITNESS WHEREOF, the Insurer has caused this policy to be signed on the
Declarations Page by its President, a Secretary and a duly authorized
representative of the Insurer.
/s/ Elizabeth M. Tuck [Illegible]
- ------------------------------- --------------------------------
SECRETARY PRESIDENT
--------------------------------------------
AUTHORIZED REPRESENTATIVE
----------------------------- ---------------------------------
COUNTERSIGNATURE DATE COUNTERSIGNED AT
HOFFMAN INSURANCE AGENCY INC
2 BEREA COMMONS
BEREA, OH 44017
<PAGE> 4
[LOGO AMERICAN INTERNATIONAL COMPANIES]
DIRECTORS, OFFICERS AND CORPORATE LIABILITY INSURANCE POLICY
In consideration of the payment of the premium, and in reliance upon the
statements made to the Insurer by application forming a part hereof and its
attachments and the material incorporated therein, the insurance company
designated in Item 8 of the Declarations, herein called the "Insurer", agrees as
follows:
1. INSURING AGREEMENTS
COVERAGE A: DIRECTORS AND OFFICERS INSURANCE
This policy shall pay the Loss of each and every Director or Officer of the
Company arising from a Claim first made against the Directors or Officers
during the Policy Period or the Discovery Period (if applicable) and
reported to the Insurer pursuant to the terms of this policy for any actual
or alleged Wrongful Act in their respective capacities as Directors or
Officers of the Company, except when and to the extent that the Company has
indemnified the Directors or Officers. The Insurer shall, in accordance with
and subject to Clause 8, advance Defense Costs of such Claim prior to its
final disposition.
COVERAGE B: CORPORATE LIABILITY INSURANCE
This policy shall pay the Loss of the Company arising from a:
(i) Securities Claim first made against the Company, or
(ii) Claim first made against the Directors or Officers,
during the Policy Period or the Discovery Period (if applicable) and reported
to the Insurer pursuant to the terms of this policy for any actual or alleged
Wrongful Act, but, in the case of (ii) above, only when and to the extent
that the Company has indemnified the Directors or Officers for such Loss
pursuant to law, common or statutory, or contract, or the Charter or By-laws
of the Company duly effective under such law which determines and defines
such rights of indemnity. The Insurer shall, in accordance with and subject
to Clause 8, advance Defense Costs of such Claim prior to its final
disposition.
<PAGE> 5
2. DEFINITIONS
(a) "Claim" means:
(1) a written demand for monetary or non-monetary relief; or
(2) a civil, criminal, or administrative proceeding for monetary or
non-monetary relief which is commenced by:
(i) service of a complaint or similar pleading; or
(ii) return of an indictment (in the case of a criminal
proceeding); or
(iii) receipt or filing of a notice of charges.
The term "Claim" shall include a Securities Claim; provided, however,
that with respect to Coverage B(i) only, Claim or Securities Claim
shall not mean a criminal or administrative proceeding against the
Company.
(b) "Company" means the Named Corporation designated in Item 1 of the
Declarations and any Subsidiary thereof.
(c) "Continuity Date" means the date set forth in:
(1) Item 6A of the Declarations with respect to
Coverages A and B (ii); or
(2) Item 6B of the Declarations with respect to Coverage B(i); or
(3) Item 6C of the Declarations with respect to Coverages A and B
for a Claim against an Insured arising out of such Insured
serving as a director, officer, trustee or governor of an
Outside Entity.
(d) "Defense Costs" means reasonable and necessary fees, costs and expenses
consented to by the Insurer (including premiums for any appeal bond,
attachment bond or similar bond, but without any obligation to apply for
or furnish any such bond) resulting solely from the investigation,
adjustment, defense and appeal of a Claim against the Insureds, but
excluding salaries of Officers or employees of the Company.
2
<PAGE> 6
(e) "Director(s) or Officer(s)" or "Insured(s)" means:
(1) with respect to Coverages A and B (ii), any past, present or
future duly elected or appointed directors or officers of
the Company. In the event the Named Corporation or a
Subsidiary thereof operates outside the United States, then
the terms "Director(s) or Officer(s)" or "Insured(s)" also
mean those titles, positions or capacities in such foreign
Named Corporation or Subsidiary which is equivalent to the
position of Director(s) or Officer(s) in a corporation
incorporated within the United States. Coverage will
automatically apply to all new Directors and Officers after
the inception date of this policy;
(2) with respect to Coverage B(i) only, the Company.
(f) "Listed Event" means any of the following events:
(1) any event for which the Company has reported or is required
to report on Form 8-K filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934;
or
(2) any restatement or correction of a Company financial
statement contained in any document filed with the
Securities and Exchange Commission; or
(3) any statement or disclosure made by or on the behalf of the
Company relating to a prior forecast, estimate or projection
of the Company's earnings or sales made by or on behalf of
the Company, which statement or disclosure represents a
greater than 15% change from such prior forecast, estimate
or projection.
(g) "Loss" means damages, judgments, settlements and Defense Costs;
however, Loss shall not include civil or criminal fines or penalties
imposed by law, punitive or exemplary damages, the multiplied portion
of multiplied damages, taxes, any amount for which the Insureds are
not financially liable or which are without legal recourse to the
Insureds, or matters which may be deemed uninsurable under the law
pursuant to which this policy shall be construed.
Further, with respect to Coverage B only, Loss shall not include
damages, judgments or settlements arising out of a Claim alleging that
the Company paid an inadequate or unfair price or consideration for
the purchase of its own securities or the securities of a Subsidiary.
Notwithstanding the foregoing, with respect to Coverage B(i) only and
subject to the other terms, conditions and exclusions of the policy,
Loss shall include punitive damages (if insurable by law) imposed upon
the Company.
<PAGE> 7
(h) "No Liability" means with respect to a Securities Claim made against
the Insured(s): (1) a final judgment of no liability obtained prior to
trial, in favor of all Insureds, by reason of a motion to dismiss or a
motion for summary judgment, after the exhaustion of all appeals; or
(2) a final judgment of no liability obtained after trial, in favor of
all Insureds, after exhaustion of all appeals. In no event shall the
term "No Liability" apply to a Securities Claim made against an
Insured for which a settlement has occurred.
(i) "Outside Entity" means:
(1) a not-for-profit organization under section 501(c)(3) of the
Internal Revenue Code of 1986 (as amended); or
(2) any other corporation, partnership, joint venture or other
organization listed by endorsement to this policy.
(j) "Policy Period" means the period of time from the inception date shown
in Item 3 of the Declarations to the earlier of the expiration date
shown in Item 3 of the Declarations or the effective date of
cancellation of this policy; however, to the extent that coverage
under this policy replaces coverage in other policies terminating at
noon standard time on the inception date of such coverage hereunder,
then such coverage as is provided by this policy shall not become
effective until such other coverage has terminated.
(k) "Securities Claim" means a Claim made against an Insured which alleges
a violation of the Securities Act of 1933 or the Securities Exchange
Act of 1934, rules or regulations promulgated thereunder, the
securities laws of any state, or any foreign jurisdiction, and which
alleges a Wrongful Act in connection with the claimant's purchase or
sale of, or the offer to purchase or sell to the claimant, any
securities of the Company, whether on the open market or arising from
a public or private offering of securities by the Company.
(l) "Subsidiary" means:
(1) any corporation of which the Named Corporation owns on or before
the inception of the Policy Period more than 50% of the issued
and outstanding voting stock either directly, or indirectly
through one or more of its Subsidiaries;
(2) automatically any corporation whose assets total less than 10% of
the total consolidated assets of the Company as of the inception
date of this policy, which corporation becomes a Subsidiary
during the Policy Period. The Named Corporation shall provide the
Insurer with full particulars of the new Subsidiary before the
end of the Policy Period;
4
<PAGE> 8
(3) any corporation which becomes a Subsidiary during the Policy
Period (other than a corporation described in paragraph (2)
above) but only upon the condition that within 90 days of its
becoming a Subsidiary the Named Corporation shall have provided
the Insurer with full particulars of the new Subsidiary and
agreed to any additional premium and/or amendment of the
provisions of this policy required by the Insurer relating to
such new Subsidiary. Further, coverage as shall be afforded to
the new Subsidiary is conditioned upon the Named Corporation
paying when due any additional premium required by the Insurer
relating to such new Subsidiary.
A corporation becomes a Subsidiary when the Named Corporation owns
more than 50% of the issued and outstanding voting stock, either
directly, or indirectly through one or more of its Subsidiaries. A
corporation ceases to be a Subsidiary when the Named Corporation
ceases to own more than 50% of the issued and outstanding voting stock
either directly, or indirectly through one or more of its
Subsidiaries.
In all events, coverage as is afforded under this policy with respect
to any Claim made against a Subsidiary or any Director or Officer
thereof shall only apply for Wrongful Acts committed or allegedly
committed after the effective time that such Subsidiary became a
Subsidiary and prior to the time that such Subsidiary ceased to be a
Subsidiary.
(m) "Wrongful Act" means:
(1) with respect to individual Directors or Officers, any breach
of duty, neglect, error, misstatement, misleading statement,
omission or act by the Directors or Officers of the Company
in their respective capacities as such, or any matter
claimed against them solely by reason of their status as
Directors or Officers of the Company, or any matter claimed
against them arising out of their serving as a director,
officer, trustee or governor of an Outside Entity in such
capacities, but only if such service is at the specific
written request or direction of the Company,
(2) with respect to the Company, any breach of duty, neglect,
error, misstatement, misleading statement, omission or act
by the Company, but solely as respects a Securities Claim.
5
<PAGE> 9
3. EXTENSIONS
Subject otherwise to the terms hereof, this policy shall cover Loss arising
from any Claims made against the estates, heirs, or legal representatives
of deceased Directors or Officers, and the legal representatives of
Directors or Officers in the event of incompetency, insolvency or
bankruptcy, who were Directors or Officers at the time the Wrongful Acts
upon which such Claims are based were committed.
Subject otherwise to the terms hereof, this policy shall cover Loss arising
from all Claims made against the lawful spouse (whether such status is
derived by reason of statutory law, common law or otherwise of any
applicable jurisdiction in the world) of an individual Director or Officer
for all Claims arising solely out of his or her status as the spouse of an
individual Director or Officer, including a Claim that seeks damages
recoverable from marital community property, property jointly held by the
individual Director or Officer and the spouse, or property transferred from
the individual Director or Officer to the spouse; provided, however, that
this extension shall not afford coverage for any Claim for any actual or
alleged Wrongful Act of the spouse, but shall apply only to Claims arising
out of any actual or alleged Wrongful Acts of an individual Director or
Officer, subject to the policy's terms, conditions and exclusions.
4. EXCLUSIONS
The Insurer shall not be liable to make any payment for Loss in connection
with a Claim made against an Insured:
(a) arising out of, based upon or attributable to the gaining in fact of
any profit or advantage to which an Insured was not legally entitled;
(b) arising out of, based upon or attributable to: (1) profits in fact made
from the purchase or sale by an Insured of securities of the Company
within the meaning of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any state
statutory law; or (2) payments to an Insured of any remuneration
without the previous approval of the stockholders of the Company, which
payment without such previous approval shall be held to have been
illegal;
(c) arising out of, based upon or attributable to the committing in fact
of any criminal or deliberate fraudulent act;
[The Wrongful Act of a Director or Officer shall not be imputed to any
other Director or Officer for the purpose of determining the applicability
of the foregoing exclusions 4(a) through 4(c)]
6
<PAGE> 10
(d) alleging, arising out of, based upon or attributable to the facts
alleged, or to the same or related Wrongful Acts alleged or contained,
in any claim which has been reported, or in any circumstances of which
notice has been given, under any policy of which this policy is a
renewal or replacement or which it may succeed in time;
(e) alleging, arising out of, based upon or attributable to any pending or
prior litigation as of the Continuity Date, or alleging or derived
from the same or essentially the same facts as alleged in such pending
or prior litigation;
(f) alleging, arising out of, based upon or attributable to a Listed Event
that occurs no later than 90 days subsequent to the Continuity Date;
provided, however, that this exclusion shall only apply with respect
to coverage which would have otherwise been afforded under Coverage
B(i) of the policy;
(g) with respect to serving as a director, officer, trustee or governor of
an Outside Entity, for any Wrongful Act occurring prior to the
Continuity Date if the Insured knew or could have reasonably foreseen
that such Wrongful Act could lead to a Claim under this policy;
(h) alleging, arising out of, based upon or attributable to any actual or
alleged act or omission of the Directors or Officers serving in their
capacities as directors, officers, trustees or governors of any other
entity other than the Company or an Outside Entity, or by reason of
their status as directors, officers, trustees or governors of such
other entity;
(i) which is brought by any Insured or by the Company; or which is brought
by any security holder of the Company, whether directly or
derivatively, unless such security holder's Claim is instigated and
continued totally independent of, and totally without the solicitation
of, or assistance of, or active participation of, or intervention of,
any Insured or the Company; provided, however, this exclusion shall
not apply to a wrongful termination of employment Claim brought by a
former employee other than a former employee who is or was a Director
of the Company;
(j) for any Wrongful Act arising out of the Insured serving as a director,
officer, trustee or governor of an Outside Entity if such Claim is
brought by the Outside Entity or by any director, officer, trustee or
governor thereof; or which is brought by any security holder of the
Outside Entity, whether directly or derivatively, unless such security
holder's Claim is instigated and continued totally independent of, and
totally without the solicitation of, or assistance of, or active
participation of, or intervention of, the Outside Entity, any
director, officer, trustee or governor thereof, any Insured or the
Company;
(k) for bodily injury, sickness, disease, death or emotional distress of
any person, or damage to or destruction of any tangible property,
including the loss of use thereof, or for injury from libel or slander
or defamation or disparagement, or for injury from a violation of a
person's right of privacy;
7
<PAGE> 11
(l) alleging, arising out of, based upon, attributable to, or in any way
involving, directly or indirectly:
(1) the actual, alleged or threatened discharge, dispersal, release
or escape of pollutants; or
(2) any direction or request to test for, monitor, clean up, remove,
contain, treat, detoxify or neutralize pollutants,
including but not limited to a Claim alleging damage to the Company or
its securities holders.
Pollutants include (but are not limited to) any solid, liquid, gaseous
or thermal irritant or contaminant, including smoke, vapor, soot,
fumes, acids, alkalis, chemicals and waste. Waste includes (but is not
limited to) materials to be recycled, reconditioned or reclaimed;
(m) for violation(s) of any of the responsibilities, obligations or duties
imposed upon fiduciaries by the Employee Retirement Income Security
Act of 1974, or amendments thereto or any similar provisions of state
statutory law or common law.
5. LIMIT OF LIABILITY - (FOR ALL LOSS - INCLUDING DEFENSE COSTS)
The Limit of Liability stated in Item 4 of the Declarations is the limit of
the Insurer's liability for all Loss, under Coverage A and Coverage B
combined, arising out of all Claims first made against the Insureds during
the Policy Period and the Discovery Period (if applicable); however, the
Limit of Liability for the Discovery Period shall be part of, and not in
addition to, the Limit of Liability for the Policy Period. Further, any
Claim which is made subsequent to the Policy Period or Discovery Period (if
applicable) which pursuant to Clause 7(b) or 7(c) is considered made during
the Policy Period or Discovery Period shall also be subject to the one
aggregate Limit of Liability stated in Item 4 of the Declarations.
DEFENSE COSTS ARE NOT PAYABLE BY THE INSURER IN ADDITION TO THE LIMIT OF
LIABILITY. DEFENSE COSTS ARE PART OF LOSS AND AS SUCH ARE SUBJECT TO THE
LIMIT OF LIABILITY FOR LOSS.
6. RETENTION CLAUSE
The Insurer shall only be liable for the amount of Loss arising from a
Claim which is in excess of the Retention amount stated in Item 5 of the
Declarations, such Retention amount to be borne by the Company and/or the
Insureds and shall remain uninsured, with regard to all Loss under: (i)
Coverage A or B(ii) for which the Company has indemnified or is permitted
or required to indemnify the Director(s) or Officer(s) ("Indemnifiable
Loss"); or (ii) Coverage B(i). A single Retention amount shall apply to
Loss arising from all Claims alleging the same Wrongful Act or related
Wrongful Acts.
8
<PAGE> 12
Notwithstanding the foregoing, solely with respect to a Securities Claim
under this policy, the Retention shall only apply to Defense Costs;
provided, however, no Retention shall apply for a Securities Claim even as
respects Defense Costs in the event of a determination of No Liability of
all Insureds, and the Insurer shall thereupon reimburse such Defense Costs
paid by the Insured.
7. NOTICE/CLAIM REPORTING PROVISIONS
NOTICE HEREUNDER SHALL BE GIVEN IN WRITING TO THE INSURER NAMED IN ITEM 8 OF
THE DECLARATIONS AT THE ADDRESS INDICATED IN ITEM 8 OF THE DECLARATIONS. IF
MAILED, THE DATE OF MAILING SHALL CONSTITUTE THE DATE THAT SUCH NOTICE WAS
GIVEN AND PROOF OF MAILING SHALL BE SUFFICIENT PROOF OF NOTICE.
(a) The Company or the Insureds shall, as a condition precedent to the
obligations of the Insurer under this policy, give written notice to the
Insurer of any Claim made against an Insured as soon as practicable and
either:
(1) any time during the Policy Period or during the Discovery Period
(if applicable); or
(2) within 30 days after the end of the Policy Period or the
Discovery Period (if applicable), as long as such Claim is
reported no later than 30 days after the date such Claim was
first made against an Insured.
(b) If written notice of a Claim has been given to the Insurer pursuant to
Clause 7(a) above, then any Claim which is subsequently made against the
Insureds and reported to the Insurer alleging, arising out of, based
upon or attributable to the facts alleged in the Claim for which such
notice has been given, or alleging any Wrongful Act which is the same as
or related to any Wrongful Act alleged in the Claim of which such notice
has been given, shall be considered made at the time such notice was
given.
(c) If during the Policy Period or during the Discovery Period (if
applicable) the Company or the Insureds shall become aware of any
circumstances which may reasonably be expected to give rise to a Claim
being made against the Insureds and shall give written notice to the
Insurer of the circumstances and the reasons for anticipating such a
Claim, with full particulars as to dates, persons, and entities
involved, then any Claim which is subsequently made against the Insureds
and reported to the Insurer alleging, arising out of, based upon or
attributable to such circumstances or alleging any Wrongful Act which is
the same as or related to any Wrongful Act alleged or contained in such
circumstances, shall be considered made at the time such notice of such
circumstances was given.
9
<PAGE> 13
8. DEFENSE COSTS, SETTLEMENTS, JUDGMENTS (INCLUDING THE ADVANCEMENT OF
DEFENSE COSTS)
Under both Coverage A and Coverage B of this policy, except as hereinafter
stated, the Insurer shall advance, at the written request of the Insured,
Defense Costs prior to the final disposition of a Claim. Such advanced
payments by the Insurer shall be repaid to the Insurer by the Insureds or
the Company severally according to their respective interests, in the event
and to the extent that the Insureds or the Company shall not be entitled
under the terms and conditions of this policy to payment of such Loss.
THE INSURER DOES NOT, HOWEVER, UNDER THIS POLICY, ASSUME ANY DUTY TO
DEFEND. THE INSUREDS SHALL DEFEND AND CONTEST ANY CLAIM MADE AGAINST THEM.
THE INSUREDS SHALL NOT ADMIT OR ASSUME ANY LIABILITY, ENTER INTO ANY
SETTLEMENT AGREEMENT, STIPULATE TO ANY JUDGMENT, OR INCUR ANY DEFENSE COSTS
WITHOUT THE PRIOR WRITTEN CONSENT OF THE INSURER. ONLY THOSE SETTLEMENTS,
STIPULATED JUDGMENTS AND DEFENSE COSTS WHICH HAVE BEEN CONSENTED TO BY THE
INSURER SHALL BE RECOVERABLE AS LOSS UNDER THE TERMS OF THIS POLICY. THE
INSURER'S CONSENT SHALL NOT BE UNREASONABLY WITHHELD, PROVIDED THAT THE
INSURER SHALL BE ENTITLED TO EFFECTIVELY ASSOCIATE IN THE DEFENSE AND THE
NEGOTIATION OF ANY SETTLEMENT OF ANY CLAIM.
The Insurer shall have the right to effectively associate with the Company
and the Insureds in the defense of any Claim that appears reasonably likely
to involve the Insurer, including but not limited to negotiating a
settlement. The Company and the Insureds shall give the Insurer full
cooperation and such information as it may reasonably require.
The Insurer may make any settlement of any Claim it deems expedient with
respect to any Insured subject to such Insured's written consent. If any
Insured withholds consent to such settlement, the Insurer's liability for
all Loss on account of such Claim shall not exceed the amount for which the
Insurer could have settled such Claim plus Defense Costs incurred as of the
date such settlement was proposed in writing by the Insurer.
The Company is not covered in any respect under Coverage A; the Company is
covered, subject to the policy's terms and conditions, only with respect to
its indemnification of its Directors or Officers under Coverage B(ii) as
respects a Claim against such Directors and Officers, and subject to the
policy's terms and conditions, under Coverage B(i) for a Securities Claim
made against the Company. Accordingly, the Insurer has no obligation under
this policy for Defense Costs incurred by, judgments against or settlements
by the Company arising out of a Claim made against the Company other than a
covered Securities Claim, or any obligation to pay Loss arising out of any
legal liability that the Company has to the claimant except as respects a
covered Securities Claim against the Company.
10
<PAGE> 14
With respect to (i) Defense Costs jointly incurred by, (ii) any joint
settlement made by, and/or (iii) any adjudicated judgment of joint and
several liability against the Company and any Director or Officer, in
connection with any Claim other than a Securities Claim, the Company and
the Director(s) or Officer(s) and the Insurer agree to use their best
efforts to determine a fair and proper allocation of the amounts as between
the Company and the Director(s) or Officers(s) and the Insurer, taking into
account the relative legal and financial exposures of and the relative
benefits obtained by the Directors and Officers and the Company. In the
event that a determination as to the amount of Defense Costs to be advanced
under the policy cannot be agreed to, then the Insurer shall advance such
Defense Costs which the Insurer states to be fair and proper until a
different amount shall be agreed upon or determined pursuant to the
provisions of this policy and applicable law.
9. PRE-AUTHORIZED SECURITIES DEFENSE ATTORNEYS
Only with respect to a Securities Claim:
Affixed as Appendix A hereto and made a part of this policy is a list of
Panel Counsel law firms ("Panel Counsel Firms"). The list provides the
Insured a choice of law firms from which a selection of legal counsel shall
be made to conduct the defense of any Securities Claim made against them.
The Insureds shall select a Panel Counsel Firm to defend a Securities Claim
made against the Insureds in the jurisdiction in which the Securities Claim
is brought. In the event a Securities Claim is brought in a jurisdiction
not included on the list, the Insureds shall select a Panel Counsel Firm in
the listed jurisdiction which is the nearest geographical jurisdiction to
either where the Securities Claim is brought or where the corporate
headquarters of the Named Corporation is located. In such instance the
Insureds also may, with the consent of the Insurer, which consent shall not
be unreasonably withheld, select a non-Panel Counsel Firm in the
jurisdiction in which the Securities Claim is brought to function as "local
counsel" on the Securities Claim to assist the Panel Counsel Firm which
will function as "lead counsel" in conducting the defense of the Securities
Claim.
With the express prior written consent of the Insurer, an Insured may
select a Panel Counsel Firm different from that selected by other Insured
defendants if such selection is required due to an actual conflict of
interest or is otherwise reasonably justifiable.
The list of Panel Counsel Firms may be amended from time to time by the
Insurer. However, no change shall be made to the specific list attached to
this policy during the Policy Period without the consent of the Named
Corporation. At the request of the Insured, the Insurer may in its
discretion add to the attached list of Panel Counsel Firms for the purposes
of defending a Securities Claim made against the Insured in any specified
jurisdiction (including a jurisdiction not originally included in the Panel
Counsel list) a Panel Counsel Firm not originally listed for such
jurisdiction. The Insurer may in its discretion waive, in part or in whole,
the provisions of this clause as respects a particular Securities Claim.
11
<PAGE> 15
10. DISCOVERY CLAUSE
Except as indicated below, if the Insurer or the Named Corporation shall
cancel or refuse to renew this policy, the Named Corporation shall have the
right, upon payment of an additional premium of 75% of the "full annual
premium", to a period of one year following the effective date of such
cancellation or nonrenewal (herein referred to as the "Discovery Period")
in which to give to the Insurer written notice of Claims first made against
the Insureds during said one year period for any Wrongful Act occurring
prior to the end of the Policy Period and otherwise covered by this policy.
As used herein, "full annual premium" means the premium level in effect
immediately prior to the end of the Policy Period. The rights contained in
this paragraph shall terminate, however, unless written notice of such
election together with the additional premium due is received by the
Insurer within 30 days of the effective date of cancellation or nonrenewal.
In the event of a Transaction, as defined in Clause 12, the Named
Corporation shall have the right, within 30 days before the end of the
Policy Period, to request an offer from the Insurer of a Discovery Period
(with respect to Wrongful Acts occurring prior to the effective time of the
Transaction) for a period of no less than three years or for such longer or
shorter period as the Named Corporation may request. The Insurer shall
offer such Discovery Period pursuant to such terms, conditions and premium
as the Insurer may reasonably decide. In the event of a Transaction, the
right to a Discovery Period shall not otherwise exist except as indicated
in this paragraph.
The additional premium for the Discovery Period shall be fully earned at
the inception of the Discovery Period. The Discovery Period is not
cancelable. This clause and the rights contained herein shall not apply to
any cancellation resulting from non-payment of premium.
11. CANCELLATION CLAUSE
This policy may be canceled by the Named Corporation at any time only by
mailing written prior notice to the Insurer or by surrender of this policy
to the Insurer or its authorized agent. This policy may also be canceled by
or on behalf of the Insurer by delivering to the Named Corporation or by
mailing to the Named Corporation, by registered, certified, or other first
class mail, at the Named Corporation's address as shown in Item 1 of the
Declarations, written notice stating when, not less than 60 days
thereafter, the cancellation shall be effective. The mailing of such notice
as aforesaid shall be sufficient proof of notice. The Policy Period
terminates at the date and hour specified in such notice, or at the date
and time of surrender.
If this policy shall be canceled by the Named Corporation, the Insurer
shall retain the customary short rate proportion of the premium herein.
If this policy shall be canceled by the Insurer, the Insurer shall retain
the pro rata proportion of the premium herein.
12
<PAGE> 16
Payment or tender of any unearned premium by the Insurer shall not be a
condition precedent to the effectiveness of cancellation, but such payment
shall be made as soon as practicable.
If the period of limitation relating to the giving of notice is prohibited
or made void by any law controlling the construction thereof, such period
shall be deemed to be amended so as to be equal to the minimum period of
limitation permitted by such law.
12. CHANGE IN CONTROL OF NAMED CORPORATION
If during the Policy Period:
a. the Named Corporation shall consolidate with or merge into, or
sell all or substantially all of its assets to any other person
or entity or group of persons and/or entities acting in concert;
or
b. any person or entity or group of persons and/or entities acting
in concert shall acquire an amount of the outstanding securities
representing more than 50% of the voting power for the election
of Directors of the Named Corporation, or acquires the voting
rights of such an amount of such securities;
(either of the above events herein referred to as the
"Transaction")
then this policy shall continue in full force and effect as to Wrongful
Acts occurring prior to the effective time of the Transaction, but there
shall be no coverage afforded by any provision of this policy for any
actual or alleged Wrongful Act occurring after the effective time of the
Transaction. This policy may not be canceled after the effective time of
the Transaction and the entire premium for this policy shall be deemed
earned as of such time. The Named Corporation shall also have the right to
an offer by the Insurer of a Discovery Period described in Clause 10 of the
policy.
The Named Corporation shall give the Insurer written notice of the
Transaction as soon as practicable, but not later than 30 days after the
effective date of the Transaction.
13. SUBROGATION
In the event of any payment under this policy, the Insurer shall be
subrogated to the extent of such payment to all the Company's and the
Insureds' rights of recovery thereof, and the Company and the Insureds
shall execute all papers required and shall do everything that may be
necessary to secure such rights including the execution of such documents
necessary to enable the Insurer to effectively bring suit in the name of
the Company and/or the Insureds. In no event, however, shall the Insurer
exercise its rights of subrogation against an Insured under this policy
unless such Insured has been convicted of a criminal act, or been
judicially determined to have committed a deliberate fraudulent act, or
obtained any profit or advantage to which such Insured was not legally
entitled.
13
<PAGE> 17
14. OTHER INSURANCE AND INDEMNIFICATION
Such insurance as is provided by this policy shall apply only as excess
over any other valid and collectible insurance.
In the event of a Claim against a Director or Officer arising out of his or
her serving as director, officer, trustee or governor of an Outside Entity,
coverage as is afforded by this policy shall be specifically excess of
indemnification provided by such Outside Entity and any insurance provided
to such Outside Entity with respect to its directors, officers, trustees or
governors. Further, in the event such other Outside Entity insurance is
provided by the Insurer or any member company of American International
Group, Inc. ("AIG") (or would be provided but for the application of the
retention amount, exhaustion of the limit of liability or failure to submit
a notice of a Claim) then the maximum aggregate Limit of Liability for all
Losses combined covered by virtue of this policy as respects any such Claim
shall be reduced by the limit of liability (as set forth on the
declarations page) of the other AIG insurance provided to such Outside
Entity.
15. NOTICE AND AUTHORITY
It is agreed that the Named Corporation shall act on behalf of its
Subsidiaries and all Insureds with respect to the giving notice of Claim or
giving and receiving notice of cancellation, the payment of premiums and
the receiving of any return premiums that may become due under this policy,
the receipt and acceptance of any endorsements issued to form a part of
this policy and the exercising or declining to exercise any right to a
Discovery Period.
16. ASSIGNMENT
This policy and any and all rights hereunder are not assignable without the
written consent of the Insurer.
17. ARBITRATION
It is hereby understood and agreed that all disputes or differences which
may arise under or in connection with this policy, whether arising before
or after termination of this policy, including any determination of the
amount of Loss, shall be submitted to the American Arbitration Association
under and in accordance with its then prevailing commercial arbitration
rules. The arbitrators shall be chosen in the manner and within the time
frames provided by such rules. If permitted under such rules the
arbitrators shall be three disinterested individuals having knowledge of
the legal, corporate management or insurance issues relevant to the matters
in dispute.
14
<PAGE> 18
Any party may commence such arbitration proceeding in either New York, New
York; Atlanta, Georgia; Chicago, Illinois; or Denver, Colorado. The
arbitrators shall give due consideration to the general principles of
Delaware law in the construction and interpretation of the provisions of
this policy; provided, however, that the terms, conditions, provisions and
exclusions of this policy are to be construed in an evenhanded fashion as
between the parties, including without limitation, where the language of
this policy is alleged to be ambiguous or otherwise unclear, the issue shall
be resolved in the manner most consistent with the relevant terms,
conditions, provisions or exclusions of the policy (without regard to the
authorship of the language, the doctrine of reasonable expectation of the
parties and without any presumption or arbitrary interpretation or
construction in favor of either party or parties, and in accordance with the
intent of the parties.)
The written decision of the arbitrators shall be provided to both parties
and shall be binding on them. The arbitrators' award shall not include
attorney fees or other costs.
Each party shall bear equally the expenses of the arbitration.
18. ACTION AGAINST INSURER
Except as provided in Clause 17 of the policy, no action shall lie against
the Insurer unless, as a condition precedent thereto, there shall have been
full compliance with all of the terms of this policy, nor until the amount
of the Insureds' obligation to pay shall have been finally determined either
by judgment against the Insureds after actual trial or by written agreement
of the Insureds, the claimant and the Insurer.
Any person or organization or the legal representative thereof who has
secured such judgment or written agreement shall thereafter be entitled to
recover under this policy to the extent of the insurance afforded by this
policy. No person or organization shall have any right under this policy to
join the Insurer as a party to any action against the Insureds or the
Company to determine the Insureds' liability, nor shall the Insurer be
impleaded by the Insureds or the Company or their legal representatives.
Bankruptcy or insolvency of the Company or the Insureds or of their estates
shall not relieve the Insurer of any of its obligations hereunder.
19. HEADINGS
The descriptions in the headings of this policy are solely for convenience,
and form no part of the terms and conditions of coverage.
15
<PAGE> 19
This page intentionally left blank
<PAGE> 20
APPENDIX A
PANEL COUNSEL
-1-
<TABLE>
<CAPTION>
CALIFORNIA Palo Alto
Los Angeles
<S> <C>
Wilson Sonsini Goodrich & Rosati
Gibson Dunn & Crutcher 650 Page Mill Road
333 South Grand Avenue Palo Alto, California 94304-1050
Los Angeles, California 90071-3197 Contact Person: Bruce Vanyo or
Contact Persons: Steven Sethatz (415) 493-9300
Robert S. Warren (213) 229-7326
Wayne W. Smith (213) 229-7464 Heller, Ellman, White & McAuliffe
John H. Sharer (213) 229-7476 525 University Avenue
Palo Alto, California 94301
Irell & Manella Contact Person: Norman J. Blears
1800 Avenue Of The Stars (415) 324-7000
Suite 900
Los Angeles, California 90067 San Francisco
Contact Person: Richard Borow
(310) 277-1010 Brobeck, Phleger & Harrison
Spear Street Tower
Kirkland & Ellis One Market
300 South Grand Avenue San Francisco, California 94104
Los Angeles, California 90071 Contact Person:
Contact Person: Jeffrey S. Davidson or Tower C. Snow, Jr. (415) 442-0900
Stephen C. Neal (213) 680-8400
Heller, Ehrman, White & McAuliffe
Latham & Watkins 333 Bush Street
633 West Fifth Avenue San Francisco, California 94104
Los Angeles, CA 90071-2007 Contact Person: Douglas Schwab or
Contact: M. Laurence Popofsky (415) 772-6000
Hugh Steven Wilson (213) 485-1234
Munger, Tolles & Olson McCutchen, Doyle, Brown & Enersen
355 South Grand Avenue - 35th floor 3 Embarcadero Center - 18th floor
Los Angeles, California 90071-1560 San Francisco, California 94111
Contact Person: Dennis Kinnaird Contact Person: David Balabanian or
(213) 683-9264 Philip R. Rotner (415) 393-2000
or John W. Spiegel (213) 683-9152
Morrison & Foerster
O'Melveny & Myers 345 California Street
400 South Hope Street San Francisco, California 94104-2675
Los Angeles, California 90071-2899 Contact Person:
Contact Person: Seth Aronson or Melvin R. Goldman (415) 677-7311
Robert Vanderet (213) 669-6000 Paul T. Friedman (415) 677-7444
Skadden, Arps, Slate, Meagher & Flom Orrick Herrington & Sutcliffe
300 South Grand Avenue Old Federal Reserve Bank Bldg.
Suite 3400 400 Sansome Street
Los Angeles, California 90071 San Francisco, California 94111
Contact Person: James E. Lyons or Contact Person: James A. Hughes
Frank Rothman (213) 687-5000 (415) 392-1122
or W. Reece Bader (415) 392-1122
Pillsbury, Madison & Sutro
P.O. Box 7880
235 Montgomery Street
San Francisco, California 94104
Contact Person: Gary H. Anderson
(415) 983-1341
</TABLE>
<PAGE> 21
APPENDIX A (continued)
PANEL COUNSEL
-2-
<TABLE>
<CAPTION>
DISTRICT OF COLUMBIA GEORGIA
Washington Atlanta
<S> <C>
Arnold & Porter Alston & Bird
555 Twelfth St. N.W. One Atlantic Center
Washington, DC 20004-1202 1201 West Peachtree Street
Contact Person: Scott Schreiber Atlanta, Georgia 30309
(202) 942-5672 Contact Person: Peter Q. Bassett (404) 881-7343
Mary C. Gill (404) 881-7276
Davis Polk & Wardwell
1300 I Street, NW King & Spalding
Suite 1100 191 Peachtree Street N.W.
Washington, D.C. 20005 Atlanta, Georgia 30303-1763
Contact Person: Scott W. Muller Contact Person: Michael R. Smith or
Michael P. Carroll (202) 962-7000 Griffin Bell (404) 572-4600
Gibson, Dunn & Crutcher Long, Aldridge & Norman
1050 Connecticut Avenue, NW One Peachtree Center
Suite 900 303 Peachtree Street - Suite 5300
Washington, D.C. 20036-5306 Atlanta, Georgia 30308
Contact Person: F. Joseph Warin Contact Person: Clay C. Long (404) 527-4050
(202) 887-3609 J. Allen Maines (404) 527-8340
Mudge Rose Guthrie Alexander & Ferdon Smith, Gambrell & Russel
212 K Street, NW Suite 1800
Washington, D.C. 20037 3343 Peachtree Road N.E.
Contact Person: Leonard Garment or Atlanta, Georgia 30326-1010
I. Lewis Libby (202) 429-9355 Contact Person: David Handley (404) 264-2671
Robert C. Schwartz (404) 264-2658
Patton Boggs, L.L.P
2550 M Street N.W. ILLINOIS
Suite 900 Chicago
Washington, D.C. 20037
Contact Person: Jenner & Block
C. Allen Foster (202) 457 6320 One IBM Plaza
or Charles H. Camp (202) 457-5265 Chicago, Illinois 60611
Contact Person: Jerold Solovy
Shearman & Sterling (312) 222-9350
801 Pennsylvania Avenue N.W.
Washington, D.C. 20004-2604 Kirkland & Ellis
Contact Person: Thomas S. Martin or 200 East Randolph Drive
Jonathan L. Greenblatt (202) 508-8000 Chicago, Illinois 60601
Contact Person: Garrett B. Johnson
Willkie Farr & Gallagher Robert J. Kopecky (312) 861-2000
Three Lafayette Centre
1155 21st Street N.W.
Washington, D.C. 20036-3384
Contact Person:
Kevin B. Clark (202) 328-8000
</TABLE>
<PAGE> 22
APPENDIX A (continued)
PANEL COUNSEL
-3-
<TABLE>
<CAPTION>
<S> <C>
Sidley & Austin NEW YORK
One First National Plaza New York
Chicago, Illinois 60603
Contact Person: Robert Downing (312) 853-7434 Arnold&Porter
Eugene Schoon (312) 853-7279 399 Park Avenue
Walter C. Carlson (312) 853-7734 New York, New York 10022-21690
Contact Person
Skadden, Arps, Slate, Meagher & Flom Kenneth V.Handal (212) 715-1020
333 West Wacker Drive or Scott Schreiber (212) 701-1000
Suite 2100
Chicago, Illinois 60606 Cahill Gordon & Reindel
Contact Person: Timothy Nelsen or 80 Pine Street
Susan Getzendanner (312) 407-0700 New York, New York 10005
Contact Person: Charles A. Gilman
Sonnenschein Nath & Rosenthal or Thomas J. Kavaler (212) 701-3000
8000 Sears Tower or Immanuel Kohn
Chicago, Illinois 60606-6404
Contact Person: Harold D. Shapiro Davis, Polk & Wardwell
(312) 876-8035 450 Lexington Avenue
New York, New York 10017
MASSACHUSETTS Contact Person: Henry King,
Boston or Dan Kolb (212) 450-4000
Goodwin, Proctor & Hoar Fried Frank Harris Shriver & Jacobson
Exchange Place 1 New York Plaza - 27th Floor
Boston, Massachusetts 02109 New York, New York 10004
Contact Person: Contact Person: Sheldon Raab
Don M. Kennedy (617) 570-1000 (212) 820-8090
Hale & Dorr Kirkland & Ellis
60 State St. Citicorp Center
Boston, Massachusetts 02109 153 East 53rd Street
Jeffery Rudman (617) 742-9100 New York, New York 10022-4675
Contact Person: Yosef J. Riemer or
Frank M. Holozubiec (212) 446-4800
Ropes & Gray
One International Plaza Milbank, Tweed, Hadley & McCloy
Boston, Massachusetts 02110-2624 1 Chase Manhattan Plaza
Contact Person: John Donovan, Jr. New York, New York 10005
(617) 951-7566 Contact Person: Russell E. Brooks
(212) 530-5554
Skadden, Arps, Slate, Meagher & Flom
1 Beacon Street Mudge Rose Guthrie Alexander & Ferdon
Boston, Massachusetts 02108 180 Maiden Lane
Contact Person: Thomas A. Dougherty or New York, New York 10038
George J. Skelley (617) 573-4800 Contact Person: Kenneth Conboy,
John J. Kirby, Jr., or
Palmer & Dodge Laurence V. Senn, Jr. (212) 510-7000
1 Beacon Street
Boston, Massachusetts 02108 Shearman & Sterling
Contact Person: Peter Terris or Citicorp Center
Peter Saparoff (617) 573-0100 153 E 53rd Street
New York, New York 10022-4676
Contact Person:
Dennis Orr (212) 848-8000
</TABLE>
<PAGE> 23
APPENDIX A (continued)
PANEL COUNSEL
-4-
<TABLE>
<CAPTION>
<S> <C>
Simpson Thacher & Bartlett TEXAS
425 Lexington Avenue Dallas
New York, New York 10017
Contact Person: Roy L. Reardon, Akin, Gump, Strauss, Hauer & Feld, L.L.P.
James Hagan, or 4100 Suite
Michael J. Chepiga (212) 455-2000 1700 Pacific Avenue
Dallas, Texas 75201-4618
Skadden, Arps, Slate, Meagher & Flom Contact Person: Michael Lowenberg P.C.
919 Third Avenue or Louis P. Bickel (214) 969-2800
New York, New York 10022
Contact Person: Barry H. Garfinkel or Fulbright & Jaworski
Jonathan Lerner (212) 735-3000 2200 Ross Avenue
Suite 2800
Stroock & Stroock & Lavan Dallas, Texas 75201
Seven Hanover Square Contact Person: Karl G. Dial
New York, NY 10004-2696 (214) 855-8000
Contact:
Melvin A. Brosterman (212) 806-5400
Laurence Greenwald (212) 806-5400 Locke Purnell Rain Harrell
Alvin K. Hellerstein (212) 806-5400 2200 Ross Avenue
Suite 2200
Sullivan & Cromwell Dallas, TX 75201-6776
125 Broad Street Contact Person:
New York, New York 10004 John McElhaney (214) 740-8458
Contact Person: John L. Warden Peter Flvnn (214) 740-8654
(212) 558-4000 Morris Harrell (214) 740-8404
Wachtell, Lipton, Rosen & Katz
51 West 57th Street Thompson & Knight, P.C.
New York, New York 10019 1700 Pacific Avenue
Contact Person: Norman Redlich Suite 3300
(212) 371-9200 Dallas, TX 75201
Contact Person:
Willkie Farr & Gallagher Schuyler B. Marshall (214) 969-1246
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677 Baker & Botts, L.L.P.
Contact Person: 2001 Ross Avenue
Michael R. Young (212) 821-8000 Dallas, Texas 75201-2916
David L. Foster (212) 821-8000 Contact Person:
Richard L. Posen (212) 821-8000 Ronald L. Palmer (214) 953-6500
Weil, Gotshal & Manges Haynes & Boone, L.L.P.
767 Fifth Avenue 3100 NationsBank Plaza
New York, New York 10153 901 Main Street
Contact Person: Dennis J. Block Dallas, Texas 75202-3789
(212) 310-8000 Contact Person: Michael Boone,
George Bramblett, or
Noel Hensley (214) 651-5000
Kaye, Scholer, Fierman, Hays & Handler
425 Park Avenue
New York, New York 10022
Contact Person: Frederic W. Yerman
(212) 836-8663
</TABLE>
<PAGE> 24
APPENDIX A (continued)
PANEL COUNSEL
-5-
<TABLE>
<CAPTION>
Houston
<S> <C>
Vinson & Elkins
Akin, Gump, Strauss, Hauer & Feld, L.L.P. 2500 First City Tower
Pennzoil Place - South Tower 1001 Fannin
711 Louisiana Street Houston, Texas 77002-6760
Suite 1900 Contact Person: David T. Hedges Jr.
Houston, Texas 77002 (713) 758-2676
Contact Person: Charles Moore or
Paula Hinton (713) 220-5800 Baker & Botts
910 Louisiana Street
Houston, Texas 77002-4995
Fulbright & Jaworski, L.L.P. William C. Slugger (713) 229-1234
1301 McKinnev Harold Metts (713) 229-1234
Suite 5100
Houston, Texas 77010
Contact Person: Richard Carrell or
Frank Jones (713) 651-5151
</TABLE>
<PAGE> 25
ENDORSEMENT# 1
--------------
This endorsement, effective 12:01 AM May 14, 1996 forms a part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
OUTSIDE ENTITY ENDORSEMENT
(2x)
In consideration of the premium charged, it is hereby understood and agreed that
the following entities shall be deemed an "Outside Entity", but only as respects
the Outside Entity's respective Continuity Date below:
OUTSIDE ENTITY CONTINUITY DATE
-------------- ---------------
1) A not-for-profit organization under
section 501(c) (3) of the Internal Revenue
Code of 1986 (as amended). May 14, 1993
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.
-------------------------
AUTHORIZED REPRESENTATIVE
<PAGE> 26
ENDORSEMENT# 2
------------
This endorsement, effective 12:01 AM May 14, 1996 forms a part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
OHIO
----
AMENDATORY ENDORSEMENT
----------------------
Wherever used in this endorsement: 1) "we", "us", "our", and "Insurer" mean the
insurance company which issued this policy; and 2) "you" , "your", "named
Insured", "First Named Insured", and "Insured" mean the Named Corporation, Named
Organization, Named Sponsor, Named Insured, or Insured stated in the
declarations page; and 3) "Other Insured(s)" means all other persons or entities
afforded coverage under the policy.
In consideration of the premium charged, it is understood and agreed that the
cancellation provision of the Policy is deleted in its entirety and replaced by
the following:
CANCELLATION
- ------------
This policy may be cancelled by the named Insured by surrender thereof to the
Insurer or any of its authorized agents or by mailing to the Insurer written
notice stating when thereafter the cancellation shall be effective.
After coverage has been in effect for more than 90 days or after the effective
date of the renewal of the policy, a notice of cancellation shall not be issued
by the Insurer unless it is based on at least one of the following reasons:
a) Nonpayment of premium;
b) Discovery of fraud or material misrepresentation in the procurement of the
insurance;
c) Discovery of willful or reckless acts or omissions on the part of the named
Insured or Other Insured(s) which increase any hazard insured against;
d) The occurrence of a change in the individual risk which substantially
increases any hazard insured against;
e) Loss of or substantial decrease in applicable reinsurance;
f) Failure of an Insured or Other Insured(s) to corrent material violations of
safety codes or to comply with reasonable written loss control
recommendations; or
g) A determination by the director of insurance that the continuation of the
Policy would create a condition that would be hazardous to the Insured or
other Insureds or to the public.
The notice of cancellation will be in writing, be mailed to the Insured at his
last known address, and contain all of the following:
-1-
<PAGE> 27
ENDORSEMENT# 2 (continued)
------------
- The policy number;
- The date of notice;
- The effective date of cancellation (Except for nonpayment of premium,
the effective date of cancellation shall not be less than thirty (30)
days from the date of mailing the notice. And when cancellation is for
nonpayment of premium, the effective date of cancellation will be no
less than ten (10) days from the date of mailing the notice); and
- An explanation of the reason for cancellation.
NONRENEWAL
- ----------
The Insurer shall provide at least thirty (30) days written notice of its
intention not to renew the policy at its expiration date.
NOTICE REQUIREMENTS FOR INCREASE IN PREMIUM
- -------------------------------------------
An increase who intends to condition renewal upon a substantial increase in
premium shall mail a notice of such intention to the agent of record and to the
Insured at least 30 days prior to the expiration date of the policy. If the
notice is mailed less than 30 days before the expiration date of the policy the
Insured's coverage then in effect remains in effect until 30 days after the date
of mailing the notice.
All other terms, conditions and exclusions shall remain the same.
------------------------------
AUTHORIZED REPRESENTATIVE
-2-
<PAGE> 28
ENDORSEMENT# 3
------------
This endorsement, effective 12:01 AM May 14, 1996 forms a part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
OHIO AMENDATORY ENDORSEMENT
DISCOVERY CLAUSE
In consideration of the premium charged, it is hereby understood and agreed
that:
The first paragraph of Clause 10. DISCOVERY, is deleted in its entirety and
replaced by the following:
10. DISCOVERY CLAUSE
If the Insurer or the Named Corporation shall cancel or refuse to renew
this policy the Named Corporation shall have the right, upon payment of
an additional premium of 75% of the Full Annual Premium, to a period of
one year following the effective date of such cancellation or nonrenewal
(herein referred to as the Discovery Period) in which to give
written notice to the Insurer of claims first made against the Insureds
during said one year period for any Wrongful Act occurring prior to the
end of the Policy Period and otherwise covered by this policy. As used
herein, "Full Annual Premium" means the premium level in effect
immediately prior to the end of the Policy Period.
The rights contained in this clause shall terminate, however, unless
written notice of such election together with the additional premium due
is received by the Insurer within sixty (60) days of the effective date
of cancellation or non-renewal. The additional premium for the Discovery
Period shall be fully earned at the inception of the Discovery Period.
The Discovery Period is not cancelable. This clause and the rights
contained herein shall not apply to any cancellation resulting from
non-payment of premium.
The offer by the Insurer of renewal terms, conditions, limits of
liability and/or premiums different from those from the expiring policy
shall not constitute refusal to renew.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE> 29
ENDORSEMENT# 4
------------
This endorsement, effective 12:01 AM May 14, 1996 forms a part of policy number
483-15-97 issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
OHIO AMENDATORY ENDORSEMENT
NOTICE AND AUTHORITY
In consideration of the premium charged, it is hereby understood and agreed that
Section 15., NOTICE AND AUTHORITY, is deleted in its entirety and replaced with
the following:
15. NOTICE AND AUTHORITY
It is agreed that the Named Corporation shall act on behalf of its Subsidiaries
and all Insureds with respect to the giving and receiving of notice of claim or
cancellation, the payment of premiums and the receiving of any return premiums
that may become due under this policy, the receipt and acceptance of any
endorsements issued to form a part of this policy and the exercising or
declining to exercise any right to a Discovery Period.
It is further agreed that the Insurer will provide Loss information to the
Insured within forty-five days of the Insured's request for such information, or
when notice of cancellation or nonrenewal is mail to the Insured.
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.
------------------------------
AUTHORIZED REPRESENTATIVE
<PAGE> 30
ENDORSEMENT# 5
------------
This endorsement, effective 12:01 AM May 14, 1996 forms a part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
GENERAL E&O EXCLUSION
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer shall not be liable to make any payment for Loss in connection with
any claim or claims made against the Directors or Officers alleging, arising out
of, based upon or attributable to the Company's or an Insured's performance of
or failure to perform professional services for others for a fee, or any act,
error, or omission relating thereto.
All other terms and conditions remain unchanged.
-------------------------
AUTHORIZED REPRESENTATIVE
<PAGE> 31
ENDORSEMENT# 6
------------
This endorsement, effective 12:01 AM May 14, 1996 forms a part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
NUCLEAR ENERGY LIABILITY EXCLUSIONS ENDORSEMENT
(BROAD FORM)
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer shall not be liable to make any payment for Loss in connection with
any Claim made against any Insured(s):
A. alleging, arising out of, based upon, attributable to, or in any way
involving, directly or indirectly the hazardous properties of nuclear
material, including but not limited to:
(1) nuclear material located at any nuclear facility owned by, or operated
by or on behalf of, the Company, or discharged or dispersed therefrom;
or
(2) nuclear material contained in spent fuel or waste which was or is at
any time possessed, handled, used, processed, stored, transported or
disposed of by or on behalf of the Company; or
(3) the furnishing by an Insured or the Company of services, materials,
parts or equipment in connection with the planning, construction,
maintenance, operation or use of any nuclear facility; or
(4) claims for damages to the Company or its shareholders which alleges,
arises from, is based upon, is attributed to or in any way involves,
directly or indirectly, the hazardous properties of nuclear material.
B. (1) which is insured under a nuclear energy liability policy issued by
Nuclear Energy Liability Insurance Association, Mutual Atomic Energy
Liability underwriters, or Nuclear Insurance Association of Canada, or
would be insured under any such policy but for its termination or
exhaustion of its Limit of Liability; or,
(2) with respect to which (a) any person or organization is required to
maintain financial protection pursuant to the Atomic Energy Act of
1954, or any law amendatory thereof, or (b) the Insured is, or had
this policy not been issued would be entitled to indemnity from the
United States of America, or any agency thereof, under any agreement
entered into the United States of America, or any agency thereof, with
any person or organization.
-1-
<PAGE> 32
ENDORSEMENT # 6 (Continued)
-------------
As used in this endorsement:
"hazardous properties" include radioactive, toxic or explosive properties;
"nuclear material" means source material, special nuclear material or byproduct
material;
"source material", "special nuclear material", and "byproduct material" have the
meanings given them in the Atomic Energy Act of 1954 or in any law amendatory
thereof;
"spent fuel" means any fuel element or fuel component, solid or liquid, which
has been used or exposed to radiation in a nuclear reactor;
"waste" means any waste material (1) containing byproduct material and (2)
resulting from the operation by any person or organization of any nuclear
facility included within the definition of nuclear facility under paragraph (a)
or (b) thereof;
"nuclear facility" means -
(a) any nuclear reactor,
(b) any equipment or device designed or used for (1) separating the isotopes
of uranium or plutonium, (2) processing or utilizing spent fuel, or (3)
handling, processing or packaging waste,
(c) any equipment or device used for the processing, fabricating or alloying
of special nuclear material if at any time the total amount of such
material in the custody of the insured at the premises where such
equipment or device is located consists of or contains more than 25 grams
of plutonium or uranium 233 or any combination thereof, or more than 250
grams of uranium 235,
(d) any structure, basin, excavation, premises or place prepared or used for
the storage or disposal of waste, and includes the site on which any of
the foregoing is located, all operations conducted on such site and
all-premises used for such operations;
"nuclear reactor" means any apparatus designed or used to sustain nuclear
fission in a self-supporting chain reaction or to contain a critical mass of
fissionable material.
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.
------------------------------
AUTHORIZED REPRESENTATIVE
-2-
<PAGE> 33
ENDORSEMENT# 7
------------
This endorsement, effective 12:01 AM May 14, 1996 forms a part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
CAPTIVE INSURANCE COMPANY
In consideration of the premium charged, it is hereby understood and
agreed that the Insurer shall not be liable to make any payments for Loss
in connection with any Claim made against any Insured(s) alleging,
arising out of, based upon, attributable to the ownership, management,
maintenance and/or control by the Company of any captive insurance
company or entity including but not limited to Claims alleging the
insolvency or bankruptcy of the Named Corporation as a result of such
ownership, operation, management and control.
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.
-----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE> 34
ENDORSEMENT# 8
-------------
This endorsement, effective 12:01 AM May 14, 1996 forms a part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa,
COMMISSIONS EXCLUSION
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer shall not be liable to make any payment for Loss in connection with
any Claim made against any Insured(s) alleging, arising out of, based upon,
attributable to:
(i) Payments, commissions, gratuities, benefits or any other favors to or for
the benefit of any full or part-time domestic or foreign government or
armed services officials, agents, representatives, employees or any
members of their family or any entity with which they are affiliated; or
(ii) Payments, commissions, gratuities, benefits or any other favors to or for
the benefit of any full or part-time officials, directors, agents,
partners, representatives, principal shareholders, or owners or
employees, or affiliates (as that term is defined in The Securities
Exchange Act of 1934, including any of their officers, directors, agents,
owners, partners, representatives, principal shareholders or employees)
of any customers of the company or any members of their family or any
entity with which they are affiliated; or
(iii) Political contributions, whether domestic or foreign.
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.
-----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE> 35
ENDORSEMENT# 9
------------
This endorsement, effective 12:01 AM May 14, 1996 forms a part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
MEDICAL MALPRACTICE EXCLUSION ENDORSEMENT
In consideration of the premium charged, it is hereby understood
and agreed that the Insurer shall not be liable to make any
payment for Loss in connection with any claim or claims made
against the Directors or Officers alleging, arising out of, based
upon or attributable to medical or professional malpractice,
including but not limited to the rendering or failure to render
medical or professional service or treatment.
All other terms and conditions remain unchanged.
-----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE> 36
ENDORSEMENT# 10
------------
This endorsement, effective 12:01 AM May 14, 1996 forms a part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
GLOBAL EXTENSION ENDORSEMENT
In consideration of the premium charged, it is hereby understood and agreed that
such coverage as is provided by this policy shall apply worldwide. It is further
understood and agreed that with regard to any Claim made or suit instituted
outside of the United States of America, Canada or any of their territories or
possessions and reported to the Insurer under the provisions of this policy, the
Insurer shall, when requested to do so in writing by the Named Corporation:
a) undertake the investigation, settlement and defense of Claims or suits
against the Insureds, the Company and the Directors shall cooperate in the
investigation and defense of such Claims and suits as may be required by
the Insureds;
b) pay covered Loss of the Insureds or reimburse the Company for:
(i) all damages and judgments arising from liability imposed upon the
Insureds by reason of a final judgment under law by a court of
competent jurisdiction for any alleged Wrongful Acts to which this
insurance applies; and
(ii) all Defense Costs arising from any such Claim or suit to which this
endorsement applies; and
(iii) all sums for settlements negotiated by the Insurer with the approval
of the Company and the Insured(s), provided that if the Company or
the Insured(s) refuse to consent to a settlement recommended by the
Insurer, the Insurer's obligation and liability for defense under
paragraph (a) above shall terminate and the Insurer's liability for
payment under this paragraph(b) shall not exceed the amount of the
settlement recommended and the expenses under (b) (ii) above as of
the time of refusal to consent.
The amounts due under b(i), (ii), and (iii) above shall be included in, and not
in addition to, the Limit of Liability set forth on the Declarations page of
this policy and shall be subject to the applicable Retention(s). The amounts due
under this endorsement shall be paid in the currency of the country in which the
final adjudication was made, the expenses incurred or the settlement negotiated.
It is further understood and agreed that the Insurer shall not be held
responsible for any delay or failure to perform its obligation hereunder due to
national, federal state or municipal action or regulation; strikes or other
labor troubles; acts of God, war, riot, insurrection or mutiny; or any other
causes, contingencies, or circumstances outside the United States not subject to
the Insurer's control which make the fulfillment of this endorsement
impracticable; any of which shall, without liability, excuse the insurer from
the obligations set forth in this Endorsement.
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.
-----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE> 37
ENDORSEMENT# 11
This endorsement, effective 12:01 AM May 14, 1996 forms a part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
EMPLOYMENT PRACTICES ENDORSEMENT
COVERAGE
--------
In consideration of the premium charged, it is hereby understood and agreed that
the coverage as is afforded by this policy is extended to Employment Practice
Claims against an individual "Insured" (defined below) (whether such claims are
brought by (i) a past, present or prospective employee or employees, whether
directly or by class action; or (ii) by the Equal Employment Opportunity
Commission ("EEOC") or any other state or federal governmental authority
regulating employment practices; or (iii) by any other person or entity),
subject to both the terms, conditions and exclusions of this endorsement and the
policy.
DEFINITIONS
-----------
It is further understood and agreed that for the purposes of this endorsement
only, the following definitions shall apply:
(1) "Employment Practices Claims" shall mean any Claim relating
to a past, present or prospective employee of the Company
for, or arising out of the following: (i) any actual or
alleged wrongful dismissal, discharge or termination (either
actual or constructive), of employment; (ii)
employment-related misrepresentation; (iii) wrongful failure
to employ or promote; (iv) wrongful deprivation of career
opportunity; (v) wrongful discipline; (vi) failure to grant
tenure or negligent employee evaluation; or (vii) failure to
provide adequate employee policies and procedure; or (viii)
sexual or workplace harassment of any kind, (including the
alleged creation of a harassing workplace environment); or
(ix) unlawful discrimination, (including sexual or workplace
harassment or creation of a harassing workplace environment)
whether direct, indirect, or unintentional.
Employment Practices Claims shall include Claims brought
under state, local or federal law (whether common or
statutory) and shall include, but not be limited to,
allegations of violations of the following federal laws (as
amended), including regulations promulgated thereunder:
1. Family and Medical Leave Act of 1993
2. Americans with Disabilities Act of 1992 (ADA),
3. Civil Rights Act of 1991,
- 1 -
<PAGE> 38
ENDORSEMENT# 11 (continued)
------------
4. Age Discrimination in Employment Act of 1967 (ADEA),
including the Older Workers Benefit Protection Act of
1990.
5. Title VII of the Civil Rights Law of 1964, as amended,
including the Pregnancy Discrimination Act of 1978,
6. Civil Rights Act of 1866, Section 1981, and
7. Fifth and Fourteenth Amendments of the U.S.
Constitution.
(2) The term "Insured" shall include, for the purposes of
Employment Practices Claims only, any past, present or
future duly elected individual Director or Officer or any
past, present of future employee of the Company whether such
individual is in a supervisory, co-worker or subordinate
position or otherwise. Coverage shall automatically apply to
all new employees after the inception date of the policy.
EXCLUSIONS
----------
It is further understood and agreed that solely for the additional coverage
hereby granted for Employment Practices Claims exclusions (i) and (k) are
amended as follows:
(1) Exclusion (i) is amended by deleting the phrase, "wrongful
termination of employment claims", and substituting the phrase,
"Employment Practice Claims" (as defined in this endorsement) and
by deleting the word "former employee" and substituting the word
"employee" to read as follows:
(i) which are brought by any Insured or the Company; or which
are brought by any security holder of the Company, whether
directly or derivatively, unless such security holder's
Claim(s) is instigated and continued totally independent of,
and totally without the solicitation of, or assistance of,
or active participation of, or intervention of, any Insured
or the Company; provided, however, this exclusion shall not
apply to Employment Practice Claims brought by an employee
other than an employee who is or was a Director of the
Company.
(2) Exclusion (k) is amended by deleting the phrase, "emotional
distress", and by deleting the phrase, "or for injury from libel
or slander or defamation or disparagement or for injury from a
violation of a person's right of privacy", to read as follows:
(k) for bodily injury, sickness, disease or death of any
person, or damage to or destruction of any tangible
property, including the loss of use thereof.
It is further understood and agreed that only as respects any additional
coverage granted by virtue of this endorsement, the following exclusions shall
apply:
(1) The Insurer shall not be liable for any Loss in connection with
any Claim or Claims made against an Insured alleging, arising out
of, based upon or attributable to any pending or prior litigation
as of May 14, 1996, or alleging or derived from the same or
essentially the same facts as alleged in such pending or prior
litigation.
- 2 -
<PAGE> 39
ENDORSEMENT# 11 (continued)
------------
(2) The Insurer shall not be liable for any Loss in connection with any
Claim or Claims made against an Insured for any alleged Wrongful
Act committed prior to May 14, 1996 if any Insured(s), as of such
date, knew or could have reasonably foreseen that such Wrongful Act
could lead to a Claim.
ALL OTHER TERMS, CONDITIONS, AND EXCLUSIONS OF THE POLICY REMAIN UNCHANGED.
-----------------------------
AUTHORIZED REPRESENTATIVE
- 3 -
<PAGE> 40
ENDORSEMENT# 12
------------
This endorsement, effective 12:01 AM May 14, 1996 forms a part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
SUBLIMIT/RETENTION FOR EMPLOYMENT PRACTICES CLAIMS
In consideration of the premium charged, it is hereby
understood and agreed that with regards to all Loss in
connection with any claim or claims made against the Directors
or Officers brought by an employee of the Company and solely
alleging Wrongful Acts occurring in connection with the
employer-employee relationship including allegations of
unlawful discrimination, sexual harassment, Wrongful
Termination and like allegations, item 4 and Item 5 of the
Declarations are amended to read as follows:
Item 4. Limit of Liability: $1,000,000 aggregate for
Coverages A and B combined (including Defense
Costs)
Item 5. Retention:
Company Reimbursement and Indemnifiable Loss: $75,000
for Loss arising from claims alleging the same
Wrongful Act or related Wrongful Acts.
It is further understood and agreed that nothing in this
endorsement shall be construed to grant coverage for claims
otherwise excluded by this policy.
It is further understood and agreed that coverage as is
afforded by virtue of this endorsement shall be part of and
not in addition to the aggregate Limit of Liability in the
Declarations and in no way serves to increase the Insurer's
Limit of Liability as therein stated.
All other terms and conditions shall remain unchanged.
-----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE> 41
ENDORSEMENT# 13
------------
This endorsement, effective 12:01 AM May 14, 1996 forms a part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
AMEND ARBITRATION
In consideration of the premium charged, it is hereby
understood and agreed that the second paragraph of Clause 17.
ARBITRATION is deleted in its entirety and replaced by the
following:
Any party may commence such arbitration proceeding in either
Cleveland, Ohio; New York, New York; Atlanta, Georgia;
Chicago, Illinois; or Denver, Colorado. The arbitrators shall
give due consideration to the principles of Delaware law in
the construction and interpretation of the provisions of this
policy; provided, however, that the terms, conditions,
provisions and exclusions of this policy are to be construed
in an evenhanded fashion as between the parties, including
without limitation, where the language of this policy is
alleged to be ambiguous or otherwise unclear, the issue shall
be resolved in the manner most consistent with the relevant
terms, conditions, provisions, or exclusions of the policy
(without regard to the authorship of the language, the
doctrine of reasonable expectation of the parties and without
any presumption or arbitrary interpretation or construction in
favor of either party or parties, and in accordance with the
intent of the parties).
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
-----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE> 42
ENDORSEMENT# 14
------------
This endorsement, effective 12:01 AM May 14, 1996 forms a part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
LISTED EVENT DELETION ENDORSEMENT
In consideration of the premium charged, it is hereby
understood and agreed that Clause 2, Definitions, (f) "Listed
Events" is deleted in its entirety.
It is further understood and agreed that Clause 4, Exclusions,
(f) ("90 day Listed Event Exclusion") is deleted in its
entirety.
All other terms and conditions remain unchanged.
-----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE> 43
ENDORSEMENT #15
This endorsement, effective 12:01 AM MAY 14, 1996 forms part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, PA
Three Year initial Public Offering Securities Claims Coverage (a 36
month non-cancelable coverage enhancement)
YEAR ONE POLICY
In consideration of the premium charged, it is hereby understood and agreed that
coverage is afforded under this policy for initial Public Offering Claim(s) made
against the Directors and Officers or the Company and reported to the Insurer
pursuant to the terms of the policy during the Policy Period described in
paragraph 1. below, subject to the provisions of this endorsement and the other
terms, conditions, and exclusions of the policy:
1. Solely as respects initial Public Offering Claim(s), Item 3. of
the Declarations, Policy Period, is amended to read as follows:
POLICY PERIOD: From: MAY 14, 1996 To: MAY 14, 1999
(12:01 A.M. standard time at the address stated in item 1.)
2. The term "Initial Public Offering Claim(s)" means a Securities
Claim made against the Directors and Officers or the Company
which alleges a violation of the Securities Act of 1933 or the
Securities Exchange Act of 1934, rule or regulations promulgated
thereunder, the securities laws of any state, or any foreign
jurisdiction, and which alleges, in whole or in part, an initial
Public Offering Wrongful Act in connection with the claimant's
purchase or sale of, or the offer to purchase or sell to the
claimant, any securities of the Company, whether in the Initial
Public Offering scheduled below or on the open market following
the Initial Public Offering.
3. The term "Initial Public Offering Wrongful Act" means a Wrongful
Act which alleges any breach of duty, neglect or error, involving
or relating, in whole or in part, to a misstatement, misleading
statement, untrue statement or omission of a statement of a
material fact relating to the Initial Public Offering which is
(i) contained in the registration statement (including any
amendment thereof) or any related preliminary or final
prospectus, filed by the Company in connection with the Initial
Public Offering or (ii) made in, or in connection with, any press
COPY
<PAGE> 44
release, press conference, "road show" or other forum
conducted by, or any document produced by or communication
made by the Insured(s) whether occurring before or after the
Initial Public Offering.
4. Clause 11, Cancellation Clause, is amended by the addition
of the following to the end thereof:
Any coverage provided by the endorsement entitled, "THREE
YEAR INITIAL PUBLIC OFFERING SECURITIES CLAIMS COVERAGE" may
not be canceled by either the Named Corporation or the
Insurer.
However, notwithstanding the foregoing, this policy may be
canceled by or on the behalf of the Insurer only in the
event of non-payment of premium by the Named Corporation. In
the event of non-payment of premium by the Named
Corporation, the Insurer may cancel this policy by
delivering to the Named Corporation or by mailing to the
Named Corporation, by registered, certified, or other first
class mail, at the Named Corporation's address as shown in
Item 1. of the Declarations, written notice stating when,
not less than 30 days thereafter, the cancellation shall be
effective. The mailing of such notice as aforesaid shall be
sufficient proof of notice. The Policy Period terminates at
the date and hour specified in such notice, or at the date
and time of surrender.
If the period of limitation relating to the giving of notice
is prohibited or made void by any law controlling the
construction thereof, such period shall be deemed to be
amended so as to be equal to the minimum period of
limitation permitted by such law.
5. In the event that any coverage provided by this endorsement
is also provided by any renewal or successor policy issued
by the Insurer or any member company of American
International Group, Inc. (AIG), (or would be provided but
for the application of the retention amount, exhaustion of
the limit of liability or failure to submit a notice of a
Claim) then the maximum aggregate Limit of Liability for all
Losses combined covered by virtue of this endorsement as
respects any such Initial Public Offerings Claim(s), shall
be reduced by the limit of liability (as set forth on the
Declarations Page) of such other AIG policy.
COPY
<PAGE> 45
6. "Initial Public Offering" means the initial public offering
by the Company listed below:
<TABLE>
<CAPTION>
Issuing Company Filing Date Registration
--------------- ----------- ------------
Statement No.
-------------
<S> <C> <C>
COLLABORATIVE CLINICAL RESEARCH INC. TO BE DETERMINED
</TABLE>
7. The Limit of Liability for the coverage provided by this
endorsement shall be part of and not in addition to the
aggregate Limit of Liability as stated in Item 4. of the
Declarations. Nothing herein shall be construed to increase
the Insurer's Limit of Liability as therein stated.
All other terms, conditions and exclusions remain unchanged.
-----------------------------
AUTHORIZED REPRESENTATIVE
COPY
<PAGE> 46
ENDORSEMENT #16
This endorsement, effective 12:01 AM MAY 14, 1996 forms part of
policy number 483-15-97
issued to COLLABORATIVE CLINICAL RESEARCH INC
by National Union Fire Insurance Company of Pittsburgh, PA
REINSTATEMENTS OF LIMIT
(reinstated as primary)
In consideration of the additional premium of $27,122 it is hereby understood
and agreed that the Named Corporation shall have the right to Reinstatement of
Limit option (hereinafter the "option" or "Reinstated Limit") described below,
subject to the terms of this endorsement.
The conditions for this reinstatement are as follows:
1. In the event any Claim is reported to the Insurer during the Policy Period,
then at the written request of the Named Corporation, Clause 5 of this
policy, LIMIT OF LIABILITY (FOR ALL LOSS-INCLUDING DEFENSE COSTS), shall be
amended to read as follows:
5. LIMIT OF LIABILITY - REINSTATED - (FOR ALL LOSS - INCLUDING
DEFENSE COSTS)
a) The Limit of Liability stated in Item 4 of the Declarations is the
limit of the Insurer's liability for all Loss, under Coverage A and
Coverage B combined, arising out of all Claims first made against the
Insureds during that part of the Policy Period beginning from the
inception date of the Policy Period and ending at 12:01 AM of the
Effective Date of Exercise of the Reinstatement of Limit option
afforded under endorsement #16 of this policy. The limit described in
this paragraph shall be separate from and in addition to the limit of
liability described in paragraph (b) below.
b) This policy shall also provide a Limit of Liability equal to the
Limit of Liability stated in Item 4 of the Declarations for all Loss,
under Coverage A and Coverage B combined, arising out of all Claims
first made against the Insured during that part of the Policy Period
beginning 12:01 a.m. of the Effective Date of Exercise of the
Reinstatement of Limits option and ending the expiration date of the
Policy Period or the Discovery Period (if applicable); however, the
Limit of Liability for the Discovery Period shall be part of, and not
in addition to, the Limit of Liability described in this paragraph.
The limit described in this paragraph shall be separate from and in
addition to the limit of liability described in paragraph (a) above.
COPY
<PAGE> 47
c) Any Claim which is made subsequent to the period of time described in
paragraph (a) or (b) above which pursuant to Clause 7(b) or 7(c) of
the policy is considered made at the time of a previous Claim (or
notice of circumstances that could reasonably give rise to a Claim)
made during the Policy Period or Discovery Period shall also be
subject to the one aggregate Limit of Liability applicable to such
previous Claim or notice, as the case may be.
d) The Effective Date of Exercise is TO BE DETERMINED.
DEFENSE COSTS ARE NOT PAYABLE BY THE INSURER IN ADDITION TO THE LIMIT
OF LIABILITY. DEFENSE COSTS ARE PART OF LOSS AND AS SUCH ARE SUBJECT
TO THE LIMIT OF LIABILITY FOR LOSS.
2. The additional premium to exercise the Full Reinstatement of Limits option
shall be Fifty Percent (50%) of the Remaining Pro-Rata Premium for the
Policy Period LESS the amount of the additional premium paid for this
endorsement, but in no event less that zero ($0). The Remaining Pro-Rata
Premium shall be determined by multiplying the Daily Premium by the
Remaining Policy Period. The Daily Premium means the total Policy Period
premium divided by total number of days in the Policy Period. The Remaining
Policy Period means the number of days between the date the option is
exercised and the expiration date of the Policy Period.
3. The earliest time that the reinstatement option may be exercised is the
First Anniversary Date of this policy. The First Anniversary Date shall
mean the twelve (12) month period following the inception date of the
policy. The option may only be exercised after the reporting of a Claim and
may not be exercised solely due to the reporting of a notice of
circumstances pursuant to Clause 7(c) of the policy.
4. The Reinstated Limit shall apply solely to Unrelated Claims first made
against an insured on or after the date the option first becomes effective
as stated in Clause 5(d). The term Unrelated Claims means any Claim other
than a Claim which was made against an insured prior to such effective
time. Any Claim which is reported subsequent to such effective time but is
considered made prior to such effective time pursuant to clause 7(b) or (c)
of the policy shall also not be covered under the Reinstated Limit. The
limit described in Clause 5(a) above shall apply solely to Claims first
made against the insureds prior to the date the option first becomes
effective as stated in clause 5(d) above.
COPY
<PAGE> 48
5. The Reinstated Limit shall apply as primary insurance.
6. The additional premium charged for this endorsement shall be fully earned
and non-refundable regardless of whether any reinstatement of limit option
is exercised.
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.
-----------------------------
AUTHORIZED REPRESENTATIVE
COPY
<PAGE> 49
[LOGO] AMERICAN INTERNATIONAL COMPANIES
- --------------------------------------------------------------------------------
Name of Insurance Company to which Application is made
(herein called the "Insurer")
DIRECTORS AND OFFICERS INSURANCE RENEWAL APPLICATION
-------------------------------------------------------------------
Name of Insurance Policy to which Application is applicable
NOTICE: THE POLICY PROVIDES THAT THE LIMIT OF LIABILITY AVAILABLE TO PAY
JUDGMENTS OR SETTLEMENTS SHALL BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE.
FURTHER NOTE THAT AMOUNTS INCURRED FOR LEGAL DEFENSE SHALL BE APPLIED AGAINST
THE RETENTION AMOUNT.
IF A POLICY IS ISSUED, IT WILL BE ON A CLAIMS-MADE BASIS
- --------------------------------------------------------------------------------
1. APPLICANT'S
(a) Corporation name COLLABORATIVE CLINICAL RESEARCH, INC.
(b) State of incorporation OHIO
(c) Date of incorporation 7/17/91
(d) Address 20600 CHAGRIN BLVD, SUITE 1050
CLEVELAND, OH 44122
(e) Nature of business CLINICAL TRIAL MANAGEMENT
(f) Primary SIC code(s)
(g) Corporation has been continually operating since 7-17-91
(h) Total number of locations (please check): one two three
--- --- ---
more than three X
---
(i) Does the Applicant operate any retail outlets? Yes No X (If "Yes,"
--- ---
number of retail outlets: .)
-----------------
1
<PAGE> 50
2. (a) Amount of insurance requested: $ 5,000,000
----------
100,000
(b) Self-insured retention desired (each loss): $ 200,000 - (secondly)
----------
3. STOCK OWNERSHIP
(a) The following securities of the Applicant (or its Subsidiaries) are
publicly traded: [ ] equity, [ ] debt,
[ ] mixed (attach explanation)
(1) If no securities are publicly traded, check here: "none" X
---
(2) For those securities that are publicly traded, indicate name of
exchange(s) and ticket symbol(s) here:
------------
(If included as an attachment, check here: )
----
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(b) Total number of voting shares outstanding 413,258 Common Before IPO @ 3/31/96
2,182,353 Preferred Before IPO @ 3-31-96
---------
</TABLE>
(c) Total number of voting shareholders 21
--
(d) Total number of voting shares owned by its Directors (direct and
beneficial) See Page 47 of Prospectus
-------------------------
(e) Total number of voting shares owned by its Officers (direct and
beneficial) who are not Directors See Page 47 of Prospectus.
-----------
(f) Does any shareholder own five percent or more of the voting shares
directly or beneficially? If so, designate name and percentage of
holdings. (If no such shareholders, check here: "none" ______.)
See Page 47 of Prospectus
(g) Are there any other securities convertible to voting stock? If so,
describe fully. (If none, check here: "none" ____.) Preferred
converts into Common at the IPO
PLEASE DO NOT COMPLETE 4(a) AND 4(b) IF PUBLICLY TRADED.
4. (a) Complete list of all Directors of the Applicant by name and
affiliation with other corporations. (If included as an attachment
herein, check here .) See Page 36 of Prospectus.
-----
(b) Complete list of all Officers of the Applicant by name and affiliation
with other corporations. (If included as an attachment herein, check
here .) See Page 36 of Prospectus
-------
5. LIST OF ALL DIRECT AND INDIRECT SUBSIDIARY CORPORATIONS:
<TABLE>
<CAPTION>
DOMESTIC
BUSINESS OR TYPE PERCENTAGE OF DATE ACQUIRED OR FOREIGN COUNTRY
NAME OF OPERATION OWNERSHIP OR CREATED OF INCORPORATION
- ------------ ---------------- ------------- --------------- ------------------
<S> <C> <C> <C> <C>
GFI, INC CLINICAL RESEARCH 100% 2/1/96 USA
HRI, INC HEALTH-CARE DATA 50% 6/1/95 USA
</TABLE>
2
<PAGE> 51
Coverage to include all Subsidiaries? Yes X No If "Yes", include complete list
--- --
of Directors and Officers of each Subsidiary. If no, include complete list of
Directors and Officers of each Subsidiary for which coverage is requested. If
included as an attachment herein, check here: X .
---
6. Are any plans for merger, acquisition or consolidation of or by the
Applicant or any of its Subsidiaries being considered: Yes No X
---- -----
(a) If so, have they been approved by the board of directors: Yes No
--- ---
Date of Approval
---------------------------
(b) If so, have they been submitted to the shareholders for approval?
Yes No
--- ----
Date of Approval
------------------------------
7. Name of Risk Manager and General Counsel (or equivalent position) and
number of years in current position:
Terry C. Black, CFO CALFEE, HALTER AND GRISWOLD
--------------------------------------------------------------------------
8. Name and Location (City) of outside law firm for securities or litigation
matters:
Calfee, Halter and Griswold Cleveland OH
--------------------------------------------------------------------------
9. ATTACH COPIES OF THE FOLLOWING FOR THE APPLICANT AND, TO THE EXTENT
AVAILABLE, EACH OF ITS SUBSIDIARIES:
(a) Latest annual report Prospectus Attached
(b) Latest 10K report filed with SEC (if the Company is publicly traded)
(c) Latest interim financial statement available Prospectus Attached
(d) All proxy statements and Notices of Annual Meeting of Stockholders
within the last twelve months
(e) All registration statements filed with SEC within the last twelve
months (if the Company is Publicly traded)
(f) Copy (certified by Corporate Secretary) of the indemnification
provisions of the charter and the by laws. Also attach copy of any
corporate indemnification agreement. Form Attached
(g) Latest CPA management letter along with applicant's response to any
recommendations made therein. Attached Audit Committee Minutes
- --------------------------------------------------------------------------------
3
<PAGE> 52
It is agreed that the Applicant will file with the Insurer, as soon as it
becomes available, a copy of each registration statement and annual or
interim report which the Applicant or any Subsidiary may from time to time
file with the Securities and Exchange Commission.
----------------------------------------------------------------------------
THE UNDERSIGNED AUTHORIZED OFFICER OF THE APPLICANT DECLARES THAT THE
STATEMENTS SET FORTH HEREIN ARE TRUE. THE UNDERSIGNED AUTHORIZED OFFICER
AGREES THAT IF THE INFORMATION SUPPLIED ON THIS APPLICATION CHANGES BETWEEN
THE DATE OF THIS APPLICATION AND THE EFFECTIVE DATE OF THE INSURANCE, HE/SHE
(UNDERSIGNED) WILL, IN ORDER FOR THE INFORMATION TO BE ACCURATE ON THE
EFFECTIVE DATE OF THE INSURANCE, IMMEDIATELY NOTIFY THE INSURER OF SUCH
CHANGES, AND THE INSURER MAY WITHDRAW OR MODIFY ANY OUTSTANDING QUOTATIONS
AND/OR AUTHORIZATIONS OR AGREEMENTS TO BIND THE INSURANCE.
SIGNING OF THIS APPLICATION DOES NOT BIND THE APPLICANT OR THE INSURER TO
COMPLETE THE INSURANCE, BUT IT IS AGREED THAT THIS APPLICATION SHALL BE THE
BASIS OF THE CONTRACT SHOULD A POLICY BE ISSUED, AND IT WILL BE ATTACHED TO
AND BECOME PART OF THE POLICY.
ALL WRITTEN STATEMENTS AND MATERIALS FURNISHED TO THE INSURER IN CONJUNCTION
WITH THIS APPLICATION ARE HEREBY INCORPORATED BY REFERENCE INTO THIS
APPLICATION AND MADE A PART HEREOF.
FOR KENTUCKY APPLICANTS: ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD
ANY INSURANCE COMPANY OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE
CONTAINING ANY MATERIALLY FALSE INFORMATION OR CONCEALS, FOR THE PURPOSE OF
MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A
FRAUDULENT INSURANCE ACT, WHICH IS A CRIME.
FOR NEW YORK APPLICANTS: ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD
ANY INSURANCE COMPANY OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR
STATEMENT OF CLAIM CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS,
FOR THE PURPOSE OF MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL
THERETO, COMMITS A FRAUDULENT INSURANCE ACT, WHICH IS A CRIME, AND SHALL ALSO
BE SUBJECT TO A CIVIL PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE
STATED VALUE OF THE CLAIM FOR EACH SUCH VIOLATION.
FOR OHIO APPLICANTS: ANY PERSON WHO, WITH INTENT TO DEFRAUD OR KNOWING THAT
HE IS FACILITATING A FRAUD AGAINST AN INSURER, SUBMITS AN APPLICATION OR
FILES A CLAIM CONTAINING A FALSE OR DECEPTIVE STATEMENT IS GUILTY OF
INSURANCE FRAUD.
FOR PENNSYLVANIA APPLICANTS: ANY PERSON WHO KNOWINGLY AND WITH INTENT TO
DEFRAUD ANY INSURANCE COMPANY OR OTHER PERSON FILES AN APPLICATION FOR
INSURANCE OR STATEMENT OF CLAIM CONTAINING ANY MATERIALLY FALSE INFORMATION
OR CONCEALS, FOR THE PURPOSE OF MISLEADING, INFORMATION CONCERNING ANY FACT
MATERIAL THERETO COMMITS A FRAUDULENT INSURANCE ACT, WHICH IS A CRIME AND
SUBJECTS SUCH PERSON TO CRIMINAL AND CIVIL PENALTIES.
<PAGE> 53
Signed /s/ Jeffrey A. Green
-------------------------
(Applicant)
Date 5/14/96
------------------------
<TABLE>
<CAPTION>
<S> <C>
Title President Corporation None
------------------------------------------------------ ----------------
(must be signed by Chairman of the Board or President) (Corporate Seal)
</TABLE>
Attest /s/ Jeffery J. Phillips
-------------------------------
Broker Jeffery J. Phillips
-------------------------------
Address #2 Berea Commons
------------------------------
Berea, OH 44017
------------------------------
Please read the following statement carefully and sign where indicated. If a
policy is issued, this signed statement will be attached to the policy.
The undersigned authorized officer of the Applicant hereby acknowledges that
he/she is aware that the limit of liability contained in this policy shall be
reduced, and may be completely exhausted, by the costs of legal defense and, in
such event, the Insurer shall not be liable for the costs of legal defense or
for the amount of any judgment or settlement to the extent that such exceeds the
limit of liability of this policy.
The undersigned authorized officer of the Applicant hereby further acknowledges
that he/she is aware that legal defense costs that are incurred shall be applied
against the retention amount.
Signed /s/ Jeffrey A. Green
------------------------------------------------------
(Applicant)
Date 5/14/96
--------------------------------------------------------
Title President
-------------------------------------------------------
(must be signed by Chairman of the Board or President)
5
