<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 7, 1997
REGISTRATION NO. 333-19911
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
AMENDMENT NO. 1 TO
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SELFCARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3826 04-3164127
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
200 PROSPECT STREET
WALTHAM, MASSACHUSETTS 02154
(617) 647-3900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
------------------------
RON ZWANZIGER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SELFCARE, INC.
200 PROSPECT STREET
WALTHAM, MASSACHUSETTS 02154
(617) 647-3900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MARTIN CARMICHAEL III, P.C. KENNETH J. NOVACK, ESQ.
GOODWIN, PROCTER & HOAR LLP MINTZ, LEVIN, COHN, FERRIS, GLOVSKY
EXCHANGE PLACE AND POPEO, P.C.
BOSTON, MASSACHUSETTS 02109 ONE FINANCIAL CENTER
(617) 570-1000 BOSTON, MASSACHUSETTS 02111
(617) 542-6000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Boston,
State of Massachusetts, on February 7, 1997.
SELFCARE, INC.
By: /s/ RON ZWANZIGER
------------------------------------
Ron Zwanziger
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act, this Amendment to this
Registration Statement has been signed below by the following persons on behalf
of the registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- -----------------------------------------------------
<C> <C> <S>
/s/ RON ZWANZIGER President, Chief Executive Officer February 7, 1997
- ---------------------------------------- and Director (Principal Executive
Ron Zwanziger Officer)
* Chief Financial Officer (Principal February 7, 1997
- ---------------------------------------- Financial Officer and Principal
Anthony H. Hall Accounting Officer)
* Director February 7, 1997
- ----------------------------------------
Jonathan J. Fleming
* Director February 7, 1997
- ----------------------------------------
Carol R. Goldberg
* Director February 7, 1997
- ----------------------------------------
Edward B. Roberts
* Director February 7, 1997
- ----------------------------------------
Willard Lee Umphrey
* Director February 7, 1997
- ----------------------------------------
Peter Townsend
* Director February 7, 1997
- ----------------------------------------
John F. Levy
By: /s/ RON ZWANZIGER
- ----------------------------------------
Ron Zwanziger, Attorney-in-Fact
</TABLE>
II-1
<PAGE> 3
EXHIBIT INDEX
ITEM 27. EXHIBITS
(a) Exhibits. The following is a complete list of Exhibits filed as part of
this Registration Statement.
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 to the Company's registration statement on Form
SB-2, No. 333-4830-NY)
*3.2 Certificate of Designation for the Safecare, Inc. Series A Convertible
Preferred Stock
3.3 Amended and Restated By-laws (incorporated by reference to Exhibit 3.2 to
the Company's registration statement on Form SB-2, No. 333-4830-NY)
4.1 Specimen certificate for shares of Common Stock, par value $.001 per share,
of the Company (incorporated by reference to Exhibit 4.1 to the Company's
registration statement on Form SB-2, No. 333-4830-NY)
*4.2 Specimen certificate for shares of Series A Convertible Preferred Stock,
par value $.001 par share, of the Company
++5.1 Opinion of Goodwin, Procter & Hoar LLP
9.1 Voting Agreement, dated May 13, 1996, by and among the stockholders of
Selfcare, Inc. who are signatories thereto. (incorporated by reference to
Exhibit 9.1 to the Company's registration statement on Form SB-2, No.
333-4830-NY)
10.1 Agreement, dated March 22, 1996, between Selfcare, Inc. and Princeton
BioMeditech Corporation (incorporated by reference to Exhibit 10.1 to the
Company's registration statement on Form SB-2, No. 333-4830-NY)
10.2 Master Agreement, dated as of November 10, 1995, by and among Johnson &
Johnson Development Corporation, LifeScan, Inc. and Selfcare, Inc.
(incorporated by reference to Exhibit 10.2 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)
10.3 Form of Sales Distribution Agreement for Testing System for Blood Glucose
between LifeScan, Inc. and Selfcare, Inc. (incorporated by reference to
Exhibit 10.3 to the Company's registration statement on Form SB-2, No.
333-4830-NY)
10.4 Investment Agreement, dated as of November 10, 1995, by and between Johnson
& Johnson and Selfcare, Inc. (incorporated by reference to Exhibit 10.4 to
the Company's registration statement on Form SB-2, No. 333-4830-NY)
10.5 Master Agreement, dated as of November 30, 1994, among Selfcare, Inc.,
Cambridge Biotech Limited (Cambridge Diagnostics Ireland Limited) and
Cambridge Biotech Corporation (incorporated by reference to Exhibit 10.5 to
the Company's registration statement on Form SB-2, No. 333-4830-NY)
10.6 Sale and Subscription Agreement, dated as of November 30, 1994, between
Cambridge Biotech Limited (Cambridge Diagnostics Ireland Limited),
Cambridge Biotech Corporation and Selfcare, Inc. (incorporated by reference
to Exhibit 10.6 to the Company's registration statement on Form SB-2, No.
333-4830-NY)
10.7 Indemnification Agreement dated as of November 30, 1994, by and between,
Cambridge Biotech Corporation and Cambridge Biotech Limited (Cambridge
Diagnostics Ireland Limited) (incorporated by reference to Exhibit 10.7 to
the Company's registration statement on Form SB-2, No. 333-4830-NY)
10.8 License Agreement [CAPILLUS], dated November 30, 1994, between Cambridge
Biotech Corporation and Cambridge Biotech Limited (Cambridge Diagnostics
Ireland Limited) (incorporated by reference to Exhibit 10.8 to the
Company's registration statement on Form SB-2, No. 333-4830-NY)
10.9 License Agreement [HIV 1/2 EIA], dated November 30, 1994, between Cambridge
Biotech Corporation and and Cambridge Biotech Limited (Cambridge
Diagnostics Ireland Limited) (incorporated by reference to Exhibit 10.9 to
the Company's registration statement on Form SB-2, No. 333-4830-NY)
</TABLE>
II-2
<PAGE> 4
<TABLE>
<C> <S>
10.10 License Agreement [HIV 1/2 RTD], dated November 30, 1994, between Cambridge
Biotech Corporation and Cambridge Biotech Limited (Cambridge Diagnostics
Ireland Limited) (incorporated by reference to Exhibit 10.10 to the
Company's registration statement on Form SB-2, No. 333-4830-NY)
10.11 License Agreement [LYME], dated November 30, 1994, between Cambridge
Biotech Corporation and Cambridge Biotech Limited (Cambridge Diagnostics
Ireland Limited) (incorporated by reference to Exhibit 10.11 to the
Company's registration statement on Form SB-2, No. 333-4830-NY)
10.12 License Agreement [RAPID TEST], dated November 30, 1994, between Cambridge
Biotech Corporation and Cambridge Biotech Limited (Cambridge Diagnostics
Ireland Limited) (incorporated by reference to Exhibit 10.12 to the
Company's registration statement on Form SB-2, No. 333-4830-NY)
10.13 License Agreement [HEP D], dated November 30, 1994, between Cambridge
Biotech Limited (Cambridge Diagnostics Ireland Limited) and Cambridge
Biotech Corporation (incorporated by reference to Exhibit 10.13 to the
Company's registration statement on Form SB-2, No. 333-4830-NY)
10.14 Shareholders' Agreement, dated November 30, 1994, by and among Selfcare,
Inc.,Cambridge Biotech Corporation and Cambridge Biotech Affiliated
Corporation) (Cambridge Affiliate Corporation) (incorporated by reference
to Exhibit 10.14 to the Company's registration statement on Form SB-2, No.
333-4830-NY)
10.15 Management Agreement, dated November 30, 1994, between Cambridge Biotech
Affiliated Corporation (Cambridge Affiliate Corporation) and Cambridge
Biotech Limited (Cambridge Diagnostics Ireland Limited) (incorporated by
reference to Exhibit 10.15 to the Company's registration statement on Form
SB-2, No. 333-4830-NY)
10.16 Manufacturing Agreement, dated November 30, 1994, between Cambridge Biotech
Affiliated Corporation (Cambridge Affiliate Corporation) and Cambridge
Biotech Limited (Cambridge Diagnostics Ireland Limited) (incorporated by
reference to Exhibit 10.16 to the Company's registration statement on Form
SB-2, No. 333-4830-NY)
10.17 Sales Agent Agreement, dated November 30, 1994, between Cambridge Biotech
Affiliated Corporation (Cambridge Affiliate Corporation) and Cambridge
Biotech Limited (Cambridge Diagnostics Ireland Limited) (incorporated by
reference to Exhibit 10.17 to the Company's registration statement on Form
SB-2, No. 333-4830-NY)
10.18 Stock Purchase Agreement, dated as of March 8, 1994, among Selfcare, Inc.,
Ron Zwanziger and Enviromed plc (incorporated by reference to Exhibit 10.18
to the Company's registration statement on Form SB-2, No. 333-4830-NY)
10.19 Registration Rights Agreement, dated April 5, 1994, between Selfcare, Inc.,
USB '93 Technology Associates Limited Partnership and Enviromed plc
(incorporated by reference to Exhibit 10.19 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)
10.20 Shareholders' Agreement, dated as of March 15, 1994, among Selfcare, Inc.,
USB '93 Technology Associates Limited Partnership, Enviromed plc and the
Ron Zwanziger Family Trust (incorporated by reference to Exhibit 10.20 to
the Company's registration statement on Form SB-2, No. 333-4830-NY)
10.21 Technology Purchase and Sale Agreement, dated as of December 29, 1993,
between Selfcare, Inc. and USB '93 Technology Associates Limited
Partnership (incorporated by reference to Exhibit 10.21 to the Company's
registration statement on Form SB-2, No. 333-4830-NY)
10.22 Technology License and Development Agreement, dated as of December 29,
1993, between Selfcare, Inc. and USB '93 Technology Associates Limited
Partnership (incorporated by reference to Exhibit 10.22 to the Company's
registration statement on Form SB-2, No. 333-4830-NY)
</TABLE>
II-3
<PAGE> 5
<TABLE>
<C> <S>
10.23 Guarantee and Debenture, dated August 30, 1995, between Cambridge Biotech
Limited (Cambridge Diagnostics Ireland Limited) and USB '93 Technology,
Inc. (incorporated by reference to Exhibit 10.23 to the Company's
registration statement on Form SB-2, No. 333-4830-NY)
10.24 Guarantee of Selfcare, Inc., dated June 11, 1995, in favor of Highlands and
Islands Enterprises (incorporated by reference to Exhibit 10.24 to the
Company's registration statement on Form SB-2, No. 333-4830-NY)
10.25 Guarantee of Selfcare, Inc., dated June 11, 1995, in favor of Inverness and
Nairn Enterprise Company (incorporated by reference to Exhibit 10.25 to the
Company's registration statement on Form SB-2, No. 333-4830-NY)
10.26 Investment and Loan Agreement, dated December 24, 1995, by and between
Orgenics Ltd. and Selfcare, Inc. (incorporated by reference to Exhibit
10.26 to the Company's registration statement on Form SB-2, No.
333-4830-NY)
10.27 Form of Option Agreement by and between Selfcare, Inc. and stockholders of
Orgenics, Ltd. and Orgenics International Holdings, B.V., together with
letter amendment thereto dated July 11, 1996. (incorporated by reference to
Exhibit 10.27 to the Company's registration statement on Form SB-2, No.
333-4830-NY)
10.28 Grant Agreement, dated February 21, 1992, among The Industrial Development
Authority of Ireland, Cambridge Biotech Limited (Cambridge Diagnostics
Ireland Limited) and Cambridge Biotech Corporation (incorporated by
reference to Exhibit 10.28 to the Company's registration statement on Form
SB-2, No. 333-4830-NY)
10.29 Grant Agreement, dated October 2, 1992, among The Industrial Development
Authority of Ireland, Cambridge Biotech Limited (Cambridge Diagnostics
Ireland Limited) and Cambridge Biotech Corporation (incorporated by
reference to Exhibit 10.29 to the Company's registration statement on Form
SB-2, No. 333-4830-NY)
10.30 Grant Agreement, dated December 5, 1995, among The Industrial Development
Authority of Ireland, Cambridge Biotech Limited (Cambridge Diagnostics
Ireland Limited) and Cambridge Biotech Corporation (incorporated by
reference to Exhibit 10.30 to the Company's registration statement on Form
SB-2, No. 333-4830-NY)
10.31 Employment Agreement, dated October 15, 1991, between Superior Sensors,
Inc. (Selfcare, Inc.) and Kenneth D. Legg, Ph.D. (incorporated by reference
to Exhibit 10.31 to the Company's registration statement on Form SB-2, No.
333-4830-NY)
10.32 Employment Agreement, dated June 15, 1992, between Superior Sensors, Inc.
(Selfcare, Inc.) and Richard Pinkowitz, Ph.D. (incorporated by reference to
Exhibit 10.32 to the Company's registration statement on Form SB-2, No.
333-4830-NY)
10.33 Employment Agreement, dated November 13, 1994, between Selfcare
International GmbH and Otto Wahl (incorporated by reference to Exhibit
10.33 to the Company's registration statement on Form SB-2, No.
333-4830-NY)
10.34 Selfcare, Inc. 1992 Stock Plan (incorporated by reference to Exhibit 10.34
to the Company's registration statement on Form SB-2, No. 333-4830-NY)
10.35 Selfcare, Inc. 1994 Incentive and Non-qualified Stock Option Plan
(incorporated by reference to Exhibit 10.35 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)
10.36 Amended and Restated Selfcare, Inc. 1996 Stock Option and Grant Plan
(incorporated by reference to Exhibit 4.1 to the Company's registration
statement on Form S-8, No. 333-15583)
10.37 Selfcare, Inc. Employee Stock Purchase Plan (incorporated by reference to
Exhibit 10.37 to the Company's registration statement on Form SB-2, No.
333-4830-NY)
10.38 Standard form Commercial Lease, dated July 15, 1992, between Superior
Sensors, Inc. (Selfcare, Inc.) and Nova Realty Associates (incorporated by
reference to Exhibit 10.38 to the Company's registration statement on Form
SB-2, No. 333-4830-NY)
</TABLE>
II-4
<PAGE> 6
<TABLE>
<C> <S>
10.39 Lease, dated February 21, 1992, between The Industrial Development
Authority of Ireland and Cambridge Biotech Limited (Cambridge Diagnostics
Ireland Limited) (incorporated by reference to Exhibit 10.39 to the
Company's registration statement on Form SB-2, No. 333-4830-NY)
10.40 Form of lease between Highlands and Islands Enterprises and Hebocraft
Limited (Inverness Medical Limited) (incorporated by reference to Exhibit
10.40 to the Company's registration statement on Form SB-2, No.
333-4830-NY)
10.41 Joint Venture Agreement, dated March 8, 1994, between Enviromed Plc. and
Selfcare, Inc. (incorporated by reference to Exhibit 10.41 to the Company's
registration statement on Form SB-2, No. 333-4830-NY)
10.42 Lease for Selfcare, Inc.'s facility in Brussels, Belgium (incorporated by
reference to Exhibit 10.42 to the Company's registration statement on Form
SB-2, No. 333-4830-NY)
10.43 Lease for Selfcare International GmbH's facility in Munich, Germany
(incorporated by reference to Exhibit 10.43 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)
10.44 Form of Cambridge Diagnostics Note, together with schedule of noteholders
(incorporated by reference to Exhibit 10.44 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)
10.45 Manufacturing Agreement, dated June 3, 1996, between Nova Biomedical
Corporation and Selfcare, Inc. (incorporated by reference to Exhibit 10.45
to the Company's registration statement on Form SB-2, No. 333-4830-NY)
10.46 Form of Cambridge Diagnostics Warrants, together with schedule of
warrantholders (incorporated by reference to Exhibit 10.47 to the Company's
registration statement on Form SB-2, No. 333-4830-NY)
10.47 Agreement between Inverness Medical Limited (formerly, Hebocraft Limited)
and Highlands and Islands Enterprise, dated May 31, 1995 (incorporated by
reference to Exhibit 10.47 to the Company's registration statement on Form
SB-2, No. 333-4830-NY)
10.48 Agreement between Inverness Medical Limited (formerly, Hebocraft Limited)
and Inverness & Nairn Local Enterprise Company, dated May 31, 1995
(incorporated by reference to Exhibit 10.48 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)
10.49 Form of Letter Agreement by and between Selfcare, Inc. and certain holders
of Cambridge Diagnostics Notes dated July 19, 1996 (incorporated by
reference to Exhibit 10.49 to the Company's registration statement on Form
SB-2, No. 333-4830-NY)
10.50 Supply Agreement dated August 27, 1996, by and between Selfcare, Inc.,
Selfcare International GmbH and A. Menarini Industrie Parmaceutiche Riunite
S.r.L. (incorporated by reference to Exhibit 10.50 to the Company's
quarterly report on Form 10-QSB for the period ended September 30, 1996)
10.51 Manufacturing Agreement for Pregnancy and Ovulation Stick/Cassette Test
Kits, dated September 7, 1996, by and between Nova BioMedical Corp. and
Selfcare, Inc. (incorporated by reference to Exhibit 10.51 to the Company's
quarterly report on Form 10-QSB for the period ended September 30, 1996)
*+10.52 Development and Distribution Agreement dated as of December 31, 1996
between ChemTrak Incorporated and Selfcare, Inc.
*+10.53 Asset Purchase Agreement dated as of January 14, 1997 by and between
American Home Products Corporation, American Cyanamid Company, A.H. Robins
Company, Incorporated and Selfcare, Inc. and Selfcare Acquisition Corp.
with certain exhibits
*10.54 Agreement between EN PLC Limited Partnership and Selfcare, Inc. dated
October 17, 1996
</TABLE>
II-5
<PAGE> 7
<TABLE>
<C> <S>
*10.55 Form of Letter Agreement by and between Selfcare, Inc. and certain holders
of Cambridge Diagnostics Notes dated November 23, 1996
*10.56 Form of Letter Agreement by and between Selfcare, Inc. and certain holders
of Cambridge Diagnostics Notes dated December 31, 1996
*+10.57 Sales Distribution Agreement for Testing System for Blood Glucose between
LifeScan, Inc. and Selfcare, Inc. dated October 9, 1996
*10.58 Form of Offshore Convertible Securities Subscription Agreement by and
between Safecare, Inc. and certain investors dated October, 1996
11.1 Statement re: computation of per share earnings
++21.1 Schedule of Subsidiaries of Registrant
++23.1 Consent of Counsel (included in Exhibit 5.1 hereto)
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Kost Levary and Forer
23.4 Consent of Galloro & Associados
24.1 Power of Attorney (included on signature page of Registration Statement as
filed)
*99.1 Form of Lock-up Letter Agreement by and between the Underwriters and
certain stockholders of Selfcare, Inc.
99.2 Judgment and Opinion of U.S. Bankruptcy Court (D. Mass. W. Division), In
re: Cambridge Biotech Corporation, Chapter 11 Case No. 94-43054-JFQ,
entered September 1, 1995. (incorporated by reference to Exhibit 99.2 to
the Company's registration statement on Form SB-2, No. 333-4830-NY)
99.3 Order of Approval of Scheme of Arrangement by The High Court of Ireland
(incorporated by reference to Exhibit 99.3 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)
99.4 Order of U.S. Bankruptcy Court (D. Mass. W. Division), In re: Cambridge
Biotech Corporation, Chapter 11 Case No. 94-43054-JFQ, entered November 18,
1994 (incorporated by reference to Exhibit 99.4 to the Company's
registration statement on Form SB-2, No. 333-4830-NY)
</TABLE>
- ---------------
* Filed herewith.
+ Confidential treatment requested.
++ To be filed by amendment.
II-6
<PAGE> 1
2,000,000 SHARES
SELFCARE, INC.
COMMON STOCK
($.001 PAR VALUE)
UNDERWRITING AGREEMENT
----------------------
, 1997
LEHMAN BROTHERS INC.
DILLON, READ & CO. INC.
A.G. EDWARDS & SONS, INC.
As Representatives of the several
Underwriters named in Schedule 1,
C/O LEHMAN BROTHERS INC.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Selfcare, Inc., a Delaware corporation (the "Company"), proposes to issue
and sell to the several underwriters named in Schedule 1 hereto (the
"Underwriters") 2,000,000 shares (the "Firm Shares") of the Company's Common
Stock, $.001 par value per share (the "Common Stock"). In addition, the Company
proposes to grant to the Underwriters an option to purchase up to an additional
300,000 shares of Common Stock on the terms and for the purposes set forth in
Section 2 (the "Option Shares"). The Firm Shares and the Option Shares, if
purchased, are hereinafter collectively called the "Shares." This is to confirm
the agreement concerning the purchase of the Shares from the Company by the
Underwriters.
1. Representations, Warranties and Agreements of the Company. The Company
represents, warrants and agrees that:
(a) A registration statement on Form SB-2 (File No. 333- )
with respect to the Shares has (i) been prepared by the Company in conformity
with the requirements of the United States Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations (the "Rules and
Regulations") of the United States Securities and Exchange Commission (the
"Commission") thereunder, (ii) been filed with the Commission under the
Securities Act and (iii) become effective under the Securities Act. If any
post-effective amendment to such registration statement has been filed with the
Commission prior to the execution and delivery of this
<PAGE> 2
Agreement, the most recent such amendment has been declared effective by the
Commission. Copies of such registration statement and all amendments thereto,
including post-effective amendments, if any, have been delivered by the Company
to you as the representatives (the "Representatives") of the Underwriters. As
used in this Agreement, "Effective Time" means the date and the time as of which
such registration statement, or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission; "Effective Date"
means the date of the Effective Time; "Preliminary Prospectus" means each
prospectus included in such registration statement or amendments thereof, before
it became effective under the Securities Act and any prospectus filed with the
Commission by the Company with the consent of the Representatives pursuant to
Rule 424(a) of the Rules and Regulations; "Registration Statement" means such
registration statement, as amended at the Effective Time, including all
information contained in the final prospectus filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations in accordance with Section 5 hereof
and deemed to be a part of the registration statement as of the Effective Time
pursuant to paragraph (b) of Rule 430A of the Rules and Regulations; if the
Company has filed or files a registration statement under Rule 462(b) of the
Rules and Regulations ("Rule 462(b)") to register additional shares (a "Rule
462(b) Registration Statement"), then the term "Registration Statement" shall be
deemed to include such registration statement; and "Prospectus" means such final
prospectus, as first filed with the Commission pursuant to paragraph (1) or (4)
of Rule 424(b) of the Rules and Regulations. The Commission has not issued any
order preventing or suspending the use of any Preliminary Prospectus or
Prospectus or the effectiveness of the Registration Statement, and no proceeding
for any such purpose has been initiated or, to the best of the Company's
knowledge, threatened by the Commission.
(b) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the Commission, as
the case may be, conform in all material respects to the requirements of the
Securities Act and the Rules and Regulations and do not and will not, as of the
applicable effective date (as to the Registration Statement and any amendment
thereto) contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and as of the applicable filing date (as to a prospectus
and any amendment or supplement thereto) include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided that the Company makes no representation or warranty as
to information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written information furnished
to the Company through the Representatives by or on behalf of any Underwriter
specifically for inclusion therein. There is no contract or document required to
be described in the Registration Statement or the Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or filed as
required.
(c) The Company has no subsidiaries (as defined in Section 15
hereof) other than Selfcare Europe, Ltd., Selfcare Benelux, Selfcare Europe,
GmbH, Cambridge Diagnostics Ireland Limited, Cambridge Affiliate Corporation,
Selfhelp Israel, Ltd., Selfcare International GmbH, Inverness Medical Limited,
Orgenics Ltd., Orgenics International Holdings B.V. and Selfcare Acquisition
Corp. The Company and each of its subsidiaries have been duly incorporated and
are validly existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation, are duly qualified to do business and
are in good standing
2
<PAGE> 3
as foreign corporations in each jurisdiction in which their respective ownership
or leasing of property or the conduct of their respective businesses requires
such qualification, except where the failure to be so qualified would not have a
material adverse effect on the consolidated financial position, stockholders'
equity, results of operations, business or prospects of the Company and its
subsidiaries, considered as a single enterprise (a "Material Adverse Effect"),
and have all power and authority necessary to own or hold their respective
properties and to conduct the businesses in which they are engaged; none of the
subsidiaries (other than Cambridge Diagnostics Ireland Limited) is a
"significant subsidiary", as such term is defined in Rule 405 of the Rules and
Regulations.
(d) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; and all of the outstanding shares of capital stock of each
subsidiary have been duly and validly authorized and issued and are fully paid
and non-assessable and, except as described in the Prospectus, are owned
directly by the Company, free and clear of all liens, encumbrances, equities or
claims. There are no preemptive rights or other rights to subscribe for or to
purchase, or, upon consummation of the offering to which this Agreement relates,
any restriction upon the voting or transfer of, any shares of capital stock
pursuant to the Company's Articles of Incorporation, By-laws or other governing
documents or any agreement or other instrument to which the Company is a party
or by which it may be bound, except pursuant to the Company's stock option and
employee stock purchase plans described in the Prospectus and except with
respect to the voting of any shares of capital stock pursuant to that certain
voting agreement among Ron Zwanziger and certain stockholders of the Company
dated May 13, 1996 (the "Voting Agreement").
(e) The Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued, fully paid and non-assessable and not be subject to any
preemptive rights; and the Shares will conform to the description thereof
contained in the Prospectus.
(f) The Company has full right, corporate power and authority to
enter into this Agreement and to perform and discharge its obligations
hereunder, and this Agreement has been duly authorized, executed and delivered
by the Company and constitutes the valid and legally binding agreement of the
Company, except as rights to indemnification may be limited by federal or state
securities laws and except for the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting the
rights of creditors generally.
(g) The execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions contemplated hereby will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
its subsidiaries is a party or by which the Company or its subsidiaries is bound
or to which any of the property or assets of the Company or its subsidiaries is
subject and which, in any such case, is material to the Company and its
subsidiaries (taken as a whole), nor will such actions result in any violation
of the provisions of the Certificate of Incorporation or By-laws or other
organizational documents of the Company or its subsidiaries, as amended, or any
statute or
3
<PAGE> 4
any order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or its subsidiaries or any of their properties or
assets; and except for the registration of the Shares under the Securities Act
and such consents, approvals, authorizations, registrations or qualifications as
may be required under the Exchange Act and applicable blue sky, state or foreign
securities laws in connection with the purchase and distribution of the Shares
by the Underwriters, no consent, approval, authorization or order of, or filing
or registration with, any such court or governmental agency or body is required
for the execution, delivery and performance of this Agreement by the Company and
the consummation of the transactions contemplated hereby.
(h) Except as described in the Prospectus, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the Company
owned or to be owned by such person or to include such securities for
registration in a registration statement filed by the Company under the
Securities Act; and the Company is not required to include any such securities
in the securities being registered pursuant to the Registration Statement, nor
is it required to file any registration statement for the registration of any
securities of any person or register any such securities pursuant to any other
registration statement filed by the Company under the Securities Act for a
period of at least 120 days after the Effective Date.
(i) Except as described in the Prospectus, the Company has not
sold or issued any shares of Common Stock during the six-month period preceding
the date of the Prospectus, including any sales pursuant to Rule 144A under, or
Regulations D or S of, the Securities Act, other than shares issued pursuant to
the Amended and Restated 1996 Stock Option and Grant Plan and the Employee Stock
Purchase Plan (collectively, the "Stock Option and Purchase Plans").
(j) Neither the Company nor any of its subsidiaries have
sustained, since the date of the latest audited financial statements included in
the Prospectus, any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since such date, there
has not been any change in the capital stock or long-term debt of the Company or
its subsidiaries or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus.
(k) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or included in
the Prospectus present fairly the financial condition and results of operations
of the entities purported to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved.
(l) Arthur Andersen LLP, who have certified certain financial
statements of the Company, whose report appears in the Prospectus and who have
delivered the initial letter referred to in Section 7(g) hereof, are independent
public accountants as required by the Securities Act and the Rules and
Regulations.
4
<PAGE> 5
(m) The Company and each of its subsidiaries have good and
marketable title to all personal property owned by them, in each case free and
clear of all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries. All real property and buildings
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries.
(n) The Company and its subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is required by their
respective contractual relations, or as is adequate for the conduct of their
respective businesses and the value of their respective properties and, to the
Company's knowledge, as is customary for companies engaged in similar businesses
in similar industries.
(o) Except as described in the Prospectus, the Company and its
subsidiaries own or possess adequate rights to use all material patents (or
foreign equivalents), patent applications, trademarks, service marks, trade
names, trademark registrations, service mark registrations, copyrights and
licenses, both in the United States and outside the United States, necessary for
the conduct of their respective businesses as currently conducted and as
contemplated in the Prospectus and have no reason to believe that the conduct of
their respective businesses will conflict in any material respect with, and have
not received any notice of any material claim of conflict with, any such rights
of others.
(p) Except as described in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or its subsidiaries are a
party or of which any property or assets of the Company or its subsidiaries are
the subject which, if determined adversely to the Company or its subsidiaries,
could have a Material Adverse Effect, and to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(q) There are no contracts or other documents which are required
to be described in the Prospectus or filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have not
been described in the Prospectus or filed as exhibits to the Registration
Statement.
(r) No relationship, direct or indirect, exists between or among
the Company or its subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or its subsidiaries on the
other hand, which is required to be described in the Prospectus but is not so
described.
(s) No labor disturbance by the employees of the Company exists
or, to the knowledge of the Company, is imminent which could be expected to have
a Material Adverse Effect.
(t) The Company does not maintain any "pension plan" as defined
in the Employee Retirement Income Security Act of 1974, as amended, including
the regulations and
5
<PAGE> 6
published interpretations thereunder ("ERISA").
(u) The Company and its subsidiaries have filed all federal,
state and material local income and franchise tax returns (or the foreign
equivalents thereof) required to be filed through the date hereof or have
requested extensions thereof and have paid all taxes due thereon, and no tax
deficiency has been determined adversely to the Company or its subsidiaries
which has had (nor does the Company have any knowledge of any tax deficiency
which, if determined adversely to the Company or its subsidiaries, could have) a
Material Adverse Effect.
(v) Since the date as of which information is given in the
Prospectus through the date hereof, and except as may otherwise be disclosed in
the Prospectus, the Company has not (i) issued or granted any securities (except
pursuant to the exercise of any options or warrants that are disclosed in the
Prospectus), (ii) incurred any material liability or obligation, direct or
contingent, other than liabilities and obligations which were incurred in the
ordinary course of business, (iii) entered into any transaction not in the
ordinary course of business or (iv) declared or paid any dividend on its capital
stock.
(w) The Company (i) makes and keeps accurate books and financial
records in all material respects and (ii) maintains internal accounting controls
which provide reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) transactions are recorded as
necessary to permit preparation of its financial statements and to maintain
accountability for its financial and corporate books and records and financial
accounts, (C) access to its assets is permitted only in accordance with
management's authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(x) Neither the Company nor any of its subsidiaries (i) is in
violation of its Certificate of Incorporation or By-laws or other organizational
documents, as amended, (ii) is in default in any material respect, and no event
has occurred which, with notice or lapse of time or both, would constitute such
a default, in the due performance or observance of any term, covenant or
condition contained in any material indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by which it
is bound or to which any of its properties or assets is subject or (iii) is in
violation in any material respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be subject
or has failed to obtain any material license, permit, certificate, franchise or
other governmental authorization or permit necessary to the ownership of its
property or to the conduct of its business.
(y) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or other person associated with or acting on
behalf of the Company or any of its subsidiaries, has used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or made any unlawful bribe, rebate, payoff, influence payment,
kickback or other payment.
(z) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company or any of its
subsidiaries (or, to the knowledge of the
6
<PAGE> 7
Company, any of their predecessors in interest) at, upon or from any of the
property now or previously owned or leased by the Company or any of its
subsidiaries in violation of any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit or which would require remedial action under
any applicable law, ordinance, rule, regulation, order, judgment, decree or
permit, except for any violation or remedial action which would not have,
singularly or in the aggregate with all such violations and remedial actions, a
Material Adverse Effect; there has been no material spill, discharge, leak,
emission, injection, escape, dumping or release of any kind onto such property
or into the environment surrounding such property of any toxic wastes, medical
wastes, solid wastes, hazardous wastes or hazardous substances due to or caused
by the Company or any of its subsidiaries or with respect to which the Company
or any of its subsidiaries have knowledge, except for any such spill, discharge,
leak, emission, injection, escape, dumping or release which would not have,
singularly or in the aggregate with all such spills, discharges, leaks,
emissions, injections, escapes, dumpings and releases, a Material Adverse
Effect; and the terms "hazardous wastes", "toxic wastes", "hazardous substances"
and "medical wastes" shall have the meanings specified in any applicable local,
state, federal and foreign laws or regulations with respect to environmental
protection.
(aa) Neither the Company nor any of its subsidiaries is an
"investment company" within the meaning of such term under the United States
Investment Company Act of 1940 and the rules and regulations of the Commission
thereunder.
(ab) Except as disclosed in the Prospectus, there are no business
relationships or related-party transactions of the nature required to be
disclosed in the Prospectus pursuant to Item 404 of Regulation S-K under the
Securities Act.
(ac) The Company is a "small business issuer" as defined by
Regulation S-B under the Securities Act and qualifies for use of Form SB-2 for
registration of its securities under the Securities Act.
(ad) Neither the Company nor any of its subsidiaries or
affiliates have taken, directly or indirectly, any action designed to cause or
result in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the shares of
Common Stock to facilitate the sale or resale of the Shares.
(ae) The Common Stock is listed on the AMEX, and the Company
meets or exceeds the listing requirements of the AMEX. The Shares are approved
for listing on the AMEX, subject only to official notice of issuance.
2. Purchase of the Shares by the Underwriters. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell 2,000,000 Firm Shares
to the several Underwriters, and each of the Underwriters, severally and not
jointly, agrees to purchase the number of the Firm Shares appearing opposite
that Underwriter's name in Schedule 1 hereto. The respective purchase
obligations of the Underwriters with respect to the Firm Shares shall be rounded
among the Underwriters to avoid fractional shares, as the Representatives may
determine.
In addition, the Company hereby grants to the Underwriters an option to
purchase
7
<PAGE> 8
up to 300,000 Option Shares. Such option is granted solely for the purpose of
covering over-allotments in the sale of Firm Shares and is exercisable as
provided in Section 4 hereof. Option Shares shall be purchased severally for the
account of the Underwriters in proportion to the number of Firm Shares set forth
opposite the name of such Underwriters in Schedule 1 hereto. The respective
purchase obligations of each Underwriter with respect to the Option Shares shall
be adjusted by the Representatives so that no Underwriter shall be obligated to
purchase Option Shares other than in 100 share quantities. The price of both the
Firm Shares and any Option Shares shall be $ per share.
The Company shall not be obligated to deliver any of the Shares to be
delivered on the First Delivery Date or the Second Delivery Date (as hereinafter
defined), as the case may be, except upon payment for all of the Shares to be
purchased on such Delivery Date as provided herein.
3. Offering of Shares by the Underwriters.
Upon authorization by the Representatives of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares for sale upon
the terms and conditions set forth in the Prospectus.
[It is understood that [__________] shares of the Firm Stock will initially
be reserved by the several Underwriters for offer and sale upon the terms and
conditions set forth in the Prospectus and in accordance with the rules and
regulations of the National Association of Securities Dealers, Inc. to employees
and persons having business relationships with the Company and its subsidiaries
who have heretofore delivered to the Representatives offers to purchase shares
of Firm Stock in form satisfactory to the Representatives, and that any
allocation of such Firm Stock among such persons will be made in accordance with
timely directions received by the Representatives from the Company; provided,
that under no circumstances will the Representatives or any Underwriter be
liable to the Company or to any such person for any action taken or omitted in
good faith in connection with such offering to employees and persons having
business relationships with the Company and its subsidiaries. It is further
understood that any shares of such Firm Stock which are not purchased by such
persons will be offered by the Underwriters to the public upon the terms and
conditions set forth in the Prospectus.]
4. Delivery of and Payment for the Shares. Delivery of and payment for
the Firm Shares shall be made at the offices of Lehman Brothers Inc., Three
World Financial Center, New York, New York 10285, at 10:00 A.M., New York time,
on the third full business day following the date of this Agreement (or on the
fourth full business day if the pricing of the Firm Shares should take place
after 4:30 P.M., New York time) or at such other date or place as shall be
determined by agreement between the Representatives and the Company. This date
and time are sometimes referred to as the "First Delivery Date." On the First
Delivery Date, the Company shall deliver or cause to be delivered certificates
representing the Firm Shares to the Representatives for the account of each
Underwriter against payment to or upon the order of the Company of the purchase
price by certified or official bank check or checks payable in New York Clearing
House (next-day) funds. Time shall be of the essence, and delivery at the time
and place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder. Upon delivery, the Firm Shares shall
be registered in such names and in such denominations as the
8
<PAGE> 9
Representatives shall request in writing not less than two full business days
prior to the First Delivery Date. For the purpose of expediting the checking and
packaging of the certificates for the Firm Shares, the Company shall make the
certificates representing the Firm Shares available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the First Delivery Date.
At any time on or before the thirtieth day after the date of this
Agreement, the option granted in Section 2 may be exercised by written notice
being given to the Company by the Representatives. Such notice shall set forth
the aggregate number of Option Shares as to which the option is being exercised,
the names in which the Option Shares are to be registered, the denominations in
which the Option Shares are to be issued and the date and time, as determined by
the Representatives, when the Option Shares are to be delivered; provided,
however, that this date and time shall not be earlier than the First Delivery
Date nor earlier than the second business day after the date on which the option
shall have been exercised nor later than the fifth business day after the date
on which the option shall have been exercised. The date and time the Option
Shares are delivered are sometimes referred to as the "Second Delivery Date" and
the First Delivery Date and the Second Delivery Date are sometimes each referred
to as a "Delivery Date".
Delivery of and payment for the Option Shares shall be made at the place
specified in the first sentence of the first paragraph of this Section 4 (or at
such other place as shall be determined by agreement between the Representatives
and the Company) at 10:00 a.m., New York City time, on the Second Delivery Date.
On the Second Delivery Date, the Company shall deliver or cause to be delivered
the certificates representing the Option Shares to the Representatives for the
account of each Underwriter against payment to or upon the order of the Company
of the purchase price by certified or official bank check or checks payable in
New York Clearing House (next-day) funds. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligation of each Underwriter hereunder. Upon delivery, the
Option Shares shall be registered in such names and in such denominations as the
Representatives shall request in the aforesaid written notice. For the purpose
of expediting the checking and packaging of the certificates for the Option
Shares, the Company shall make the certificates representing the Option Shares
available for inspection by the Representatives in New York, New York, not later
than 2:00 P.M., New York City time, on the business day prior to the Second
Delivery Date.
5. Further Agreements of the Company. The Company hereby covenants and
agrees:
(a) To prepare the Prospectus in the form required by the Securities
Act and reasonably acceptable to the Representatives and to file such Prospectus
pursuant to Rule 424(b) under the Securities Act not later than Commission's
close of business on the second business day following the execution and
delivery of this Agreement or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Securities Act; to advise the
Representatives, promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes effective or
any supplement to the Prospectus or any amended Prospectus has been filed and to
furnish the Representatives with copies thereof; to file, if the Company elects
to rely upon Rule 462(b), a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) and to pay the applicable fees in
accordance with
9
<PAGE> 10
Rules 111 and 3(a) of the Rules and Regulations by the earlier of (i) 10.00
P.M., New York time on the date of this Agreement or (ii) the time confirmations
are sent or given, as specified by Rule 462(b); to advise the Representatives,
promptly after it receives notice thereof, of the issuance by the Commission of
any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, of the suspension of the qualification
of the Shares for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Registration Statement or
the Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such qualification,
to use promptly its best efforts to obtain its withdrawal;
(b) To furnish promptly to each of the Representatives and to counsel
for the Underwriters a signed copy of the Registration Statement as originally
filed with the Commission, and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith;
(c) To deliver promptly to the Representatives such number of the
following documents as the Representatives shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with the
Commission and each amendment thereto; and (ii) each Preliminary Prospectus, the
Prospectus and any amended or supplemented Prospectus; and, if the delivery of a
prospectus is required at any time after the Effective Time in connection with
the offering or sale of the Shares or any other securities relating thereto and
if at such time any events shall have occurred as a result of which the
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were made
when such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary to amend or supplement the Prospectus in order to comply
with the Securities Act, to notify the Representatives and, upon their request,
to prepare and furnish without charge to each Underwriter and to any dealer in
securities as many copies as the Representatives may from time to time
reasonably request of an amended or supplemented Prospectus which will correct
such statement or omission or effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Company or the Representatives, be required by
the Securities Act or requested by the Commission;
(e) Prior to filing with the Commission any amendment to the
Registration Statement, Rule 462(b) Registration Statement or supplement to the
Prospectus or any Prospectus pursuant to Rule 424 of the Rules and Regulations,
to furnish a copy thereof to the Representatives and counsel for the
Underwriters and obtain the consent of the Representatives to the filing, which
consent shall not be unreasonably withheld;
(f) As soon as practicable after the Effective Date (provided that the
Company shall have until at least 45 days after the end of the fiscal quarter in
which the first anniversary of the Effective Date occurs), to make generally
available to the Company's shareholders and to deliver to the Representatives in
accordance with Rule 158 of the Rules and
10
<PAGE> 11
Regulations an earnings statement of the Company and its subsidiaries (which
need not be audited) complying with Section 11(a) of the Securities Act and the
Rules and Regulations and covering a period of at least twelve consecutive
months beginning after the Effective Date;
(g) For a period of five years following the Effective Date, to
furnish to the Representatives copies of all materials furnished by the Company
to its shareholders and all public reports and all reports and financial
statements furnished by the Company to the principal national securities
exchange upon which the Common Stock may be listed pursuant to requirements of
or agreements with such exchange or to the Commission pursuant to the Exchange
Act or any rule or regulation of the Commission thereunder, except for any
portion of such report furnished to such exchange or to the Commission for which
Confidential Treatment has been requested;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Shares for offering and
sale under the securities laws of such jurisdictions as the Representatives may
request and to comply with such laws so as to permit the continuance of sales
and dealings therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Shares; provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to file
a general consent to service of process in any jurisdiction;
(i) For a period of 120 days from the date of the Prospectus, not to,
directly or indirectly, offer for sale, sell or otherwise dispose of (or enter
into any transaction or device which is designed to, or could be expected to,
result in the disposition by any person at any time in the future of) any shares
of Common Stock (other than the Shares, shares issued pursuant to the Stock
Option and Purchase Plans, shares issued in connection with the LifeScan
Alliance, shares issued in connection with the Orgenics Acquisition, shares
issued in connection with the cancellation of the CDIL Warrants, shares issued
in connection with the conversion of the Cambridge Diagnostic Notes, shares
issued in connection with conversion of the Series A Preferred Stock and shares
issued in connection with the acquisition of a business or businesses by the
Company, provided that the total number of shares, including securities
convertible into shares, shall not exceed 50% of the actual number of shares of
Common Stock outstanding on the date hereof), or sell or grant options, rights
or warrants with respect to any shares of Common Stock (other than the grant of
options pursuant to the Stock Option and Purchase Plans), without the prior
written consent of Lehman Brothers Inc.; and to cause each officer, director and
certain shareholders of the Company, including all 5% or greater shareholders,
to furnish to the Representatives, prior to the First Delivery Date, a letter or
letters, in form and substance satisfactory to counsel for the Underwriters,
pursuant to which each such person shall agree not to, directly or indirectly,
offer for sale, sell or otherwise dispose of (or enter into any transaction or
device which is designed to, or could be expected to, result in the disposition
by any person at any time in the future of) any shares of Common Stock or other
securities of the Company for a period of 120 days from the date of the
Prospectus, without the prior written consent of Lehman Brothers Inc.;
(j) Prior to the Effective Date, to apply for the listing of the
Shares on the American Stock Exchange and to complete the listing prior to the
First Delivery Date;
(k) To apply the net proceeds from the sale of the Shares being sold
by the
11
<PAGE> 12
Company as set forth in the Prospectus;
(l) To take such steps as shall be necessary to ensure that neither
the Company nor any of its subsidiaries shall become an "investment company"
within the meaning of such term under the United States Investment Company Act
of 1940 and the rules and regulations of the Commission thereunder.
6. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Shares and any taxes payable
in that connection; (b) the costs incident to the preparation, printing and
filing under the Securities Act of the Registration Statement and any amendments
and exhibits thereto; (c) the costs of distributing the Registration Statement
as originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus, all as provided in
this Agreement; (d) the costs of producing and distributing this Agreement, the
Agreement Among Underwriters and any other related documents in connection with
the offering, purchase, sale and delivery of the Shares; (e) the filing fees
incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of sale of the Shares; (f) any applicable
American Stock Exchange listing or other fees; (g) the fees and expenses of
qualifying the Shares under the securities laws of the several jurisdictions as
provided in Section 5(h) and of preparing, printing and distributing a Blue Sky
Memorandum (including related fees and expenses of counsel to the Underwriters
related thereto); [(h) all costs and expenses of the Underwriters, including the
fees and disbursements of counsel for the Underwriters, incident to the offer
and sale of Shares by the Underwriters to employees and persons having business
relationships with the Company and its subsidiaries, as described in Section 3;]
and (i) all other costs and expenses incident to the performance of the
obligations of the Company under this Agreement; provided that, except as
provided in this Section 6 and in Section 11, the Underwriters shall pay their
own costs and expenses, including the costs and expenses of their counsel, any
transfer taxes on the Shares which they may sell and the expenses of advertising
any offering of the Shares made by the Underwriters.
7. Conditions of the Underwriters' Obligations. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on each Delivery Date, of the representations and warranties of the Company,
and to each of the following additional terms and conditions:
(a) The Prospectus shall have been filed in a timely manner with the
Commission in accordance with Section 5(a); the Registration Statement and all
post-effective amendments thereto shall have become effective, all filings
required by Rule 424 and Rule 430A of the Rules and Regulations shall have been
made, and no such filings shall have been made without the consent of the
Representatives, which consent shall not have been unreasonably withheld; if the
Company has elected to rely on Rule 462(b), the Rule 462(b) Registration
Statement shall have become effective not later than the earlier of (i) 10:00
P.M., New York Time on the date of this Agreement or (ii) the time confirmations
are sent or given as specified in Rule 462(b); no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued, and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus or
otherwise shall have been disclosed to you and
12
<PAGE> 13
complied with to your satisfaction.
(b) No Underwriter shall have been advised by the Company or shall
have discovered and disclosed to the Company on or prior to such Delivery Date
that the Registration Statement or the Prospectus or any amendment or supplement
thereto contains an untrue statement of fact which, in your opinion or in the
opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel for the
Underwriters, is material or omits to state a fact which, in your opinion or the
opinion of such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Shares, the Registration
Statement and the Prospectus, and all other legal matters relating to this
Agreement and the transactions contemplated hereby shall be reasonably
satisfactory in all material respects to you and your counsel, and the Company
shall have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(d) On each Delivery Date, there shall have been furnished to you the
written opinion of Goodwin, Procter & Hoar LLP, counsel to the Company,
addressed to the Underwriters and dated such Delivery Date, in form and
substance reasonably satisfactory to the Representatives and their counsel, to
the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, is qualified to do business and is in good standing as a
foreign corporation in the Commonwealth of Massachusetts and has all
corporate power and authority necessary to own or hold its properties
and conduct the businesses in which it is engaged;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the outstanding shares of capital stock of
the Company have been, and the Shares, upon issuance and delivery and
payment therefore in the manner provided for herein, will be, duly and
validly authorized and issued, fully paid and non-assessable and
conform in all material respects to the description thereof contained
in the Prospectus; and, except as described in the Prospectus, all of
the outstanding shares of capital stock of the subsidiaries of the
Company which have material assets or business operations are owned
directly by the Company, free and clear of all liens, encumbrances,
equities or claims, other than one share in each of Cambridge
Diagnostics Ireland Ltd. and Inverness Medical Limited held by
officers of the Company, and 1,000,000 shares of 6% Cumulative
Redeemable Preference Shares in Inverness Medical Limited held by
Inverness & Nairn Local Enterprise Company; and there are no
preemptive or other rights to subscribe for or to purchase, nor, upon
consummation of the offering to which this Agreement relates, any
restriction upon the voting or transfer of, any of the Shares pursuant
to the Company's Certificate of Incorporation or By-laws, as amended,
or any agreement or other instrument known to such counsel except with
respect to the Voting Agreement;
13
<PAGE> 14
(iii) To such counsel's knowledge and other than as set forth in
the Prospectus, there are no legal or governmental proceedings pending
to which the Company or any of its subsidiaries is a party or of which
any property or assets of the Company or its subsidiaries is the
subject which, if determined adversely to the Company or its
subsidiaries, would be reasonably likely to have a Material Adverse
Effect; and, to such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others;
(iv) The Registration Statement and all post effective amendments
thereto, if any, have been declared effective (or in the case of any
Rule 462(b) Registration Statement, has become effective) under the
Securities Act, the Prospectus has been filed with the Commission
pursuant to the subparagraph of Rule 424(b) of the Rules and
Regulations specified in such opinion on the date specified therein;
(v) The Registration Statement and the Prospectus and any further
amendments or supplements thereto made by the Company (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) comply as to form in all material
respects with the requirements of the Securities Act and the Rules and
Regulations;
(vi) The statements made in the Prospectus under the headings
"Description of Capital Stock" and "Business -- Strategic
Transactions" and in the Registration Statement in Items 24 and 26
insofar as such statements are, or refer to statements of law or legal
conclusions, are true and correct in all material respects;
(vii) To such counsel's knowledge, there are no contracts or
other documents which are required to be described in the Prospectus
or filed as exhibits to the Registration Statement by the Securities
Act or by the Rules and Regulations which have not been described or
filed as exhibits to the Registration Statement or incorporated
therein by reference as permitted by the Rules and Regulations;
(viii) This Agreement has been duly authorized, executed and
delivered by the Company;
(ix) The issue and sale of the Shares being delivered on such
Delivery Date by the Company and the compliance by the Company with
all of the provisions of this Agreement and the consummation of the
transactions contemplated hereby will not to such counsel's knowledge
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such actions result in any violation
of the provisions of the Certificate of Incorporation or By-laws or
other organizational documents of the Company or, to such counsel's
knowledge, any of its subsidiaries, as such documents may be amended
from time to time, or to such counsel's knowledge any statute or any
order, rule or regulation
14
<PAGE> 15
of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties or
assets; and, except for the registration of the Shares under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required and have been
obtained under the Exchange Act and applicable blue sky, state or
foreign securities laws in connection with the purchase and
distribution of the Shares by the Underwriters, no consent, approval,
authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution,
delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby;
(x) Except as described in the Prospectus, to such counsel's
knowledge, there are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or
to be owned by such person or to include such securities for
registration in a registration statement filed by the Company under
the Securities Act; and the Company is not required to include any
such securities in the securities being registered pursuant to the
Registration Statement, nor is it required to file any registration
statement for the registration of any securities of any person or
register any such securities pursuant to any other registration
statement filed by the Company under the Securities Act for a period
of 120 days after the Effective Date; and
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the Federal laws of the United States of America,
the laws of The Commonwealth of Massachusetts and the General Corporation Law of
the State of Delaware. Such counsel shall also have furnished to the
Representatives a written statement, addressed to the Underwriters and dated
such Delivery Date, in form and substance reasonably satisfactory to the
Representatives, to the effect that (x) such counsel has acted as counsel to the
Company on a regular basis in connection with securities laws matters and
certain other matters, including the preparation of the Registration Statement
and (y) based on the foregoing, no facts have come to the attention of such
counsel which lead them to believe that the Registration Statement, as of the
Effective Date, or any amendment thereto, contains or contained any untrue
statement of a material fact or omits or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that the Prospectus, or any amendment or supplement thereto,
contains or contained any untrue statement of a material fact or omits or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(e) On each Delivery Date, counsel to Cambridge Diagnostics Ireland
Ltd., Cambridge Affiliate Corporation, Inverness Medical Limited, Orgenics Ltd.,
Orgenics International Holdings, B.V. and Selfcare Acquisition Corp.
(collectively, the "Significant Subsidiaries"), acceptable to the
Representatives and their counsel, shall have furnished to you their written
opinions, as counsel to the Significant Subsidiaries, addressed to the
Underwriters and dated such Delivery Date, in form and substance reasonably
satisfactory to the Representatives and their counsel, to the effect that:
15
<PAGE> 16
(i) The Significant Subsidiaries have been duly incorporated or
organized and are validly existing as corporations or limited
liability companies, as the case may be, in good standing under the
laws of their respective jurisdictions of incorporation or
organization, are duly qualified to do business and are in good
standing in each jurisdiction in which their respective ownership or
leasing of property or the conduct of their respective businesses
requires such qualification and have all power and authority necessary
to own or hold their respective properties and conduct the businesses
in which they are engaged;
(ii) All of the issued shares of capital stock of each
Significant Subsidiary have been duly and validly authorized and
issued and are fully paid, non-assessable and, except as set forth in
the Prospectus, are owned directly or indirectly by the Company, free
and clear of all liens, encumbrances, equities or claims;
(iii) All real property and buildings held under lease by the
Significant Subsidiaries are held by them under valid, subsisting and
enforceable leases, with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such
property and buildings by them.
(iv) The issue and sale of the shares of Stock being delivered on
such Delivery Date by the Company and the compliance by the Company
with all of the provisions of this Agreement and the consummation of
the transactions contemplated hereby will not conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which any Significant Subsidiary is a party or by which any
Significant Subsidiary is bound or to which any of the property or
assets of any Significant Subsidiary is subject, nor will such actions
result in any violation of the provisions of the charter or by-laws or
other organizational documents of any Significant Subsidiary or any
statute or any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over the [the
applicable] Significant Subsidiary or any of its properties or assets.
(f)(I) On each delivery date, the Company shall have furnished to the
Representatives an opinion of Oppedahl & Larsen, United States patent counsel
for the Company, addressed to the Underwriters and dated such Delivery Date in
form and substance reasonably satisfactory to the Representatives to the effect
that:
(i) The statements in the Registration Statement and Prospectus
under the caption "Risk Factors -- Dependence on Patents and
Proprietary Technology" insofar as such statements constitute
summaries of matters of law, are accurate statements or summaries of
the matters set forth therein.
(ii) The statements in the Registration Statement and Prospectus
under the caption "Business - Patents and Proprietary Rights," insofar
as those statements relate to pending U.S. patent applications of the
Company, to licenses for non-invasive blood glucose monitoring systems
and a near infrared technique, or to trademark registrations and
applications filed by the Company are accurate
16
<PAGE> 17
statements or summaries of the matters set forth therein, and that
such counsel is not aware of any facts which would form a basis for a
belief that any of the other statements in this section are untrue or
misleading.
(iii) No facts have come to the attention of such counsel which
would form a basis for the belief that (a) the Registration Statement
or any amendment thereto or (b) the Prospectus, as amended or
supplemented, contain any untrue statement of a material fact with
respect to the patent position of the Company or any of its
subsidiaries, or omit to state any material fact relating to the
patent position of the Company or any of its subsidiaries, which is
necessary to make the statements contained therein not misleading.
(iv) The Company has obtained assignment documents from the named
inventors for each of its United States patent applications, and to
the inventions described and claimed therein and foreign applications
filed for such inventions, and has caused these assignments to be
recorded in the United States Patent and Trademark Office.
(iv) The Company has valid license rights to the patents and
patent applications listed in Schedule A to such counsel's opinion.
(vi) No facts have come to the attention of such counsel that
would form a basis for the belief that any of the United States
patents owned by the Company is unenforceable or invalid.
(vii) Such counsel is not aware of any US patents of others which
are or would be infringed by the specific current or proposed products
or processes for monitoring of blood glucose referred to in the
Prospectus in such manner as to materially and adversely affect the
Company or any of its subsidiaries; such counsel has no knowledge of
any pending or threatened action, suit, proceeding or claim by others
that the Company or any of its subsidiaries is infringing any patent
which could result in any material adverse effect on the Company.
(viii) Such counsel does not know of any contracts or other
documents relating to the proprietary information of the Company or
its subsidiaries or United States patents or patent applications other
than those described in the Registration Statement and the Prospectus
or identified on Schedule A.
(II) On each delivery Date, the Company shall have furnished to the
Representatives an opinion of Lahive & Cockfield, special patent counsel for the
Company, addressed to the Underwriters and dated such Delivery Date in form and
substance reasonably satisfactory to the Representatives and with respect to
patent matters relating to the Company's exclusive worldwide alliance with
LifeScan, Inc., a subsidiary of Johnson & Johnson, to the effect that:
(i) The statements in the Registration Statement and Prospectus,
insofar as such statements constitute summaries of matters of law, are
accurate statements or summaries of the matters set forth therein.
17
<PAGE> 18
(ii) No facts have come to the attention of such counsel which
would form a basis for the belief that (a) the Registration Statement
or any amendment thereto or (b) the Prospectus, as amended or
supplemented, contain any untrue statement of a material fact, or omit
to state any material fact, which is necessary to make the statements
contained therein not misleading.
(iii) Such counsel is not aware of any patents of others which
are or would be infringed by specific, current or proposed products or
processes referred to in the Prospectus in such manner as to adversely
affect the Company or any of its subsidiaries; such counsel has no
knowledge of any pending or threatened action, suit, proceeding or
claim by others that the Company or any of its subsidiaries is
infringing any patent which could result in any material adverse
effect on the Company.
(g) The Representatives shall have received from Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., counsel for the Underwriters, such opinion or
opinions, dated such Delivery Date, with respect to the issuance and sale of the
Shares, the Registration Statement, the Prospectus and other related matters as
the Representatives may reasonably require, and the Company shall have furnished
to such counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.
(h) At the time of execution of this Agreement, the Representatives
shall have received from Arthur Andersen LLP a letter, in form and substance
satisfactory to the Representatives, addressed to the Underwriters and dated the
date hereof (i) confirming that they are independent public accountants within
the meaning of the Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, (ii) stating, as of the date hereof (or, with
respect to matters involving changes or developments since the respective dates
as of which specified financial information is given in the Prospectus, as of a
date not more than five days prior to the date hereof), the conclusions and
findings of such firm with respect to the financial information and other
matters ordinarily covered by accountants' "comfort letters" to underwriters in
connection with registered public offerings.
(i) With respect to the letter of Arthur Andersen LLP referred to in
the preceding paragraph and delivered to the Representatives concurrently with
the execution of this Agreement (the "initial letter"), on each Delivery Date
the Company shall have furnished to the Representatives a letter (the
"bring-down letter") of such accountants, addressed to the Underwriters and
dated such Delivery Date (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance with
the applicable requirements relating to the qualification of accountants under
Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date of
the bring-down letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five days
prior to the date of the bring-down letter), the conclusions and findings of
such firm with respect to the financial information and other matters covered by
the initial letter and (iii) confirming in all material respects the conclusions
and findings set forth in the initial letter.
18
<PAGE> 19
(j) On each Delivery Date, the Company shall have furnished to the
Representatives a certificate, dated such Delivery Date, of its Chairman of the
Board, its President or a Vice President and its Chief Financial Officer stating
that:
(i) The representations and warranties of the Company contained
in this Agreement are true and correct as of such Delivery Date, and
the Company has complied with all agreements and satisfied all
conditions on its part to be complied with or satisfied prior to such
Delivery Date; and the conditions set forth in Sections 7(a) and 7(m)
have been fulfilled; and
(ii) They have carefully examined the Registration Statement and
the Prospectus and, in their opinion (A) as of the Effective Date, the
Registration Statement and Prospectus did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (B) since the Effective Date no event has
occurred which should have been set forth in a supplement or amendment
to the Registration Statement or the Prospectus.
(k) You shall have been furnished such additional documents and
certificates as you or counsel for the Underwriters may reasonably request.
(l) The letter agreements among you and officers, directors and
certain stockholders of the Company relating to restrictions on sales of the
Company's securities, delivered to you on or prior to the date hereof, shall be
in full force and effect on such Delivery Date.
(m) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus or (ii) since such date there shall not
have been any change in the capital stock or long-term debt of the Company or
any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in clause (i) or (ii), is, in the
judgment of the Representatives, so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered on such Delivery Date on the terms and in the
manner contemplated in the Prospectus.
(n) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market shall have been suspended or minimum prices shall
have been established on any such exchange or such market by the Commission, by
such exchange or by any other regulatory body or governmental authority having
jurisdiction, (ii) a banking moratorium shall have been declared by Federal or
state authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving the
United States or there shall have been a declaration of a national emergency or
war by the United States or (iv) there shall have occurred such a material
19
<PAGE> 20
adverse change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the United States
shall be such) as to make it, in the judgment of a majority in interest of the
Underwriters, impracticable or inadvisable to proceed with the public offering
or delivery of the Shares being delivered on such Delivery Date on the terms and
in the manner contemplated in the Prospectus.
(o) The American Stock Exchange shall have approved the Shares for
listing, subject only to official notice of issuance.
All such opinions, letters, evidence, certificates and documents shall be
in compliance with the provisions of this Agreement only if they are
satisfactory in form and substance to you and counsel for the Underwriters. The
Company shall furnish to you conformed copies of such opinions, letters,
evidence, certificates and documents in such number as you shall reasonably
request. If any of the conditions specified in this Section 7 shall not have
been fulfilled when and as required by this Agreement, the Agreement and all
obligations of the Underwriters hereunder may be canceled at, or prior to, each
Delivery date, by you. Any such cancellation shall be without liability of the
Underwriters to the Company. Notice of such cancellation shall be given to the
Company in writing, or by telecopy or telephone confirmed in writing.
8. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Underwriter
(including any Underwriter in its role as a qualified independent underwriter
pursuant to the rules of the National Association of Securities Dealers, Inc.),
its officers and employees and each person, if any, who controls any Underwriter
within the meaning of the Securities Act, from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of Shares), to which that Underwriter, officer,
employee or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto or (B) in
any blue sky application or other document prepared or executed by the Company
(or based upon any written information furnished by the Company) specifically
for the purpose of qualifying any or all of the Shares under the securities laws
of any state or other jurisdiction (any such application, document or
information being hereinafter called a "Blue Sky Application"), (ii) the
omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, or in any Blue Sky Application any material fact required to be stated
therein or necessary to make the statements therein not misleading or (iii) any
act or failure to act or any alleged act or failure to act by any Underwriter in
connection with, or relating in any manner to, the Shares or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above (provided that the Company shall not be
liable under this clause (iii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to act
undertaken or omitted to be taken by such Underwriter through its gross
negligence or willful misconduct), and shall reimburse each Underwriter and each
such officer, employee or controlling person promptly upon demand for any
20
<PAGE> 21
legal or other expenses reasonably incurred by that Underwriter, officer,
employee or controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any such
amendment or supplement, or in any Blue Sky Application, in reliance upon and in
conformity with written information concerning such Underwriter furnished to the
Company through the Representatives by or on behalf of any Underwriter
specifically for inclusion therein; and provided further, that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates to
any untrue statement, alleged untrue statement, omission or alleged omission
made in any Preliminary Prospectus but eliminated or remedied in the Prospectus,
such indemnity agreement shall not inure to the benefit of any Underwriter from
whom the person asserting any loss, claim, damage or liability purchased the
Shares which are the subject thereof (or to the benefit of any person who
controls such Underwriter) if a copy of the Prospectus was not sent or given to
such person with or prior to the written confirmation of the sale of such Shares
to such person. The foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to any Underwriter or to any
officer, employee or controlling person of that Underwriter.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, its officers and employees, each of its directors
(including any person who, with his or her consent, is named in the Registration
Statement as about to become a director of the Company), and each person, if
any, who controls the Company within the meaning of the Securities Act or
otherwise, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company or any such
director, officer or controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any Preliminary Prospectus, the
Registration Statement or the Prospectus or in any amendment or supplement
thereto, or (B) in any Blue Sky Application or (ii) the omission or alleged
omission to state in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or in any amendment or supplement thereto, or in any Blue Sky
Application any material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information concerning
such Underwriter furnished to the Company through the Representatives by or on
behalf of that Underwriter specifically for inclusion therein, and shall
reimburse the Company and any such director, officer or controlling person for
any legal or other expenses reasonably incurred by the Company or any such
director, officer or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred. The foregoing indemnity agreement is in
addition to any liability which any Underwriter may otherwise have to the
Company or any such director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the
21
<PAGE> 22
indemnifying party in writing of the claim or the commencement of that action;
provided, however, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have under this Section 8 except to
the extent it has been materially prejudiced by such failure and, provided
further, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have to an indemnified party otherwise than
under this Section 8. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that the Representatives shall have
the right to employ counsel to represent jointly the Representatives and those
other Underwriters and their respective officers, employees and controlling
persons who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Underwriters against the Company under this
Section 8 if, in the reasonable judgment of the Representatives, it is advisable
for the Representatives and those Underwriters, officers, employees and
controlling persons to be jointly represented by separate counsel, and in that
event the fees and expenses of such separate counsel shall be paid by the
Company. No indemnifying party shall (i) without the prior written consent of
the indemnified parties (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with the consent of the indemnifying party or if there
be a final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 8(a) or 8(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other from
the offering of the Shares or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and the Underwriters on
the other with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other with respect to such
offering shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Shares purchased under this Agreement
22
<PAGE> 23
(before deducting expenses) received by the Company on the one hand, and the
total underwriting discounts and commissions received by the Underwriters with
respect to the shares of the Shares purchased under this Agreement, on the other
hand, bear to the total gross proceeds from the offering of the shares of the
Shares under this Agreement, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Underwriters, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contributions pursuant to this Section 8 were to be
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the loss, claim, damage
or liability, or action in respect thereof, referred to above in this Section 8
shall be deemed to include, for purposes of this Section 8(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8(d), no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise paid or
become liable to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute as provided in
this Section 8(d) are several in proportion to their respective underwriting
obligations and not joint.
(e) The Underwriters severally confirm and the Company acknowledges
that the statements with respect to the public offering of the Shares by the
Underwriters set forth on the cover page of, the legend concerning
over-allotments on the inside front cover page of and the concession and
reallowance figures appearing under the caption "Underwriting" in, the
Prospectus are correct and constitute the only information concerning such
Underwriters furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus.
9. Defaulting Underwriters. If, on either Delivery Date, any Underwriter
defaults in the performance of its obligations under this Agreement, the
remaining non-defaulting Underwriters shall be obligated to purchase the Shares
which the defaulting Underwriter agreed but failed to purchase on such Delivery
Date in the respective proportions which the number of the Firm Shares set
opposite the name of each remaining non-defaulting Underwriter in Schedule 1
hereto bears to the total number of the Firm Shares set opposite the names of
all the remaining non-defaulting Underwriters in Schedule 1 hereto; provided,
however, that the remaining non-defaulting Underwriters shall not be obligated
to purchase any of the Shares on such Delivery Date if the total number of
Shares which the defaulting Underwriter or Underwriters agreed but failed to
purchase on such date exceeds 9.09% of the total number of Shares to be
purchased on such Delivery Date, and any remaining non-defaulting Underwriter
shall not be obligated to purchase more than 110% of the number of Shares which
it agreed to purchase on such Delivery Date pursuant to the terms of Section 2.
If the foregoing maximums are exceeded, the remaining non-defaulting
Underwriters,
23
<PAGE> 24
or those other underwriters satisfactory to the Representatives who so agree,
shall have the right, but shall not be obligated, to purchase, in such
proportion as may be agreed upon among them, all the Shares to be purchased on
such Delivery Date. If the remaining non-defaulting Underwriters or other
underwriters satisfactory to the Representatives do not elect to purchase the
shares which the defaulting Underwriter or Underwriters agreed but failed to
purchase on such Delivery Date, this Agreement (or, with respect to the Second
Delivery Date, the obligation of the Underwriters to purchase, and of the
Company to sell, the Option Shares) shall terminate without liability on the
part of any non-defaulting Underwriter or the Company, except that the Company
will continue to be liable for the payment of expenses to the extent set forth
in Sections 6 and 11. As used in this Agreement, the term "Underwriter"
includes, for all purposes of this Agreement unless the context requires
otherwise, any party not listed in Schedule 1 hereto who, pursuant to this
Section 9, purchases Firm Shares which a defaulting Underwriter agreed but
failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If other
underwriters are obligated or agree to purchase the Shares of a defaulting or
withdrawing Underwriter, either the Representatives or the Company may postpone
the Delivery Date for up to seven full business days in order to effect any
changes that in the opinion of counsel for the Company or counsel for the
Underwriters may be necessary in the Registration Statement, the Prospectus or
in any other document or arrangement.
10. Termination. The obligations of the Underwriters hereunder may be
terminated by the Representatives by notice given to and received by the Company
prior to delivery of and payment for the Firm Shares if, prior to that time, any
of the events described in Sections 7(m) or 7(n), shall have occurred or if the
Underwriters shall decline to purchase the Shares for any reason permitted under
this Agreement.
11. Reimbursement of Underwriters' Expenses. If the Company shall fail to
tender the Shares for delivery to the Underwriters by reason of any failure,
refusal or inability on the part of the Company to perform any agreement on its
part to be performed, or because any other condition of the Underwriters'
obligations hereunder required to be fulfilled by the Company is not fulfilled,
the Company will reimburse the Underwriters for all reasonable out-of-pocket
expenses (including fees and disbursements of counsel) incurred by the
Underwriters in connection with this Agreement and the proposed purchase of the
Shares, and upon demand (accompanied by reasonable documentation of such
expenses) the Company shall pay the full amount thereof to the Representatives.
If this Agreement is terminated pursuant to Section 9 by reason of the default
of one or more Underwriters, the Company shall not be obligated to reimburse any
defaulting Underwriter on account of those expenses.
12. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission to Lehman Brothers Inc., Three World Financial Center,
New York, New York 10285, Attention: Syndicate Department (Fax: 212-526-6588),
with a copy, in the case of any notice pursuant to Section 8(c), to the Director
of Litigation, Office of the General Counsel, Lehman Brothers Inc., Three World
Financial Center, 10th Floor, New York, NY 10285;
24
<PAGE> 25
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Ron Zwanziger (Fax: 617-647-3939); provided,
however, that any notice to an Underwriter pursuant to Section 8(c) shall be
delivered or sent by mail, telex or facsimile transmission to such Underwriter
at its address set forth in its acceptance telex to the Representatives, which
address will be supplied to any other party hereto by the Representatives upon
request. Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof. The Company shall be entitled to act and rely
upon any request, consent, notice or agreement given or made on behalf of the
Underwriters by the Representatives.
13. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of and be binding upon the Underwriters, the Company and their
respective successors. This Agreement and the terms and provisions hereof are
for the sole benefit of only those persons, except that (A) the representations,
warranties, indemnities and agreements of the Company contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control any Underwriter within the meaning of Section 15 of the
Securities Act and (B) the indemnity agreement of the Underwriters contained in
Section 8(b) of this Agreement shall be deemed to be for the benefit of
directors of the Company, officers of the Company who have signed the
Registration Statement and any person controlling the Company within the meaning
of Section 15 of the Securities Act. Nothing in this Agreement is intended or
shall be construed to give any person, other than the persons referred to in
this Section 13, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
14. Survival. The respective indemnities, representations, warranties and
agreements of the Company and the Underwriters contained in this Agreement or
made by or on behalf on them, respectively, pursuant to this Agreement, shall
survive the delivery of and payment for the Shares and shall remain in full
force and effect, regardless of any investigation made by or on behalf of any of
them or any person controlling any of them.
15. Definition of the Terms "Business Day" and "Subsidiary". For purposes
of this Agreement, (a) "business day" means any day on which the New York Stock
Exchange, Inc. is open for trading and (b) "subsidiary" has the meaning set
forth in Rule 405 of the Rules and Regulations.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New York.
17. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
25
<PAGE> 26
If the foregoing correctly sets forth the agreement between the Company and
the Underwriters, please indicate your acceptance in the space provided for that
purpose below.
Very truly yours,
SELFCARE, INC.
By
--------------------------------
Ron Zwanziger, Chairman and
Chief Executive Officer
Accepted:
LEHMAN BROTHERS INC.
DILLON, READ & CO. INC.
A.G. EDWARDS & SONS, INC.
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
By LEHMAN BROTHERS INC.
By
------------------------------
Authorized Representative
26
<PAGE> 27
SCHEDULE 1
----------
Number of
Underwriters Firm Shares
- ------------ -----------
Lehman Brothers Inc.........................................................
Dillon, Read & Co. Inc......................................................
A.G. Edwards & Sons, Inc....................................................
TOTAL 2,000,000
=========
<PAGE> 1
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF A SERIES OF
PREFERRED STOCK
OF
SELFCARE, INC.
-------------
Selfcare, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"), does hereby certify:
That, pursuant to authority conferred upon the Board of Directors of the
Corporation by the Amended and Restated Certificate of Incorporation of said
Corporation, as amended, and pursuant to the provisions of Section 151 of Title
8 of the Delaware Code of 1953, said Board of Directors, at a meeting duly held
on October 10, 1996, adopted a resolution providing for the designations,
preferences and relative, participating, optional or other rights, and the
qualifications, limitations or restrictions thereof, of a series of preferred
stock, which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the provisions of the Amended and Restated
Certificate of Incorporation of the Corporation, a series of preferred stock of
the Corporation known as Series A Convertible Preferred Stock be, and it hereby
is, created, classified, and authorized, and the issuance thereof is provided
for, and that the designation and number of shares, and relative rights,
preferences and limitations thereof, shall be as set forth in the form appended
hereto as Exhibit A.
<PAGE> 2
EXHIBIT A
Section 1. Designation.
-----------
The shares of the series of Preferred Stock shall be designated as "Series
A Convertible Preferred Stock," and the number of shares constituting such
series shall be 10,000. The par value of the Series A Convertible Preferred
Stock shall be $.001 per share.
Section 2. Dividends.
---------
(a) The holders of outstanding shares of Series A Convertible
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds legally available for the payment of dividends,
dividends at the rate per share of 6% of the initial purchase price paid for
such shares (the "Purchase Price") per annum. All dividends shall be cumulative
and shall be payable in cash in arrears on each January 15, April 15, July 15
and October 15 (each such date, a "Dividend Payment Date") commencing on January
15, 1997, in preference to and with priority over dividends on the common stock
of the Corporation, par value $.001 per share, (the "Common Stock"). Such
quarterly dividends shall be cumulative and shall accrue (whether or not earned
or declared, and whether or not there are fund legally available therefor)
without interest from the first day of the quarterly period in which such
dividend may be payable as herein provided. Notwithstanding the foregoing, in
the event that the closing bid price of the Common Stock on the American Stock
Exchange (or, in the event that such security is not traded on the American
Stock Exchange, such other national or regional securities exchange or automated
quotation system upon which such security is listed and principally traded or,
if no such price is available, the per share market value of such security as
determined by a nationally recognized investment banking firm or other
nationally recognized financial adviser retained by Seller for such purpose)
during any thirty (30) consecutive calendar days is equal to or greater than
$20.00 per share, the dividends provided for herein shall cease to accrue
following such 30-day period.
(b) All dividends paid with respect to shares of the Series A
Convertible Preferred Stock pursuant to Section 2(a) hereof shall be paid pro
rata to the holders entitled thereto. Any such unpaid dividends shall be in
arrears until paid.
(c) Whenever dividends on the Series A Convertible Preferred Stock are
in arrears, the Corporation shall not declare dividends on or make any other
distribution in respect of the Common Stock.
(d) The amount of dividends accrued on the Series A Convertible
Preferred Stock for any period less than a full quarterly dividend period
(including the initial dividend period) shall be equal to a pro rata portion of
the total dividend payable for the quarterly dividend period during which such
period occurs, based on the actual number of days elapsed in such period and the
total number of days in the applicable quarterly dividend period. Dividends
shall accrue on a daily basis during each dividend period as provided above, and
the
2
<PAGE> 3
Liquidation Preference (as defined below) of each outstanding share of Series A
Convertible Preferred Stock shall be correspondingly increased on a daily basis.
Each such dividend shall be payable to holders of record as their names shall
appear on the stock books of the Corporation on any record date for such
dividends, except that dividends in arrears for any past Dividend Payment Date
may be declared and paid at any time without reference to such regular Dividend
Payment Date to holders of record on such date not more than sixty (60) days or
less then ten (10) days prior to the date of payment as shall be determined by
the Board of Directors.
Section 3. Liquidation Preference.
----------------------
(a) Preference.
----------
(i) In the event of any liquidation, dissolution or winding up of
the Corporation, either voluntarily or involuntarily, the holders of the Series
A Convertible Preferred Stock shall be entitled to receive prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of Common Stock of the Corporation, an amount equal
to the sum of (A) the Purchase Price (which shall be $1,000 per share), plus (B)
a further amount equal to any dividends on such shares as to which holders of
the Series A Convertible Preferred Stock are entitled pursuant to Section 2 that
have not been paid (such sum, the "Liquidation Preference"). If, upon such
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation available for distribution to the shareholders of the Corporation
are insufficient to provide for the payment of the full Liquidation Preference,
such assets as are so available shall be distributed pro rata among the holders
of the Series A Convertible Preferred Stock.
(ii) The amount per share set forth in Section 3(a)(i) shall be
appropriately adjusted for any stock splits, stock combinations, stock dividends
or similar recapitalizations with respect to the Series A Convertible Preferred
Stock.
(b) CONSOLIDATION OR MERGER. A consolidation or merger of the
Corporation with or into any other corporation or corporations, or a sale of all
or substantially all of the assets of the Corporation, shall not be deemed to be
a liquidation, dissolution or winding up within the meaning of this Section 3.
Section 4. Conversion.
----------
Unless previously converted pursuant to certain subscription agreements
with the Corporation, each share of Series A Convertible Preferred Stock shall
automatically be converted into shares of Common Stock at the closing bid price
of the Common Stock on the American Stock Exchange (or, in the event that such
security is not traded on the American Stock Exchange, such other national or
regional securities exchange or automated quotation system upon which such
security is listed and principally traded or, if no such price is
3
<PAGE> 4
available, the per share market value of such security as determined by a
nationally recognized investment banking firm or other nationally recognized
financial adviser retained by Seller for such purpose) on October 15, 1998,
without any action on the part of the holder thereof or the Corporation.
Section 5. Voting Rights of Series A Convertible Preferred Stock.
-----------------------------------------------------
Except as required by law, each share of Series A Convertible Preferred
Stock shall be non-voting. The increase or decrease in the amount of authorized
capital stock of any class, including Series A Convertible Preferred Stock,
shall not require the consent of the holders of Series A Convertible Preferred
Stock and shall not be deemed to materially and adversely affect the specified
designations, preferences or special rights of the Series A Convertible
Preferred Stock.
[Remainder of page intentionally left blank.]
4
<PAGE> 5
IN WITNESS WHEREOF, Selfcare, Inc. has caused this certificate to be
executed in its name and on its behalf by its President, and attested by its
Secretary, as of this 10th day of October, 1996.
SELFCARE, INC.
By:/s/ Ron Zwanziger
--------------------------------------
Name: Ron Zwanziger
Title: President
Attest:
/s/ Kenneth D. Legg
- -----------------------------------
Name: Kenneth D. Legg
Title: Secretary
5
<PAGE> 1
SEE REVERSE SIDE FOR RESTRICTIONS
- --------------------------------------------------------------------------------
INCORPORATED UNDER THE LAWS OF DELAWARE
- --------------------------------------------------------------------------------
No. Specimen [ART: EAGLE ON GLOBE] XXX Shares
- --------------------------------------------------------------------------------
SELFCARE, INC.
FULLY-PAID AND NON-ASSESSABLE SHARES OF
SERIES A CONVERTIBLE PREFERRED STOCK
$.001 PAR VALUE
- --------------------------------------------------------------------------------
THIS
CERTIFIES
THAT Specimen is the owner of
---------------------------------------
XXX (XXX) ---------------Shares of the Stock of
- --------------------------------
SELFCARE, INC. Series A Convertible Preferred
transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate
to be signed by its duly authorized officers and its Corporate Seal to
be hereunder affixed this__________day of________________A.D. __
- ------------------------------------- ----------------------------
President and Chief Executive Officer Secretary
SHARES $.001 par value EACH
[Copyright] GOES 196
FORM 196P H.& W., INC.
SELFCARE, INC.
Fully-paid and non-assessable shares of
Series A Convertible Preferred Stock
$.001 par value PREFERRED
CERTIFICATE
NO.196.
NO. Specimen
For XXX Shares
-------------------
Issued to
Specimen
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
Dated
------------------------------------------------
FROM WHOM TRANSFERRED
-----------------------------------------------------
Dated
------------------------------------------------
NO. ORIGINAL NO. ORIGINAL NO. OF SHARES
CERTIFICATE SHARES TRANSFERRED
-----------------------------------------------------
Received CERTIFICATE NO. Specimen
------------
For XXX Shares
---------------------------
this day of
--------- -----------------
------------------------------------
------------------------------------
FORM 196P HOBBS & WARREN, INC.
<PAGE> 2
The Issuer is authorized to issue more than one class of stock. The Issuer will
furnish without charge to each stockholder who requests a copy of the powers,
designations, preferences and relative, participating, optional, or other
special rights of each outstanding class of stock or series thereof of the
Issuer, and the qualifications, limitations or restrictions of such preferences
and/or rights.
The shares of the Issuer represented by this certificate have been issued
pursuant to Regulation S promulgated under the Securities Act of 1933, as
amended ("Act"), and have not been registered under the Act. These shares may
not be offered or sold within the United States or to or for the account of a
"U.S. Person" (as that term is defined in Regulation S) until after the fortieth
(40th) day following completion of the Regulation S offering of the Issuer
pursuant to which these shares have been issued and only in compliance with the
Act. The Issuer will notify the transfer agent of the date of completion of such
offering.
The Issuer is authorized to issue more than one class of stock. The Issuer will
furnish without charge to each stockholder who requests a copy of the powers,
designations, preferences and relative, participating, optional, or other
special rights of each outstanding class of stock or series thereof of the
Issuer, and the qualifications, limitations or restrictions of such preferences
and/or rights.
The shares of the Issuer represented by this certificate have been issued
pursuant to Regulation S promulgated under the Securities Act of 1933, as
amended ("Act"), and have not been registered under the Act. These shares may
not be offered or sold within the United States or to or for the account of a
"U.S. Person" (as that term is defined in Regulation S) until after the fortieth
(40th) day following completion of the Regulation S offering of the Issuer
pursuant to which these shares have been issued and only in compliance with the
Act. The Issuer will notify the transfer agent of the date of completion of such
offering.
CERTIFICATE
FOR
XXX
SHARES
of the
STOCK
Series A Convertible Preferred
------------------------------
SELFCARE, INC.
------------------------------
ISSUED TO
Specimen
------------------------------
DATE
------------------------------
For Value Received,______hereby sell, assign and transfer
unto____________________________________
______________________________________________Shares of the Stock represented by
the within Certificate, and do hereby irrevocably constitute and appoint
___________________________________________________Attorney to transfer the said
Stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated_______________________ _____
In presence of _____________________________________
_______________________________________
NOTICE. THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE> 1
Information from this exhibit has been omitted and filed separately
with the Securities and Exchange Commission
EXHIBIT 10.52
DEVELOPMENT AND DISTRIBUTION AGREEMENT
BETWEEN
CHEMTRAK INCORPORATED
AND
SELFCARE, INC.
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS....................................... 1
1.1 "Affiliate"........................................... 1
1.2 "ChemTrak Technology"................................. 1
1.3 "Commercialization Costs"............................. 2
1.4 "Confidential Information"............................ 2
1.5 "Counseling Service".................................. 2
1.6 "HIV Product"......................................... 2
1.7 "Net Sales"........................................... 3
1.8 "Purchase Price"...................................... 3
1.9 "Royalty"............................................. 3
1.10 "Sample Collection Kit"............................... 3
1.11 "Software"............................................ 3
1.12 "Standard Cost of Goods".............................. 3
1.13 "Territory"........................................... 3
1.14 "Testing Facility".................................... 3
1.15 "True Home HIV Test".................................. 3
ARTICLE 2. GRANT OF RIGHTS; EXCLUSIVITY...................... 4
2.1 License Grants to Selfcare............................ 4
2.2 Covenant Not to Sell Competitive Products............. 5
2.3 Loss of Exclusivity................................... 5
2.4 Selfcare Affiliates................................... 6
ARTICLE 3. DEVELOPMENT OF THE HIV PRODUCT.................... 7
3.1 General Responsibilities.............................. 7
3.2 Testing Facilities; Counseling Service................ 8
3.3 Clinical Trials Supply................................ 8
3.4 Plan; Reports......................................... 9
3.5 Publications.......................................... 9
ARTICLE 4. SUPPLY OF SAMPLE COLLECTION KITS.................. 9
4.1 Purchases of Sample Collection Kits................... 9
4.2 Orders................................................ 9
4.3 Purchase Price; Payment............................... 10
4.4 Delivery.............................................. 10
4.5 Acceptance............................................ 11
ARTICLE 5. MARKETING, SALE AND DISTRIBUTION OF HIV PRODUCTS.. 11
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
PAGE
5.1 Marketing Efforts..................................... 11
5.2 Sales and Advertising Activities...................... 12
5.3 Pricing............................................... 12
5.4 Packaging............................................. 12
5.5 General Conduct....................................... 12
ARTICLE 6. REPORTS; FORECASTS; MARKETING PLANS............... 13
6.1 Reports............................................... 13
6.2 Forecasts............................................. 13
6.3 Marketing Plans and Reports........................... 13
6.4 Confidential Information.............................. 14
ARTICLE 7. PAYMENTS.......................................... 14
7.1 Expenses.............................................. 14
7.2 License Fee........................................... 14
7.3 Sales Milestone Payments.............................. 14
7.4 Royalties............................................. 14
7.5 Manner and Place of Payment........................... 15
7.6 Records and Audit of Sales and Expenses............... 15
ARTICLE 8. CONFIDENTIALITY................................... 16
8.1 Nondisclosure Obligations............................. 16
8.2 Exceptions............................................ 16
8.3 Authorized Disclosure................................. 16
8.4 Terms of this Agreement............................... 17
ARTICLE 9. INTELLECTUAL PROPERTY............................. 17
9.1 Ownership of Intellectual Property.................... 17
9.2 Defense of Intellectual Property Suits................ 17
9.3 Expenses and Remedies................................. 18
9.4 Disclaimer............................................ 18
9.5 Prosecution of Intellectual Property Suits............ 19
ARTICLE 10. TERM AND TERMINATION; CHANGE OF CONTROL........... 19
10.1 Term.................................................. 19
10.2 Change of Control..................................... 19
10.3 Termination for Material Breach....................... 20
10.4 Consequences of Termination........................... 20
ii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
PAGE
10.5 No Other Rights Upon Termination...................... 22
10.6 Surviving Obligations................................. 22
ARTICLE 11. WARRANTIES; INDEMNIFICATION....................... 22
11.1 Sample Collection Kit Warranty........................ 22
11.3 Warranty Disclaimers and Limitations.................. 23
11.4 Indemnification....................................... 23
11.5 Insurance............................................. 24
ARTICLE 12. REPRESENTATIONS AND WARRANTIES.................... 24
12.1 Representation and Warranties of ChemTrak............. 24
12.2 Representations and Warranties of Selfcare............ 25
ARTICLE 13. MISCELLANEOUS..................................... 25
13.1 Assignment............................................ 25
13.2 Export Law Compliance................................. 25
13.3 Foreign Corrupt Practices Act......................... 26
13.4 Benefits and Binding Nature of Agreement.............. 26
13.5 Entire Agreement; Amendments.......................... 26
13.6 No Other Terms and Conditions......................... 26
13.7 Force Majeure......................................... 26
13.8 Notice................................................ 26
13.9 English Language; Governing Law....................... 27
13.10 Waiver................................................ 27
13.11 Severability.......................................... 27
13.12 Rights and Remedies Cumulative........................ 28
13.13 Independent Contractors............................... 28
13.14 Counterparts.......................................... 28
iii.
<PAGE> 5
DEVELOPMENT AND DISTRIBUTION AGREEMENT
THIS DEVELOPMENT AND DISTRIBUTION AGREEMENT (the "Agreement") is made
as of December 31, 1996 (the "Effective Date") by and between CHEMTRAK
INCORPORATED, a Delaware corporation ("ChemTrak"), and SELFCARE, INC.
("Selfcare"), a Delaware corporation. ChemTrak and Selfcare are sometimes
referred to herein as a "Party" or the "Parties."
RECITALS
WHEREAS, ChemTrak has developed a mail-in HIV test (the "HIV PRODUCT,"
as further defined in Article 1 below) and has conducted certain trials directed
toward obtaining regulatory approval to commercially sell the HIV Product in the
United States shortly following the Effective Date; and
WHEREAS, Selfcare has substantial experience in the distribution,
marketing and sale of health care products in the Territory (as defined below)
and is willing to conduct activities necessary to obtain applicable regulatory
approvals for the HIV Product in the Territory and to establish one or more
central laboratory testing facilities and a counseling service in connection
with the HIV Product; and
WHEREAS, ChemTrak wishes to designate Selfcare, and Selfcare wishes to
be designated, as ChemTrak's exclusive distributor for the HIV Product in the
Territory, on the terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the foregoing premises and the
covenants set forth below, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "AFFILIATE" shall mean an entity that, directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with ChemTrak or Selfcare.
1.2 "CHEMTRAK TECHNOLOGY" shall mean all inventions, patent
applications, patents, know-how, technology, trade secrets, processes, data,
methods or other information, the Software, and any physical, chemical or
biological material, in each case which ChemTrak owns, controls or has a license
to (with a right to sublicense) and which is useful in the use, sale or
distribution of the HIV Product in the Territory, as listed in Exhibit B.
1.
<PAGE> 6
1.3 "COMMERCIALIZATION COSTS" shall mean expenses identifiable to
marketing, promoting, selling and distributing the HIV Product in the Territory
and performing testing, reporting and counseling services incident to the sale
of HIV Products, specifically including expenses of advertising the HIV Product,
specialized training of the sales force with respect to the HIV Product in
particular, salaries and commissions of the sales force to the extent time is
dedicated to the HIV Product, costs of financing receivables and inventories of
the HIV Product, costs of shipping and insuring Sample Collection Kits from
ChemTrak to Selfcare, reasonable allocation of overhead identifiable to such
activities, all recurring and annual regulatory fees and expenses, costs of
pursuing and maintaining trademark protection in the Territory pursuant to
Section 9.1, and such other expenses as the Parties may agree in writing to
include as Commercialization Costs. All such costs shall be determined in
accordance with generally accepted accounting principles consistently applied.
"Commercialization Costs" shall specifically exclude expenses deducted from
gross invoices under the definition of "Net Sales," the Purchase Price paid to
ChemTrak for Sample Collection Kits, the license fee and milestone payments made
by Selfcare to ChemTrak under this Agreement, and costs of establishing
Regulatory Approvals for the HIV Product and the Testing Facilities and
Counseling Service in advance of commercial sales.
1.4 "CONFIDENTIAL INFORMATION" shall mean, subject to the exceptions
set forth in Section 8.2, any information or materials received by one Party
from the other Party. In particular, Confidential Information shall be deemed to
include, but not be limited to, the ChemTrak Technology, any know-how, data,
process, technique, formula or biological or physical material relating to the
HIV Product and any research project, work in process, future development,
scientific, engineering, manufacturing, marketing, business plan, financial or
personnel matter relating to either Party, its present or future products,
sales, suppliers, customers, employees, investors or business, whether in oral,
written, graphic or electronic form, to the extent provided by one Party to the
other.
1.5 "COUNSELING SERVICE" shall have the meaning assigned in Section
1.6.
1.6 "HIV PRODUCT" shall mean that Aware(TM) brand mail-in HIV test
which has been developed by ChemTrak, consisting of a blood sample home
preparation kit (the "SAMPLE COLLECTION KIT"), procedures for analysis of the
blood sample at a mail-in central laboratory (a "TESTING FACILITY," as further
described in Section 3.2) and reporting of results to customers, and a
counseling service (the "COUNSELING SERVICE," as further described in Section
3.2) for discussion of results with customers, as further described in
regulatory materials submitted by ChemTrak to the U.S. Food and Drug
Administration ("FDA") prior to the Effective Date. "HIV Product" shall also
include any future modification, line extension or improved version of such
product developed by ChemTrak during the term of this Agreement, but excluding
any mail-in HIV urine or saliva test, and any True Home HIV Test.
2.
<PAGE> 7
[CONFIDENTIAL TREATMENT]
1.7 "NET SALES" shall mean the gross invoices delivered by Selfcare and
its Affiliates for the sale of HIV Products to independent third parties who are
not Affiliates of either Selfcare or any Selfcare Affiliate, less the following
deductions:
(1) Prompt payment or other trade or quantity discounts
actually allowed and taken in such amounts as are
customary in the trade; and
(2) Taxes, tariffs and duties levied on shipments or
sales of the HIV Product (other than franchise or
income taxes on the income of Selfcare and
withholding taxes, if any, on Royalty payments made
hereunder) actually paid or withheld.
1.8 "PURCHASE PRICE" shall have the meaning assigned in Section 4.4.
1.9 "ROYALTY" shall mean XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX: Net
Sales, plus any other compensation invoiced, earned or received in respect of
the offer, sale or distribution of HIV Products, XXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
1.10 "SAMPLE COLLECTION KIT" shall have the meaning assigned in Section
1.6.
1.11 "SOFTWARE" shall mean ChemTrak's proprietary software, in machine
executable object code form only, for tracking blood samples received from
customers, the results of all tests performed to determine the presence of HIV
and the disclosure of results to customers, as used in ChemTrak's studies
performed in pursuit of U.S. regulatory approval for the HIV Product.
1.12 "STANDARD COST OF GOODS" shall mean the costs to produce the
Sample Collection Kit as set forth on Exhibit A. Such costs shall be consistent
with generally accepted accounting principles, as applied by ChemTrak in its
financial statements.
1.13 "TERRITORY" shall mean Europe, including all European countries,
all Scandinavian countries, all the countries of Eastern Europe and the
Commonwealth of Independent States (all previous USSR territories).
1.14 "TESTING FACILITY" shall have the meaning assigned in Section 1.6.
1.15 "TRUE HOME HIV TEST" shall mean any product which permits an end
user to prepare a bodily fluid sample and conduct a test to determine the
presence of HIV in such sample, in each case without the assistance of a
laboratory facility.
3.
Material Omitted and Filed Separately
with the Securities and Exchange Commission
<PAGE> 8
ARTICLE 2
GRANT OF RIGHTS; EXCLUSIVITY
2.1 LICENSE GRANTS TO SELFCARE.
(a) Subject to the terms and conditions of this Agreement,
ChemTrak hereby grants to Selfcare a license under the ChemTrak Technology to
offer and sell the HIV Product in the Territory, including but not limited to
the right to perform HIV testing, and to use the Software solely for the purpose
of performing such testing, at a Testing Facility for purchasers of the HIV
Product, for the term of this Agreement. This license shall be exclusive except
as otherwise provided in Section 2.3 below. Selfcare may sublicense or otherwise
transfer such rights (without the right to grant further sublicenses or
otherwise transfer such rights) to third parties only with ChemTrak's prior
written consent, which shall not be unreasonably withheld. Selfcare will provide
ChemTrak with a complete copy of the proposed sublicense agreement at the time
Selfcare solicits ChemTrak's consent to the sublicense.
(b) As a condition of the license rights set forth in this
Agreement, Selfcare shall use the Software in connection with all HIV testing in
the Territory unless the parties mutually agree that a modified version of the
Software will be used. Selfcare shall not copy the Software in any manner,
except that Selfcare may make one working copy, and one copy for back-up
purposes, for each Testing Facility. Selfcare shall not distribute or provide
the Software or any copy thereof to any third party without the prior written
consent of ChemTrak. Further, Selfcare shall not modify the Software in any way,
including without limitation by making any localizations, without the prior
written consent of ChemTrak, which consent shall not be unreasonably withheld.
Selfcare shall not reverse engineer or reverse compile the Software and shall
not use the Software in any manner other than pursuant to the license granted
above in this Section 2.1(b). Immediately upon the expiration or any termination
of this Agreement or at a later time specified by ChemTrak, Selfcare shall
return all copies of the Software to ChemTrak and make no further use of the
Software.
(c) Subject to the terms and conditions of this Agreement,
ChemTrak hereby grants to Selfcare an exclusive license to use the mark
Aware(TM) in connection with the offer, sale and distribution of the HIV Product
in the Territory for the term of this Agreement. As a condition of the license
rights set forth in this Agreement, Selfcare agrees that the Aware(TM) mark
shall be used in connection with such activities and no other marks, including
the ChemTrak(R) mark, shall be used unless the parties mutually agree on such
use in advance. ChemTrak shall retain ownership of and all rights in the
Aware(TM) mark and shall own and retain all rights in any alternative or
additional brand name(s) which the parties may agree to use (collectively, the
"MARKS"). In order to assure the quality of goods marketed under the Marks,
ChemTrak shall have the right to
4.
<PAGE> 9
[CONFIDENTIAL TREATMENT]
inspect Selfcare's facilities during normal business hours, after giving
reasonable notice of such intent. Selfcare shall conduct its business in a
manner which will enhance the reputation and goodwill attached to the Marks, and
all goodwill shall inure to the benefit of ChemTrak as owner of the Marks.
(d) Selfcare agrees to use the ChemTrak Technology and the
Marks only to offer, sell and distribute the HIV Product in the Territory for
the term of this Agreement and not for any other purpose.
2.2 COVENANT NOT TO SELL COMPETITIVE PRODUCTS. Selfcare hereby
covenants not to market, sell or distribute, directly or indirectly through one
or more third parties, any mail-in HIV blood test product other than the HIV
Product in any country in the Territory where Selfcare has an exclusive license
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX provided, however, that this
covenant will not apply in the event that this Agreement is terminated by
Selfcare pursuant to Section 10.3 for ChemTrak's material breach of this
Agreement. The restriction on the sale of mail-in HIV blood tests does not apply
to mail-in urine or saliva tests. Selfcare hereby acknowledges that the ChemTrak
Technology, particularly ChemTrak's proprietary Software and the data and
regulatory strategy reflected in ChemTrak's filings with the U.S. FDA regarding
the HIV Product, has been maintained by ChemTrak as highly confidential and
constitutes ChemTrak's proprietary and extremely valuable trade secret
information. Selfcare further acknowledges that it has not previously engaged in
development or marketing of any mail-in HIV test product, and the ChemTrak
Technology confers upon Selfcare a substantial competitive advantage in
obtaining regulatory approval and market acceptance of a mail-in HIV test
product in the Territory. Accordingly, Selfcare and ChemTrak each acknowledge
and agree that the XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX is
reasonable and necessary to protect the commercial value of ChemTrak's
proprietary trade secrets provided to Selfcare under this Agreement.
2.3 LOSS OF EXCLUSIVITY. ChemTrak will have the option, upon ninety
(90) days advance written notice, to convert Selfcare's exclusive rights to
offer, sell and distribute the HIV Product in each country in the Territory into
non-exclusive rights in any of the following events:
(a) Selfcare fails to file for Regulatory Approval in such
country by a date determined as follows. Set forth on Exhibit C are projected
dates by which the parties expect Selfcare will file for regulatory approval to
commercially sell the HIV Product in the major European countries listed on
Exhibit C. If at any time Selfcare believes that it will likely not be able to
make such a filing by such date, then Selfcare shall immediately notify ChemTrak
and the parties shall meet and confer regarding the reasons for such delay and
available means to expedite such filings. The parties will seek to mutually
5.
Material Omitted and Filed Separately
with the Securities and Exchange Commission.
<PAGE> 10
[Confidential Treatment]
agree on a plan and new timetable for making such filing. If the parties are
unable to agree on such a plan and timetable, then ChemTrak will have the option
to convert Selfcare's rights in such country to non-exclusive effective six (6)
months after the date set forth on Exhibit C if Selfcare has not made the
required regulatory filing by the end of such 6-month period.
(b) Selfcare fails to launch a commercially reasonable
marketing campaign designed to generate substantial demand for HIV Products and
commence commercial sales of the HIV Product in such country within six (6)
months after receiving Regulatory Approval in such country.
(c) Selfcare's market share for the HIV Product in such
country, as measured on the second and each subsequent anniversary of the date
of Selfcare's first commercial sale of an HIV Product in such country, is less
than XXXXXXXXXXXXXXXXXXX of the percentage of the market that each competitor
would have if all had equal market share. For example, if as of such anniversary
there are three competitors in the market, then ChemTrak may convert the license
to non-exclusive if Selfcare's market share is less than XXXXXXXXXXXXXXXXXXXX as
of such date XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. For purposes of this paragraph, the
relevant market shall consist of all mail-in HIV blood tests, and each separate
brand shall constitute one competitor in the market. In order to enable ChemTrak
to calculate market share, Selfcare shall provide ChemTrak upon request with all
relevant information available to Selfcare.
2.4 SELFCARE AFFILIATES.
(a) All costs, expenses, revenues and proceeds incurred or
received by any Selfcare Affiliate shall be deemed to be incurred or received by
Selfcare for purposes of all financial calculations and obligations under this
Agreement. Notwithstanding any other terms of this Agreement, the Parties agree
that all payments due from Selfcare to ChemTrak hereunder shall be made by
Selfcare and not any Selfcare Affiliate.
(b) The Parties agree that the goals with respect to non-U.S.
income or withholding tax liability shall be to minimize the aggregate amount of
non-U.S. income and withholding tax liabilities incurred by the Parties
collectively with respect to commercialization of the HIV Product in the
Territory, and to allocate such tax burdens equally between the Parties as
provided herein. In that regard:
(i) If any non-U.S. income or withholding tax
liability is incurred by either Party with respect to operations conducted
pursuant to this Agreement (e.g., such Party could not avoid the tax liability
by applying current operating losses or net operating loss carryforwards
resulting from operations related to the sale of the HIV
6.
[Material Omitted and Filed Separately
with the Securities and Exchange Commission]
<PAGE> 11
[Confidential Treatment]
Product pursuant to the Agreement), then (A) when Selfcare incurs the non-U.S.
tax liability, the full amount of such liability shall be xxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxx, and (B) when ChemTrak incurs the non-U.S. tax
liability, the full amount of such liability shall be xxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxx. The Parties acknowledge that any tax credit related to
the HIV Product will xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx if the tax credit is used by Selfcare to
avoid paying taxes in any jurisdiction for operations related to the sale of HIV
Products pursuant to this Agreement.
(ii) The Parties also agree that each may either (A)
avoid potential non-U.S. income or withholding tax liability by applying current
operating losses and net operating loss carry forwards that result from its
operations with respect to the HIV Product, and/or (B) avoid paying non-U.S.
income or withholding taxes by applying tax credits resulting from operations
with respect to the HIV Product.
(iii) If either Party could apply any tax credits
arising in any jurisdiction other than the United States related to the HIV
Product against income in any jurisdiction that is not related to the sale of
HIV Products pursuant to this Agreement, then it shall promptly notify the other
Party. The Parties agree to meet with each other along with their tax advisors
and to take all commercially reasonable steps to permit such credit to be used
by one Party and to permit the other Party to obtain XXXXXXXXXXXXXXXXXXXX of
such credit.
ARTICLE 3
DEVELOPMENT OF THE HIV PRODUCT
3.1 GENERAL RESPONSIBILITIES. Selfcare shall have sole responsibility
for diligently pursuing Regulatory Approval of the HIV Product throughout the
Territory as soon as practicable, and for bearing all costs associated
therewith. Selfcare shall prepare, file and pursue diligently all regulatory
applications necessary to obtain such Regulatory Approvals. ChemTrak will
provide Selfcare with a copy of all documentation required by the U.S. FDA in
connection with its review of the HIV Product, including a right to reference
all applications, registrations, and supporting documents submitted and received
by ChemTrak, and will provide assistance in connection with the pursuit of
Regulatory Approvals in the Territory according to a plan to be mutually agreed
upon. Such assistance will be provided without charge to Selfcare. Selfcare
shall have the right to use such information solely for the purpose of pursuing
Regulatory Approvals and commercializing HIV Products in the Territory during
the term of this Agreement; provided, however, that ChemTrak will provide
Selfcare access to this information after the termination or expiration of this
Agreement to permit Selfcare to comply with regulatory requirements applicable
to HIV Products sold by Selfcare during the term of this Agreement and to defend
against product liability and other suits pertaining to such
7.
[Material Omitted and Filed Separately
with the Securities and Exchange Commission]
<PAGE> 12
[CONFIDENTIAL TREATMENT]
HIV Products. Selfcare shall copy ChemTrak on all correspondence with regulatory
authorities in the Territory, and ChemTrak shall have an irrevocable right to
reference all applications, registrations and supporting documentation submitted
and received by Selfcare.
(a) U.S. REGULATORY APPROVAL. ChemTrak shall keep Selfcare
informed of the progress of efforts to obtain Regulatory Approval from the U.S.
FDA. ChemTrak will notify Selfcare promptly of any delays in obtaining approval
and consult with Selfcare on the resolution of any outstanding issues. At the
sole option of Selfcare, Selfcare may terminate the Agreement upon sixty (60)
days notice if ChemTrak fails to obtain Regulatory Approval in the United States
within XXXXXX of the Effective Date.
3.2 TESTING FACILITIES; COUNSELING SERVICE. Prior to obtaining the
first Regulatory Approval in the Territory, Selfcare shall establish or contract
for a single central laboratory (or more as Selfcare determines is reasonable or
necessary) to conduct HIV testing in accordance with the protocols and
procedures described in ChemTrak's submissions to the U.S. FDA or amended, as
required by a country's regulatory authorities, (a "TESTING FACILITY"). ChemTrak
shall provide Selfcare with a copy of the Software for use at each such facility
for the processing of HIV Tests during the term of this Agreement. At such time
Selfcare shall also establish a counseling service to report results to
customers and provide appropriate counseling regarding the results, again as
provided in ChemTrak's submissions to FDA or amended, as required by a country's
regulatory authorities, (the "COUNSELING SERVICE"). Selfcare shall bear all
costs associated with establishing the Testing Facilities and the Counseling
Service, including any additional requirements of the countries in the
Territory. ChemTrak shall have the right to inspect the Testing Facilities and
Counseling Service during normal business hours (after giving reasonable notice)
in order to ensure that each is operating in the manner described in ChemTrak's
FDA documentation or amended, as required by a country's regulatory authorities,
and in accordance with all applicable regulatory standards.
3.3 CLINICAL TRIALS SUPPLY. Subject to the terms of this Agreement,
ChemTrak shall use diligent efforts to supply or cause to be supplied to
Selfcare, and Selfcare shall purchase from ChemTrak, Selfcare's requirements of
Sample Collection Kits for use in Territory Development activities, including
clinical studies. ChemTrak will provide such product units to Selfcare for a
purchase price equal to XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX; provided
that such product units are made available to study subjects for XXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. If the
compensation paid exceeds such amount, the Parties shall mutually determine an
appropriate purchase price for such product units.
8.
[MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE> 13
3.4 PLAN; REPORTS.
(a) Within 90 days following the Effective Date, Selfcare
shall prepare a detailed plan describing activities to be undertaken to pursue
Regulatory Approvals for the HIV Product in the Territory and to establish the
Testing Facilities and Counseling Service. ChemTrak shall have the right to
review and comment on such plan before Selfcare makes any contact with any
regulatory agency pertaining to the HIV Product in the Territory. Once agreed
between the parties, Selfcare shall conduct its regulatory activities regarding
the HIV Product as provided in the plan. However, Selfcare reserves the right to
modify the plan, as required by regulatory circumstances, following consultation
with ChemTrak.
(b) Selfcare shall report to ChemTrak at least once each
calendar quarter, but not later than thirty (30) days following the end of such
calendar quarter, on the progress of such activities. Selfcare will notify
ChemTrak as soon as practicable in the event of any substantial changes in the
development activities described in the plan and in the event any Regulatory
Approval is received for any country in the Territory.
3.5 PUBLICATIONS. Selfcare and ChemTrak shall cooperate in the
preparation and publication of papers in support of development and marketing
activities in the Territory. Neither Party shall present, publish or otherwise
disclose any information regarding the HIV Product in the Territory except with
the prior written consent of the other. Each party shall make available to the
other at no cost a copy of any publications or other marketing support materials
which such Party produces for its purposes.
ARTICLE 4
SUPPLY OF SAMPLE COLLECTION KITS
4.1 PURCHASES OF SAMPLE COLLECTION KITS. Subject to the terms of this
Agreement, ChemTrak shall use diligent efforts to supply Selfcare, and Selfcare
shall purchase from ChemTrak, Selfcare's requirements of Sample Collection Kits
in such quantities as Selfcare shall order pursuant to this Article 4. All
Sample Collection Kits supplied by ChemTrak shall conform to specifications to
be agreed upon by the parties in accordance with applicable Regulatory
Approvals. ChemTrak will provide the blood collection card and its proprietary
finger stick device for inclusion in each Sample Collection Kit; Selfcare shall
be responsible for including instruction leaflets and for final packaging and
labeling, including any text not in English.
4.2 ORDERS. Within thirty (30) days after the receipt of the first
Regulatory Approval for HIV Product in a country in the Territory, Selfcare
shall submit to ChemTrak an initial purchase order for a mutually agreed upon
number of Sample Collection Kits based on the predicted number necessary to
launch the product.
9.
<PAGE> 14
[CONFIDENTIAL TREATMENT]
ChemTrak shall use diligent efforts to deliver such Sample Collection Kits as
soon as practicable thereafter, but in no event longer than 60 days after the
date of such purchase order. Beginning on the first day of each calendar quarter
thereafter, Selfcare shall provide ChemTrak with a firm purchase order
specifying the number of Sample Collection Kits desired, on a monthly basis, for
the following quarter and a proposed shipment date for such units of no less
than 60 days from the date of such purchase order (each, a "Purchase Order").
ChemTrak will accept any such Purchase Order from Selfcare within five (5) days
after receipt of such Purchase Order at its principal place of business.
4.3 PURCHASE PRICE; PAYMENT. Selfcare shall pay to ChemTrak a price
(the "PURCHASE PRICE") for purchase of Sample Collection Kits equal to
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. ChemTrak shall
invoice Selfcare for such amount as of the date of shipment. All payments for
Sample Collection Kits shall be due within forty-five (45) days after the date
of Selfcare's receipt of a confirmed faxed copy of ChemTrak's invoice and
confirmed shipment for such Sample Collection Kits.
4.4 DELIVERY.
(a) ChemTrak shall use diligent efforts, consistent with its
other shipment obligations and manufacturing capacity, to ship all Sample
Collection Kits ordered by Selfcare on or before the requested shipment date, to
the extent such date is at least fifteen (15) days after the date ChemTrak
accepts the Purchase Order for such shipment. The shipping and packaging method
used will be at the discretion of ChemTrak, subject to written approval of
Selfcare. Deliveries shall be made F.O.B. ChemTrak's facility (ICC Incoterms
1990) and shall be shipped to Selfcare's address as set forth in this Agreement,
or as otherwise directed by Selfcare in writing. All Sample Collection Kits will
be shipped by ChemTrak freight collect, or if prepaid, such freight will be
subsequently billed to Selfcare. If requested by Selfcare, ChemTrak will insure
the shipments against damage to or loss of Sample Collection Kits and will
subsequently bill Selfcare for such shipping insurance. Selfcare will reimburse
ChemTrak for shipping and insurance expenses, if any, within forty-five (45)
days after the date of such invoices. ChemTrak reserves the right to deliver in
advance of estimated delivery dates. Selfcare shall make any claims for damage
or loss in transit through the carrier and any insurance proceeds payable in
respect of any loss incurred shall be paid to Selfcare.
(b) If at any time ChemTrak is unable to supply total
worldwide demand for Sample Collection Kits, ChemTrak shall allocate available
Sample Collection Kits (or components thereof) to the Territory pro rata with
other markets outside the Territory based upon relative market share, as
measured by the most recent quarterly or annual sales figures for which data is
reasonably available.
10.
[MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE> 15
(c) In the event that ChemTrak, whether by reason of Force
Majeure or otherwise, either (1) fails in any quarter to deliver to Selfcare at
least fifty percent (50%) of the amount of Sample Collection Kits ordered by
Selfcare or (2) fails in each of two consecutive quarters to deliver to Selfcare
at least eighty percent (80%) of the amounts ordered by Selfcare for each of
such quarters, notwithstanding the obligation of Selfcare to purchase from
ChemTrak all Sample Collection Kits, Selfcare shall be entitled for the duration
of the term of this Agreement to seek alternate sources of supply for the Sample
Collection Kits (or components thereof) to be used, sold or otherwise
distributed in the Territory pursuant to the license granted herein, and such
license shall be deemed to include such right. In particular, if Selfcare seeks
alternate sources for ChemTrak's proprietary finger stick device, Selfcare will
have a non-exclusive, worldwide license to make such devices or have them made
by a third party. In the event that Selfcare exercises its right to use
alternate sources of supply, the cost of securing Sample Collection Kits (or
components thereof) from alternate sources of supply shall be deemed to be a
Commercialization Cost.
4.5 ACCEPTANCE. Selfcare shall inspect all Sample Collection Kit
shipments received from ChemTrak for visible damage promptly upon receipt
thereof at the shipping destination and may reject any Sample Collection Kit
Units which are damaged or fail to comply with the specification agreed by the
parties. Sample Collection Kits not rejected by written notification to ChemTrak
within sixty (60) days after receipt by Selfcare shall be deemed to have been
accepted. Rejected goods shall be returned freight prepaid to ChemTrak within
fifteen (15) days after rejection. As promptly as possible after receipt by
ChemTrak of properly rejected goods, ChemTrak shall, at ChemTrak's option, (i)
replace the rejected goods at ChemTrak's expense, or (ii) grant Selfcare a
credit for such rejected goods equal to the price paid therefor. Such
replacement or credit shall be ChemTrak's sole responsibility and obligation to
Selfcare for nonconforming Sample Collection Kits. The party shipping the goods
pursuant to this section shall bear the entire risk of loss for goods during
shipment. Any insurance proceeds payable in respect of any loss incurred shall
be paid to the party bearing the risk of loss for such goods to the extent of
the loss incurred. For properly rejected goods, ChemTrak will prepay
transportation charges back to Selfcare and shall reimburse Selfcare for any
reasonable costs of transportation for returning such goods; for all other
goods, Selfcare shall pay transportation charges in both directions.
ARTICLE 5
MARKETING, SALE AND DISTRIBUTION OF HIV PRODUCTS
5.1 MARKETING EFFORTS. Selfcare agrees to use diligent efforts to
promote the sale, marketing and distribution of the HIV Products in the
Territory, including undertaking a commercially reasonable advertising campaign
in connection with the launch and sale of HIV Products. Selfcare shall provide
ChemTrak with a copy of its
11.
<PAGE> 16
marketing plan as provided in Section 6.3 for ChemTrak's review and comment.
Selfcare agrees to consider in good faith ChemTrak's comments regarding
advertising, marketing promotion and sales efforts.
5.2 SALES AND ADVERTISING ACTIVITIES. Selfcare shall provide ChemTrak
with written copies of all advertising claims which Selfcare intends to make in
connection with HIV Products prior to making any such claim to any third party.
The parties shall mutually agree upon all claims, and either party shall have
the right to prohibit the making of any particular claim for regulatory, ethical
or marketing reasons. Selfcare agrees that no claims prohibited by applicable
law or regulation will be made in connection with HIV Products.
5.3 PRICING. Selfcare shall notify ChemTrak of the price(s) it intends
to charge third parties for HIV Product at least ninety (90) days prior to
commencing commercial sales in any country. To the extent required under
applicable European Union regulations, Selfcare shall charge the same price for
HIV Product in countries in the Territory that are members of the European
Union. The parties shall discuss optimal pricing strategies and Selfcare shall
consider any comments ChemTrak may have in good faith, provided that Selfcare
shall remain ultimately responsible for determining the price.
5.4 PACKAGING. Selfcare will be responsible for packaging Sample
Collection Kits for resale under this Agreement, including, without limitation,
designing and producing all packaging materials and product inserts, all in
forms to be approved in writing by ChemTrak prior to first use by Selfcare, such
approval not to be unreasonably withheld. Copyright and other proprietary rights
related to amended packaging, labeling, and inserts shall remain the exclusive
property of Selfcare and may not be used by ChemTrak without the express written
consent of Selfcare; provided, however, that ChemTrak shall own the brand name
under which the product is sold, as provided in Section 2.1(c). Notwithstanding
the foregoing, ChemTrak shall provide Selfcare with copies of all packaging
materials and product inserts which ChemTrak uses in connection with the HIV
Product outside the Territory.
5.5 GENERAL CONDUCT. Selfcare covenants that it shall not solicit sale
of HIV Products, or advertise or keep a stock of HIV Products, outside of the
Territory. Selfcare shall not, directly or indirectly, without the prior written
authorization of ChemTrak, (i) contact any of ChemTrak's suppliers or vendors of
HIV Product components, or (ii) initiate any contact with any federal, state or
local regulatory agency or entity outside the Territory about the HIV Product.
Selfcare shall conduct its efforts under this Agreement in compliance with all
regulatory requirements applicable to the offer, distribution and sale of HIV
Product. Selfcare shall comply with all health registration laws, regulations
and orders of any government entity within the Territory and with all other
governmental requirements relating to the promotion, marketing and sale of the
HIV Product in the
12.
<PAGE> 17
Territory. The parties agree to cooperate in all respects, including providing
all information and documents in each party's possession, to assure compliance
with adverse event reporting requirements and similar regulations applicable to
the HIV Product, on a worldwide basis, including but not limited post-approval
requirements imposed by the U.S. FDA by PMA approval order or regulation
pursuant to 21 CFR Part 814, Subpart E, and medical device reporting obligations
under 21 CFR Part 803. Each party shall notify the other within 20 days of
becoming aware of any reportable adverse events or device malfunctions
associated with the HIV Products, or sooner to the extent applicable regulatory
requirements require reporting to government officials in a time less than 20
days. In addition, each party will assist the other in investigating any such
reportable events, as reasonably requested, in order to comply with the
applicable regulatory requirements.
ARTICLE 6
REPORTS; FORECASTS; MARKETING PLANS
6.1 REPORTS. Each party shall keep the other fully informed of all
governmental activities and plans which potentially or actually affect the sale
of the HIV Products in the Territory. Selfcare shall provide to ChemTrak from
time to time, but no less than annually, written reports of any known third
party activities relating to the manufacture, sale or distribution of products
that are competitive with HIV Products in the Territory, including all available
information relating to pricing, new products and product promotions. At a
minimum, such reports shall be submitted to ChemTrak by confirmed facsimile
within thirty (30) days after the end of each calendar year.
6.2 FORECASTS. Beginning thirty (30) days after receipt of the first
Regulatory Approval for HIV Products in the Territory, and on the first day of
each calendar quarter thereafter, Selfcare shall furnish to ChemTrak a
nonbinding rolling twelve (12)-month forecast of its anticipated purchases of
Sample Collection Kits and sales of HIV Products for each country in the
Territory.
6.3 MARKETING PLANS AND REPORTS. Prior to First Commercial Sale and at
the beginning of each calendar year thereafter, Selfcare shall submit to
ChemTrak in writing whatever annual marketing plan detailing Selfcare's proposed
marketing and pricing strategy and tactics for the HIV Product during the
following year has been developed by Selfcare for its internal use. In addition,
Selfcare shall submit to ChemTrak (a) quarterly sales reports detailing
Selfcare's sales of the HIV Product in the preceding quarter, which reports
shall be submitted to ChemTrak within thirty (30) days after the end of each
quarter; and (b) copies of any market research reports relating to HIV Product
sales and HIV Product competition which Selfcare commissions or otherwise
obtains, which reports shall be submitted to ChemTrak promptly after receipt
thereof by Selfcare.
13.
<PAGE> 18
6.4 CONFIDENTIAL INFORMATION. All reports, forecasts and plans
generated by or for Selfcare with respect to the HIV Product and provided to
ChemTrak under this Article 6 (collectively, the "Marketing Data") shall
constitute Confidential Information of Selfcare, as defined under Article 8
hereof. Such Marketing Data shall be kept confidential in accordance with
Article 8 but may be used by ChemTrak, only with express written consent from
Selfcare, not to be unreasonably withheld, in connection with the
commercialization of HIV Products.
ARTICLE 7
PAYMENTS
7.1 EXPENSES. All expenses incurred by Selfcare in connection with its
obligations under this Agreement will be borne solely by Selfcare, subject to
recovery of certain expenses out of Net Sales of HIV Product as provided in
Section 7.4. Selfcare will be responsible for appointing its own employees,
agents and representatives, who will be compensated by Selfcare. ChemTrak shall
only be obliged to incur expenses under Section 3.1 (Regulatory Assistance),
Section 3.3, Article 4 (Supply of Sample Collection Kits) and Article 9
(Intellectual Property), subject to reimbursement of certain expenses by
Selfcare as provided in such sections.
7.2 LICENSE FEE. Selfcare shall pay to ChemTrak a license fee of
XXXXXXXX upon execution of this Agreement. This license fee shall be
non-refundable and shall not be creditable against any future payments due to
ChemTrak.
7.3 SALES MILESTONE PAYMENTS. In addition to the Royalty payments
provided for in Section 7.4, Selfcare shall, upon the achievement of the events
set forth below, make the following payments to ChemTrak:
(a) XXXXXXXX upon obtaining Regulatory Approval in the first
of the U.K., Germany or France; and
(b) XXXXXXXX upon achieving the first XXXXXXXXXX in Net Sales
from the sale of HIV Products in the Territory.
Payments made pursuant to this Section 7.3 shall be non-refundable and
shall not be creditable against any future payments.
7.4 ROYALTIES. Within thirty (30) days after the end of each calendar
quarter, Selfcare shall deliver a report to ChemTrak detailing Selfcare's Net
Sales made in such quarter and all other compensation invoiced, earned or
received in respect of the offer, sale or distribution of HIV Products in such
quarter, and XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX, with line items for each of the deductions
described in the definition of
14.
[MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE> 19
Confidential Treatment
"Net Sales" and for each of the categories of XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. For purposes of calculating
quarterly Royalty payments, all receipts and deductions included in Net Sales
shall be recognized as of the date of invoice and XXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
Together with Selfcare's report due 30 days after the end of each quarter,
Selfcare shall pay the Royalty for such quarter to ChemTrak. If
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX shall be carried forward to
the next quarter and set off against future Royalty payments.
7.5 MANNER AND PLACE OF PAYMENT. Any payments to ChemTrak shall be made
in U.S. Dollars by wire transfer at such bank in the United States as ChemTrak
shall specify from time to time. Payments shall be made for the amount of U.S.
Dollars reported by ChemTrak (in the case of expense reimbursement) or agreed by
the Parties (in the case of a Purchase Price). Exchange conversion of foreign
currencies will be the responsibility of Selfcare; provided that for purposes of
calculating U.S. Dollar payments to be made by Selfcare to ChemTrak hereunder
all revenues received and costs paid in foreign currencies shall be deemed
converted to U.S. Dollars at the exchange rate for each currency that is the
average of the daily spot rate reported by the U.S. edition of the Wall Street
Journal for each trading day during the reporting period.
7.6 RECORDS AND AUDIT OF SALES AND EXPENSES. Each Party will maintain
complete and accurate records regarding sales, costs, expenses and payments
applicable to HIV Products, in sufficient detail to enable the other Party to
confirm the accuracy of payments due under this Agreement. In particular,
Selfcare shall keep separate records of each of the categories of costs
specifically referenced in the definition of Commercialization Costs. Such
records shall be open, during reasonable business hours for a period of three
(3) years from creation of the record, for examination at the other Party's
expense and not more often than once each year by a certified public accountant
from a major recognized accounting firm selected by the other Party for the sole
purpose of verifying the correctness of calculations made under this Agreement.
The accounting expense shall be paid by the Party requesting the audit. If
material discrepancies (in excess of 5%) are identified in such audit, the
audited Party shall bear the accounting expense. Any records or accounting
information received from the other Party shall be Confidential Information. The
terms of this section shall survive any termination or expiration of this
Agreement for a period of three (3) years.
15.
Material Omitted and Filed Separately
with the Securities and Exchange Commission
<PAGE> 20
ARTICLE 8
CONFIDENTIALITY
8.1 NONDISCLOSURE OBLIGATIONS. During the term of this Agreement, and
for a period of three (3) years after termination hereof, each Party will
maintain all Confidential Information in trust and confidence and will not
disclose any Confidential Information to any third party or use any Confidential
Information for any unauthorized purpose. Each Party may use such Confidential
Information only to the extent required to accomplish the purposes of this
Agreement. Confidential Information shall not be used for any purpose or in any
manner that would constitute a violation of any laws or regulations, including
without limitation the export control laws of the United States. Confidential
Information shall not be reproduced in any form except as required to accomplish
the intent of this Agreement. No Confidential Information shall be disclosed to
any employee, agent, consultant, sublicensee or supplier who does not have a
need for such information. To the extent that disclosure is authorized by this
Agreement, the disclosing Party will obtain prior agreement from its employees,
agents, consultants, sublicensees or suppliers to whom disclosure is to be made
to hold in confidence and not make use of such information for any purpose other
than those permitted by this Agreement. Each Party will promptly notify the
other upon discovery of any unauthorized use or disclosure of the Confidential
Information.
8.2 EXCEPTIONS. Confidential Information shall not include any
information which:
(a) is now, or hereafter becomes, through no act or failure to
act on the part of the receiving Party, generally known or available;
(b) is known by the receiving Party at the time of receiving
such information, as evidenced by its written records;
(c) is hereafter furnished to the receiving Party by a third
party, as a matter of right and without restriction on disclosure; or
(d) is the subject of a written permission to disclose
provided by the disclosing Party.
8.3 AUTHORIZED DISCLOSURE. Notwithstanding any other provision of this
Agreement, each Party may disclose Confidential Information if such disclosure:
(a) is in response to a valid order of a court or other
governmental body of the United States or any political subdivision thereof;
provided, however, that the responding Party shall first have given notice to
the other Party hereto and shall have
16.
<PAGE> 21
made a reasonable effort to obtain a protective order requiring that the
Confidential Information so disclosed be used only for the purposes for which
the order was issued;
(b) is otherwise required by law, provided that the Disclosing
Party take all available steps to designate the information as confidential and
to prevent further disclosure by the recipient; or
(c) is otherwise necessary to file or prosecute patent
applications, prosecute or defend litigation or comply with applicable
governmental regulations or otherwise establish rights or enforce obligations
under this Agreement, but only to the extent that any such disclosure is
necessary, provided that the Disclosing Party take all available steps to
designate the information as confidential and to prevent further disclosure by
the recipient.
8.4 TERMS OF THIS AGREEMENT. The Parties agree that the material
financial terms of this Agreement will be considered Confidential Information of
both Parties. However, each Party shall have the right to disclose the material
financial terms of this Agreement to any potential acquirer, merger partner, or
other bona fide potential financial or strategic partner, subject to a
requirement of best efforts to secure confidential treatment of such
information.
ARTICLE 9
INTELLECTUAL PROPERTY
9.1 OWNERSHIP OF INTELLECTUAL PROPERTY. ChemTrak shall retain all of
its rights, title and interest in and to all ChemTrak Technology, including but
not limited to the Software, and all modifications and improvements to the
foregoing. ChemTrak shall also own all right, title and interest in all
copyrights, trademarks, including but not limited to the Aware(TM) trademark,
and trade names and all other industrial and intellectual property embodied in
or related to the HIV Product, except as otherwise expressly provided in this
Agreement. ChemTrak shall file for and pursue trademark protection for the
Aware(TM) mark in countries in the Territory where HIV Products are sold, at
Selfcare's expense, subject to recovery as a Commercialization Cost. ChemTrak
shall also file for and pursue patent protection for the finger stick device in
countries in the Territory where the Parties agree patent protection would be
advantageous. Selfcare shall bear the initial costs of obtaining and maintaining
such patent prosecution, and such costs shall be Commercialization Costs.
9.2 DEFENSE OF INTELLECTUAL PROPERTY SUITS. If a third party asserts
that a patent, trademark or other proprietary right owned by it is infringed or
otherwise violated by the offer, distribution or sale of the HIV Product in the
Territory, the Party against whom such a claim was asserted shall immediately
provide the other Party notice of such
17.
<PAGE> 22
Confidential Treatment
claim and the related facts in reasonable detail. ChemTrak shall have the first
right, but not the obligation, to act to resolve the issue through negotiation
and to control the defense of any legal proceeding. If ChemTrak assumes the
defense, Selfcare shall cooperate with ChemTrak and shall have the right to be
represented separately by counsel of its own choice. If ChemTrak fails to notify
Selfcare, within thirty (30) days after receiving notice that a complaint has
been filed with a court of competent jurisdiction (but in any event reasonably
in advance of any deadline for responding to the complaint), that ChemTrak will
assume control of the defense, then Selfcare shall have the right, but not the
obligation, to so control the defense by counsel of its own choice. If Selfcare
assumes the defense, ChemTrak shall cooperate with Selfcare and shall have the
right to be represented separately by counsel of its own choice.
9.3 EXPENSES AND REMEDIES. ChemTrak shall bear XXXX XXXXXXX expenses
incurred by ChemTrak or Selfcare in the defense of suits described in Section
9.2, including but not limited to attorneys' fees and expenses. If Selfcare
assumes the defense pursuant to Section 9.2, Selfcare shall not enter into any
settlement that may adversely affect the HIV Product outside the Territory, or
require ChemTrak to make any payment to a third party or Selfcare, without the
prior written consent of ChemTrak. If ChemTrak assumes the defense, ChemTrak may
settle any such suit at any time in any manner that does not materially
adversely affect Selfcare. ChemTrak shall notify Selfcare in writing in the
event it proposes to resolve the matter in any other manner, and the Parties
shall discuss available options in good faith and each shall use all
commercially reasonable efforts to reach a mutually agreed upon resolution
within forty five (45) days after the date of ChemTrak's notice. Such actions
may include (i) procuring the right from such third party to sell or use the HIV
Product, with any running royalty obligations to be subject to approval by both
Parties (not to be unreasonably withheld) and, if approved, to be included in
Commercialization Costs, (ii) replacing the HIV Product with a functionally
equivalent product that does not violate the third party's rights, or (iii)
modifying the HIV Product to make it functionally equivalent and not violate
such rights. If the Parties are unable to reach agreement on how to resolve such
matter after the above discussion period, and either Party reasonably determines
that continued sale of the HIV Product in the Territory would infringe or
violate the third party's rights, then such Party may cease performance under
this Agreement immediately upon written notice to the other Party and this
Agreement shall terminate thirty (30) days after the date of such notice.
9.4 DISCLAIMER. THE FOREGOING PROVISIONS OF THIS ARTICLE 9 STATE THE
ENTIRE LIABILITY AND EXCLUSIVE REMEDY OF THE PARTIES AND THEIR CUSTOMERS WITH
RESPECT TO ANY ALLEGED INFRINGEMENT OF PATENTS, COPYRIGHTS, TRADEMARKS OR OTHER
INTELLECTUAL PROPERTY RIGHTS BY THE HIV PRODUCTS OR ANY PART THEREOF.
18.
Material Omitted and Filed Separately with the
Securities and Exchange Commission
<PAGE> 23
CONFIDENTIAL TREATMENT
9.5 PROSECUTION OF INTELLECTUAL PROPERTY SUITS. If either party
believes that a third Party is infringing any patent, copyright, trademark or
other intellectual property right belonging to the parties and applicable to the
HIV Product in the Territory, it shall promptly notify the other Party. The
Parties shall meet and discuss whether to take action to abate the infringement
and, if so, what actions to take, which Party will take such actions and how
related expenses will be borne between the Parties. If either Party elects to
initiate such a suit, the other Party shall cooperate in the action and have the
right but not the obligation to bear up to one-half the expenses of the suit,
provided that such Party undertakes in writing within ninety (90) days after the
suit is initiated to bear a stated percentage of such costs. Any recovery or
settlement obtained in such an action shall be used first to reimburse each
Party pro rata for litigation expenses. Any remaining recovery will be allocated
between the parties in proportion to the share of litigation expenses they bore.
ARTICLE 10
TERM AND TERMINATION; CHANGE OF CONTROL
10.1 TERM. This Agreement shall become effective on the Effective Date
and shall remain in effect for a period of five (5) years from the date of
Selfcare's first commercial sale of HIV Product in any country listed on Exhibit
C (the "Fifth Anniversary"), unless it is renewed by agreement of the parties or
automatically as provided below. The Agreement will automatically renew for a
period of two (2) years if, as of the date sixty (60) days prior to the Fifth
Anniversary, Selfcare's market share for the HIV Product throughout the five (5)
countries listed on Exhibit C, in the aggregate, is at least equal to XXXXX
XXXXXXX XXXXX, determined by dividing Selfcare's net sales (as reported for
financial purposes) of HIV Products in such countries over the previous twelve
(12) month period by the total net sales (as reported for financial purposes) of
all sellers of mail-in HIV blood tests in such countries. The same test will be
applied as of the date sixty (60) days before the two-year renewal term expires.
If the test is met, the Agreement will renew for subsequent two-year terms in
the same manner.
10.2 CHANGE OF CONTROL.
(a) If Selfcare undergoes an Acquisition Transaction (as
defined below), ChemTrak shall have the right to terminate this Agreement upon
six (6) months prior written notice to Selfcare.
(b) If ChemTrak undergoes an Acquisition Transaction, ChemTrak
(or the surviving entity in the Acquisition Transaction) shall have the right to
assume from Selfcare all rights licensed to Selfcare under this Agreement, as
follows. If ChemTrak elects to assume such role, it shall so notify Selfcare in
writing within six (6) months of the closing of ChemTrak's Acquisition
Transaction. Promptly following delivery of such
MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION
19.
<PAGE> 24
notice, the parties shall meet to mutually select a recognized investment
banking firm with substantial relevant industry expertise to (i) select three
(3) reasonable methods of determining the value of this Agreement to Selfcare as
of the date of ChemTrak's election notice to Selfcare and (ii) to calculate such
valuation using each of the three (3) methods and provide a report to each
Party. For the purposes of this valuation, Selfcare is deemed to have met the
requirements for maintaining an exclusive license in each country in the
Territory, without regard to whether Selfcare has actually sought Regulatory
Approval or marketed a product in each country in the Territory. ChemTrak shall
have the option to terminate this Agreement and obtain all licenses, rights,
information, materials, contract rights and assistance from Selfcare as may be
necessary or useful to enable ChemTrak to take over Selfcare's position of
exclusive distributor and seller of HIV Products in the Territory (to "Assume
the Business"), at the average of the three (3) valuations calculated by the
investment banker. If ChemTrak is interested in exercising such option, it shall
so notify Selfcare within thirty (30) days of receiving the three valuation
figures from the investment banker. Promptly following delivery of such a
notice, the parties shall negotiate in good faith the details of a transaction
for ChemTrak to assume the business at such a valuation. If the parties are
unable or unwilling to close such a transaction within ninety (90) days of
ChemTrak's notice, then ChemTrak may submit the matter to binding mediation to
resolve the terms of such transaction.
(c) An "ACQUISITION TRANSACTION" shall mean a merger or
consolidation of a Party with or into any other entity, including a reverse
triangular merger involving such Party, a sale of all or substantially all of
the assets or business of such Party, or a similar transaction, or a sale of the
business unit to which this Agreement relates, whereby the controlling
shareholders of a Party before the transaction own less than 50% of the shares
of the Party after the transaction.
10.3 TERMINATION FOR MATERIAL BREACH. If either Party is in material
breach of this Agreement, the non-breaching Party may give written notice to the
breaching Party of its intention to terminate this Agreement, and this Agreement
shall terminate sixty (60) days after the giving of such notice unless during
the 60-day period the breach has been cured. If the allegedly breaching Party
files a court action or initiates an arbitration proceeding denying the breach,
then both Parties shall continue to perform this Agreement pending resolution of
such action.
10.4 CONSEQUENCES OF TERMINATION. Upon the effective date of expiration
or early termination of this Agreement, the following shall occur:
(a) TERMINATION OF LICENSES. The licenses set forth in Section
2.1 shall terminate and Selfcare shall immediately discontinue all marketing,
sales and distribution of the HIV Product in the Territory. Selfcare shall
discontinue all use in the Territory of ChemTrak's trade name and trademarks,
and the ChemTrak Technology, including the
20.
<PAGE> 25
Software. Selfcare shall return all copies of the Software in any form to
ChemTrak. Notwithstanding the foregoing, Selfcare shall have the right, for a
period not to exceed ninety (90) days, to sell any HIV Products remaining in
inventory to the extent the same are not repurchased by ChemTrak pursuant to
Section 10.3(c) below. Selfcare shall also have the obligation to complete
testing, report results and provide counseling services for any customers to
whom Selfcare has sold Sample Collection Kits. Except to the extent of selling
its remaining inventory as permitted by Section 10.3(c) below, after termination
Selfcare shall not represent or hold itself out as being an authorized
distributor or sales representative for the HIV Product in the Territory or
engage in any practices which might make it appear that Selfcare is such an
authorized distributor or sales representative.
(b) ACCRUED RIGHTS AND OBLIGATIONS. The rights of either party
which may have accrued up to the date of such termination shall not be affected,
and Selfcare shall not be relieved of (i) any obligation for any sums due to
ChemTrak for HIV Products covered by Purchase Orders accepted prior to
expiration or termination and due to be delivered within the ninety (90) day
period following the effective date of such expiration or termination (including
any amount due but not yet paid, with all such amounts being nonrefundable and
not subject to any setoff or similar right) or (ii) any confidentiality
obligation under Article 8 hereof. The due date of all outstanding invoices to
Selfcare for HIV Products shall automatically be accelerated to become due and
payable by immediate wire transfer on the effective date of termination, even if
longer terms have been previously agreed to. ChemTrak may, at its sole option,
(i) cancel all orders or portions thereof remaining unshipped as of the
effective date of termination and (ii) repurchase Selfcare's remaining inventory
of HIV Products in accordance with Section 10.4(c) below.
(c) REPURCHASE OF INVENTORY. ChemTrak shall have the right,
but not the obligation, to repurchase from Selfcare all of the HIV Product (to
the extent that the same are in new and original condition) then in Selfcare's
inventory, F.O.B. Selfcare's facilities, whereupon ChemTrak shall repay to
Selfcare the actual price paid by Selfcare to ChemTrak for such returned HIV
Products less any and all amounts owing and uncontested, for whatever reason,
from Selfcare to ChemTrak.
(d) CONFIDENTIAL INFORMATION. Each party shall return to the
other or destroy, at the other party's instruction, all Confidential Information
of the other party, with the exception of records required to be maintained to
be in compliance with U.S. FDA regulations and other regulations applicable to
the Territory, including advertising matter; provided, however, that in the
event of early termination for any reason other than material breach by
ChemTrak, ChemTrak shall have the right to retain copies of, and use for its own
internal marketing purposes, any Marketing Data (as defined under Section 6.3),
provided Selfcare has given prior written consent.
21.
<PAGE> 26
(e) INSPECTION RIGHT. Each party shall make available for
copying and inspection by a third party auditor all books and records of such
party required to be kept pursuant to Section 7.6 for a period of one (1) year
following the effective date of termination.
10.5 NO OTHER RIGHTS UPON TERMINATION. Neither party hereto shall be
responsible to the other for compensation, damages, or otherwise by reason of
termination of this Agreement, except for termination due to material breach
pursuant to Section 10.3, at any time, except as provided herein. Selfcare
understands and acknowledges that any contracts or other arrangements it enters
into with any third parties with respect to the HIV Products will be subject and
subordinate to the rights of termination set forth in this Agreement.
10.6 SURVIVING OBLIGATIONS. Termination or expiration of this Agreement
shall not relieve either party of its obligations under Sections 2.2, 7.6, 10.4,
10.5, 10.6 and Articles 8, 11 and 13 hereof.
ARTICLE 11
WARRANTIES; INDEMNIFICATION
11.1 SAMPLE COLLECTION KIT WARRANTY. ChemTrak warrants that the Sample
Collection Kits supplied by ChemTrak under this Agreement will be of
merchantable quality and will strictly conform to the Sample Collection Kit
specifications mutually agreed to by the parties. In no event shall ChemTrak be
liable under this Agreement for any failure of any Sample Collection Kit to meet
the specifications due to improper use, storage or shipment by Selfcare or
anyone receiving the Sample Collection Kit directly or indirectly from Selfcare.
(a) INTELLECTUAL PROPERTY WARRANTY. ChemTrak warrants that it
has the authority and right to grant the rights licensed to Selfcare, with
respect to any of the intellectual property defined in Section 9.1.
11.2 SELFCARE WARRANTIES. Selfcare warrants that all testing of blood
samples conducted under this Agreement will be carried out strictly in
accordance with the procedures described in the PMA submitted by ChemTrak to the
U.S. FDA for the HIV Product (or amended, as required by a country's regulatory
authorities) and in accordance with all applicable requirements of regulatory
authorities in the Territory. Selfcare further warrants that all reporting of
results to customers and counseling services provided under this Agreement will
be carried out in a professional manner in accordance with applicable regulatory
requirements and professional standards prevalent in the Territory, including
all requirements and standards concerning confidentiality of results.
22.
<PAGE> 27
11.3 WARRANTY DISCLAIMERS AND LIMITATIONS. EXCEPT AS SET FORTH IN
SECTION 11.1 ABOVE, CHEMTRAK MAKES NO WARRANTIES WITH RESPECT TO THE HIV
PRODUCT, EXPRESS OR IMPLIED, AND SPECIFICALLY WITHOUT LIMITATION, CHEMTRAK
DISCLAIMS ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR FREEDOM
FROM INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS. EXCEPT AS SET
FORTH ABOVE, CHEMTRAK NEITHER ASSUMES NOR AUTHORIZES ANY PERSON TO ASSUME ANY
LIABILITY OR WARRANTY IN CONNECTION WITH THE HIV PRODUCTS. IN THE EVENT OF A
BREACH BY CHEMTRAK OF THE WARRANTY SET FORTH IN THE FIRST PARAGRAPH OF SECTION
11.1 ABOVE, SELFCARE'S SOLE REMEDY WILL BE TO RETURN THE AFFECTED HIV PRODUCTS
FOR REPAIR, REPLACEMENT OR CREDIT OF THE PURCHASE PRICE, AT CHEMTRAK'S OPTION.
11.4 INDEMNIFICATION.
(a) ChemTrak hereby agrees to defend, indemnify and hold
Selfcare and its agents and employees harmless from and against any and all
liabilities, expenses and/or loss, including reasonable attorneys' fees
("Losses") resulting directly or indirectly from third party suits, claims,
actions or demands, to the extent such suits, claims actions or demands result
from (i) the failure of Sample Collection Kits supplied by ChemTrak to meet the
warranty set forth in the first paragraph of Section 11.1, (ii) breach of the
intellectual property warranty set forth in Section 11.1(a), except to the
extent that Sections 9.2 and 9.3 apply to any such third party action, (iii) the
application of HIV Product testing procedures carried out as described in the
PMA submitted by ChemTrak to the U.S. FDA for the HIV Product, or (iv) the
recklessness, gross negligence, or willful misconduct of ChemTrak or its
officers, employees or agents, and in each case do not result from the
recklessness, negligence or wrongdoing of Selfcare or its officers, employees or
agents.
(b) Selfcare hereby agrees to defend, indemnify and hold
ChemTrak and its agents and employees harmless from and against any and all
liabilities, expenses and/or loss, including reasonable attorneys' fees
("Losses") resulting directly or indirectly from third party suits, claims,
actions or demands, to the extent such suits, claims actions or demands result
from (i) the sale or distribution of HIV Products by Selfcare (other than losses
provided for in Section 9.3) or use by any purchasers, including any improper
sales by Selfcare to customers who are located in any territory outside the
Territory, (ii) the breach of any representation made or warranty given by
Selfcare with respect to the HIV Product to customers (other than the labeling
for the HIV Product as approved by applicable regulatory authorities in the
Territory) or to ChemTrak under this Agreement, including the warranties made in
Section 11.2, (iii) services rendered by Selfcare in connection with the HIV
Product, including but not limited to counseling services, or (iv)
23.
<PAGE> 28
the recklessness, gross negligence, or willful misconduct of Selfcare or its
officers, employees or agents, and do not result from matters subject to
indemnification by ChemTrak under Section 11.4(a) above.
(c) If a Party intends to seek indemnification under this
Section 11.4, it shall so notify the other Party. The Party seeking
indemnification under this Article 11 (the "Indemnified Party") shall (i) give
the other Party (the "Indemnifying Party") notice of the relevant claim, (ii)
cooperate with the Indemnifying Party, at the Indemnifying Party's expense, in
the defense of such claim, and (iii) give the Indemnifying Party the right to
control the defense and settlement of any such claim, except that the
Indemnifying Party shall not enter into any settlement that adversely affects
the Indemnified Party's rights or interest without the Indemnified Party's prior
written approval. The Indemnified Party shall have no authority to settle any
claim on behalf of the Indemnifying Party.
11.5 INSURANCE. Prior to any distribution of HIV Products, Selfcare
shall obtain and maintain in effect insurance policies providing general
liability, product liability and contractual liability coverage. Each such
insurance policy shall provide coverage sufficient to cover all claims with
respect to any HIV Products sold under this Agreement and to cover Selfcare's
indemnification obligation under this Agreement and shall name ChemTrak, its
directors, officers, employees and agents as additional insureds. At the request
of ChemTrak, Selfcare will provide ChemTrak with complete copies of such
policies in order for ChemTrak to confirm that such policies provide sufficient
coverage. Selfcare shall notify ChemTrak at least thirty (30) days prior to any
expiration or termination of any such policy.
ARTICLE 12
REPRESENTATIONS AND WARRANTIES
12.1 REPRESENTATION AND WARRANTIES OF CHEMTRAK. ChemTrak hereby
represents and warrants as follows:
(a) CORPORATE POWER. ChemTrak is duly organized and validly
existing under the laws of the state of Delaware and has full corporate power
and authority to enter into this Agreement and to carry out the provisions
hereof.
(b) DUE AUTHORIZATION. ChemTrak is duly authorized to execute
and deliver this Agreement and to perform its obligations hereunder.
(c) BINDING AGREEMENT. This Agreement is a legal and valid
obligation binding upon ChemTrak and is enforceable in accordance with its
terms. The execution, delivery and performance of this Agreement by ChemTrak
does not conflict with any agreement, instrument or understanding, oral or
written, to which it is a Party or by which
24.
<PAGE> 29
it may be bound, nor violate any law or regulation of any court, governmental
body or administrative or other agency having authority over it.
12.2 REPRESENTATIONS AND WARRANTIES OF SELFCARE. Selfcare hereby
represents and warrants as follows:
(a) CORPORATE POWER. Selfcare is duly organized and validly
existing under the laws of Delaware and has full corporate power and authority
to enter into this Agreement and to carry out the provisions hereof.
(b) DUE AUTHORIZATION. Selfcare is duly authorized to execute
and deliver this Agreement and to perform its obligations hereunder.
(c) BINDING AGREEMENT. This Agreement is a legal and valid
obligation binding upon Selfcare and is enforceable in accordance with its
terms. The execution, delivery and performance of this Agreement by Selfcare
does not conflict with any agreement, instrument or understanding, oral or
written, to which it is a Party or by which it may be bound, nor violate any law
or regulation of any court, governmental body or administrative or other agency
having authority over it.
ARTICLE 13
MISCELLANEOUS
13.1 ASSIGNMENT. Neither Party shall assign any of its rights or
delegate any of its duties under this Agreement without the prior written
consent of the other, except that either Party may assign this Agreement without
such consent to any Affiliate or successor by merger or sale of substantially
all of its business unit to which this Agreement relates. Section 10.2 sets
forth additional provisions regarding a change of control of either party. Any
attempted assignment or delegation in contravention of this Article shall be
void and of no effect.
13.2 EXPORT LAW COMPLIANCE. Selfcare understands and recognizes that
the HIV Products and other materials made available to it hereunder may be
subject to the export administration regulations of the United States Department
of Commerce and other United States government regulations related to the export
of medical HIV Products. Selfcare represents that it is familiar with and agrees
to comply with all such regulations, including any future modifications thereof,
in connection with the distribution of the HIV Product. Selfcare agrees that it
will not sell or distribute the HIV Product or clinical data relating to the HIV
Product without complying with all applicable regulations. Selfcare hereby
agrees to indemnify and hold ChemTrak harmless from any breach of this Section
13.2.
25.
<PAGE> 30
13.3 FOREIGN CORRUPT PRACTICES ACT. Selfcare hereby agrees that it
shall comply with the requirements of the United States Foreign Corrupt
Practices Act and shall refrain from any payments to third parties which would
cause ChemTrak or Selfcare to violate such Act. Selfcare hereby agrees to
indemnify and hold harmless ChemTrak from any breach of this Section 13.3.
13.4 BENEFITS AND BINDING NATURE OF AGREEMENT. This Agreement shall be
binding upon, and inure to the benefit of, the successors, executors, heirs,
representatives, administrators and permitted assigns of the Parties hereto.
13.5 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with all
exhibits attached and referenced herein, embodies the final, complete and
exclusive understanding between the Parties, and replaces and supersedes all
previous agreements, understandings or arrangements between the Parties with
respect to its subject matter, including but not limited to the Confidentiality
Agreement between the parties dated June 26, 1996 and the non-binding Letter of
Intent between the parties dated as of August 28, 1996, as amended. All
information exchanged by the parties prior to the Effective Date pursuant to the
Confidentiality Agreement shall be deemed to be Confidential Information subject
to the terms of this Agreement, including but not limited to Article 8. No
modification or waiver of any terms or conditions hereof, nor any
representations or warranties shall be of any force or effect unless such
modification or waiver is in writing and signed by an authorized officer of each
Party hereto.
13.6 NO OTHER TERMS AND CONDITIONS. The Parties intend that this
Agreement set forth all of the terms and conditions applicable to the sale of
the HIV Product and accordingly agree that all provisions, terms and conditions
of any purchase order, sales or order acknowledgment, invoice or other business
form or document (a "Form"), unless an amendment to this Agreement in accordance
with Section 13.5 hereof, shall be superseded hereby and therefore shall be
disregarded and have no force and effect. If a Form purports to be conditioned
in any manner on agreement to and/or acceptance of any provisions, terms and
conditions other than those set forth herein, then such condition is hereby
waived. In no event shall either Party be bound by any provisions, terms or
conditions relating to the subject matter of this Agreement not set out herein.
13.7 FORCE MAJEURE. Neither Party shall be liable to the other for its
failure to perform any of its obligations under this Agreement, except for
payment obligations, during any period in which such performance is delayed
because of, or rendered impracticable or impossible due to, unforeseen
circumstances beyond its reasonable control, including without limitation, acts
of God, fire, flood, war or labor unrest.
13.8 NOTICE. All notices concerning this Agreement shall be written in
the English language and shall be deemed to have been received (a) two (2) days
after being
26.
<PAGE> 31
properly sent by commercial overnight courier, or (b) one (1) day after being
transmitted by confirmed facsimile, in each case addressed to the address below:
If to ChemTrak:
ChemTrak Incorporated
929 E. Arques Avenue
Sunnyvale, California 94086-4520
Attention: President
Telephone: (408) 773-8156
Facsimile: (408) 524-9464
If to Selfcare:
Selfcare, Inc.
200 Prospect Street
Waltham, Massachusetts 02154
Attention: President
Telephone: (617) 647-3900
Facsimile: (617) 647-3939
13.9 ENGLISH LANGUAGE; GOVERNING LAW. This Agreement has been prepared
in the English language and the English language shall control its
interpretation. All information to be provided by the parties to each other
shall be in English, and Selfcare shall be responsible for all necessary
translation. This Agreement shall be governed by the laws of the State of
California as applied to agreements executed and performed entirely in
California by California residents.
13.10 WAIVER. Any waiver (express or implied) by either Party of any
default or breach of this Agreement shall not constitute a waiver of any other
or subsequent default or breach.
13.11 SEVERABILITY. Each Party hereby agrees and acknowledges that this
Agreement fairly sets forth the business understanding of the Parties. In the
event that any provision of this Agreement shall be unenforceable or invalid
under any applicable law or be so held by applicable court decision, the Parties
shall change such provision or this Agreement so as to best accomplish the
overall allocation of economic and other benefits between the Parties reflected
in this Agreement, within the limits of applicable law or applicable court
decisions.
27.
<PAGE> 32
13.12 RIGHTS AND REMEDIES CUMULATIVE. Except as expressly provided
herein, the rights and remedies provided in this Agreement shall be cumulative
and not exclusive of any other rights and remedies provided by law or otherwise.
13.13 INDEPENDENT CONTRACTORS. Each Party shall act as an independent
contractor under the terms of this Agreement. Neither Party is, nor shall it be
deemed to be, an employee, agent, co-venturer, franchisee or legal
representative of the other for any purpose. Neither Party shall be entitled to
enter into any contracts in the name of, or on behalf of the other, nor shall
either Party be entitled to pledge the credit of the other in any way or hold
itself out as having authority to do so.
13.14 COUNTERPARTS. This Agreement may be executed in counterparts with
the same force and effect as if each of the signatories had executed the same
instrument.
IN WITNESS WHEREOF, the Parties have each caused this Agreement to be
signed and delivered by their duly authorized representatives as of the date
first written above.
CHEMTRAK INCORPORATED SELFCARE, INC.
By: /s/ Edward F. Covell By: /s/ Anthony H. Hall
------------------------------ ------------------------------
Name: Edward F. Covell Name: Anthony H. Hall
----------------------------- -----------------------------
Title: President Title: Chief Financial Officer
----------------------------- -----------------------------
28.
<PAGE> 33
EXHIBIT A
STANDARD COST OF GOODS
Standard Cost of Goods:
a. Direct and Indirect Materials
b. Direct and Indirect Labor
c. Payments made to Third Parties
d. Overhead (Indirect Production Costs) - expenses incurred in
support of the manufacturing operation as well as those caused by
the process of converting raw materials into HIV Product units.
Items to be included in overhead shall be consistent with Generally
Accepted Accounting Principles consistently applied, and shall include but
not be limited to:
Operations administration, purchasing, engineering, maintenance,
utilities, building and grounds, quality assurance (including
samples), receiving and stores department expenses, shipping
department expenses, freight, depreciation (building and
equipment). Also included are some labor related overhead expenses
such as: Retirement Plan Costs, Payroll Taxes, Vacation Pay, Sick
Leave, Holiday Pay, Separation Pay, Shift Premium (incentive for
other than the day shift work), Overtime Premium (i.e. -
incremental portion over straight time pay).
<PAGE> 34
CONFIDENTIAL TREATMENT
EXHIBIT B
CHEMTRAK TECHNOLOGY
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXX
the "Software," as defined in the Agreement
PMA # BP950003, together with three supplements filed to date with FDA
Physical Elements of the complete Sample Collection Kit:
Finger Stick Device
Blood Collection Card, with bar code
Directions for Use
Information About AIDS insert
Tyvek Bag for Collection Card
Return package
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE> 35
EXHIBIT C
REGULATORY FORECASTS
France: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Germany: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Italy: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Spain: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
United Kingdom: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
<PAGE> 1
ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT dated as of January 14, 1997 (the
"Agreement") by and between AMERICAN HOME PRODUCTS CORPORATION, a Delaware
corporation ("AHP"), AMERICAN CYANAMID COMPANY, a Maine corporation
("Cyanamid"), A.H. Robins Company, Incorporated, a Delaware corporation ("A.H.
Robins" and together with Cyanamid and AHP, "Sellers") and Selfcare, Inc., a
Delaware corporation ("Selfcare") and Selfcare Acquisition Corp., a Delaware
corporation, and a wholly-owned subsidiary of Selfcare ("Acquisition Corp." and
together with Selfcare, "Buyers").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Sellers are engaged in, among other things, the marketing and sale
of certain over-the-counter branded products sold in the vitamin and nutritional
supplements categories which branded products are listed on EXHIBIT A attached
hereto (the "Brands");
WHEREAS, Buyers desire to purchase certain assets of Sellers relating to
the Brands in the Territory (as defined below), and Sellers desire to sell such
assets to Buyers, upon the terms and subject to the conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
Whenever used in this Agreement the terms defined below shall have the
indicated meanings:
1.1 "AFFILIATE" shall mean, with respect to any Person, any Person which
directly or indirectly through stock ownership or through other arrangements
either controls, or is controlled by or is under common control with, such
Person, PROVIDED, HOWEVER, for purposes of this Agreement the term "Affiliate"
shall not include subsidiaries in which a Person owns a majority of the ordinary
voting power to elect a majority of the board of directors but is restricted
from electing such majority by contract or otherwise, until such time as such
restrictions are no longer in effect.
1.2 "AGGRIEVED PARTY" shall have the meaning set forth in Section 8.2.
<PAGE> 2
1.3 "ALLOCATION STATEMENT" shall have the meaning set forth in
Section 2.7.
1.4 "APPLICABLE LAWS" shall mean, with respect to the Brands or the
Purchased Assets in the Territory, all laws, treaties, statutes, ordinances,
judgments, decrees, directives, rules, injunctions, writs, regulations, binding
arbitration rulings, orders, judicial or administrative interpretations or
authorization of, any Governmental Authority having jurisdiction over the Brands
or the Purchased Assets in the Territory, as may be in effect on the Closing
Date.
1.5 "APPLICABLE PERMITS" shall mean any waiver, exemption, variance,
permit, authorization, license or similar approval, required to be obtained
under Applicable Laws in connection with the manufacture of the Products (to the
extent Sellers manufacture the Products), distribution or sale of the Products
or the ownership of the Purchased Assets, each in the Territory.
1.6 "ASSUMED LIABILITIES" shall mean (i) all future obligations that are
required to be performed and fulfilled after the Closing under the terms of the
Contracts, (ii) except to the extent Buyers are entitled to indemnification
pursuant to Section 8.1(a)(v), obligations for the return of Products returned
after the Closing Date, and (iii) except to the extent Buyers are entitled to
indemnification pursuant to Section 8.1(a)(vi), obligations for trade
advertising, promotion and coupons relating to the Brands each as in existence
as of the Closing Date.
1.7 "BOOKS AND RECORDS" shall mean the books and records of the Sellers to
the extent related exclusively to the Brands or the Purchased Assets and copies
of such other books and records of Sellers to the extent related to the
Purchased Assets.
1.8 "BRANDS" shall have the meaning set forth in the first whereas clause
of this Agreement.
1.9 "CLOSING" shall have the meaning set forth in Section 2.3.
1.10 "CLOSING DATE" shall have the meaning set forth in Section 2.3.
1.11 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.12 "COMPETITION LAWS" shall mean all Applicable Laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade.
-2-
<PAGE> 3
1.13 "CONTRACTS" shall mean all agreements, insurance policies, sales
orders, licenses, purchase orders, guarantees and any and all other contracts or
binding arrangements to which Sellers are a party specifically relating to the
Purchased Assets, but excluding any contracts or other binding arrangements to
the extent related to the Excluded Assets.
1.14 "COSTS" shall have the meanings set forth in Section 8.1.
1.15 "CUSTOMER" shall have the meaning set forth in Section 3.15.
1.16 "ENCUMBRANCES" shall mean all claims, security interests, liens,
pledges, charges, escrows, options, proxies, rights of first refusal, preemptive
rights, mortgages, hypothecations, prior assignments, title retention
agreements, indentures, security agreements or any other encumbrances of any
kind.
1.17 "EXCLUDED ASSETS" shall mean any of the assets of Sellers not
primarily related to the Brands or included among the Purchased Assets,
including but not limited to, cash, cash equivalents, accounts receivables, any
type of receivable for Taxes, inventories (including raw materials and works in
progress) machinery and equipment (other than machinery and equipment included
in the Purchased Assets) and Intellectual Property set forth on SCHEDULE 3.6 or
otherwise retained by Sellers pursuant to the terms of Section 2.8 hereof.
1.18 "EXCLUDED LIABILITIES" shall mean any liabilities to the extent
relating to the Brands or the Purchased Assets other than Assumed Liabilities.
1.19 "FINANCING" shall have the meaning set forth in Section 4.6.
1.20 "FINANCING AGREEMENTS" shall have the meaning set forth in Section
4.6.
1.21 "GAAP" shall mean United States generally accepted accounting
principles consistently applied.
1.22 "GOVERNMENTAL AUTHORITY" shall mean any governmental department,
commission, board, bureau, agency, court or other instrumentality of the United
States, any foreign government or any jurisdiction, municipality or other
political subdivision thereof.
1.23 "HSR ACT" shall have the meaning set forth in Section 6.3.
-3-
<PAGE> 4
1.24 "INDEMNIFYING PARTY" shall have the meaning set forth in Section
8.2(i).
1.25 "INDICIA" shall have the meaning set forth in Section 2.8.
1.26 "INTELLECTUAL PROPERTY" shall mean the following properties: (i)
subject to Section 2.8, all Know-how; (ii) all Trademarks (subject to the
Trademark License Agreement); (iii) all copyrights, copyright registrations and
applications for registration, designs, industrial models and utility models
(including registrations and applications for registration thereof), and (iv)
subject to Section 2.8, all trade secrets, insofar as on or before the Closing
Date (i), (ii), (iii) and/or (iv) are (a) owned or acquired by Sellers, and (b)
employed in connection with the manufacture, use, promotion, advertisement,
distribution and/or sale of the Products in the Territory, but not including the
Excluded Assets.
1.27 "KNOW-HOW" shall mean non-exclusive rights to all product
specifications, processes, product designs, plans, ideas, concepts,
manufacturing, engineering and other manuals and drawings, technical
information, data, research records, promotional literature, customer and
supplier lists and similar data and information, and other confidential or
proprietary technical and business information which on or before the Closing
Date are (a) owned or acquired by Sellers, and (b) employed in connection with
the manufacture, use, promotion, advertisement, distribution and/or sale of the
Products in the Territory, but not including the Excluded Assets.
1.28 "MATERIAL ADVERSE CHANGE" shall mean a change that has had a Material
Adverse Effect.
1.29 "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
Purchased Assets or the business, operations or financial condition of the
manufacture, distribution and sale of the Products, whether or not covered by
insurance.
1.30 "MINIMUM LOSS" shall have the meaning set forth in Section 8.3.
1.31 "PERMITTED ENCUMBRANCES" shall have the meaning set forth in Section
3.5(b).
1.32 "PERSON" shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
-4-
<PAGE> 5
1.33 "POST-CLOSING TAX PERIOD" shall mean any Tax period (or portion
thereof) beginning on the Closing Date.
1.34 "PRE-CLOSING TAX PERIOD" shall mean any Tax period (or portion
thereof) ending before the Closing Date.
1.35 "PRODUCT LIABILITY CLAIMS" shall have the meaning set forth in Section
3.14.
1.36 "PRODUCTS" shall mean all products of Sellers bearing the Trademarks
sold prior to Closing.
1.37 "PROMISSORY NOTE" shall mean the promissory note of Selfcare in the
principal amount of $6 million in the form attached hereto as EXHIBIT E.
1.38 "PURCHASED ASSETS" shall mean, collectively, the Intellectual Property
(subject to Section 2.8), and to the extent related to the Brands in the
Territory, sales and promotional material (including without limitation
pertaining to radio, television and print campaigns), customer lists and Books
and Records, Applicable Permits (if assignable) and the plates, dyes and custom
molds (if applicable) listed on SCHEDULE 1.36, all transferable licenses,
permits or other Governmental Authority authorizations exclusively relating to
the Brands, the rights and future obligations of Sellers under the Contracts,
and all goodwill directly related to the Brands; provided, however, that the
Purchased Assets shall not include (i) the trademark FERRO SEQUELS(R) that is
subject to the Trademark License Agreement and (ii) the Excluded Assets.
1.39 "PURCHASE PRICE" shall have the meaning set forth in Section 2.1.
1.40 "RECALL CAMPAIGNS" shall have the meaning set forth in Section 3.14.
1.41 "SUPPLY AGREEMENTS" shall mean the supply agreements related to
certain products in finished packaged form to be provided by Sellers, their
Affiliates or third party manufacturers to Buyers, substantially in the form of
EXHIBIT B attached hereto.
1.42 "STATEMENTS OF NET REVENUE" shall have the meaning set forth in
Section 3.3.
1.43 "TAXES" (and with correlative meanings, "TAX," "TAXES" and "TAXABLE")
shall mean all taxes of any kind imposed by a federal, state, local or foreign
Governmental Authority, including but not limited to those on, or measured by or
referred to as income, gross receipts, financial operation, sales, use, ad
-5-
<PAGE> 6
valorem, value added, franchise, profits, license, excise, stamp, premium,
property, transfer or windfall profits taxes, customs, duties or similar fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by such
Governmental Authority with respect to such amounts.
1.44 "TERMINATION DATE" shall have the meaning set forth in Section 9.1.
1.45 "TERRITORY" shall mean the United States of America (which shall not
include its Territories).
1.46 "TRADEMARK LICENSE AGREEMENT" shall mean the Trademark License
Agreement with respect to the FERRO SEQUELS trademark, substantially in the form
of EXHIBIT C hereto.
1.47 "TRADEMARKS" shall mean (a) the trademarks listed on SCHEDULE 3.9(a),
as well as (b) trade dress, labels, logos and all other names and slogans
associated with the Brands in the Territory or embodying associated goodwill of
the Brands within the Territory, whether or not registered, and any applications
or registrations therefor, and (c) any associated goodwill incident to (a) or
(b) above. It is understood by the parties that Trademarks shall not include the
Excluded Assets, as well as the names "American Home Products Corporation",
"American Cyanamid Company", "Lederle", "A.H. Robins", "Whitehall-Robins",
"Whitehall-Robins Healthcare", the "Spectrum" trademark, the "Whitehall Temple
Design" logo, the "Spectrum" design mark as identified on SCHEDULE 3.6 and any
derivatives or variations thereof used by Sellers on or before the Closing Date.
1.48 "TRANSITION SERVICES AGREEMENT" shall mean the transition services
agreement between Sellers or their Affiliates and Buyers to be entered into
prior to Closing based on the business terms contained in the term sheet set
forth on EXHIBIT D hereto.
ARTICLE 2
PURCHASE AND SALE; CLOSING; ALLOCATION
2.1 PURCHASE AND SALE. Upon the terms and subject to conditions of this
Agreement, (a) Sellers shall sell, assign, transfer and deliver to Buyers the
Purchased Assets, and (b) Buyers shall purchase and accept the Purchased Assets
from Sellers, subject to the Assumed Liabilities, for an aggregate purchase
price of Thirty-Six Million Dollars ($36,000,000.00) (the "Purchase Price"). The
Purchase Price shall be payable as provided in Section 2.4(a) and (b).
-6-
<PAGE> 7
2.2 ASSUMPTION OF LIABILITIES. With respect to the purchase and sale of
the Purchased Assets, in addition to payment of the Purchase Price and pursuant
to assumption agreements to be executed and delivered in accordance with Section
2.4(h), Buyers will assume at the Closing and subsequently, in due course, pay,
honor and discharge (except where it is contesting in good faith) all of the
Assumed Liabilities.
2.3 THE CLOSING. Unless this Agreement shall have been terminated, on the
terms and subject to the conditions of this Agreement, the closing of the sale
and purchase of the Purchased Assets and the consummation of the other
transactions contemplated hereby (the "Closing") shall take place at the offices
of AHP, Five Giralda Farms, Madison, New Jersey 07940 on the later of February
10, 1997 or the third business day after the date on which the last to be
fulfilled or waived of the conditions set forth in Article 7 (other than those
contemplated to be satisfied at Closing) shall be fulfilled or waived in
accordance with this Agreement or at such other time, date or place as the
parties may mutually agree upon in writing (the "Closing Date"). At the Closing,
the parties to this Agreement will exchange funds, certificates and other
documents specified in this Agreement. For purposes of this Agreement the
Closing will be treated as if it occurred at 12:01 a.m. on the Closing Date.
2.4 DELIVERIES BY Buyers. At the Closing, Buyers shall deliver, or cause
to be delivered, to Sellers the following:
(a) cash in the amount of Thirty Million Dollars ($30,000,000) payable
by wire transfer in immediately available funds to a U.S. bank account of
Sellers (which account shall be designated by Sellers no fewer than two business
days prior to the Closing Date);
(b) the Promissory Note duly executed by Selfcare;
(c) the certificate executed by an authorized officer of each of
Buyers required to be delivered pursuant to Section 7.2(c);
(d) a certificate, executed by an authorized officer of each of
Buyers, certifying (i) the due organization and good standing of Buyers, (ii)
the certificate of incorporation of Selfcare and Acquisition Corp., each
certified by the Secretary of State of Delaware; (iii) the corporate resolutions
of Buyers authorizing the transactions contemplated by this Agreement, and (iv)
the incumbency of officers of each of Buyers executing this Agreement, the
Promissory Note and the other agreements, instruments or certificates delivered
at the Closing;
-7-
<PAGE> 8
(e) the Transition Services Agreement, duly executed by Buyers;
(f) the Supply Agreements, duly executed by Buyers;
(g) the Trademark License Agreement, duly executed by Buyers;
(h) such instruments of assumption and other certificates, instruments
or documents, in form and substance reasonably acceptable to Sellers, as may be
necessary to effect Buyers' assumption under Applicable Laws of the Assumed
Liabilities; and
(i) such other instruments and documents, in form and substance
reasonably acceptable to Buyers and Sellers, as may be necessary to effect the
Closing.
2.5 DELIVERIES BY SELLERS. At the Closing, Sellers shall deliver to Buyers
the following:
(a) the certificate executed by authorized officers of each of Sellers
required to be delivered pursuant to Section 7.3(c);
(b) a certificate, executed by an authorized officer of each of the
Sellers, certifying (i) the due organization and good standing of Sellers, (ii)
the corporate resolutions of Sellers authorizing the transactions contemplated
by this Agreement, and (iii) the incumbency of officers of the Sellers executing
this Agreement and the other agreements, instruments or certificates delivered
upon the Closing;
(c) the Transition Services Agreement, duly executed by Sellers;
(d) the Supply Agreements, duly executed by Sellers;
(e) the Trademark License Agreement, duly executed by Sellers;
(f) bills of sale and any other appropriate instruments of sale and
conveyance, in form and substance reasonably acceptable to Buyers, transferring
under Applicable Laws all tangible personal property included in the Purchased
Assets to Buyers or its Affiliates;
(g) bills of sale and any other appropriate instruments of sale and
conveyance, in form and substance reasonably acceptable to Buyers, transferring
under Applicable Laws all Intellectual Property included within the Purchased
Assets to Buyers or its Affiliates, including assignments of
-8-
<PAGE> 9
trademarks suitable for recording with the United States Patent and Trademark
Office.
(h) assignments, in form and substance reasonably acceptable to
Buyers, assigning to Buyers or its Affiliates under Applicable Laws all
Contracts; and
(i) such other instruments and documents, in form and substance
reasonably acceptable to Buyers and Sellers, as may be necessary to effect the
Closing.
2.6 FURTHER ASSURANCES.
(a) From time to time, at Buyers' or Sellers' request and in
accordance with Section 6.2, whether at or after the Closing Date, Buyers or
Sellers, as the case may be, shall, and shall cause their respective Affiliates
to, execute and deliver such further instruments of conveyance, transfer and
assignment, cooperate and assist in providing information for making and
completing regulatory filings, and take such other actions as Buyers or Sellers,
as the case may be, may reasonably require of the other party to more
effectively assign, convey and transfer to such party the Purchased Assets and
to assume the Assumed Liabilities, as contemplated by this Agreement.
(b) To the extent that the assignment of any Contract to Buyers
hereunder shall require the consent of the other party thereto, this Agreement
shall not constitute an agreement to assign the same if an attempted assignment
would constitute a breach thereof. Sellers will use their diligent efforts to
obtain the consent of the other parties to such assumed Contracts for the
assignment thereof to Buyers, PROVIDED, HOWEVER, that Sellers shall not be
obligated to make any payment or take any other detrimental action to obtain any
such consent. If any such consent is not obtained, Sellers shall, and shall
cause their Affiliates to, cooperate with Buyers in any arrangement reasonably
requested by Buyers to provide for Buyers the same or similar benefits under any
such Contract, including the enforcement at the cost of and for the benefit of
Buyers of any and all rights thereunder of Sellers or their respective
Affiliates against the other party thereto.
2.7 ALLOCATION.
(a) Prior to Closing, Buyers and Sellers shall use diligent efforts to
agree in good faith upon a statement (the "Allocation Statement") setting forth
the value of the Purchased Assets, which shall be used for the allocation of the
Purchase Price among the Purchased Assets.
(b) The Sellers and Buyers covenant and agree to report for Tax
purposes the allocation of such Purchase Price
-9-
<PAGE> 10
among the Purchased Assets in a manner entirely consistent with the Allocation
Statement and agree to act in accordance with such Allocation Statement and in
the filing of all tax returns (including, without limitation, filing Form 8594
with its federal income tax return for the taxable year that includes the date
of the Closing) and in the course of any tax audit, tax review or tax litigation
relating thereto.
2.8 SELLERS' RETENTION OF CERTAIN RIGHTS. Notwithstanding anything to the
contrary contained in this Agreement other than the provisions of this Section
2.8, Sellers shall retain rights in and to the Know-how and trade secrets for
the following purposes: to utilize the Know-how and trade secrets (a) without
restriction outside the Territory and (b) within the Territory (i) to
manufacture, distribute, promote, advertise, use, and/or sell products other
than the Products, and (ii) to manufacture, distribute, promote, advertise, use
and/or sell Products for direct export by Sellers and/or their Affiliates
outside of the Territory; provided however, that nothing contained herein shall
permit Sellers and/or their Affiliates to promote, advertise or sell in the
Territory the Products to retail customers.
This Agreement shall not affect the rights of Sellers, and/or their
Affiliates, to utilize in countries and territories other than the Territory,
Sellers' trademarks, copyrights, trade dress, product shapes, packaging, label,
product, and other designs and indicia of Sellers' ownership.
Sellers agree not to sell or distribute products (which if sold or
distributed within the Territory would infringe Buyers' rights in the
Trademarks) to any Person that Sellers and/or their Affiliates know (i) intends
to export or sell, directly or indirectly, or (ii) does export or sell, directly
or indirectly, such products into the Territory.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby jointly and severally represent and warrant to Buyers as
follows:
3.1 ORGANIZATION, GOOD STANDING, POWER, ETC. Each Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation. Each Seller has the requisite corporate power and
authority to execute and deliver this Agreement and the other agreements
contemplated hereby, and each Seller has all requisite corporate power to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement by each Seller, the execution and delivery by each
Seller of the other agreements contemplated hereby, and the consummation by each
-10-
<PAGE> 11
Seller of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of each Seller and no
other or further corporate proceedings will be necessary for the execution and
delivery of such agreements by each Seller, the performance by each Seller of
its obligations hereunder and thereunder and the consummation by each Seller of
the transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by each Seller and constitutes a legal, valid and binding
obligation of each Seller enforceable against such Seller in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws of general applicability relating to or affecting
the enforcement of creditors' rights and general principles of equity.
3.2 GOVERNMENTAL AUTHORIZATION; REQUIRED CONSENTS. The execution, delivery
and performance by Sellers of this Agreement and the other agreements
contemplated hereby and the consummation by Sellers of the transactions
contemplated hereby and thereby will not require any notice to, filing with, or
the consent, approval or authorization of, any Person or Governmental Authority,
except as contemplated in Section 6.3 hereof or as set forth in SCHEDULE 3.2,
other than where the failure to obtain such consent, approval or authorization,
or to give or make any such notice or filing, would not be reasonably expected
to have a Material Adverse Effect. Except as contemplated in Section 6.3 hereof
or as set forth in SCHEDULE 3.2, neither the execution, delivery or performance
of this Agreement or of the other agreements contemplated hereby nor the
consummation of the transactions contemplated hereby or thereby will (i) violate
or result in a breach or result in the acceleration or termination of, or the
creation in any third party of the right to accelerate, terminate, modify or
cancel, any Contract or other material obligation or liability to which any of
the Sellers is a party or is bound or to which any of the Purchased Assets are
subject, (ii) conflict with, violate or result in a breach of any provision of
the incorporation documents or by-laws of any of Sellers in any material
respect, or (iii) conflict with or violate any Applicable Laws in any material
respect or court order.
3.3 STATEMENTS OF BRAND INCOME. The audited statements of Net Revenues in
Excess of Direct Expenses for the years ended November 30, 1995 and 1996, are
attached hereto as EXHIBIT F (collectively, the "STATEMENTS OF NET REVENUE").
The information contained in the Statements of Net Revenue fairly present in all
material respects Net Revenues, cost of sales, direct marketing expenses, direct
selling, general and administrative expenses and net revenues in excess of
direct expenses, in conformity with GAAP applied on a consistent basis (except
as may be indicated in the notes thereto) for the periods then ended.
-11-
<PAGE> 12
3.4 ABSENCE OF CERTAIN CHANGES. Except (x) to the extent arising out of or
relating to the transactions contemplated by this Agreement or (y) for matters
listed on SCHEDULE 3.4, since November 30, 1996, (i) the Purchased Assets have
been utilized in the ordinary course of business of Sellers in a manner
consistent with past practice and (ii) other than the general decline in the
business related to the Purchased Assets described on SCHEDULE 3.4, there has
not been any Material Adverse Change or any damage, destruction, loss or claim,
whether or not covered by insurance, or condemnation or other taking adversely
affecting in any material respect the Purchased Assets taken as a whole.
3.5 PROPERTIES.
(a) Except as set forth on SCHEDULE 3.5(a), Sellers have good and
marketable title to all Purchased Assets.
(b) No Purchased Asset is subject to any Encumbrance, except (i)
liens for Taxes, assessments and other governmental charges not yet due and
payable or being contested in good faith; (ii) immaterial mechanics', workmen's,
repairmen's, warehousemen's, carriers' or other like liens arising or incurred
in the ordinary course of business (all items included in items (i) and (ii) are
referred to collectively herein as the "Permitted Encumbrances").
(c) No violation of any Applicable Law relating to the Purchased
Assets currently exists, except for violations which have not had or would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
3.6 SUFFICIENCY OF THE PURCHASED ASSETS. Upon the Closing, Buyers will
acquire good and marketable title in and to each of the Purchased Assets, free
and clear of all Encumbrances, except the Permitted Encumbrances. Other than as
described on SCHEDULE 3.6 and except for the Excluded Assets, the Intellectual
Property included in the Purchased Assets constitutes, and on the Closing Date
will constitute, all of the intellectual property (including without limitation,
the Intellectual Property) that Sellers have used, held for use or is necessary
for the use, in the manufacture, use, advertising, promotion, sale and
distribution of the Products in the Territory on the Closing Date.
3.7 LITIGATION. (a) Except as set forth in SCHEDULE 3.7(a), there is no
civil, criminal or administrative action, suit, hearing, proceeding or
investigation pending or, to the knowledge of Sellers, threatened against the
Seller in connection with the Brands, the Purchased Assets or the transactions
contemplated hereby.
(b) Except as set forth in SCHEDULE 3.7(b), the Sellers are not
subject to any order, writ, judgment, award,
-12-
<PAGE> 13
injunction, or decree of any court or governmental or regulatory authority or
any arbitrator or arbitrators relating to the Purchased Assets.
3.8 CONTRACTS. SCHEDULE 3.8(i) sets forth a list, as of the date hereof,
of each Contract. Except as set forth in SCHEDULE 3.8(ii), each Contract is a
valid and binding agreement and is in full force and effect. Except as otherwise
provided in SCHEDULE 3.8(iii), Sellers are not in default and have no knowledge
of any default by the other party thereto under any Contract listed in SCHEDULE
3.8(i). To Sellers' knowledge, there is no assertion by any third party of any
claim of material default or breach under any of the Contracts except for such
claim as would not be reasonably expected to have a Material Adverse Effect.
3.9 INTELLECTUAL PROPERTY RIGHTS.
(a) LIST OF CERTAIN INTELLECTUAL PROPERTY. SCHEDULE 3.9(a) lists all
Intellectual Property that is registered with or issued by the United States
Patent and Trademark Office and the United States Copyright Office. The list
specifies, where applicable, the jurisdictions in which each has been issued or
registered, including the respective registration or application numbers and
names of all registered owners.
(b) NO CONFLICT. To the knowledge of the Sellers, there is no
unauthorized use, infringement or misappropriation of any of the Intellectual
Property by any Person, including without limitation, any employee or former
employee of the Sellers.
To the knowledge of Sellers, except as set forth in SCHEDULE 3.9(b), with
respect to the Intellectual Property, no Person has asserted or threatened, in
writing, to assert any claim:
(i) that the manufacturing, use, sale, marketing, advertising, promotion
or distribution of any one or more of the Purchased Assets infringes
or misappropriates any intellectual property right of any Person;
(ii) adverse to Sellers' use of the Intellectual Property; or
(iii) challenging Sellers' ownership of, or the validity of or right to
enforce, the Intellectual Property.
(c) OWNERSHIP WARRANTY. Except as disclosed on SCHEDULE 3.9(c),
Sellers represent and warrant that:
(i) Sellers own all right, title, and interest in and to the
properties described in Section 1.26(ii) and (iii);
-13-
<PAGE> 14
(ii) Sellers own the properties described in Section 1.26(i) and
(iv);
(iii) no other Person has any ownership interest with respect to
the Trademarks in the Territory; and
(iv) no Intellectual Property is subject to any outstanding
decree, order, judgment, settlement, or stipulation restricting in any manner
the assignment or sale thereof by the Sellers or use or exploitation thereof by
the Buyers in the Territory.
(d) STATUS OF REGISTRATION. All of the Intellectual Property listed on
SCHEDULE 3.9(a) that is issued by, registered with or filed with the U.S. Patent
and Trademark Office or the U.S. Copyright Office has been duly issued by or
registered with or duly filed in such office, as the case may be, and has been
properly maintained and renewed in accordance with all applicable provisions of
applicable law and regulations in the U.S. To the best of Sellers' knowledge,
the Sellers have taken, and where applicable, not failed to take, reasonable
precautions to (i) protect their rights in the Trademarks and (ii) maintain the
confidentiality of the proprietary Know-how. Except as disclosed on SCHEDULE
3.9(d), to the knowledge of Sellers', Sellers are not in breach of any material
provision of any written contract, license, sublicense, assignment or
indemnification which relates to the Intellectual Property and have not taken or
failed to take any action that would preclude or hinder the protection or
enforcement of the Trademarks.
(e) PATENTS. Subject to the provisions of SCHEDULE 3.6, as of the
Closing Date, Sellers neither own nor have acquired any patents (including
applications, renewals, reissues, divisions, continuations,
continuations-in-part, and extensions thereof) which are used or held for use in
the manufacture, promotion, use, advertisement, distribution and/or sale of the
Products in the Territory.
3.10 COMPLIANCE WITH LAW; APPLICABLE PERMITS. Except as set forth in
SCHEDULE 3.7(b) or SCHEDULE 3.10, the Purchased Assets are being utilized in
compliance with all Applicable Laws, except where the failure so to comply would
not be reasonably expected to have a Material Adverse Effect. Sellers have all
Applicable Permits necessary to own, operate or lease their respective
properties and to utilize the Purchased Assets as currently conducted, other
than those the absence of which would not be reasonably expected to have a
Material Adverse Effect. There are no proceedings pending or, to the knowledge
of Sellers, threatened which may result in the revocation, cancellation or
suspension of any such Applicable Permits, except those the
-14-
<PAGE> 15
absence of which would not be reasonably expected to have a Material Adverse
Effect.
3.11 FDA MATTERS. Except as set forth on SCHEDULE 3.11, none of the
Products is being manufactured, assembled (other than the manufacture or
assembly in connection with research and development) or sold by the Sellers
which at the date hereof would require any approval of the United States Food
and Drug Administration (the "FDA") or any other Governmental Authority for the
purpose for which they are being manufactured, assembled or sold which approval
has not been obtained. Except as set forth on SCHEDULE 3.11, the Brands now
being commercially distributed by Sellers in the Territory meet the applicable
legal requirements of any such jurisdiction in all material respects and all
requisite Applicable Permits have been duly obtained and are in full force and
effect. There is no action or proceeding by the FDA or any other Governmental
Authority, including, but not limited to, recall procedures, pending or, to the
knowledge of Sellers, threatened against Sellers relating to safety or efficacy
of any of the Products.
3.12 INSURANCE. All of the policies of insurance and bonds presently in
force with respect to the Purchased Assets are listed in SCHEDULE 3.12.
3.13 BROKER'S FEES. Except for the retention of Dominick & Dominick and
Furman Selz Incorporated, the fees and expenses of which will be paid by Sellers
pursuant to Section 6.1, the Sellers have not employed any broker, finder or
investment banker or incurred any liability for any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement.
3.14 WARRANTIES AND RECALLS. There are no current general recall campaigns
or programs relating to the Products ("Recall Campaigns"), except as set forth
on SCHEDULE 3.15. Except as set forth on SCHEDULE 3.7(a) or SCHEDULE 3.14, no
product liability or similar claims or proceedings ("Product Liability Claims")
are pending or have been instituted or, to the knowledge of Sellers, threatened
in writing since January 1, 1994.
3.15 CUSTOMERS. SCHEDULE 3.16 sets forth a list as of the date hereof of
the name of (i) each of Sellers' twenty most significant customers (in terms of
payments by such persons in 1996) (a "Customer"). There is no pending material
dispute with any Customer and, to the knowledge of Sellers, no Customer has
threatened in writing to decrease materially its purchases of the Products.
3.16 DEPOSITS AND PREPAYMENTS. Sellers have not received any payments or
deposits from Customers for products relating to the Products not yet shipped by
Sellers to such Customers.
-15-
<PAGE> 16
3.17 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations
and warranties of Sellers expressly set forth in this Agreement, neither Sellers
nor any other Person makes any other express or implied representation or
warranty on behalf of Sellers, or otherwise with respect to the Purchased
Assets.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYERS
Each of the Buyers hereby jointly and severally represent and warrant to
Sellers that:
4.1 CORPORATE ORGANIZATION. Each of the Buyers is a corporation duly
organized, validly existing and in good standing under the laws of Delaware.
Each of the Buyers has the requisite corporate power and authority to own,
operate or lease the properties that it purports to own, operate or lease and to
carry on its business as it is now being conducted and is duly licensed or
qualified as a foreign corporation in each domestic or foreign jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties owned or leased by it makes such licensing or qualification
necessary, except where the failure to be so licensed or qualified would not be
reasonably expected to have a material adverse effect on the business,
operations or financial condition of each of the Buyers and their subsidiaries,
taken as a whole.
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of the Buyers has the
requisite corporate power and authority to execute and deliver this Agreement,
the Promissory Note (with respect to Selfcare) and the other agreements
contemplated hereby and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by each of the Buyers of this Agreement, the
Promissory Note (with respect to Selfcare), and the other agreements
contemplated hereby and the consummation by Buyers of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of each of the Buyers and no other corporate
proceeding is necessary for the execution and delivery of this Agreement, the
Promissory Note, or such other agreements contemplated hereby, the performance
by Buyers of their obligations hereunder or thereunder and the consummation by
Buyers of the transactions contemplated hereby and thereby. This Agreement has
been duly executed and delivered by each of the Buyers and constitutes a legal,
valid and binding obligation of Buyers, enforceable against Buyers in accordance
with its terms, except as the same may be limited by bankruptcy, insolvency,
moratorium, reorganization or other laws of general applicability relating to
-16-
<PAGE> 17
or affecting the enforcement of creditor's rights and general principles of
equity.
4.3 CAPITALIZATION OF BUYERS (a) As of the date hereof, the authorized
capital stock of Selfcare consists of (i) 40,000,000 shares of Common Stock,
$.001 par value per share, and (ii) 5,000,000 shares of Preferred Stock, $.001
par value per share, of which 10,000 shares are designated as Series A
Convertible Preferred Stock. As of November 13, 1996, (i) 5,874,367 shares of
Common Stock are issued and outstanding, all of which have been validly issued
and are fully paid and non-assessable, and (ii) 5,500 shares of Series A
Convertible Preferred Stock are issued and outstanding, all of which have been
validly issued and are fully paid and non-assessable.
(b) As of the date of this Agreement, the authorized capital stock of
Acquisition Corp. consists of 1,000 shares of Common Stock, $.01 par value. As
of the date hereof, 1,000 shares of Common Stock are issued and outstanding, all
of which have been validly issued and are fully paid and non-assessable. All
shares of Acquisition Corp. are owned solely by Selfcare.
4.4 BROKER'S FEES. Except for the retention of Covington Associates, the
fees and expenses of which will be paid by Buyers pursuant to Section 6.1, none
of Buyers or any of its Affiliates has employed any broker, finder or investment
banker or incurred any liability for any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement.
4.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as contemplated by
Section 6.3 hereof, no material filing with, and no material permit,
authorization, consent or approval of, any public body or authority is necessary
for the consummation by Buyers of the transactions contemplated by this
Agreement or the other agreements which Buyers will execute pursuant to the
terms of this Agreement. Except as contemplated by Section 6.3 hereof, the
execution and delivery of this Agreement and such other agreements and the
consummation of the transactions contemplated hereby and thereby will not (x)
conflict with or result in a breach of any of the provisions of the Certificate
of Incorporation or by-laws of Buyers, or (y) contravene in any material respect
any law, rule or regulation of any state, the federal laws of the United States
or any foreign country or any order, writ, judgment, injunction, decree,
determination or award currently in effect that is binding upon Buyers or any of
their subsidiaries or any of their respective properties.
4.6 FINANCING. Buyers will use their commercially reasonable efforts to
receive and furnish a copy to Sellers of a commitment letter (the "Commitment
Letter") from a bank of national or international standing acceptable to Sellers
in their
-17-
<PAGE> 18
reasonable judgement (it being understood that Fleet Bank so qualifies and is
satisfactory to Sellers) in an amount no less than $27 million. Buyers will use
their commercially reasonable efforts to enter into financing (loan or equity)
agreements (the "Financing Agreements") so that the aggregate proceeds of the
bank and/or equity financing (together with Buyers' cash on hand, the
"Financing") will be in an amount sufficient to pay any amounts at Closing
necessary to acquire the Purchased Assets, and to pay all related fees and
expenses required to be borne by Buyers.
4.7 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations
and warranties of Buyers expressly set forth in this Agreement, neither Buyers
nor any other Person makes any other express or implied representation or
warranty on behalf of Buyers.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE CLOSING
Sellers agree that:
5.1 CONDUCT OF THE BUSINESS. From the date hereof until the Closing Date
(a) Sellers shall utilize the Purchased Assets in the ordinary course consistent
with past practice and use their diligent efforts to preserve intact
relationships with third parties, including the Customers. Without limiting the
generality of the foregoing, from the date hereof until the Closing Date,
Sellers will not acquire, sell, lease, license or otherwise dispose of any
Purchased Assets except in the ordinary course consistent with past practice of
Sellers; and (b) without the written consent of Buyers, Sellers will not enter
into any Contract which, had it been in existence on the date hereof, would have
been required to be listed in SCHEDULE 3.8.
5.2 ACCESS TO INFORMATION. From the date hereof until the Closing Date,
Sellers (a) will give Buyers, their counsel, financial advisors, lenders,
auditors and other authorized representatives full access on reasonable notice
and at reasonable times to the books and records of Sellers to the extent
relating to the Brands or the Purchased Assets, (b) will furnish to Buyers, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information to the extent relating to the
Purchased Assets as such Persons may reasonably request and (c) will instruct
counsel and financial advisors of Sellers to cooperate with Buyers in its
investigation of the Purchased Assets PROVIDED that any investigation pursuant
to this Section shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of Sellers. In
-18-
<PAGE> 19
connection therewith, the parties will comply with the terms of the
Confidentiality Agreement dated January 10, 1996 between Selfcare and Furman
Selz Incorporated, as agent of AHP, which agreement shall survive the
termination of this Agreement.
5.3 NOTICES OF CERTAIN EVENTS. (a) Sellers shall promptly notify Buyers
of:
(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental Authority
in connection with the Brands, the Purchased Assets or the transactions
contemplated by this Agreement;
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to
or involving or otherwise affecting Sellers or the Purchased Assets that,
if pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 3.7 or Section 3.14 or that relate to
the consummation of the transactions contemplated by this Agreement; and
(iv) any notice or other communication (A) from a Customer that the
Customer intends to decrease materially its purchases of the Products or
(B) from a supplier of the Products that the supplier intends to
discontinue supplying, or increase materially the price of, the goods or
services provided by such supplier.
5.4 BUYERS' NOTIFICATION. Buyers shall promptly notify Sellers of (i) all
significant developments relating to the Financing, and (ii) any facts and
circumstances that are reasonably likely to result in (a) any of the conditions
set forth in the Financing Agreements not being satisfied, or (b) the conditions
set forth in Section 7.1(d) not being satisfied.
5.5 CERTAIN ACTIONS. Sellers shall not waive, release, grant or transfer
any Intellectual Property included in the Purchased Assets or any right thereto
or modify or change in any material respect any existing material license,
distribution agreement or other document, in each case, other than in the
ordinary course of business.
ARTICLE 6
ADDITIONAL AGREEMENTS
-19-
<PAGE> 20
The parties hereto agree that:
6.1 EXPENSES. Except as expressly set forth herein, all expenses,
including the fees of any attorneys, accountants, investment bankers or others
engaged by a party, incurred in connection with this Agreement and the
transactions contemplated hereby, shall be paid by the party incurring such
expenses whether or not the transactions contemplated by this Agreement are
consummated.
6.2 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees (i) to use all reasonable efforts to
do, or cause to be done, all things necessary, proper or advisable to consummate
the transactions contemplated by this Agreement and to cooperate with each other
in connection with the foregoing, (ii) to defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby, (iii) to use all reasonable efforts to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby, and (iv) to
use all reasonable efforts to effect all necessary registrations and filings and
submissions of information required or requested by Governmental Authorities
with respect to the transactions contemplated hereby.
6.3 FILINGS AND AUTHORIZATIONS. The Sellers and Buyers have filed or
supplied or will, as promptly as practicable, file or supply, or cause to be
filed or supplied, all notifications and information required to be filed or
supplied pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act") and, if necessary, any other Competition Laws, in
connection with the transactions contemplated by this Agreement. Sellers and
Buyers, as promptly as practicable, (a) will make, or cause to be made, all such
other filings and submissions under Applicable Laws, or to their subsidiaries
and Affiliates, as may be required for them to consummate the transactions
contemplated hereby in accordance with the terms of this Agreement, and (b) will
use reasonable efforts to obtain, or cause to be obtained, all authorizations,
approvals, consents and waivers from all Governmental Authorities necessary to
be obtained by them, or their Affiliates, in order for them so to consummate
such transactions.
6.4 INFORMATION FOR OTHER FILINGS. The parties represent to each other
that the information provided and to be provided by Buyers and Sellers,
respectively, for use in any document to be filed under the HSR Act or any other
Competition Law, shall, at the respective times such documents are filed with
such Governmental Authority, and if so required and on the Closing Date, be true
and correct in all material respects and shall not omit to state any material
fact required to be stated therein or
-20-
<PAGE> 21
necessary in order to make such information not false or misleading in any
material respect, and Sellers and Buyers each agree that if so required to so
correct any such information provided by it for use in such documents that shall
have become false or misleading in any material respect.
6.5 TAX MATTERS.
(a) Buyers and Sellers agree to furnish or cause to be furnished to
each other, upon request, as promptly as practicable, such information and
assistance relating to the Purchased Assets as is reasonably necessary for the
filing of all returns, and making of any election related to Taxes, the
preparation for any audit by any taxing authority, and the prosecution or
defense of any claim, suit or proceeding relating to any Tax return. Sellers and
Buyers shall cooperate with each other in the conduct of any audit or other
proceeding related to Taxes involving the Purchased Assets and each shall
execute and deliver such documents as are necessary to carry out the intent of
this Section 6.5(a).
(b) All personal property taxes and similar ad valorem obligations
levied with respect to the Purchased Assets for a taxable period which includes
(but does not end on) the Closing Date (collectively, the "APPORTIONED
OBLIGATIONS") shall be apportioned between Sellers and Buyers as of the Closing
Date based on the number of days of such taxable period included in the
Pre-Closing Tax Period and the number of days of such taxable period included in
the Post-Closing Period. Sellers shall be liable for the proportionate amount of
such taxes that is attributable to the Pre-Closing Tax Period, and Buyers shall
be liable for the proportionate amount of such taxes that is attributable to the
Post-Closing Tax Period. Within 60 days after the Closing, Sellers and Buyers
shall present statements to each other setting forth the amount of reimbursement
to which each is entitled under this Section 6.5(b) together with such
supporting evidence as is reasonably necessary to calculate the proration
amount. The proration amount shall be paid by the party owing it to the other
within 30 days after the delivery of such statement. Thereafter, Sellers shall
notify Buyers upon receipt of any bill for personal property taxes relating to
the Purchased Assets, part or all of which are attributable to the Post-Closing
Tax Period, and shall promptly deliver such bill to Buyers who shall pay the
same to the appropriate Taxing Authority. In the event that either Sellers on
the one hand or Buyers on the other hand shall thereafter make a payment for
which it is entitled to reimbursement under this Section 6.5(b), the other party
shall make such reimbursement promptly but in no event later than 30 days after
the presentation of a statement setting forth the amount of reimbursement to
which the presenting party is entitled along with such supporting evidence as is
reasonably necessary to calculate the amount of reimbursement.
-21-
<PAGE> 22
Any payment required under this Section and not made within 10 days of delivery
of the statement shall bear interest at the rate per annum determined, from time
to time, under the provisions of Section 6621(a)(2) of the Code from the
delivery date for each day until paid.
(c) Any transfer, documentary, sales, use or other Taxes assessed upon
or with respect to the transfer of the Purchased Assets to Buyers and any
recording or filing fees with respect thereto shall be borne equally by Sellers
on the one hand and Buyers on the other.
6.6 USE OF CERTAIN NAMES. Following the Closing, Buyers shall revise
product literature and labeling (including stickering), change packaging and
stationery, and otherwise discontinue use of the names "American Cyanamid,"
"American Home Products," "Lederle," "A.H. Robins," "Whitehall-Robins
Healthcare," "Whitehall" and derivatives and variations thereof in the manner
set forth in the Supply Agreements.
6.7 OTHER AGREEMENTS. At the Closing, Sellers and Buyers will enter into
the Supply Agreements, the Trademark License Agreement and Transition Services
Agreement and Selfcare will execute and deliver the Promissory Note.
6.8 TERMINATION OF SALE DISCUSSIONS. Upon the execution of this Agreement,
Sellers shall promptly terminate all pending discussions with prospective buyers
of the Purchased Assets other than Buyers. During the period between the date
hereof and the Closing, unless this Agreement is terminated by either party in
accordance with the provisions hereof, neither Sellers nor any of their
respective officers, directors, Affiliates, employees or agents will, directly
or indirectly, solicit any offers, bids or indications of interest, with respect
to the Purchased Assets nor shall Sellers furnish, or authorize any agent or
representative to furnish, any information concerning the Purchased Assets to
any third party.
6.9 ACCESS TO RECORDS AFTER EFFECTIVE TIME. (a) For a period of six years
after the Closing, or, if later, until the end of the statute of limitations
period with respect to Taxes regarding the Purchased Assets, Sellers and their
representatives shall have reasonable access to all of the books and records of
the Buyers relating to the Purchased Assets with respect to periods prior to the
Closing Date to the extent that such access may reasonably be required by
Sellers in connection with matters relating to or affected by the operations of
the Purchased Assets prior to the Closing Date. Buyers shall afford such access
upon receipt of reasonable advance notice and during normal business hours.
Sellers shall be solely responsible for any costs and expenses incurred by them
pursuant to this Section 6.9. If Buyers shall desire to dispose of any of such
books and records
-22-
<PAGE> 23
prior to the expiration of such six-year period (or, if later, until the end of
the statute of limitations period with respect to Taxes regarding the Purchased
Assets), the Buyers shall, prior to such disposition, give Sellers a reasonable
opportunity, at Sellers' expense, to segregate and remove such books and records
as Sellers may elect.
(b) To the extent not included in the Books and Records, for a period
of six years after the Closing Date, or until the end of the period of the
statute of limitations with respect to Taxes regarding the Purchased Assets,
Buyers, and their respective representatives shall have reasonable access to all
of the books and records relating to the Purchased Assets. Such access shall be
afforded by Sellers and their Affiliates upon receipt of reasonable advance
notice and during normal business hours. Buyers shall be solely responsible for
any costs and expenses incurred by them pursuant to this Section 6.9(b). If
Sellers or any of their Affiliates shall desire to dispose of any of such books
and records prior to the expiration of such six-year period, Sellers shall,
prior to such disposition, give Buyers and its Affiliates opportunity, at
Buyers's expense, request delivery of any such books and records to Buyers.
6.10 NON-SOLICITATION. Until the first anniversary of the Closing Date,
Buyers agree that they and their Affiliates will not, directly or indirectly,
for their own benefit or as agent for another, without the prior consent of
Sellers, hire any person employed by Sellers with whom Buyers have had contact
in connection with this transaction or solicit to leave the employ of Sellers;
PROVIDED THAT, such covenant shall not restrict Buyers and their Affiliates from
conducting a general employee solicitation act not targeted at Sellers or their
Affiliates. This provision does not survive termination of the Agreement.
ARTICLE 7
CONDITIONS
7.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. The obligation of each party to effect the
transactions contemplated by this Agreement shall be subject to the fulfillment
at or prior to the Closing Date of the following conditions:
(a) all consents and approvals of Governmental Authorities, if any,
necessary to permit the consummation of the transactions contemplated by this
Agreement shall have been obtained and any waiting period (including any
extension thereof) applicable to the consummation of the Agreement under the HSR
Act or under other Competition Laws shall have expired or been terminated;
-23-
<PAGE> 24
(b) no preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a Governmental
Authority or executive order promulgated or enacted by any Governmental
Authority shall be in effect that would restrain or otherwise prevent the
consummation of the transactions contemplated by the Agreement;
(c) Buyers and Sellers shall have entered into the Transition Services
Agreement, the Supply Agreements and the Trademark License Agreement; and
(d) Buyers shall have obtained funds from the Financing and/or cash
on hand sufficient to enable it to pay the cash portion of the Purchase Price
for the Purchased Assets.
7.2 CONDITIONS TO THE OBLIGATION OF SELLERS. The obligation of Sellers to
effect the transactions contemplated by this Agreement is subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) Buyers shall have performed in all material respects each
obligation and agreement and complied in all material respects with each
covenant to be performed and complied with by it hereunder at or prior to the
Closing Date;
(b) the representations and warranties of Buyers in this Agreement
shall be accurate in all material respects, as of the Closing Date with the same
force and effect as though made at such time, except for changes contemplated by
this Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date);
(c) Buyers shall have furnished to Sellers a certificate, dated as of
the Closing Date, signed by a duly authorized officer of each of the Buyers to
the effect that all conditions set forth in Sections 7.2(a) and (b) have been
satisfied; and
(d) the Board of Directors of AHP shall have approved the transactions
contemplated by this Agreement; provided, however, that the transaction shall be
presented to the AHP Board of Directors for consideration at the next scheduled
Board meeting following Buyers' delivery of a Commitment Letter to AHP
satisfactory to AHP in its reasonable judgment.
7.3 CONDITIONS TO THE OBLIGATION OF BUYERS. The obligation of Buyers to
effect the transactions contemplated by this Agreement is subject to the
fulfillment at or prior to the Closing Date of the following conditions:
-24-
<PAGE> 25
(a) Sellers shall have performed in all material respects each
obligation and agreement and complied in all material respects with each
covenant to be performed and complied with by them hereunder at or prior to the
Closing;
(b) the representations and warranties of Sellers in this Agreement,
to the extent qualified as to materiality shall be accurate in all respects,
and, to the extent not so qualified, shall be accurate in all material respects,
as of the Closing Date with the same force and effect as though made at such
time, except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such date);
(c) Sellers shall have furnished to Buyers a certificate, dated as of
the Closing Date, signed by a duly authorized officer of each of the Sellers to
the effect that all conditions set forth in Sections 7.3(a) and (b) have been
satisfied;
(d) The consents of third parties, including Governmental Authorities,
set forth in SCHEDULE 7.3(d), shall have been obtained or arrangements shall
have been made reasonably satisfactory to Buyers and Sellers to allow Buyers to
receive substantially the same economic benefits as if all such consents have
been obtained; and
(e) Since the date of this Agreement, there shall not have occurred a
Material Adverse Effect.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNIFICATION. (a) Subject to Section 8.3, Sellers shall jointly and
severally indemnify, defend and hold harmless Buyers and its Affiliates, and
their respective officers, directors, employees and controlling Persons from any
liability, damage, deficiency, loss, judgments, assessments, cost or expense,
including reasonable attorneys' fees and costs of investigating and defending
against lawsuits, complaints, actions or other pending or threatened litigation
(being hereafter referred to in this Article VIII as "Costs"), arising from or
attributable to:
(i) The breach of any representation or warranty made by Sellers in
this Agreement;
-25-
<PAGE> 26
(ii) Any failure of Sellers duly to perform or observe any covenant or
agreement to be performed or observed by Sellers pursuant to this
Agreement;
(iii) The Excluded Liabilities;
(iv) Except as otherwise specifically set forth in the Supply
Agreement, all Product Liability claims directly related to products
manufactured and sold by Sellers prior to Closing;
(v) All obligations for the return of Products returned subsequent to
the Closing Date but prior to the nine-month anniversary of the Closing
Date which the customer has previously taken title to, or otherwise
accepted for delivery, in an amount not to exceed EIGHT HUNDRED FIFTY
THOUSAND DOLLARS ($850,000), it being understood that for purposes of
satisfying the indemnity contained herein, such returns shall be valued at
the price paid by such customer for such returned Product, and Buyers shall
remit to Sellers any consideration received after such return for such
returned Product; and
(vi) All obligations for the redemption of coupons issued prior to
Closing but redeemed prior to the nine-month anniversary of the Closing
Date, in an amount not to exceed ONE HUNDRED THOUSAND DOLLARS ($100,000).
(b) Buyers shall jointly and severally indemnify and hold harmless
Sellers, their respective officers, directors, employees and Affiliates from
Costs arising from or attributable to:
(i) The breach of any representation or warranty made by Buyers in
this Agreement;
(ii) Any failure of Buyers duly to perform or observe any covenant or
agreement to be performed or observed by Buyers pursuant to this Agreement;
(iii) The Assumed Liabilities;
(iv) Except as specifically set forth in the Supply Agreements, all
Product Liability claims related to products manufactured or sold by Buyers
or its Affiliates on or after the Closing; and
(v) Except to the extent indemnification is provided for in Section
8.1(a)(v), all obligations for Products sold prior to or subsequent to the
Closing Date and returned subsequent to the Closing Date.
-26-
<PAGE> 27
(c) Sellers and Buyers shall indemnify the other for all Taxes for the
periods and in the manner described in Section 6.5 which shall be the sole and
exclusive basis of indemnity for Taxes under this Agreement.
8.2 PROCEDURES.
(i) Promptly after the receipt by any Person entitled to indemnity
hereunder of notice under this paragraph 8.2, of (a) any claim or (b) the
commencement of any action or proceeding, such Person (the "Aggrieved
Party") will, if a claim with respect thereto is to be made against any
party obligated to provide indemnification pursuant to this Article 8 (the
"Indemnifying Party"), give such Indemnifying Party written notice of such
claim or the commencement of such action or proceeding and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting from such claim, and, upon such assumption, shall
cooperate fully with the Indemnifying Party in the conduct of such defense.
Failure by the Indemnifying Party to notify the Aggrieved Party of its
election to defend any such action within a reasonable time, but in no
event more than fifteen days after notice thereof shall have been given to
the Indemnifying Party, shall be deemed a waiver by the Indemnifying Party
of its right to defend such action. If the Indemnifying Party assumes the
defense of any such claim or litigation resulting therefrom, the
obligations of the Indemnifying Party as to such claim shall be limited to
taking all steps reasonably necessary in the defense or settlement of such
claim or litigation resulting therefrom. The Aggrieved Party may
participate, at its expense, in the defense of such claim or litigation
provided that the Indemnifying Party shall direct and control the defense
of such claim or litigation. The Indemnifying Party shall not, in the
defense of such claim or any litigation resulting therefrom, consent to
entry of any judgment, except with the written consent of the Aggrieved
Party, or enter into any settlement, except with the written consent of the
Aggrieved Party, which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Aggrieved Party of a
release from all liability in respect of such claim or litigation. In
addition, all awards and costs payable by a third party to the Aggrieved
Party or the Indemnifying Party previously paid by an Indemnifying Party
shall belong to the Indemnifying Party.
(ii) If the Indemnifying Party shall not assume the defense of any
such claim or litigation resulting therefrom, the Aggrieved Party may
defend against such claim or litigation in such manner as it may deem
appropriate and, unless the Indemnifying Party shall deposit with the
-27-
<PAGE> 28
Aggrieved Party a sum equivalent to the total amount demanded (subject to
the limitation set forth in Section 8.3(b)) in such claim or litigation
less the Minimum Loss, or shall deliver to the Aggrieved Party a surety
bond in form and substance reasonably satisfactory to the Aggrieved Party
in such amount, the Aggrieved Party may settle such claim or litigation on
such terms as it may deem appropriate, and the Indemnifying Party shall
promptly reimburse the Aggrieved Party for the amount of all expenses,
legal or otherwise, incurred by the Aggrieved Party in connection with the
defense against or settlement of such claim or litigation. If no settlement
of such claim or litigation is made, the Indemnifying Party shall promptly
reimburse the Aggrieved Party for the amount of any judgment rendered with
respect to such claim or in such litigation and of all expenses, legal or
otherwise, incurred by the Aggrieved Party in the defense against such
claim or litigation subject to the limitations set forth in Article 8.
8.3 LIMITATIONS. (a) An Aggrieved Party shall not be entitled to recover
any Costs under Section 8.1(a)(i), (ii) and (iv) until the aggregate amount of
the Costs suffered by the Aggrieved Party thereunder shall exceed $350,000.00
(the "Minimum Loss"), at which time the indemnification provided under Section
8.1(a)(i), (ii) and (iv) shall apply to all Costs in excess of the Minimum Loss,
and (b) the maximum liability under Section 8.1(a)(i), (ii) and (iv) or
8.1(b)(i) and (ii), as the case may be, for an Indemnifying Party shall not
exceed $18,000,000.00 in the aggregate. Solely for purposes of Article 8, if a
breach of representation or warranty has occurred in accordance with its terms
(including giving effect to any materiality qualifications), in determining the
amount of Costs resulting therefrom, such representation or warranty shall be
read and interpreted as if any materiality qualifications were not contained
therein.
8.4 INDEMNIFICATION AS SOLE REMEDY. To the fullest extent permitted by
law, the indemnification provided in this Article 8, subject to the limitations
set forth herein, shall be the exclusive post-Closing remedy for damages
available to any Aggrieved Party.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual written consent of Buyers and Sellers;
-28-
<PAGE> 29
(b) by Buyers or Sellers if the Closing shall not have occurred on or
prior to February 28, 1997, PROVIDED, HOWEVER, that a party shall not have the
right to terminate under this Section 9.1(b) if such party's (or such party's
Affiliates) failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in the failure of the Closing to occur on or before such
date;
(c) subject to Section 6.3, by Buyers or Sellers if a court of
competent jurisdiction or Governmental Authority shall have issued an order,
decree or ruling or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable; or
(d) by Sellers at any time after February 6, 1997 if Sellers have not
received a copy of the Commitment Letter satisfactory to Sellers in their
reasonable judgement.
The date on which this Agreement is terminated pursuant to any of the
foregoing subsections of this Section 9.1 is herein referred to as the
"Termination Date."
9.2 EFFECT OF TERMINATION. Except as set forth in Section 5.2, upon the
termination of this Agreement pursuant to Section 9.1, this Agreement shall
forthwith become null and void, except that nothing herein shall relieve any
party from liability for breach of this Agreement prior to such termination and
the provisions of Articles 8 and 10 shall survive such termination with respect
to any such breach.
ARTICLE 10
GENERAL PROVISIONS
10.1 PUBLIC STATEMENTS. So long as this Agreement is in effect, none of the
parties hereto shall issue or cause the publication of any press release or
other announcement with respect to this Agreement or the transactions
contemplated hereby without consulting with and obtaining the consent of the
other party which shall not be unreasonably withheld or delayed; PROVIDED,
HOWEVER, that such consent shall not be required where such release or
announcement is required by applicable law.
10.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
mailed by reputable overnight courier or certified mail (return receipt
requested) or sent by telecopier (confirmed thereafter by certified mail) to the
-29-
<PAGE> 30
parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:
(a) if to Sellers:
American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: David M. Olivier
Senior Vice President
Telecopier Number: (201) 660-7156
with a copy to:
American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: Senior Vice President and General
Counsel
Telecopier Number: (201) 660-7155
(b) if to Buyers:
Selfcare, Inc.
200 Prospect St.
Waltham, MA 02154
Attention: President
Telecopier Number: (617) 647-3939
with a copy to:
Foley, Hoag & Eliot, LLP
One Post Office Square
Boston, MA 02129
Attention: John D. Patterson, Jr.
Telecopier Number: (617) 832-7000
Notice so given shall (in the case of notice so given by mail) be
deemed to be given and received on the third calendar day after mailing or the
next business day if sent by a reputable overnight courier and (in the case of
notice so given by telecopier or personal delivery) on the date of actual
transmission or (as the case may be) personal delivery.
10.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the parties hereto shall survive the Closing
and shall remain in full force and effect for a period of 18 months after the
Closing Date except for those relating to Taxes, which representations and
warranties shall survive until the period of the applicable statute of
limitations has expired. Except for claims relating to Taxes, in no event shall
any amounts be recovered from an Indemnifying Party under Article 8 or otherwise
for any breaches of representations or warranties for which a written notice of
claim specifying in reasonable detail the specific nature of the Costs
-30-
<PAGE> 31
and the estimated amount of such Costs ("Claim Notice") is not delivered to the
other party prior to the close of business on the 18 month anniversary date of
the Closing Date, and the indemnities related to breaches of representations and
warranties granted by the Sellers and Buyers in Article 8 shall terminate 18
months after the Closing Date; PROVIDED, HOWEVER, that such indemnities shall
survive with respect only to the specific matter that is the subject of any
Claim Notice delivered in good faith within such 18 month period and otherwise
in compliance with the requirements of Article 8 until the earlier to occur of
(A) the date on which a final nonappealable resolution of the matter described
in such Claim Notice has been reached or (B) the date on which the matter
described in such Claim Notice has otherwise reached final resolution.
10.4 AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
10.5 WAIVER. At any time prior to the Closing, any term, provision or
condition of this Agreement may be waived in writing (or the time for
performance of any of the obligations or other acts of the parties hereto may be
extended) by the party that is entitled to the benefits thereof.
10.6 PARTIES IN INTEREST. This Agreement may not be assigned by a party
without the prior written consent of the other parties hereto; PROVIDED,
HOWEVER, that Buyers may assign its rights and obligations to an Affiliate of
Buyers. This Agreement shall not run to the benefit of or be enforceable by any
person other than a party to this Agreement and, subject to the first sentence
of this Section, its successors and assigns PROVIDED, HOWEVER, the persons
entitled to indemnification under Article 8 shall be beneficiaries of such
provisions.
10.7 ENTIRE AGREEMENT; GOVERNING LAW; MISCELLANEOUS. This Agreement
(including the documents and instruments referred to herein) constitutes the
entire agreement and supersedes all other prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof; is not intended to confer upon any other person any
rights or remedies hereunder; and shall be governed in all respects, including
validity, interpretation and effect, by the internal laws of the State of New
York without giving effect to the principles of conflicts of laws thereunder.
This Agreement may be executed in one or more counterparts which together shall
constitute a single agreement. If any provisions of this Agreement shall be held
to be illegal, invalid or unenforceable under any applicable law, then such
contravention or invalidity shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification shall
-31-
<PAGE> 32
render it legal, valid and enforceable, then this Agreement shall be construed
as if not containing the provision held to be invalid, and the rights and
obligations of the parties shall be construed and enforced accordingly.
-32-
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ David M. Oliver
-----------------------------------
Name:
Title:
AMERICAN CYANAMID COMPANY
By: /s/ Gerald A. Jibilian
-----------------------------------
Name:
Title:
A.H. ROBINS COMPANY, INCORPORATED
By: /s/ Gerald A. Jibilian
-----------------------------------
Name:
Title:
SELFCARE, INC.
By: /s/
-----------------------------------
Name:
Title:
SELFCARE ACQUISITION CORP.
By: /s/
-----------------------------------
Name:
Title:
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
AMERICAN HOME PRODUCTS CORPORATION
By:
-----------------------------------
Name:
Title:
AMERICAN CYANAMID COMPANY
By:
-----------------------------------
Name:
Title:
A.H. ROBINS COMPANY, INCORPORATED
By:
-----------------------------------
Name:
Title:
SELFCARE, INC.
By: /s/ RON ZWANZIGER
-----------------------------------
Name: RON ZWANZIGER
Title: CEO
SELFCARE ACQUISITION CORP.
By: /s/ RON ZWANZIGER
-----------------------------------
Name: RON ZWANZIGER
Title: CEO
<PAGE> 35
Direct Manufacture
MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
Exhibit B(1)
SUPPLY AGREEMENT
AGREEMENT, effective this _____ day of ________, 1997 ("Effective Date") by
and between AMERICAN HOME PRODUCTS CORPORATION, a Delaware corporation ("AHP"),
AMERICAN CYANAMID COMPANY, a Maine corporation, ("ACY") and A.H. Robins Company,
Incorporated, a Delaware corporation ("A.H. Robins" and together with AHP and
ACY, "Sellers") and SELFCARE, INC., a Delaware corporation ("SelfCare") and
SELFCARE ACQUISITION CORP., a wholly owned subsidiary of SelfCare, Inc., a
Delaware corporation (together with SelfCare, "Buyers").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Sellers are engaged, among other things, in the marketing and sale
of certain over-the-counter products sold in the vitamin and nutritional
supplement categories;
WHEREAS, Buyers desire to purchase certain assets of Sellers relating to
such products in the Territory (as hereinafter defined), and Sellers desire to
sell such assets to Buyers;
<PAGE> 36
- 2 -
WHEREAS, Sellers and Buyers have entered into an agreement with respect to
the purchase of such assets ("Asset Purchase Agreement");
WHEREAS, Buyers wish to secure a short term supply of such products and
desires Sellers to manufacture and furnish Buyers with such supply; and
WHEREAS, Sellers desire to manufacture and furnish to Buyers such supply of
products.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the following
respective meanings:
1.1 "Act" shall mean the Federal Food Drug and Cosmetic Act, as
amended.
1.2 "Affiliate" shall mean any individual, corporation or other entity
that, directly or indirectly, through stock ownership or otherwise, controls, is
controlled by, or is under
<PAGE> 37
- 3 -
common control with, the designated party, but only for so long as
the relationship exists.
1.3 "Current Products" shall mean Products having packaging bearing
the names of the Sellers or their Affiliates or any trademarks or tradedress of
Sellers not included as Purchased Assets as defined in the Asset Purchase
Agreement.
1.4 "Effective Date" shall be the date first written above.
1.5 "FDA" shall mean the United States Food and Drug Administration,
any of its successor agencies or departments, or any other agency serving the
same or similar function.
1.6 "Loss" or "Losses" shall mean all liability claims, demands,
damages, actions, suits, and judgments instituted by third parties against
either of the parties hereunder attributable to bodily injury, sickness,
disease, death, injury to property, infringement of intellectual property rights
or otherwise, including, without limitation, reasonable attorney's fees and
investigation and other costs.
1.7 "Product(s)" shall mean the vitamin and nutritional supplement
products defined in the Specifications (as hereinafter defined). The identities
of the Products are set forth in EXHIBIT A. Products included in Exhibit A and
indicated as "stock only" are included in this Agreement only for the purpose of
the sale of inventories of such "stock only" products existing as of the
Effective Date. The manufacture and supply of such "stock only"
<PAGE> 38
- 4 -
manufactured products are covered by the corresponding Supply Agreement
(Contract Manufacture) executed concurrently herewith.
1.8 "Specifications" shall mean the finished product and process and
manufacturing specifications and instructions, quality assurance and other
applicable procedures, and product descriptions applicable to the Product and/or
the packaging thereof, consistent with Sellers' past practices. The initial
Specifications shall be delivered to the Buyers by Sellers on or prior to the
Effective Date and shall be reasonably acceptable to Buyers.
1.9 "Term" shall mean the period set forth under Article 3.
1.10 "Territory" shall mean The United States of America (which shall
not include its territories or possessions).
2. SUPPLY AND LICENSE.
------------------
2.1 (a) During the Term of this Agreement, Sellers shall, subject to
the terms and conditions of this Agreement, manufacture the Products for, and
shall sell the Products to, Buyers, and shall remain able (subject to force
majeure) to manufacture and to make the Products available to Buyers during the
Term of this Agreement.
(b) Buyers shall, during the Term of this Agreement, purchase
Products from Sellers in accordance with the terms of Paragraphs 5 and 6 hereof.
<PAGE> 39
- 5 -
(c) Nothing in this Agreement shall restrict Buyers or Sellers
from manufacturing, purchasing or distributing other products which may be
competitive with any of the Products.
2.2 In supplying the Products, Sellers shall be responsible for
obtaining all raw materials, shippers, packers, and packaging materials and for
providing all labor and other overhead necessary to manufacture the Products.
2.3 The costs associated with any and all changes in packaging and/or
labeling components of the Products requested in writing by Buyers shall be
borne exclusively by Buyers.
2.4 (a) For a period of six (6) months from the Effective Date (and
subject to modification by Paragraph 2.4(d) hereof), Sellers hereby grant
Buyers, and Buyers hereby accept, a limited, implied non-exclusive, royalty-free
license under U.S. Patent No. 5,381,912 and U.S. Design Patent Nos. 359,907;
359,908; 359,909 and 359,910 (the "Packaging Patents") to distribute and/or sell
those Products produced by Sellers as of the Closing Date (as defined in the
Asset Purchase Agreement) in the packaging which are covered by the Packaging
Patents.
(b) During the six month term recited in Paragraph 2.4(a), Buyers
shall use their best efforts to convert the packaging of such Product(s) to
packaging which is commercially available from third parties other than Sellers
or its designees.
(c) Should Buyers be unable to convert such packaging as required
under Paragraph 2.4(b) despite exercise of their best efforts to do so within
the six (6) month term set forth in
<PAGE> 40
- 6 -
Paragraph 2.4(a), Sellers agree to grant an extension of the license term until
expiration of the Term to allow for the completion of the conversion.
(d) The implied license of Paragraph 2.4(a) or any extension thereof shall
terminate immediately upon the expiration or termination of this Agreement.
2.5 To facilitate Buyers' change to Product bottles not covered by the
Packaging Patents, Sellers shall conduct the stability testing reasonably
associated with such change. The parties hereby agree that such stability
testing shall be limited to a three (3) month accelerated stability testing or
as subsequently mutually agreed by the parties. The testing protocol(s) to be
used by Sellers shall be reviewed with, and approved by, Buyers prior to Sellers
conducting such testing. The costs associated with all such stability testing
shall be borne exclusively by Buyers.
3. TERM.
----
3.1 Subject to earlier termination as hereinafter provided, the term
of this Agreement shall commence on the Effective Date and shall continue for up
to twelve (12) months following the Effective Date.
<PAGE> 41
-7-
4. FORECASTS AND ORDERS.
--------------------
4.1 (a) Buyer has provided Sellers with a non-binding forecast of its
purchases of Products for the Term within the Territory, said forecast being
attached hereto as EXHIBIT B.
(b) Within ten (10) business days of the Effective Date, Buyer shall
update the forecast described in Paragraph 4.1(a). Such amended forecast shall
be a non-binding (except as provided in Paragraph 14.1(c)) forecast of their
purchases of Products for the Term within the Territory ("Annual Forecast").
Each Product is to be identified in such Annual Forecast by individual SKU.
4.2 (a) Every thirty (30) days during the term hereof, Buyer shall
provide Sellers with a good faith, non-binding forecast of its purchases of
Products during the next three (3) month period. Such forecasts shall be made
recognizing the requirements for Batch Sizes and Lead Times as defined in
Paragraph 4.2(b) hereof.
(b) Sellers have presented Buyers with, and Buyers acknowledge the
receipt of, a document listing the Products, the batch size used in the
production of each such Product ("Batch Size"), and the lead times required to
manufacture each of said Products ("Lead Times"), such document being appended
hereto as EXHIBIT D.
4.3 (a) Buyers shall authorize the manufacture and packaging of a
Product by issuing a purchase order ("Purchase Order") to Sellers and Sellers
shall fill such Purchase Orders (on a FIFO basis) from Sellers' stocks of
Current Product existing as
<PAGE> 42
-8-
of the Effective Date ("Stocks") or as necessary, Sellers shall manufacture and
package, or have packaged, such Products. Each Purchase Order shall be in a form
and contain terms previously agreed to by the parties. Each Purchase Order shall
correspond to a total quantity of Product which is a whole number multiple of
the applicable Batch Size as set forth in EXHIBIT D. The proposed delivery date
recited in the Purchase Order shall also be equal to or greater than the
applicable Lead Time for each such Product as set forth in EXHIBIT D. Each
Purchase Order shall further specify the following: (i) the identity of Product
by SKU, and (ii) the quantity of such Product.
(b) Sellers shall promptly acknowledge each Purchase Order by
signing and returning to Buyers the acknowledgment copy of each Purchase Order
promptly after its receipt. Failure of the Sellers to deliver to Buyers a
written notice objecting to a Purchase Order within five (5) business days after
receipt of the Purchase Order shall constitute Sellers' acceptance of the
Purchase Order.
(c) In the event of any conflict between the terms and conditions
of this Agreement and the terms and conditions of Buyer's Purchase Order, the
terms and conditions of this Agreement shall be controlling.
4.4 Buyers may request Seller to accept an increase in Buyers' Annual
Forecast of Product(s). Sellers' obligation with respect thereto shall solely be
to exercise commercially reasonable efforts to accommodate Buyers' request so
long as (a) such increase represents a whole number multiple of the Batch Size
of each such
<PAGE> 43
-9-
Product, (b) the period until the proposed date(s) of delivery is greater than
the applicable Lead Time for each such Product, (c) the proposed date(s) of
delivery is within the Term, and (d) the proposed increase does not represent
more than fifty percent (50%) of the Annual Forecast of such Product.
5. PRICE AND PAYMENT.
-----------------
5.1 Subject to the terms and conditions of this Agreement, Buyers
shall purchase all Products for which a Purchase Order has been submitted and
accepted by Sellers. Buyers shall pay Sellers the prices listed in the Product
and Price List (attached hereto as EXHIBIT C) for such Products.
5.2 Except as provided in Paragraph 14.1(b) hereof, Sellers shall
invoice Buyers for each shipment of Products (including Inventory as defined in
Paragraph 14.1(e) hereof) promptly upon shipment of such Products from Sellers'
loading dock. Payment for such Products shall be made by Buyers to Sellers in
United States dollars within forty-five (45) days from the date of Sellers'
invoice.
5.3 Concurrently herewith, the parties have entered into an agreement
under which Sellers shall provide Buyers with transitional services related to
the Products ("Transition Services Agreement"). In the event of any conflict
between the terms of this Agreement and the terms and conditions of the
Transition Services Agreement, the terms and conditions of the Transition
Services Agreement shall control.
<PAGE> 44
- 10 -
6. DELIVERY.
--------
6.1 All Products manufactured by Sellers during the Term shall be
delivered F.O.B. Sellers' manufacturing facilities on the date specified in the
applicable Purchase Order. All Stock shall be delivered F.O.B. Sellers'
warehouse facilities on the date specified in the applicable Purchase Order.
Inventory (as defined in Paragraph 14.1(e) hereof) shall be delivered to Buyers
promptly upon the expiration or termination of this Agreement, as applicable.
Title, possession, and risk of loss shall pass to Buyers upon delivery of
Products to Buyers' carrier at Sellers' loading docks. Upon delivery of
Products, Buyers shall promptly inspect all Products in a manner determined by
Buyers.
6.2 Prior to, or upon, Product delivery, Sellers shall provide to
Buyers a certificate of analysis with each shipment of Products stating that the
Products conform to the Specifications.
6.3 Subject to the terms and conditions of this Agreement, Sellers
shall deliver all Products so ordered on such scheduled delivery date(s). If the
amount of Products ordered to be delivered in a calendar quarter exceeds the
amount so forecast for that calendar quarter, Sellers shall deliver the
forecasted amount on the scheduled delivery date and will employ commercially
reasonable efforts to deliver the additional amount in accordance with the terms
of the Purchase Order for such order.
6.4 Buyers shall have the right to reject or revoke acceptance of any
Products which are not as warranted in Paragraph 9.1 for a period of forty-five
(45) days following the date of Sellers' delivery, pursuant to Paragraph 6.1, of
such Products. In
<PAGE> 45
-11-
such event, Sellers shall be responsible for the shipping costs associated with
returning the non-conforming Products to Sellers' loading dock.
7. SPECIFICATIONS.
--------------
7.1 Sellers represent that, as of the date hereof, they are capable of
manufacturing and packaging the Product in conformance with the Specifications.
7.2 During the term of this Agreement, the parties may revise the
Specifications only by mutual written agreement.
8. REGULATORY MATTERS AND DOCUMENTATION.
------------------------------------
8.1 During the term of this Agreement, Sellers shall perform all of
its obligations under this Agreement in compliance with the Specifications and
all applicable local, state, federal, laws and regulations, including but not
limited to the Act and the applicable Current Good Manufacturing Practices and
any other relevant regulations promulgated by the FDA.
8.2 Sellers shall keep complete and accurate records of all operations
in the manufacture and supply of Products under this Agreement.
8.3 Upon reasonable prior notice, Sellers shall permit Buyers, their
designated agents and representatives, or representatives of any United States
regulatory agency to inspect, during normal business hours, any facility used by
Sellers in performing their obligations under this Agreement. Such inspection
may include, without limitation, a review of Sellers' manufacturing
<PAGE> 46
-12-
procedures, quality assurance procedures, and any records relating to the
manufacture and supply of Products under this Agreement. Sellers shall promptly
notify Buyers in the event of any such inspection by representatives of any
United States regulatory agency and shall provide copies to Buyers of any
documents relating to such inspection, including, without limitation, the
respective agency's inspection report and Sellers' response.
9. WARRANTY.
--------
9.1 Sellers warrant that at the time of delivery to Buyers' carrier
the Products shall (a) conform to the Specifications, and (b) not be adulterated
or misbranded within the meaning of the Act.
9.2 (a) If Sellers dispute any finding by Buyers that any Products
fail to conform to the applicable Specifications, or are adulterated or
misbranded, such dispute shall be resolved by an independent laboratory selected
by Sellers, acceptable to Buyers. All fees and disbursements incurred in
connection with the independent determination shall be borne by the party which
determined incorrectly that the Products do or do not conform to the
Specifications, or are or are not adulterated or misbranded.
(b) Sellers shall promptly replace any Products not conforming to the
applicable Specifications, or otherwise adulterated or misbranded (unless such
non-conformance is due to any act or omission by Buyers or its agents or
subcontractors).
(c) Sellers, at their option, may instruct Buyers to (i) return to
Sellers (via a carrier and at a cost approved by
<PAGE> 47
-13-
Sellers), or (ii) destroy in an environmentally acceptable manner at Sellers'
expense, any Product order, or portion thereof, which does not conform to the
applicable Specifications or is otherwise adulterated or misbranded.
9.3 THE WARRANTIES CONTAINED IN THIS PARAGRAPH 9 SHALL SUPERSEDE ALL
OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING THOSE SET FORTH IN ANY
PURCHASE ORDER OR INVOICE RECEIVED PURSUANT TO THIS AGREEMENT.
10. INDEMNIFICATION.
---------------
10.1 (a) Sellers shall, at their expense, defend any action or claim
instituted against Buyers or their Affiliates and indemnify and hold harmless
Buyers and their Affiliates, together with their respective officers, directors,
employees, agents, and insurers for any Loss arising out of Sellers' breach of
any of (i) the warranties set forth in Paragraph 9.1, or (ii) Sellers'
covenants under this Agreement.
(b) Buyers shall, at their expense, defend any action or claim
instituted against Sellers or their Affiliates and indemnify and hold harmless
Sellers and their Affiliates, together with their respective officers,
directors, employees, agents, and insurers for any Loss other than those
described in Paragraph 10.1(a) hereof.
10.2 The parties hereto agree that a party seeking indemnification
hereunder shall implement the procedure set forth in Article 8.2 of the Asset
Purchase Agreement.
<PAGE> 48
-14-
11. RECALLS.
-------
11.1 If either party determines that it may be necessary to recall any
Products, it shall immediately notify the other party. The decision to implement
any such recall of Product(s) shall be made solely by Buyer.
11.2 Prior to commencing any recall, the parties shall review with one
another the manner in which the recall is to be carried out and any instructions
or suggestions of the applicable regulatory authorities.
11.3 The cost associated with any such recall shall be borne by the
party whose actions necessitated the recall.
12. INTELLECTUAL PROPERTY.
---------------------
12.1 (a) Buyers may advertise, promote, market and/or sell the
Products under any of its trademarks, copyrights, tradenames, or logos, whether
registered or unregistered.
(b) Except in association with the sale of Current Products,
Buyers shall not utilize the names of any of the Sellers or their Affiliates in
conjunction with the advertisement, promotion, marketing and/or sale of the
Products.
12.2 Except for the trademarks specifically mentioned in the Trademark
License Agreement as defined in the Asset Purchase Agreement and except for the
Trademarks as such term is defined in the Asset Purchase Agreement, Buyer shall
not use in the labeling, marketing, promotion or any other advertising of the
Products any trademarks of Sellers or their Affiliates, or any marks which are
<PAGE> 49
-15-
confusingly similar to any trademarks of Sellers of their Affiliates.
12.3 (a) Within one hundred and twenty (120) days after the Effective
Date, Buyers shall submit to Sellers its labeling and packaging requirements for
each of the Products (the "Label Requirements"). The Label Requirements shall be
of a content and style of Buyers' choosing, except that they shall not contain a
reference to Sellers or their Affiliates (unless so required by the Trademark
License Agreement). The Label Requirements may be, but need not be, identical to
the labels and packaging for the Current Products (except for the aforementioned
deleted reference to Sellers or their Affiliates and presence of a new UPC
code). Promptly after receipt of the Label Requirements, Sellers shall produce
for inspection by Buyers a sample label and/or package for each Product, which
shall be consistent with the applicable Label Requirements. Buyers shall inspect
the sample and either (i) approve it by sending Sellers written notice of
approval, or (ii) send Sellers written change instructions, in which case
Sellers shall promptly make such changes and submit a new sample for Buyers'
approval. An approved label and/or package shall hereinafter be known as a
"Label". All applicable Products manufactured following delivery of Labels to
Sellers shall bear a Label. Buyers may change a Label during the Term.
(b) Within ten (10) business days after the Effective Date, Buyers shall
submit to Sellers a new UPC code for each of the Products. Should Sellers be
required to order new Product labels prior to production of a Label as described
in Paragraph 12.3(a)
<PAGE> 50
-16-
above, such new Product labels (containing the new UPC code and Buyer's name in
place of that of Sellers) shall be ordered in reasonable quantities as agreed to
by Sellers and Buyers and be used in the production of the applicable Product
until exhausted.
(c) Prior to Sellers' production of Product bearing Labels, Sellers agree
that Buyers may sell and distribute the Product using Sellers' labeling and/or
packaging.
13. FORCE MAJEURE.
-------------
Neither party shall be liable for failure to perform any of its
obligations under this Agreement during any period in which, and to the extent
which, such performance is delayed by fire, flood or other natural disaster,
embargo, riot, changes in applicable laws, rules or regulations, whether foreign
or domestic, the intervention of any governmental authority, or any other
reasons or conditions beyond the control of the parties. Seller and Buyer shall
promptly notify the other of the occurrence of any such conditions.
14. TERMINATION.
-----------
14.1 (a) In the event that either party materially breaches or
defaults on any of its obligations, representations, warranties, or covenants
under this Agreement, the other party may give notice to the defaulting party
setting forth in reasonable detail the nature of such breach or default. If the
defaulting party fails to cure such breach or default within sixty (60) days
from the date of such notice, this Agreement shall be subject to
<PAGE> 51
-17-
immediate termination by the terminating party upon additional written notice to
the defaulting party.
(b) If Buyers apply for or consent to the appointment of a
receiver, trustee or liquidator for all or a substantial part of their assets;
admits in writing their inability to pay their debts generally as they mature;
makes a general assignment for the benefit of creditors; is adjudicated a
bankrupt; submits a petition or an answer seeking an arrangement with creditors;
takes advantage of any insolvency law except as a creditor; submits an answer
admitting the material allegations of a petition in bankruptcy or insolvency
proceeding; has an order, judgment or decree entered by any court of competent
jurisdiction approving a petition seeking reorganization of such party or
appointing a receiver, trustee or liquidator for such party, or for all or a
substantial part of any of their assets and such order, judgment or decree shall
continue unstayed and in effect for a period of ninety (90) consecutive days;
files a voluntary petition of bankruptcy or fails to remove an involuntary
petition in bankruptcy filed against their within ninety (90) days of the filing
thereof (each of which shall hereinafter be referred to as an "Insolvency
Instance"), Sellers shall have no further obligation to deliver Product(s) to
Buyers unless Buyers (i) agree to accept such Products C.O.D., (ii) post a
letter of credit, or (iii) provide Sellers with other reasonable assurances that
payment for such Products shall be made (the reasonableness of such assurances
to be made by Sellers' in their sole discretion). The cessation of
<PAGE> 52
-18-
Product delivery hereunder shall not relieve Buyers from their obligations to
purchase the Inventory as hereinafter defined.
(c) Buyers may terminate the Agreement upon sixty (60) days
written notice to Sellers. However, such early termination shall not relieve
Buyers of their obligations to purchase Products as set forth herein.
(d) In the event that a condition of force majeure, as defined in
Paragraph 13, prevents either party from performing any of its material
obligations for more than sixty (60) days, then the other party may immediately
terminate this Agreement by giving written notice to the other party which is
being prevented from performing.
(e) Upon the earlier of expiration of the Term or termination of
this Agreement for any reason, Buyers shall purchase from Sellers any work in
process, all raw materials, all finished goods (Product), labeling and packaging
materials for the Products in an amount of up to and including one hundred and
fifty percent (150%) of the Annual Forecast less the total amount of Products
recited in submitted Purchase Orders and previously delivered to Buyer
("Inventory"). Buyer shall purchase such Inventory from Sellers at a price equal
to Sellers' cost for such Inventory, as determined by third party invoices
received by Sellers.
14.2 The termination of this Agreement by either party pursuant to
this Paragraph 14 hereof shall not affect the rights of the terminating party
under this Agreement or under applicable laws.
<PAGE> 53
-19-
15. NOTICES.
-------
All notices, requests, demands or other communications required or
permitted under this Agreement shall be deemed to have been duly given and made
if made in accordance with the provisions of Paragraph 10.2 of the Asset
Purchase Agreement.
16. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to its conflict of laws
and principles.
17. INSURANCE.
---------
17.1 During the Term, Buyers shall maintain Comprehensive General
Liability Insurance, including full Products Liability coverage, with an
insurance carrier reasonably acceptable to Sellers, and coverage limits of not
less than $2,000,000.00 per occurrence and at least $5,000,000.00 aggregate
coverage for claims of bodily injury and property damage arising out of any
Loss. Such policy or policies shall extend coverage with respect to occurrences
during a policy period, regardless of the dates on which claims arising from
such an occurrence are made, and shall name Sellers as additional insureds. Such
policy or policies shall also expressly cover any liability Buyers may incur as
an indemnitor under this Agreement.
<PAGE> 54
-20-
18. GENERAL PROVISIONS.
------------------
18.1 ASSIGNABILITY. This Agreement is assignable by Buyers, in whole
or in part, provided that Buyers provide Sellers with prior written notice of
such assignment, and provided further that such assignment shall not relieve
Buyers of any of their obligations under Paragraphs 2.3, 5.1, 5.2 and 10.1(b)
hereof. Neither this Agreement nor any rights or obligations hereunder are
assignable by Sellers without the prior written consent of the Buyers, which
consent shall not be unreasonably withheld or delayed; provided, however that
Sellers may assign this Agreement and the rights and obligations hereunder to
any third party who purchases or otherwise acquires all or substantially all of
Sellers' assets. Further, Sellers may, at its sole option, elect to assign any
of their rights or obligations hereunder to an Affiliate or have any of its
Affiliates perform any of their obligations hereunder, provided that such
assignment shall not relieve Sellers of its liability for satisfaction of the
obligations contained herein.
18.2 INDEPENDENT CONTRACTORS. Both parties agree to perform under
this Agreement solely as independent contractors and shall not hold themselves
out as employees or agents of the other.
18.3 HEADINGS. The section and subsection headings of this Agreement
are for convenience of reference only and shall not be deemed to alter or affect
the provisions hereof.
18.4 WAIVER. Neither the failure nor any delay on the part of either
party hereto in exercising any right, power or remedy hereunder shall operate as
a waiver thereof, or of any other
<PAGE> 55
-21-
right, power or remedy or preclude any further or other exercise thereof, or the
exercise of any other right, power or remedy.
18.5 BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the exclusive benefit of the respective parties, their legal
representatives, successors, or permitted assigns. This Agreement is not
intended to, nor shall it create any right in any other party.
18.6 VALIDITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect any other provisions hereof, and
this Agreement shall be construed in all other respect as if such invalid and
unenforceable provisions were omitted.
18.7 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute but one and the same instrument.
18.8 NO CONFLICT. Each of the parties does hereby represent and
warrant to the other that nothing herein conflicts with or shall cause a default
under any document, agreement, instrument or other writing to which said party
is a party or by which said party is bound.
18.9 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to the transaction contemplated herein
and shall not be modified or amended except by an instrument in writing signed
by the parties hereto. Any purchase order used by Buyers for the purpose of
ordering Products shall be solely for the purpose of specifying the
<PAGE> 56
-22-
type and quantity of Products so ordered and Buyers' delivery requirements.
18.10 SURVIVAL. The provisions contained in Paragraphs 1, 2.1(c), 5,
6,8-12, and 14-18 shall survive the termination for any reason of this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers as of the Effective Date.
AMERICAN HOME PRODUCTS SELFCARE INC.
CORPORATION
By: By:
------------------------ -----------------------
Its: Its:
------------------------ -----------------------
AMERICAN CYANAMID SELFCARE ACQUISITION CORP.
COMPANY
By: By:
------------------------ ------------------------
Its: Its:
------------------------ -----------------------
<PAGE> 57
CONFIDENTIAL TREATMENT
-23-
EXHIBIT A
---------
PRODUCTS
--------
PRODUCT SKU
- ------- ---
XXXXXXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX XXXXXX
XXXXXXXXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXX XXXXXXX
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE> 58
CONFIDENTIAL TREATMENT
-24-
EXHIBIT B
---------
ANNUAL FORECAST
---------------
XXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXX XXXXXX
XXXXXXXXXXXXXXXXXXXX XXXXXX
XXXXXXXXXXXXXXXXXXXXXX XXXXX
XXXXXXXXXXXXXX
XXXXXX XXXXXXX
XXXXXXXXXXXXXXXXXXX XXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXX
XXXXXXXXXXXXXXXXXXXX XXXXXXX
XXXXXX XXXXXXX
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE> 59
CONFIDENTIAL TREATMENT
-25-
EXHIBIT C
---------
PRODUCT AND PRICE LIST
----------------------
XXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXX XXXXXXXXXX
XXXXXXXXXXXXX XXXXXXXXX
XXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXX XXXXXXXXX
XXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXX XXXXXXXX
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE> 60
CONFIDENTIAL TREATMENT
-26-
EXHIBIT D
---------
BATCH SIZE (DOZ.)
-----------------
PRODUCT BATCH SIZE (DOZ.) P.O. LEAD TIMES
XXXXXXXXXXXXXXXXX XXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX XXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX XXXX XXXXXXXX
XXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX XXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXX XXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX XXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXX XXX XXXXXXXX
XXXXX
XXXXXXXXXXXX XXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXX XXX XXXXXXXX
XXXXXXXXXXXXXXXXXXX XXXX XXXXXXXX
XXXXXXXXXXX XXXX XXXXXXXX
XXXXXXXXXXXXX XXXX XXXXXXXX
XXXXXXXXXXXXXXXXXXXXX XXX XXX
XXXXXXXXXXXXXXXXXXXXXXXXXX XXX XXX
XXXXXXXXXXXXXXXXXXXXX XXX XXX
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE> 61
Contract Manufacture
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
Exhibit B(2)
SUPPLY AGREEMENT
AGREEMENT, effective this _____ day of ________, 1997 ("Effective Date") by
and between AMERICAN HOME PRODUCTS CORPORATION, a Delaware corporation ("AHP"),
AMERICAN CYANAMID COMPANY, a Maine corporation, ("ACY"), A.H. Robins Company,
Incorporated, a Delaware Company ("A.H. Robins" and together with AHP and ACY
collectively "Sellers") and SELFCARE, INC., a Delaware corporation ("SelfCare")
and SELFCARE ACQUISITION CORP., a wholly owned subsidiary of SelfCare Inc.
(together with SelfCare "Buyers").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Sellers are, among other things, engaged in the marketing and sale
of certain over-the-counter products sold in the vitamin and nutritional
supplement categories;
WHEREAS, Buyers desire to purchase certain assets of Sellers relating to
such products in the Territory (as hereinafter defined), and Sellers desire to
sell such assets to Buyers;
<PAGE> 62
- 2 -
WHEREAS, Sellers and Buyers have entered into an agreement with respect to
the purchase of such assets ("Asset Purchase Agreement");
WHEREAS, Buyers wish to secure a short term source of manufacture of such
products and desires Sellers to aid in Buyers' procurement of the manufacture of
such Products;
WHEREAS, Seller shall supply Buyers with its current stock of products per
the terms of the corresponding Supply Agreement (Direct Manufacture) executed
concurrently herewith; and
WHEREAS, Sellers desire to aid Buyers in the procurement of the manufacture
of such products.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the following
respective meanings:
1.1 "Act" shall mean the Federal Food Drug and Cosmetic Act, as
amended.
<PAGE> 63
-3-
1.2 "Affiliate" shall mean any individual, corporation or other entity
that, directly or indirectly, through stock ownership or otherwise, controls, is
controlled by, or is under common control with, the designated party, but only
for so long as the relationship exists.
1.3 "Current Products" shall mean Products having packaging bearing
the names of the Sellers or their Affiliates or any trademarks or tradedress of
Sellers not included as Purchased Assets as defined in the Asset Purchase
Agreement.
1.4 "Effective Date" shall be the date first written above.
1.5 "FDA" shall mean the United States Food and Drug Administration,
any of its successor agencies or departments, or any other agency serving the
same or similar function.
1.6 "Loss" or "Losses" shall mean all liability claims, demands,
damages, actions, suits, and judgments instituted by third parties against
either of the parties hereunder attributable to bodily injury, sickness,
disease, death, injury to property, infringement of intellectual property rights
or otherwise, including, without limitation, reasonable attorney's fees and
investigation and other costs.
1.7 "Product(s)" shall mean the vitamin and nutritional supplement
products defined in the Specifications (as hereinafter defined). The identities
of the Products are set forth in EXHIBIT A.
<PAGE> 64
-4-
1.8 "Specifications" shall mean the finished product and process and
manufacturing specifications and instructions, quality assurance and other
applicable procedures, and product descriptions applicable to the Product and/or
the packaging thereof consistent with Sellers' past practices. The initial
Specifications shall be delivered to the Buyers by Sellers on or prior to the
Effective Date and shall be reasonably acceptable to Buyers.
1.9 "Term" shall mean the period set forth under Article 3.
1.10 "Territory" shall mean The United States of America (which shall
not include its territories or possessions).
1.11 "Contractor" shall mean a third party manufacturer of Product(s)
who agrees to manufacture Product(s) for Sellers during the Term.
2. SUPPLY.
------
2.1 (a) During the Term of this Agreement, Sellers shall, subject to
the terms and conditions of this Agreement, have Products conforming to the
Specifications manufactured by Contractor for, and shall sell such Products to,
Buyers. Sellers shall use commercially reasonable efforts to ensure that
Contractor shall remain able (subject to force majeure) to manufacture and to
make the Products available to Buyers during the term of this Agreement.
<PAGE> 65
- 5 -
(b) Buyers shall, during the term of this Agreement, purchase
Products from Sellers in accordance with the terms of Paragraphs 5 and 6 hereof.
(c) Nothing in this Agreement shall restrict Buyers or Sellers
from manufacturing, purchasing or distributing other products which may be
competitive with any of the Products.
2.2 In supplying the Products, Sellers or Contractor (as determined
solely by Sellers) shall be responsible for obtaining all raw materials,
shippers, packers, and packaging materials and for providing all labor and other
overhead necessary to manufacture the Products.
2.3 The costs associated with any and all changes in packaging and/or
labeling components of the Products requested in writing by Buyers shall be
borne exclusively by Buyers.
2.4 (a) For a period of six (6) months from the Effective Date (and
subject to modification by Paragraph 2.4(d) hereof), Sellers hereby grant
Buyers, and Buyers hereby accept, a limited, implied non-exclusive, royalty-free
license under U.S. Patent No. 5,381,912 and U.S. Design Patent Nos. 359,907;
359,908; 359,909 and 359,910 (the "Packaging Patents") to distribute and/or sell
those Products produced by Sellers as of the Closing Date (as defined in the
Asset Purchase Agreement) in the packaging which are covered by the Packaging
Patents.
(b) During the six month term recited in Paragraph 2.4(a), Buyers shall use
their best efforts to convert the packaging of
<PAGE> 66
- 6 -
such Product(s) to packaging which is commercially available from third parties
other than Sellers or its designees.
(c) Should Buyers be unable to convert such packaging as required under
Paragraph 2.4(b) despite exercise of their best efforts to do so within the six
(6) month term set forth in Paragraph 2.4(a), Sellers agree to grant Buyers an
extension of the license term until the expiration or termination of the Term to
allow for the completion of the conversion.
(d) The implied license of Paragraph 2.4(a) or any extension thereof shall
terminate immediately upon the expiration or termination of this Agreement.
2.5 To facilitate Buyers' change to a new bottle for the Protegra
Products, Sellers shall conduct the stability testing reasonably associated
with such change. The parties hereby agree that such stability testing shall
be limited to a three (3) month accelerated stability testing or as
subsequently mutually agreed to by the parties. The testing protocol(s) to be
used by Sellers shall be reviewed with, and approved by, Buyers prior to Sellers
conducting such testing. The costs associated with all such stability testing
shall be borne exclusively by Buyers.
3. TERM.
----
3.1 Subject to earlier termination as hereinafter provided, the term
of this Agreement shall commence on the Effective Date and shall continue for up
to twelve (12) months following the Effective Date.
<PAGE> 67
-7-
4. FORECASTS AND ORDERS.
--------------------
4.1 (a) Buyers have provided Sellers with a non-binding forecast of
its purchases of Products for the Term within the Territory, said forecast being
attached hereto as EXHIBIT B.
(b) Within ten (10) business days of the Effective Date, Buyers shall
update the forecast described in Paragraph 4.1(a). Such amended forecast shall
be a non-binding (except as provided in Paragraph 14.1(c)) forecast of its
purchases of Products for the term with the Territory ("Annual Forecast"). Each
Product is to be identified in such Annual Forecast by individual SKU.
4.2 (a) Every thirty (30) days during the term hereof, Buyers shall
provide Sellers with a good faith, non-binding forecast of its purchases of
Products during the next three (3) month period. Such forecasts shall be made
recognizing the requirements for Batch Sizes and Lead Times as defined in
Paragraph 4.3(b) hereof.
(b) Sellers have presented Buyers with, and Buyers acknowledge the
receipt of, a document listing the Products, the batch size used in the
production of each such Product ("Batch Size"), and the lead times required to
manufacture each of said Products ("Lead Times"), such document being appended
hereto as EXHIBIT D.
4.3 (a) Buyers shall authorize the manufacture and packaging of a
Product by issuing a purchase order ("Purchase Order") to Sellers and Sellers
shall manufacture and package, or have packaged, such Products. Each Purchase
Order shall be in a form and contain terms previously agreed to by the parties.
Each
<PAGE> 68
-8-
Purchase Order shall correspond to a total quantity of Product which is a whole
number multiple of the applicable Batch Size as set forth in EXHIBIT D. The
proposed delivery date recited in the Purchase Order shall also be equal to or
greater than the applicable Lead Time for each such Product as set forth in
EXHIBIT D. Each Purchase Order shall further specify the following: (i) the
identity of Product by SKU, and (ii) the quantity of such Product.
(b) Sellers shall promptly acknowledge each Purchase Order by
signing and returning to Buyers the acknowledgment copy of each Purchase Order
promptly after its receipt. Failure of the Sellers to deliver to Buyers a
written notice objecting to a Purchase Order within five (5) business days after
receipt of the Purchase Order shall constitute Sellers' acceptance of the
Purchase Order.
(c) In the event of any conflict between the terms and conditions
of this Agreement and the terms and conditions of Buyers' Purchase Order or any
other document, the terms and conditions of this Agreement shall be controlling.
4.4 Buyers may request Sellers to accept an increase in Buyers' Annual
Forecast of Product(s). Sellers' obligation with respect thereto shall solely be
to exercise commercially reasonable efforts to accommodate Buyers' request so
long as (a) such increase represents a whole number multiple of the Batch Size
of each such Product, (b) the period until the proposed date(s) of delivery is
greater than the applicable Lead Time for each such Product, (c) the proposed
date(s) of delivery is within the Term, and (d) the
<PAGE> 69
-9-
proposed increase does not represent more than fifty percent (50%) of the Annual
Forecast of such Product.
5. PRICE AND PAYMENT.
-----------------
5.1 Subject to the terms and conditions of this Agreement, Buyers
shall purchase all Products for which a Purchase Order has been submitted and
accepted by Sellers. Buyers shall further pay Sellers the prices listed in the
Product and Price List (attached hereto as EXHIBIT C) for such Products.
5.2 Except as provided in Paragraph 14.1(b) hereof, Sellers shall
invoice Buyers for each shipment of Product promptly upon the delivery of the
Products to Buyers' carrier at Contractor's loading dock. Payment for such
Products shall be made by Buyers to Sellers in United States dollars within
forty-five (45) days from the date of Sellers' invoice.
5.3 Concurrently herewith, the parties have entered into an agreement
under which Sellers shall provide Buyers with transitional services related to
the Products ("Transitional Services Agreement"). In the event of any conflict
between the terms of this Agreement and the terms and conditions of the
Transition Services Agreement, the terms and conditions of the Transition
Services Agreement shall control.
6. DELIVERY.
--------
6.1 All Products shall be delivered F.O.B. Contractor's manufacturing
facilities on the date specified in the applicable Purchase Order. Inventory (as
defined in Paragraph 14.1(e) hereof)
<PAGE> 70
-10-
shall be delivered to Buyers promptly upon the expiration or termination of this
Agreement, as applicable. Title, possession, and risk of loss shall pass to
Buyers upon delivery of Products to Buyers' carrier at Contractor's loading
docks. Upon delivery of Products, Buyers shall promptly inspect all Products in
a manner determined by Buyers.
6.2 Prior to, or upon, Product delivery, Buyers shall be provided with
a certificate of analysis with each shipment of Products stating that the
Products conform to the Specifications.
6.3 Subject to the terms and conditions of this Agreement, Sellers
shall exercise reasonable commercial efforts to ensure that all Products so
ordered are delivered on such scheduled delivery date(s). If the amount of
Products ordered to be delivered in a calendar quarter exceeds the amount so
forecast for that calendar quarter, Sellers shall deliver the forecasted amount
on the scheduled delivery date and will employ commercially reasonable efforts
to secure the delivery of the additional amount in accordance with the terms of
the Purchase Order for such order.
6.4 Buyers shall have the right to reject or revoke acceptance of any
Products which are not as warranted in Paragraph 9.1 for a period of forty-five
(45) days following the date of Sellers' delivery, pursuant to Paragraph 6.1, of
such Products to Buyers' carrier at Contractor's loading dock. In such event,
Sellers shall be responsible for the shipping costs associated with returning
the non-conforming Products to Contractor's loading dock.
<PAGE> 71
-11-
7. SPECIFICATIONS.
--------------
7.1 Subject to the terms and conditions of this Agreement, Sellers
shall have Contractor manufacture and package the Product(s) in conformance with
the Specifications.
7.2 During the term of this Agreement, the parties may revise the
Specifications only by mutual written agreement.
8. REGULATORY MATTERS AND DOCUMENTATION.
------------------------------------
8.1 During the term of this Agreement, Sellers shall use commercially
reasonable efforts to ensure that each such Contractor is in compliance with the
Specifications and all applicable local, state, federal, laws and regulations,
including but not limited to the Act and the applicable Current Good
Manufacturing Practices and any other relevant regulations promulgated by the
FDA.
8.2 Sellers shall use commercially reasonable efforts to ensure that
each such Contractor keep complete and accurate records of all operations in the
manufacture and supply of Products under this Agreement.
8.3 Upon reasonable prior notice, Sellers shall secure permission for
Buyers, their designated agents and representatives, or representatives of any
United States regulatory agency to inspect, during normal business hours, any
facility used by Contractors in the manufacture of Product(s). Such inspection
may include, without limitation, a review of Contractor's manufacturing
procedures, quality assurance procedures, and any records relating to the
manufacture and supply of Products under this Agreement. Sellers shall promptly
notify Buyers in the event of any such
<PAGE> 72
-12-
inspection by representatives of any United States regulatory agency and shall
provide copies to Buyers of any documents relating to such inspection,
including, without limitation, the respective agency's inspection report and
Contractor's response thereto.
9. WARRANTY.
--------
9.1 Sellers warrant that at the time of delivery to Buyers' carrier
the Products shall (a) conform to the Specifications, and (b) not be adulterated
or misbranded within the meaning of the Act.
9.2 (a) If Sellers (or Contractor) dispute any finding by Buyers that
any Products fail to conform to the applicable Specifications, or are
adulterated or misbranded, such dispute shall be resolved by an independent
laboratory selected by Sellers, acceptable to Buyers. All fees and disbursements
incurred in connection with the independent determination shall be borne by the
party which determined incorrectly that the Products do or do not conform to the
Specifications, or are or are not adulterated or misbranded.
(b) Sellers shall secure the prompt replacement from Contractor of any
Products not conforming to the applicable Specifications, or otherwise
adulterated or misbranded (unless such non-conformance is due to any act or
omission by Buyers or its agents or subcontractors).
(c) Sellers (or Contractor), at their option, may instruct Buyers to
(i) return to Sellers (or Contractor) via a carrier and at a cost approved by
Sellers (or Contractor), or (ii)
<PAGE> 73
-13-
destroy in an environmentally acceptable manner at Sellers' expense, any Product
order, or portion thereof, which does not conform to the applicable
Specifications or is otherwise adulterated or misbranded.
9.3 THE WARRANTIES CONTAINED IN THIS PARAGRAPH 9 SHALL SUPERSEDE ALL
OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING THOSE SET FORTH IN ANY
PURCHASE ORDER OR INVOICE RECEIVED PURSUANT TO THIS AGREEMENT.
10. INDEMNIFICATION.
---------------
10.1 (a) Sellers shall, at their expense, defend any action or claim
instituted against Buyers or its Affiliates and indemnify and hold harmless
Buyers and its Affiliates, together with their respective officers, directors,
employees, agents, and insurers for any Loss arising out of Sellers' or
Contractor's breach of (i) the warranties set forth in this Agreement or (ii)
Sellers' covenants under this Agreement.
(b) Buyers shall, at their expense, defend any action or claim
instituted against Sellers, Contractor or their Affiliates and indemnify and
hold harmless Sellers, Contractor and their Affiliates, together with their
respective officers, directors, employees, agents, and insurers for any Loss
other than those described in Paragraph 10.1(a) hereof.
10.2 The parties hereto agree that a party seeking indemnification
hereunder shall implement the procedure set forth in Article 8.2 of the Asset
Purchase Agreement.
<PAGE> 74
-14-
11. RECALLS.
-------
11.1 If either party determines that it may be necessary to recall any
Products, it shall immediately notify the other party. The decision to implement
any such recall of Product(s) shall be made solely by Buyers.
11.2 Prior to commencing any recall, the parties shall review with one
another the manner in which the recall is to be carried out and any instructions
or suggestions of the applicable regulatory authorities.
11.3 The cost associated with any such recall shall be borne by the
party whose actions necessitated the recall.
12. INTELLECTUAL PROPERTY.
---------------------
12.1 (a) Buyers may advertise, promote, market and/or sell the
Products under any of their trademarks, copyrights, tradenames, or logos,
whether registered or unregistered.
(b) Except in association with the sale of Current Products,
Buyers shall not utilize the names of any of the Sellers or their Affiliates in
conjunction with the advertisement, promotion, marketing and/or sale of the
Products.
12.2 Except for the trademarks specifically mentioned in the Trademark
License Agreement as defined in the Asset Purchase Agreement and except for the
Trademarks as such term is defined in the Asset Purchase Agreement, Buyers shall
not use in the labeling, marketing, promotion or any other advertising of the
Products any trademarks of Sellers or their Affiliates, or any marks which are
<PAGE> 75
-15-
confusingly similar to any trademarks of Sellers of their Affiliates.
12.3 (a) Within one hundred and twenty (120) days after the Effective
Date, Buyers shall submit to Sellers their labeling and packaging requirements
for each of the Products (the "Label Requirements). The Label Requirements shall
be of a content and style of Buyers' choosing, except that they shall not
contain a reference to Sellers or their Affiliates (unless so required by the
Trademark License Agreement). The Label Requirements may be, but need not be,
identical to the labels and packaging for the Current Products (except for the
aforementioned deleted reference to Sellers or their Affiliates and presence of
a new UPC Code). Promptly after receipt of the Label Requirements, Sellers shall
produce for inspection by Buyers a sample label and/or package for each Product,
which shall be consistent with the applicable Label Requirements. Buyers shall
inspect the sample and either (i) approve it by sending Sellers written notice
of approval, or (ii) send Sellers written change instructions, in which case
Sellers shall promptly make such changes and submit a new sample for Buyers'
approval. An approval label and/or package shall hereinafter be known as a
"Label." All applicable Products manufactured following delivery of Labels shall
bear a Label. Buyers may change a Label during the Term.
(b) Within ten (10) business days after the Effective Date,
Buyers shall submit to Sellers a new UPC code for each of the Products. Should
Sellers or Contractor be required to order new Product labels prior to
production of a Label as described in
<PAGE> 76
-16-
Paragraph 12.3(a) above, such new Product labels (containing the new UPC code
and Buyers' name in place of that of Sellers) shall be ordered in reasonable
quantities as agreed by Sellers and Buyers and used in the production of the
applicable Product until exhausted.
(c) Prior to the production of Product bearing Labels, Sellers
agree that Buyers may sell and distribute the Product using Sellers' labeling
and/or packaging.
13. FORCE MAJEURE.
-------------
Neither party shall be liable for failure to perform any of its
obligations under this Agreement during any period in which, and to the extent
which, such performance is delayed by fire, flood or other natural disaster,
embargo, riot, changes in applicable laws, rules or regulations, whether foreign
or domestic, the intervention of any governmental authority, or any other
reasons or conditions beyond the control of the parties. Seller and Buyers shall
promptly notify the other of the occurrence of any such conditions.
14. TERMINATION.
-----------
14.1 (a) In the event that either party materially breaches or
defaults on any of its obligations, representations, warranties, or covenants
under this Agreement, the other party may give notice to the defaulting party
setting forth in reasonable detail the nature of such breach or default. If the
defaulting party fails to cure such breach or default within sixty (60) days
from the date of such notice, this Agreement shall be subject to
<PAGE> 77
-17-
immediate termination by the terminating party upon additional written notice to
the defaulting party.
(b) If Buyers apply for or consent to the appointment of a
receiver, trustee or liquidator for all or a substantial part of their assets;
admits in writing their inability to pay their debts generally as they mature;
make a general assignment for the benefit of creditors; are adjudicated a
bankrupt; submit a petition or an answer seeking an arrangement with creditors;
take advantage of any insolvency law except as a creditor; submit an answer
admitting the material allegations of a petition in bankruptcy or insolvency
proceeding; have an order, judgment or decree entered by any court of competent
jurisdiction approving a petition seeking reorganization of such party or
appointing a receiver, trustee or liquidator for such party, or for all or a
substantial part of any of their assets and such order, judgment or decree shall
continue unstayed and in effect for a period of ninety (90) consecutive days;
file a voluntary petition of bankruptcy or fail to remove an involuntary
petition in bankruptcy filed against them within ninety (90) days of the filing
thereof (each of which shall hereinafter be referred to as an "Insolvency
Instance"), neither Sellers nor Contractor shall have further obligations to
deliver Product(s) to Buyers unless Buyers (i) agree to accept such Products
C.O.D., (ii) post a letter of credit, or (iii) provide Sellers or Contractor
with other reasonable assurances that payment for such Products shall be made
(the reasonableness of such assurances to be made by Sellers in their sole
discretion). The cessation of Product delivery
<PAGE> 78
-18-
hereunder shall not relieve Buyers from their obligations to purchase the
Inventory as hereinafter defined.
(c) Buyers may terminate the Agreement upon sixty (60) days
written notice to Sellers. However, such early termination shall not relieve
Buyers of their obligations to purchase Products as set forth herein.
(d) In the event that a condition of force majeure, as defined in
Paragraph 13, prevents either party (including, in the case of Sellers, the
Contractor) from performing any of its material obligations for more than sixty
(60) days, then the other party may immediately terminate this Agreement by
giving written notice to the other party which is being prevented from
performing.
(e) Upon the earlier of expiration of the Term or termination of
this Agreement for any reason, Buyers shall purchase from Sellers and Contractor
any work in process, all raw materials, all finished goods, all labeling and
packaging materials for the Products in an amount of up to and including one
hundred and fifty percent (150%) of the Annual Forecast less the total amount of
Products recited in submitted Purchase Orders and previously delivered to Buyers
("Inventory"). Buyers shall purchase such Inventory from Sellers and Contractor
at a price equal to the cost for such Inventory, as determined by third party
invoices received by Sellers or Contractor.
14.2 The termination of this Agreement by either party pursuant to
this Paragraph 14 hereof shall not affect the rights of the terminating party
under this Agreement or under applicable laws.
<PAGE> 79
-19-
15. NOTICES.
-------
All notices, requests, demands or other communications required or
permitted under this Agreement shall be deemed to have been duly given and made
if made in accordance with the provisions of Paragraph 10.2 of the Asset
Purchase Agreement.
16. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to its conflict of laws
and principles.
17. INSURANCE.
---------
17.1 During the Term, Buyers shall maintain Comprehensive General
Liability Insurance, including full Products Liability coverage, with an
insurance carrier reasonably acceptable to Sellers, and coverage limits of not
less than $2,000,000.00 per occurrence and at least $5,000,000.00 aggregate
coverage for claims of bodily injury and property damage arising out of any
Loss. Such policy or policies shall extend coverage with respect to occurrences
during a policy period, regardless of the dates on which claims arising from
such an occurrence are made, and shall name Sellers as additional insureds. Such
policy or policies shall also expressly cover any liability Buyers may incur as
indemnitors under this Agreement.
<PAGE> 80
-20-
18. GENERAL PROVISIONS.
------------------
18.1 ASSIGNABILITY. This Agreement is assignable by Buyers, in whole
or in part, provided that Buyers provide Sellers with prior written notice of
such assignment, and provided further that such assignment shall not relieve
Buyers of any of their obligations under Paragraphs 2.3, 4, 5.1, 5.2 and 10.1(b)
hereof. Neither this Agreement nor any rights or obligations hereunder are
assignable by Sellers without the prior written consent of the Buyers, which
consent shall not be unreasonably withheld or delayed; provided, however that
Sellers may assign this Agreement and the rights and obligations hereunder to
any third party who purchases or otherwise acquires all or substantially all of
Sellers' assets. Further, Sellers may, at their sole option, elect to assign any
of their rights or obligations hereunder to an Affiliate or have any of their
Affiliates perform any of their obligations hereunder, provided that such
assignment shall not relieve Sellers of their liability for satisfaction of
their obligations contained herein.
18.2 INDEPENDENT CONTRACTORS. Both parties agree to perform under this
Agreement solely as independent contractors and shall not hold themselves out as
employees or agents of the other.
18.3 HEADINGS. The section and subsection headings of this Agreement
are for convenience of reference only and shall not be deemed to alter or affect
the provisions hereof.
18.4 WAIVER. Neither the failure nor any delay on the part of either
party hereto in exercising any right, power or remedy hereunder shall operate as
a waiver thereof, or of any other
<PAGE> 81
-21-
right, power or remedy or preclude any further or other exercise thereof, or the
exercise of any other right, power or remedy.
18.5 BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the exclusive benefit of the respective parties, their legal
representatives, successors, or permitted assigns. This Agreement is not
intended to, nor shall it create any right in any other party.
18.6 VALIDITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect any other provisions hereof, and
this Agreement shall be construed in all other respect as if such invalid and
unenforceable provisions were omitted.
18.7 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute but one and the same instrument.
18.8 NO CONFLICT. Each of the parties does hereby represent and
warrant to the other that nothing herein conflicts with or shall cause a default
under any document, agreement, instrument or other writing to which said party
is a party or by which said party is bound.
18.9 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to the transaction contemplated herein
and shall not be modified or amended except by an instrument in writing signed
by the parties hereto. Any purchase order used by Buyers for the purpose of
ordering Products shall be solely for the purpose of specifying the
1
<PAGE> 82
-22-
type and quantity of Products so ordered and Buyers' delivery requirements.
18.10 SURVIVAL. The provisions contained in Paragraphs 1, 2.1(c), 5,
6,8-12, and 14-18 shall survive the termination for any reason of this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers as of the Effective Date.
AMERICAN HOME PRODUCTS SELFCARE, INC.
CORPORATION
By:_________________________ By:________________________
Its:________________________ Its:_______________________
AMERICAN CYANAMID COMPANY SELFCARE ACQUISITION CORP.
By:_________________________ By:________________________
Its:________________________ Its:_______________________
<PAGE> 83
CONFIDENTIAL TREATMENT
-23-
EXHIBIT A
---------
PRODUCTS
--------
PRODUCT NAME SKU
- ------------ ---
XX XXXXXXXXXXXXXX XXXXXXX
XX XXXXXXXXXXXXXXXXX XXXXXXX
XX XXXXXXXXXXXXX XXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXX XXXXXXXX
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE> 84
CONFIDENTIAL TREATMENT
-24-
EXHIBIT B
---------
ANNUAL FORECAST (UNITS)
-----------------------
XX XXXXXXXXXXXXXXXXX XXXXXXX
XX XXXXXXXXXXXXXXXXX XXXXXXX
XX XXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXXXX XXXXXXX
XXXXXXXXXXXXXXX XXXXXXX
MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION
<PAGE> 85
CONFIDENTIAL TREATMENT
-25-
EXHIBIT C
---------
PRODUCT AND PRICE LIST
----------------------
XX XXXXXXXXXXXXXXXXX XXXXXXXX
XX XXXXXXXXXXXXXXXXX XXXXXXXX
XX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXX XXXXXXXX
XXXXXXXXXXXXXXX XXXXXXXX
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE> 86
CONFIDENTIAL TREATMENT
-26-
EXHIBIT D
---------
BATCH SIZE (DOZ.)
-----------------
PRODUCT BATCH SIZE (DOZ.) P.O. LEAD TIMES
XXXXXXXXXXXXXXX XXXX XXXXXXXX
XXXXXXXX XXXX XXXXXXXX
XXXXXXXXXXXX XXXXXXXXXXXXX XXXX XXXXXXXX
XXXXXXXXXXXXXX XXXX XXXXXXXX
XXXXXXXXXXXXXXX XX XXXXXXXX
XXXXXXXXX XXX XXXXXXXX
XXXXXXXXXXXXXX XXXX XXXXXXXX
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE> 87
CONFIDENTIAL TREATMENT
EXHIBIT D
TRANSITION SERVICES
1. Commencing on the Closing, Sellers will provide to Buyers certain
transitional services relating to the Brands as set forth below and for the
periods of time as set forth below.
2. With respect to the Brands, Sellers will provide the following
administrative functions for a period not to exceed 90 days following the
Closing:
Sellers will assist Buyers to locate and enable a third party,
acceptable to Buyers, to provide customers service, warehousing and
distribution of Products for Buyers after the Closing Date. If such
third party distributor cannot be located or made available to
distribute Buyers' Products after Closing, Sellers agree to perform
such distribution services including receiving customer orders (from
Buyers), shipping Product from Sellers' distribution centers and
promptly, within 5 business days after shipment, notifying Buyers of
shipment. In addition to the provisions of the Supply Agreement,
Buyers agree to pay to Sellers a percentage of the transfer price per
Schedule __ of the respective Supply Agreement for each SKU
distributed by Sellers as follows:
First 30 days after closing - XX
Next 30 days after closing - XX
Next 30 days after closing - XX
The XXXX charge set forth above will cover all freight, warehousing
and other out-of-pocket costs of Sellers and will be due and payable
within 30 days after the receipt of Sellers' invoice for such
services. In no event shall Sellers be required to perform these
Transition Services longer than ninety days after Closing.
3. Buyers will continue to have reasonable access to Sellers' manufacturing
personnel knowledgeable about the Brands during the term of the Supply
Agreement.
4. Buyers will continue to have reasonable access to Sellers' marketing and
sales personnel knowledgeable about the Brands for 3 months following the
Closing Date.
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE> 1
SELFCARE
200 Prospect Street
Waltham, Massachusetts 02154
Telephone: (617) 647-3900
Facsimile: (617) 647-3939
AGREEMENT BETWEEN EN PLC LIMITED PARTNERSHIP AND SELFCARE, INC.
---------------------------------------------------------------
1. EN PLC sells its holding of 7,961,386 shares of Enviromed plc common
stock to Selfcare, Inc. at 30p/share at an exchange rate of 1.5925 or
$3,803,552.00.
2. The payment is made in the form of a 2 year note at an interest rate
of Bank of Boston prime rate plus 1 1/2% adjustable for changes in
Bank of Boston prime rate.
3. At the end of each of the first four quarters Selfcare, Inc. will pay
$316,962.68 of the loan to EN PLC plus interest and, in each of the
following four quarters it will pay $633,925.36 plus interest.
4. The note will be secured only by the Enviromed plc stock purchased.
Should Selfcare seek to sell or transfer the Enviromed plc stock
purchased in the transaction, Selfcare will have to pay off the
balance of the note plus any interest due at that time. The note is
subordinated to any current or future indebtedness of Selfcare, Inc.
5. Notwithstanding any additional documentation required, the transaction
is effective today.
for Selfcare, Inc.
/s/ Edward Roberts
-----------------------------------
Date: October 17, 1996
----------------
Professor Edward B. Roberts
for EN PLC Limited Partnership
/s/ Donald Mattes
-----------------------------------
Date: October 17, 1996
----------------
Mr. Donald A. Mattes
<PAGE> 1
[Selfcare Letterhead]
November 25, 1996
Certain holders of 10% Promissory
Notes (the "Notes") of Selfcare, Inc.
dated March 30, 1995
Dear Noteholder:
Pursuant to the letter agreement dated July 19, 1996 (the "AMEX Letter
Agreement") by and between you and Selfcare, Inc. (the "Company"), you and
certain other holders (the "Certain Holders") waived repayment of any principal
amount of any Notes held by you and the Notes of the Certain Holders until such
date (the "Determination Date") as Selfcare's stockholders' equity as of
November 30, 1996 (the "Measurement Date") has been determined (but no later
than December 31, 1996). You and the Certain Holders further agreed that if the
Company's stockholders' equity as of the Measurement Date was determined on the
Determination Date to be less than $4.0 million, the principal amount of your
and their Notes, together with any accrued but unpaid interest thereon through
the Determination Date, would be automatically converted as of the Determination
Date into a number of shares of common stock, par value $.001 per share (the
"Common Stock"), of the Company. Your agreement helped the Company obtain
approval from the American Stock Exchange to list the Company's Common Stock on
the exchange and complete its successful initial public offering on August 6,
1996.
As a result of recent developments, the Company believes its stockholders'
equity as of the Measurement Date will substantially exceed $4.0 million.
Accordingly, under the terms of the AMEX Letter Agreement, the Company believes
it will be obligated to repay the principal amount of your Notes and the Notes
of the Certain Holders in full, together with any accrued but unpaid interest,
on a date (the "Payment Date") which is within five (5) business days after the
Determination Date.
The Company, however, would prefer to delay repayment of the principal of
your Notes and the Notes held by the Certain Holders until January 15, 1998.
Accordingly, the Company is hereby asking you and the Certain Holders to agree
to the following:
1. You and the Company hereby agree that, notwithstanding anything in the
Notes to the contrary, the principal amount of your Notes is to be repaid in
full, within five (5) business days after January 15, 1998 (the "New Repayment
Date"). On the New Repayment
<PAGE> 2
Date you also will receive an amount equal to the accrued but unpaid interest
from January 1, 1998 through the New Repayment Date.
2. The Company hereby agrees that, notwithstanding your agreements herein,
you will remain entitled to (a) exercise any warrants to purchase shares of the
Company's Common Stock you already hold which were issued in connection with the
Notes as if the principal amount of your Notes, were repaid in full on the
Payment Date (in other words, you will be entitled to exercise such warrants for
the number of shares currently covered thereby during the thirty (30) day period
following the Payment Date); and (b) continue to receive payments for interest
on the principal amount of your Notes on the first business day of each calendar
quarter for the immediately preceding quarter.
3. In consideration for your agreement to the terms of this letter, the
Company will issue to you after December 3, 1996 additional warrants, dated
December 3, 1996 (the "Additional Warrants"), to purchase shares of the
Company's Common Stock in substantially the form attached hereto as EXHIBIT A.
The number of Additional Warrants that you will receive by accepting this letter
agreement will equal your Proportionate Share (as hereinafter defined) of
warrants to purchase an aggregate of 50,000 shares of the Company's Common
Stock. The term "Proportionate Share" shall mean that portion of warrants to
purchase an aggregate of 50,000 shares of the Company's Common Stock multiplied
by a fraction, the numerator of which is the principal amount of your Notes and
the denominator of which is $2.75 million. The initial exercise price per share
of Common Stock underlying the Additional Warrants shall equal the average
closing price of the Company's Common Stock on the American Stock Exchange on
November 26, 27 and 29, 1996 (the "Exercise Price").
4. As further consideration for your agreement to the terms of this letter
agreement, if your Notes are outstanding as of June 30, 1997 and the Company has
not sold shares of Common Stock after the date hereof and on or before June 30,
1997 pursuant to a registration statement on Form SB-2 (or a similar form), then
the Company will issue to you by July 15, 1997, additional warrants, dated June
30, 1997 (the "Secondary Warrants"), to purchase shares of the Company's Common
Stock in substantially the form attached hereto as EXHIBIT A. The number of
Secondary Warrants that you will receive will equal your Proportionate Share of
warrants to purchase an aggregate of 25,000 shares of the Company's Common
Stock. The initial exercise price per share of Common Stock underlying the
Secondary Warrants shall equal the Exercise Price. The aggregate number of
shares of 25,000 and the Exercise Price will be appropriately adjusted to
reflect any adjustments which would have been made if the Secondary Warrants had
instead been issued on December 3, 1996.
5. You hereby agree that you will not transfer or assign any rights
contained herein without the prior written consent of the Company. You also
hereby acknowledge and agree that the contents of this letter agreement shall
remain confidential and that neither you nor any of your employees, agents or
advisors will disclose any information contained herein in any manner
whatsoever.
Enclosed for your information is a copy of the Company's quarterly report
on Form 10-QSB dated November 14, 1996 (without exhibits). Although you should
make your decision based on what you believe is best for you, I should tell you
that every director of the
<PAGE> 3
Company who holds Notes has personally agreed to the terms of this letter
agreement including Bill Umphrey, Carol Goldberg, John Levy and my family. If
you wish to accept this offer, please (i) execute this letter by signing on the
line below and sending a copy of the executed letter to the Company by facsimile
(617-647-3939) NO LATER THAN 2:00 P.M. (NEW YORK TIME) ON TUESDAY, DECEMBER 3,
1996 and (ii) return the original hard copy of this letter to the Company at 200
Prospect Street, Waltham, Massachusetts 02154, by mail, keeping a copy for your
records. Any executed copy received by facsimile after 2:00 p.m. on December 3,
1996 will not be effective unless a separate notice of effectiveness is sent to
you by the Company.
SELFCARE, INC.
By:/s/Ron Zwanziger
-------------------------------
Ron Zwanziger, President and Chief
Executive Officer
ACCEPTED AND AGREED TO:
- -----------------------------
Signature
- -----------------------------
Print Name
333453.c2
<PAGE> 1
[Selfcare Letterhead]
December 31, 1996
All holders of 10% Promissory
Notes (the "Notes") of Selfcare, Inc.
dated March 30, 1995
Dear Noteholder:
Selfcare, Inc. (the "Company") has agreed with holders of the Notes to
revise the terms of the Notes, issue new warrants to the holders of the Notes,
and replace the existing warrants with an agreement to issue the shares covered
thereby by January 15, 2000 at the latest. As a result of these changes, the
holders of the existing warrants will be able to postpone until such issuance
the recognition of a significant amount of taxable income which otherwise might
have to be reported on their 1996 tax returns.
More specifically, the terms of the agreement are as follows:
1. You and the Company hereby agree that, notwithstanding anything in the
Notes or elsewhere to the contrary, the principal amount of your Notes is to be
repaid in full within five (5) business days after January 15, 1998 (the "New
Repayment Date"). You will continue to be entitled to continue to receive
payments of interest on the principal amount of your Notes on the first business
day of each calendar quarter for the immediately preceding quarter. On the New
Repayment Date you also will receive an amount equal to the accrued but unpaid
interest from January 1, 1998 through the New Repayment Date.
2. You and the Company hereby agree that each warrant to purchase shares of
the Company's common stock, par value $.00l per share (the "Common Stock"),
which was issued to you in connection with the issuance of the Notes is hereby
terminated and canceled as of the date hereof. In exchange therefor, the Company
agrees that it will transfer to you, for no additional consideration, the number
of shares to which your warrant currently applies (i.e., your proportionate part
of the 1,142,635 shares of Common Stock for which all such warrants could be
exercised if they all were exercisable today) on the earlier of (i) January 15,
2000 or (ii) the date on which a Change in Control (as defined in Section 6)
occurs. The Company will pay any transfer taxes due with respect to such
transfer and will appropriately adjust the number of shares to be transferred in
the event a stock dividend, stock split or
<PAGE> 2
reverse stock split with respect to the Common Stock occurs between the date
hereof and the transfer of such shares.
3. In consideration for your agreement to the terms of this letter, the
Company will issue to you new warrants (the "New Warrants") to purchase shares
of the Company's Common Stock in substantially the form attached hereto as
EXHIBIT A. The number of New Warrants that you will receive by accepting this
letter agreement will equal your Proportionate Share (as hereinafter defined) of
warrants to purchase an aggregate of 54,545 shares of the Company's Common
Stock. The term "Proportionate Share" shall mean that portion of warrants to
purchase an aggregate of 54,545 shares of the Company's Common Stock multiplied
by a fraction, the numerator of which is the principal amount of your Notes and
the denominator of which is $3 million. The initial exercise price per share of
Common Stock in the New Warrants will be $12.875 (the "Exercise Price").
4. As further consideration for your agreement to the terms of this letter
agreement, if your Notes are outstanding as of June 30, 1997 and the Company has
not sold shares of Common Stock after the date hereof and on or before June 30,
1997 pursuant to a registration statement on Form SB-2 (or a similar form), then
the Company will issue to you by July 15, 1997, additional warrants, dated June
30, 1997 (the "Secondary Warrants"), to purchase shares of the Company's Common
Stock in substantially the form attached hereto as EXHIBIT A. The number of
Secondary Warrants that you will receive will equal your Proportionate Share of
warrants to purchase an aggregate of 27,273 shares of the Company's Common
Stock. The initial exercise price per share of Common Stock underlying the
Secondary Warrants shall equal the Exercise Price. The aggregate number of
shares of 27,273 and the Exercise Price will be appropriately adjusted to
reflect any adjustments which would have been made if the Secondary Warrants had
instead been issued on December 31, 1996.
5. You hereby agree that you will not transfer or assign any rights
contained herein without the prior written consent of the Company. You also
hereby acknowledge and agree that neither you nor any of your employees, agents
or advisors will disclose any information contained herein in any manner
whatsoever.
6. For purposes of this Agreement, a "Change in Control" shall mean the
occurrence of any one of the following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Act"), (other than
the Company, any of its subsidiaries, or any trustee, fiduciary or other
person or entity holding securities under any employee benefit plan or
trust of the Company or any of its subsidiaries), together with all
"affiliates" and "associates" (as such terms are defined in Rule 12b-2
under the Act) of such person, shall become the "beneficial owner" (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Company representing in excess of 50% of either (A) the
combined voting power of the Company's then outstanding securities having
the right to vote in an
<PAGE> 3
election of the Company's Board of Directors ("Voting Securities") or (B)
the then outstanding shares of Common Stock of the Company (in either such
case other than as a result of an acquisition of securities directly from
the Company); or
(ii) persons who, as of December 31, 1996, constitute the Company's
Board of Directors (the "Incumbent Directors") cease for any reason,
including, without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a majority
of the Board, provided that any person becoming a director of the Company
subsequent to such date whose election or nomination for election was
approved by a vote of at least a majority of the Incumbent Directors shall,
for purposes of this Agreement, be considered an Incumbent Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any subsidiary thereof where the
shareholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 80% or more of
the voting shares of the corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if any),
(B) any sale, lease, exchange or other transfer (in one transaction or a
series of transactions contemplated or arranged by any party as a single
plan) of all or substantially all of the assets of the Company or (C) any
plan or proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Common Stock or other Voting Securities outstanding, increases (x) the
proportionate number of shares of Common Stock beneficially owned by any person
in excess of 50% or more of the shares of Common Stock then outstanding or (y)
the proportionate voting power represented by the Voting Securities beneficially
owned by any person in excess of 50% or more of the combined voting power of all
then outstanding Voting Securities; PROVIDED, HOWEVER, that if any person
referred to in clause (x) or (y) of this sentence shall thereafter become the
beneficial owner of any additional shares of Common Stock or other Voting
Securities (other than pursuant to a stock split, stock dividend, or similar
transaction) and then beneficially owns in excess of either 50% of the Common
Stock then outstanding or of 50% or more of such combined voting power, then a
"Change in Control" shall be deemed to have occurred for purposes of the
foregoing clause (i).
7. This Agreement supersedes and replaces all other agreements with respect
to the exchange or conversion of your Note or any change in the date of payment
thereof.
<PAGE> 4
Please confirm your agreement to the above terms by signing and returning
the enclosed extra copy of this letter to the Company at 200 Prospect Street,
Waltham, Massachusetts 02109 as promptly as possible and in any event by January
15, 1997.
SELFCARE, INC.
By: /s/ Kenneth D. Legg
-------------------------------
Kenneth D. Legg, Ph.D.
Secretary and Vice President,
U.S. Operations
ACCEPTED AND AGREED TO:
- -----------------------------
Signature
- -----------------------------
Print Name
<PAGE> 1
[INFORMATION FROM THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION]
EXHIBIT 10.57
SALES DISTRIBUTION AGREEMENT
FOR
TESTING SYSTEM
FOR
BLOOD GLUCOSE
BETWEEN
LIFESCAN, INC.
AND
SELFCARE, INC.
AS OF OCTOBER 9, 1996
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS AND REVISIONS TO GLUCOSE SYSTEM.....................................................1
1.1 Revisions to Glucose System............................................................1
---------------------------
1.2 Definitions............................................................................2
-----------
ARTICLE II
SUPPLY OF LS PRODUCTS...........................................................................3
2.1 Supply of LS Products..................................................................3
---------------------
2.2 Supply Exclusivity.....................................................................3
------------------
ARTICLE III
CAPACITY PLANNING...............................................................................4
3.1 Capacity Plan Concepts.................................................................4
----------------------
3.2 Proposed and Binding Capacity Plan Definitions.........................................4
----------------------------------------------
3.3 Base Capacity..........................................................................4
-------------
3.4 Capital Requirements Notices...........................................................5
----------------------------
3.5 Acceptance and Rejection of Capital Requirements Notices...............................5
--------------------------------------------------------
3.6 Credit for Capital Expenditure Make-up Payments........................................6
-----------------------------------------------
3.7 Cooperation Regarding Capital Expenditure Make-up Payments.............................7
----------------------------------------------------------
ARTICLE IV
MARKET DEVELOPMENT RIGHTS.......................................................................7
4.1 Initial Sales Restrictions.............................................................7
--------------------------
4.2 Reserved Marketing Rights..............................................................8
-------------------------
4.3 Failure to Purchase Yearly Minimum.....................................................8
----------------------------------
4.4 Yearly Minimums:.......................................................................8
---------------
4.5 Introduction of Competing Electrochemical System......................................10
------------------------------------------------
4.6 Notice................................................................................10
------
ARTICLE V
REQUIRED PURCHASE OF LS PRODUCTS...............................................................11
ARTICLE VI
PRICE..........................................................................................11
6.1 LS Products Other Than LS Strips......................................................11
--------------------------------
6.2 Base Strip Prices.....................................................................11
-----------------
6.3 Payment in Local Currency for LS Strips...............................................12
---------------------------------------
6.4 Adjustment Based on LS Resale Price...................................................12
-----------------------------------
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
6.5 Adjustment Based on Selfcare Profitability............................................13
------------------------------------------
ARTICLE VII
FAILURE BY SELFCARE TO SUPPLY..................................................................13
7.1 Definitions Relating to Self-help Licensing...........................................13
-------------------------------------------
7.2 License on Supply Default.............................................................14
-------------------------
7.3 Communications Following Force Majeure................................................14
--------------------------------------
7.4 Rights Following Force Majeure........................................................14
------------------------------
7.5 Restoration of Supply by Selfcare.....................................................15
---------------------------------
7.6 Terms, Royalties......................................................................15
----------------
7.7 Cooperation...........................................................................15
-----------
7.8 Exclusive Remedy......................................................................16
----------------
ARTICLE VIII
CERTAIN COVENANTS..............................................................................16
8.1 LifeScan Covenants....................................................................16
------------------
8.2 Selfcare Covenants....................................................................17
------------------
8.3 Authorization.........................................................................17
-------------
8.4 Indemnification.......................................................................17
---------------
ARTICLE IX
AGREEMENTS REGARDING TECHNOLOGY................................................................19
9.1 Infringement of Selfcare's Technology.................................................19
-------------------------------------
9.2 U.S. and European Patent Convention Patent Conflicts..................................19
----------------------------------------------------
9.3 Patent Conflicts in Other Countries...................................................20
-----------------------------------
9.4 Technical Information Necessary for Marketing.........................................20
---------------------------------------------
ARTICLE X
MISCELLANEOUS..................................................................................20
10.1 Invoicing, Shipping and Payment.......................................................20
-------------------------------
10.2 Product Warranties....................................................................21
------------------
10.3 Agreement Term........................................................................21
--------------
10.4 Termination...........................................................................21
-----------
10.5 Miscellaneous.........................................................................22
-------------
Schedules
1.1 Description of Glucose System
4.4 Inventory Target
</TABLE>
(ii)
<PAGE> 4
SALES DISTRIBUTION AGREEMENT
----------------------------
FOR A TESTING SYSTEM FOR
BLOOD GLUCOSE
This Distribution Agreement is made as of October 9, 1996 by and between
Selfcare, Inc., a Delaware corporation ("Selfcare"), and LifeScan, Inc., a
California corporation ("LifeScan"). This Distribution Agreement is entered into
pursuant to the Master Agreement dated as of November 10, 1995 (the "Master
Agreement") by and among Selfcare, LifeScan and Johnson & Johnson Development
Corporation, a New Jersey corporation and relates to a home-use testing system
for measuring the concentration of blood glucose.
In consideration of the mutual covenants contained herein, and in
accordance with the terms of the Master Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS AND REVISIONS TO GLUCOSE SYSTEM
1.1 REVISIONS TO GLUCOSE SYSTEM. LifeScan and Selfcare intend to
commercialize a different home use testing system for measuring the
concentration of blood glucose than that described in Schedule 1.1 to the Master
Agreement and hereby agree that for purposes of this Agreement, "Glucose System"
means the electrochemical blood glucose testing system described in Schedule 1.1
to this Agreement, as the same may be modified with the written approval of
LifeScan or pursuant to Section 3.5 of the Master Agreement. The parties note
that payments made and required to be made by LifeScan under the Master
Agreement and the payment for surrender and conversion of the Convertible
Promissory Notes by Johnson & Johnson Development Corporation pursuant to the
Investment Agreement continue to be governed by the definition of Glucose System
set forth in those Agreements. The parties do not intend to duplicate the
requirement of such payments and such payment, surrender and conversion based on
the definition of Glucose System set forth in the Master Agreement and the
Investment Agreement. Selfcare shall prepare a draft 510(k) Notification with
respect to the Glucose System and Section 3.5 of the Master Agreement will apply
to it such 510(k) Notification. Selfcare and LifeScan anticipate agreeing in the
future to make changes from time to time in the specification for the Glucose
System. LS Product produced by Selfcare for LifeScan which deviates from the
required specification in minor respects or which does not yet comply with
agreed changes shall be deemed to comply with the requirements of this Agreement
so long as such LS Product meets applicable regulatory requirements and is
accepted for purchase by LifeScan. In such a case the provisions of Article VII
shall not apply based solely on any such minor deviations.
<PAGE> 5
1.2 DEFINITIONS. The following terms have the meanings indicated or
referred to below. Other capitalized terms used herein and not defined herein
have the meanings ascribed thereto in the Master Agreement.
"Base Strip Prices" - See Section 6.2.
"Binding Capacity Plan" - See Section 3.2.
"Capital Expenditure Make-up Payment" - See Section 3.5.
"Capital Requirements Notice" - See Section 3.4.
"Compatible Products" - See Section 2.2.
"Force Majeure" means any act of God, accident, explosion, fire, storm,
earthquake, flood, drought, peril of the sea, riot, embargo, war or foreign,
federal, state or municipal order of general application, seizure (other than as
a result of non-compliance of the seized materials with applicable regulatory
requirements), requisition or allocation, any failure or delay of
transportation, shortage of or inability to obtain supplies, equipment, fuel or
labor or any other circumstances or event beyond the reasonable control of the
party relying upon such circumstance or event.
"Glucose System" - See Section 1.1.
"LS Instrument" - See Section 2.1.
"LS Products" - See Section 2.1.
"LS Strip" - See Section 2.1.
"Market Introduction" means any of (i) any sales, (ii) giveaways or (iii)
presale promotional advertising by LifeScan or any such activities by an
Affiliate of LifeScan, in each case, continuing for more than 30 days after the
date on which Selfcare gives notice of such activities to LifeScan.
"Person" means any individual, corporation, partnership or other entity.
"Proposed Capacity Plan" - See Section 3.2.
"Yearly Minimum" - See Section 4.4.
2
<PAGE> 6
ARTICLE II
SUPPLY OF LS PRODUCTS
2.1 SUPPLY OF LS PRODUCTS. Selfcare and LifeScan agree that, after Selfcare
has given notice to LifeScan that it is prepared to commence commercial
production of LS Products and thereafter during the term of this Distribution
Agreement, LifeScan shall have the right to purchase from Selfcare on the terms
and conditions set forth herein and resell the following products (collectively,
"LS Products"): (i) Instruments ("LS Instruments"), (ii) Test Strips ("LS
Strips") designed to be used with LS Instruments, and (iii) Related Components,
which in each case meet the specifications for the Glucose System. LS Products
shall be manufactured by or at the direction of Selfcare for purchase and resale
by LifeScan under this Distribution Agreement. LS Products shall not be resold
by LifeScan except (i) under a brand name and trade dress that is proprietary to
LifeScan or an Affiliate or (ii) on a private label basis under a brand name and
trade dress that is proprietary to any Person which is not an LS Established
Person.
"LS Established Person" means any Person which had, prior to its first
purchase from LifeScan of LS Products or other blood glucose measurement
devices, more than $100,000,000 in annual worldwide sales in the market for home
use testing of blood glucose.
2.2 SUPPLY EXCLUSIVITY. Except as permitted by Article VII, during the term
of this Distribution Agreement, neither LifeScan nor any Affiliate of LifeScan
shall purchase from any supplier other than Selfcare any Compatible Product.
"Compatible Product" means any Instrument, Test Strip or Related Component which
is designed to be used with LS Instruments or LS Strips.
2.3 SAFETY STOCK. Commencing one (1) year after the first date as of which
LifeScan requests delivery of LS Products, Selfcare will exercise reasonable
efforts to maintain an inventory of LS Products available to deliver to LifeScan
sufficient to satisfy the greater of (i) two (2) times the average monthly
purchases by LifeScan over the past six (6) months, or (ii) 1.75 times the
monthly average of LifeScan's committed orders at the time.
2.4 FORECASTS AND PURCHASE ORDERS. On or prior to December 31, March 31 and
June 30 and September 30 of each year, LifeScan shall provide Selfcare with a
written forecast of LifeScan's purchase requirements with respect to LS Products
to be purchased by it during the next twelve (12) months. The amount of LS
Products forecasted to be purchased by LifeScan in the first six months covered
by such forecast shall constitute a firm order for such LS Products. If the
amount of LS Products forecasted in the first three months of such forecast
period differs from that set forth in the prior quarterly forecast, such changed
amount shall constitute an offer to Selfcare to amend the prior period's
purchase order. Such offer shall, however, be deemed to have been rejected
unless accepted by Selfcare by notice within five days after receipt. With
respect to the fourth, fifth and sixth month covered by such
3
<PAGE> 7
forecast, the amounts of LS Products set forth in such forecast shall constitute
a purchase order for LS Products to be delivered during such months. LifeScan's
forecast of its purchase requirements for the second half of each such 12-month
period shall be advisory only.
ARTICLE III
CAPACITY PLANNING
3.1 CAPACITY PLAN CONCEPTS. From time to time LifeScan may, pursuant to
this Article III, submit forecasts, referred to as Proposed Capacity Plans, to
Selfcare for the purpose of establishing the volumes of LS Products which, if
subsequently ordered by LifeScan and not delivered by Selfcare, will under
certain circumstances entitle LifeScan to exercise certain rights under its
Self-help License pursuant to Article VII. If such forecasts for LS Strips
exceeds certain levels, Selfcare shall be entitled, pursuant to this Article
III, to require LifeScan to make certain payments, referred to as Capital
Expenditure Make-up Payments, if LifeScan confirms its volume projections and
thereafter its orders fall short by certain amounts.
3.2 PROPOSED AND BINDING CAPACITY PLAN DEFINITIONS. "Proposed Capacity
Plan" means, for any calendar year and for any LS Products, the amount thereof,
stated in terms of an average monthly purchase requirement, forecast in good
faith by LifeScan to be ordered for delivery during such calendar year in a
written projection of which LifeScan has given Selfcare notice as required
below. LifeScan shall deliver Proposed Capacity Plans to Selfcare one year prior
to the commencement of the calendar year to which they apply. Proposed Capacity
Plans must be explicitly identified with bold print in the cover letter or
transmittal form transmitting the document, and on each page of the document
proposed to constitute the Proposed Capacity Plan, as a "PROPOSED CAPACITY PLAN
PURSUANT TO THE SALES DISTRIBUTION AGREEMENT FOR TESTING SYSTEM FOR BLOOD
GLUCOSE."
"Binding Capacity Plan" means with respect to any calendar year (i) in the
case of LS Strips, the Proposed Capacity Plan for such calendar year unless
Selfcare has given a Capital Requirements Notice in response to it which has not
been accepted by LifeScan, in which event the Binding Capacity Plan for such
calendar year for LS Strips shall be such other amount as LifeScan and Selfcare
shall agree and in the absence of any such agreement, the Yearly Minimum for
such calendar year pursuant to Section 4.4 and (ii) in the case of any other LS
Products, the Proposed Capacity Plan for such calendar year.
3.3 BASE CAPACITY. "Base Capacity" means with respect to a Proposed
Capacity Plan for a calendar year, the greater of (i) the highest Binding
Capacity Plan for any then-prior calendar year with respect to which Selfcare
has given a Capital Requirements Notice which has been accepted by LifeScan and
(ii) in the case of calendar years 1997 through 2001, the Yearly Minimum set
forth in Section 4.4 with respect to such calendar year, and for 2002 and
4
<PAGE> 8
CONFIDENTIAL TREATMENT
years thereafter, 115% of the LS Strips purchased by LifeScan during the 12-
calendar month period preceding the date of delivery of such Proposed Capacity
Plan, in each case stated on an average monthly basis.
3.4 CAPITAL REQUIREMENTS NOTICES. If the average monthly purchase
requirement for LS Strips projected by LifeScan in its Proposed Capacity Plan
for a calendar year exceeds the applicable Base Capacity, Selfcare may give
written notice (a "Capital Requirements Notice") to LifeScan within sixty (60)
days after receipt of such Proposed Capacity Plan, indicating the capital
expenditures that Selfcare reasonably estimates in good faith that it will need
to make in order to meet LifeScan's projected demand. If Selfcare fails to
deliver a Capital Requirements Notice to LifeScan with respect to a Proposed
Capacity Plan, it shall become a Binding Capacity Plan and Selfcare shall not be
entitled to require LifeScan to make Capital Expenditure Make-up Payments
pursuant to Section 3.5 with respect to such Binding Capacity Plan.
3.5 ACCEPTANCE AND REJECTION OF CAPITAL REQUIREMENTS NOTICES. If LifeScan
does not accept a Capital Requirements Notice by giving notice to Selfcare
within 30 days after receipt thereof, such Capital Requirements Notice shall be
deemed rejected. If Selfcare gives a Capital Requirements Notice and it is
rejected, Selfcare shall not be required to supply more LS Strips in the
calendar year to which the Capital Requirements Notice relates than the greater
of (i) the applicable Yearly Minimum or (ii) the maximum amount Selfcare can
economically produce without incurring capital expenditures other than those
necessary to maintain existing capacity and the Proposed Capacity Plan in
response to which such Capital Requirements Notice was given shall not be
effective for any purpose hereunder. If LifeScan accepts a Capital Requirements
Notice given in response to a Proposed Capacity Plan for a calendar year by
notice to Selfcare, such Proposed Capacity Plan shall become a Binding Capacity
Plan and if LifeScan thereafter fails to order for delivery during such calendar
year at least XXX of the number of strips projected to be purchased by LifeScan
in such Binding Capacity Plan, then LifeScan shall make a payment (a "Capital
Expenditure Make-up Payment") to Selfcare, promptly after written demand
therefor, in an amount determined by the following formula:
CEMP = Cap Ex x (Required [DELTA] -Actual [DELTA] ) / Required [DELTA]
where,
CEMP = Capital Expenditure Make-up Payment with respect to a calendar year
Cap Ex = the lesser of the capital expenditures estimated by Selfcare in its
Capital Requirements Notice or the actual capital expenditures made
by Selfcare to increase LS Strip production capacity in response to
the Binding Capacity Plan for such calendar year
5
<PAGE> 9
CONFIDENTIAL TREATMENT
Required [DELTA]= the amount by which XXX of the Binding Capacity Plan
for the calendar year at issue exceeds, in the case of
calendar years through 2001, the Base Capacity for
such year and in the case of calendar years thereafter,
the total number of LS Strips projected to be purchased
by LifeScan in the Binding Capacity Plan for the
calendar year prior to the year at issue
Actual [DELTA]= the amount by which LifeScan's total purchases of LS
Strips in the applicable Current Year exceeds, in the
case of calendar years through 2001, the Base Capacity
for such year and in the case of calendar years
thereafter, the total number of LS Strips projected to
be purchased by LifeScan in the Binding Capacity Plan
for the calendar year prior to the year at issue
For example, with respect to a calendar year after 2001, if the Binding
Capacity Plan for the prior year is XXXXXXXXXXX, the Binding Capacity Plan for
the calendar year at issue is XXXXXXXXXXX, Selfcare gives and LifeScan accepts a
Capital Requirements Notice starting that Selfcare will be required to make
capital expenditures of XXXXXXXXXX to meet such increased demand and actually
spends somewhat more, and LifeScan's actual purchases in the year at issue are
XXXXXXXXXXX, LifeScan will be obligated to make a Capital Expenditure Make-up
Payment of XXXXXXXXXXX calculated as follows:
Cap Ex = XXXXXXXXXX
Required [DELTA]= (XXX x XXXXXXXXXXX) - XXXXXXXXXXX, or XXXXXXXXXXX
Actual [DELTA]= XXXXXXXXXXX - XXXXXXXXXXX or XXXXXXXXXXX
CEMP = XXXXXXXXXX x (XXXXXXXXXXX - XXXXXXXXXXX) / XXXXXXXXXX
or XXXX of XXXXXXXXXX or XXXXXXXXXXX
3.6 CREDIT FOR CAPITAL EXPENDITURE MAKE-UP PAYMENTS. If LifeScan makes a
Capital Expenditure Make-up Payment with respect to purchases of LS Strips for a
calendar year (the "Payment Year"), then in each following calendar year
thereafter (a "Credit Year") in which LifeScan purchases more LS Strips than it
did in any prior year commencing with the year with respect to which such
Capital Expenditure Make-up Payment was required, LifeScan shall be entitled to
a credit against payments next due for LS Strips purchased thereafter. The
amount of any such credit shall equal the amount by which such Capital
Expenditure Make-up Payment exceeds the amount which would have been required
had LifeScan's purchases of LS Strips in the Payment Year been equal to its
purchases in the Credit Year, reduced by any credits taken with respect to any
prior Credit Years.
For example, continuing the example in Section 3.5, if in the first year
after LifeScan makes the Capital Expenditure Make-up Payment of XXXXXXXXXXX,
LifeScan's purchases of LS Strips are XXXXXXXXXXX, LifeScan shall be entitled to
a credit calculated as follows:
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
6
<PAGE> 10
CONFIDENTIAL TREATMENT
Cap Ex = XXXXXXXXXX
Required [DELTA]= XXXXXXXXXXX
Actual [DELTA]= XXXXXXXXXXX - XXXXXXXXXXX or XXXXXXXXXXX
CEMP = XXXXXXXXXX x XXXXXXXXXXXX - XXXXXXXXXXXX / XXXXXXXXXX
or XXXX of XXXXXXXXXX or XXXXXXXXXXX
Credit = XXXXXXXXXXX - XXXXXXXXXXX or XXXXXXXXXXX
If in the second year after LifeScan makes the Capital Expenditure Make-up
Payment of XXXXXXXXXXX LifeScan's purchases of LS Strips are XXXXXXXXXXX,
LifeScan shall be entitled to a credit calculated as follows:
Cap Ex = XXXXXXXXXX
Required [DELTA]= XXXXXXXXXXX
Actual [DELTA]= XXXXXXXXXXX - XXXXXXXXXXX or XXXXXXXXXXX
CEMP = XXXXXXXXXX x XXXXXXXXXXXX - XXXXXXXXXXXX / XXXXXXXXXXX
or XXXX of XXXXXXXXXX or XXXXXXXXXX
Credit = Difference in payment - prior credit or
XXXXXXXXXXXX - XXXXXXXXXX) - XXXXXXXXXXX or XXXXXXXXXX.
3.7 COOPERATION REGARDING CAPITAL EXPENDITURE MAKE-UP PAYMENTS. LifeScan
acknowledges that its obligation to make Capital Expenditure Make-up Payments is
intended in part to facilitate financing which Selfcare may seek for the purpose
of obtaining capital to expand its production capacity of LS Strips to meet
LifeScan's demand. Prior to disclosing to any potential source of financing
other than a bank, insurance company, pension fund or other institutional
lender, any of the terms of any Transaction Agreement, however, Selfcare shall
require that such potential source of financing agree to be subject to
confidentiality obligations that are substantially equivalent to those binding
upon Selfcare under Article V of the Master Agreement. LifeScan agrees to permit
an assignment of Selfcare's rights to such payment to finance such capital
expenditures and to deliver such further instruments as Selfcare or a proposed
source of financing may reasonably require to obtain any such financing,
including an agreement not to exercise any right of set off against any assignee
of the right to receive Capital Expenditure Make-up Payments providing financing
to Selfcare. LifeScan shall not, however, be required to incur any out-of-pocket
expense or otherwise waive any right or claim against Selfcare.
ARTICLE IV
MARKET DEVELOPMENT RIGHTS
4.1 INITIAL SALES RESTRICTIONS. As an inducement to LifeScan to invest the
monies and management resources necessary to develop the market for LS Products,
Selfcare agrees that, except as provided in Sections 4.3, 4.4 and 4.5, Selfcare
shall not, to the extent such restrictions are permitted by applicable law:
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
7
<PAGE> 11
CONFIDENTIAL TREATMENT
(a) sell Compatible Products other than to LifeScan anywhere in the
world; or
(b) sell Complete System Products other than to LifeScan anywhere in
the world.
4.2 RESERVED MARKETING RIGHTS. No term of this Agreement shall prohibit
Selfcare from manufacturing and selling without restriction Test Strips for
measuring blood glucose designed to be used, and usable without an additional
electronic component not supplied by Selfcare, only with Instruments not
manufactured or sold by Selfcare. The foregoing, however, shall not constitute a
license or permission of use under any patent, patent application or other
intellectual property rights owned or used by or licensed to LifeScan or JJDC or
any of their Affiliates.
4.3 FAILURE TO PURCHASE YEARLY MINIMUM. Following any failure by LifeScan
to purchase the applicable Yearly Minimum of LS Strips with respect to a
calendar year, the restriction set forth in Section 4.1(b) shall terminate and
thereafter Selfcare shall be free to sell Complete System Products other than
Compatible Products anywhere in the world, but shall not sell Complete System
Products to or through an Established Person. On or before January 31 of each
calendar year, LifeScan shall be entitled to order LS Strips and pay for such LS
Strips at the time of placing an order for the purpose of satisfying its Yearly
Minimum purchase requirements for the previous calendar year. LifeScan may
elect, by giving notice to such effect to Selfcare not later than March 1 of
each year, to have the purchases made during the prior January counted, in whole
or in part, as purchases in the prior year. LS Strips shall be deemed to be
"purchased" for purposes of the preceding sentence only when paid for by
LifeScan, regardless of whether they have been delivered. Selfcare shall not be
obligated to deliver LS Strips ordered pursuant to this Section 4.3 sooner than
it is able to do so exercising commercially reasonable efforts.
4.4 YEARLY MINIMUMS:
(a) If Selfcare obtains FDA Clearance of the Glucose System by June 1,
1997 and has delivered to LifeScan the quantities of LS Product shown on
Schedule 4.4 (or such lesser volumes as LifeScan has ordered for delivery
on or prior to such date), the "Yearly Minimum" of LS Strips for the
succeeding calendar years shall be the applicable amount indicated in the
following table:
- --------------------------------------------------------------------------------
Year Yearly Minimum
- ---- --------------
- --------------------------------------------------------------------------------
1997 XXXXXXXXXX
- --------------------------------------------------------------------------------
1998 XXXXXXXXXX
- --------------------------------------------------------------------------------
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
8
<PAGE> 12
CONFIDENTIAL TREATMENT
- --------------------------------------------------------------------------------
1999 XXXXXXXXXXX
- --------------------------------------------------------------------------------
2000 XXXXXXXXXXX
- --------------------------------------------------------------------------------
2001 XXXXXXXXXXX
- --------------------------------------------------------------------------------
2002 and XX% of the number of LS Strips purchased from Selfcare during the
each year prior year; provided, however, that if Market Introduction has
thereafter occurred anywhere in the world with respect to any home use test
system not provided by Selfcare which is designed to measure blood
glucose and is based on a technology other than reflectance or non-
electrochemical visually-read techniques, the applicable percentage
shall be XXX% instead of XX%.
- --------------------------------------------------------------------------------
(b) If by January 31, 1998, Selfcare shall have obtained FDA Clearance
of the Glucose System and shall have delivered the quantities of LS
Products stated in Schedule 4.4 (or such lesser volumes as LifeScan has
ordered for delivery on or prior to such date), then the Yearly Minimum of
LS Strips shall be the applicable amount indicated in the following table
(subject to adjustment as provided in Section 4.4(c) hereof):
- --------------------------------------------------------------------------------
Year Yearly Minimum
- ---- --------------
- --------------------------------------------------------------------------------
1997 XXXX
- --------------------------------------------------------------------------------
1998 XXXXXXXXXXXX
- --------------------------------------------------------------------------------
1999 XXXXXXXXXXXX
- --------------------------------------------------------------------------------
2000 XXXXXXXXXX
- --------------------------------------------------------------------------------
2001 XXXXXXXXXXX
- --------------------------------------------------------------------------------
2002 XXXXXXXXXXXXX
- --------------------------------------------------------------------------------
2003 and XX% of the number of LS Strips purchased from Selfcare during the
each year prior year; provided, however, that if Market Introduction has
thereafter occurred anywhere in the world with respect to any home use test
system not provided by Selfcare which is designed to measure blood
glucose and is based on a technology other than reflectance or non-
electrochemical visually-read techniques, the applicable percentage
shall be XXX% instead of XX%.
- --------------------------------------------------------------------------------
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
9
<PAGE> 13
(c) If the Clearance/Delivery Date, as defined below, occurs after
June 1, 1997 and before January 31, 1998, then the Yearly Minimums for each
calendar year commencing 1998 shall be the weighted average of the amounts
shown in the table in Section 4.4(a) and the amounts shown in the table in
Section 4.4(b), with the weighting of the amounts shown in the table in
Section 4.4(a) based on the number of days from the Clearance/Delivery Date
until January 31, 1998, and the weighting of the amounts shown in the table
in Section 4.4(b) based on the number of days between June 1, 1997 until
the Clearance/Delivery Date. The Clearance/Delivery Date shall be the date
on which the following two conditions are satisfied: (i) Selfcare has
obtained FDA Clearance for the Glucose System and (ii) Selfcare has
delivered to LifeScan the quantity of LS Products stated in Schedule 4.4 or
such lesser amount as LifeScan shall have ordered for delivery through the
date on which Selfcare obtains FDA clearance for the Glucose System.
(d) If the Clearance/Delivery Date is after January 31, 1998, then the
Yearly Minimum of LS Strips shall be as provided in Section 4.4(b) except
that the dates shall be extended as agreed by LifeScan and Selfcare and, if
they cannot agree, as determined by arbitration pursuant to Section 6.2 of
the Master Agreement, and the fixed numbers of LS Strips shall be reduced
as agreed by LifeScan and Selfcare and, if they cannot agree, determined by
arbitration pursuant to Section 6.2 of the Master Agreement.
4.5 INTRODUCTION OF COMPETING ELECTROCHEMICAL SYSTEM. If there is Market
Introduction on or before December 31, 2001 anywhere in the world by LifeScan or
any Affiliate of LifeScan of any electrochemical testing system designed to be
capable of home use to measure the blood glucose and which is not supplied by
Selfcare, then:
(a) If such Market Introduction occurs on or before December 31, 1999
all restrictions set forth in Section 4.1 shall terminate.
(b) If such Market Introduction occurs during the years 2000 or 2001,
the restriction set forth in Section 4.1(b) shall terminate and thereafter
Selfcare shall be free to sell Complete System Products other than
Compatible Products anywhere in the world.
4.6 NOTICE. LifeScan will give notice to Selfcare of any actions by
LifeScan or any of its Affiliates of which the President of LifeScan becomes
aware which are relevant to the restrictions applicable to Selfcare pursuant to
Article IV.
10
<PAGE> 14
CONFIDENTIAL TREATMENT
ARTICLE V
REQUIRED PURCHASE OF LS PRODUCTS
If Selfcare has obtained FDA Clearance of the Glucose System after November
1, 1996 and before June 1, 1997, LifeScan agrees to purchase and pay for a
minimum of XXXXXXXXXX LS Strips in 1998 and XXXXXXXXXX LS Strips in 1999. If
Selfcare has not obtained FDA Clearance of the Glucose System by June 1, 1997,
LifeScan may elect, by giving notice to Selfcare on or before the earlier of (i)
the date which is sixty (60) days after Selfcare has obtained FDA Clearance of
the Glucose System and (ii) April 1, 1998, to have the minimum purchase
obligations set forth in the preceding sentence appropriately reduced and the
amount of such reduction determined by agreement of the parties, or failing such
agreement, by arbitration pursuant to Section 6.2 of the Master Agreement. If
LifeScan fails to make such election, such minimum purchase obligations shall
remain unchanged.
ARTICLE VI
PRICE
6.1 LS PRODUCTS OTHER THAN LS STRIPS. The base price for LS Products other
than LS Strips purchased by LifeScan hereunder shall be the cost at which such
LS Products would be valued, on a FIFO basis under United States generally
accepted accounting principles but including appropriate allocations of
overhead, for reporting on the audited balance sheet of Selfcare at the end of
the accounting period in which such LS Products is manufactured. Selfcare shall
be entitled to select from time to time such accounting period not longer than a
calendar year as it may elect for the purpose of this Section 6.1 so long as in
changing accounting periods, no cost data shall be taken into account more than
once. Unless LifeScan otherwise requests, Selfcare will contract for products
other than LS Strips solely in U.S. Dollars. If Selfcare is permitted to
contract for products other than LS Strips in a currency other than U.S.
Dollars, pricing for LS Products pursuant to Section 6.1 shall be calculated
based on the currencies in which such costs are incurred by Selfcare and shall
be converted to U.S. Dollars at the prices at which such currencies could be
purchased with U.S. Dollars prevailing at the time Selfcare prepares invoices
for such LS Products.
6.2 BASE STRIP PRICES. In each calendar year, the base price per LS Strip
(the "Base Strip Prices") purchased by LifeScan hereunder shall depend on the
annualized total number of LS Strips purchased by LifeScan during such year, as
set forth below, subject to reduction as provided in this Section 6.2:
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
11
<PAGE> 15
CONFIDENTIAL TREATMENT
<TABLE>
- ---------------------------------------------------------------------------------------------------
<CAPTION>
Number of Test Strips Purchased Price per strip in Price per strip in
During Such Calendar Year Pounds Sterling U.S. Dollars
(on an annualized basis)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Fewer than XXXXXXXXXXX XXXXX XXXXX
XXXXXXXXXXX to XXXXXXXXXXX XXXXX XXXXX
XXXXXXXXXXX to XXXXXXXXXXX XXXXX XXXXX
XXXXXXXXXXX to XXXXXXXXXXX XXXXX XXXXX
XXXXXXXXXXX to XXXXXXXXXXX XXXXX XXXXX
XXXXXXXXXXX to XXXXXXXXXXX XXXXX XXXXX
XXXXXXXXXXX or more XXXXX XXXXX
- ---------------------------------------------------------------------------------------------------
</TABLE>
Each of the base prices per strip set forth above shall be decreased by $XXXX,
for the prices stated in U.S. Dollars, and XXXXX Pounds Sterling for the prices
stated in Pounds Sterling, for the remainder of the term of this Distribution
Agreement if LifeScan pays to Selfcare $XXXXXXXXX and enters into a Distribution
Agreement with respect to the first System to be offered to LifeScan pursuant to
Section 3.2 of the Master Agreement. The price to be paid by LifeScan for LS
Strips ordered in any year shall be the applicable Base Strip Price adjusted as
provided in Sections 6.4 and 6.5 through the date of invoicing.
6.3 PAYMENT IN LOCAL CURRENCY FOR LS STRIPS. LifeScan will be invoiced in
Pounds Sterling and pay in Pounds Sterling for LS Strips which have production
cost in Pounds Sterling. LifeScan will be invoiced in U.S. Dollars and pay in
U.S. Dollars for LS Strips which have production cost in U.S. Dollars. If
Selfcare manufactures outside of United Kingdom and United States, it will not
be protected on currency fluctuations unless LifeScan otherwise agrees.
6.4 ADJUSTMENT BASED ON LS RESALE PRICE. Each calendar year (a "Price
Year") the strip prices shall be increased (but never decreased) in proportion
to the increase, if any, in the LS Resale Price from (i) the calendar year
beginning two years prior to such Price Year to (ii) the calendar year beginning
one year prior to such Price Year provided that if the LS Resale Price shall
decrease from one calendar year to the next, the LS Resale Price shall be deemed
to have remained at the level in effect prior to such decrease until thereafter
exceeded.
"LS Resale Price" means the weighted average world-wide price at which
LifeScan resells LS Strips.
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
12
<PAGE> 16
6.5 ADJUSTMENT BASED ON SELFCARE PROFITABILITY. If the sale of LS
Strips to LifeScan on the pricing terms provided in this Agreement ceases to be
profitable for Selfcare, the parties agree that in lieu of the price otherwise
applicable under this Agreement, the price for LS Strips shall be such amount as
gives Selfcare a commercially reasonable profit. The Parties agree to negotiate
in good faith with regard to any such price adjustment. The determination of the
amount of such profit shall include comparison with other Selfcare product lines
as well as other similar OEM arrangements, and shall take into account
reasonable allocations of Selfcare's overhead. If Selfcare claims that it is
entitled to a pricing adjustment under this Section 6.5, LifeScan shall be
entitled to audit Selfcare's books and records to the extent necessary to verify
Selfcare's claims with regard to its profitability.
ARTICLE VII
FAILURE BY SELFCARE TO SUPPLY
7.1 DEFINITIONS RELATING TO SELF-HELP LICENSING. "Required Amount" means,
with respect to any calendar year, the lesser of (i) the amount of LS Product
ordered by LifeScan for delivery during such period or (ii) the amount of
product forecast to be ordered by LifeScan for delivery during such calendar
year, in the Binding Capacity Plan, in each case calculated ratably on a monthly
basis.
A "Supply Default" shall occur if:
(a) Selfcare fails to ship to LifeScan on a cumulative basis during
any period of four consecutive calendar months (the "First Period") the
Required Amount of any LS Products for such First Period; and
(b) after notice of such failure by LifeScan to Selfcare, Selfcare
fails, during the course of the four consecutive calendar months
immediately following such notice (the "Second Period"), to ship to
LifeScan an amount of such LS Products equal to the lesser of (i) the
amount of such product for which LifeScan requests delivery during the
Second Period and (ii) the sum of the Required Amount for the Second Period
and the short fall in Selfcare's deliveries of such product from the
Required Amount during the First Period.
"Self-help License" means a nonexclusive license on the terms set forth in
this Article VII of Selfcare's rights in patents and know-how used in making,
using or selling the LS Products as to which either a Supply Default has
occurred or Selfcare's production capabilities have been affected by Force
Majeure, whichever is applicable, to make, use and sell such LS Products for so
long as Selfcare fails to supply the Required Amount of such LS Products. Any
such license shall permit LifeScan to authorize others to make any such LS
Products exclusively for LifeScan so long as such parties agree to terms to
protect the confidentiality of Selfcare's Confidential Information that are
substantially equivalent to those
13
<PAGE> 17
set forth in Article V of the Master Agreement. In no event, however, shall
LifeScan be entitled to authorize any Person other than Persons which are
Affiliates of LifeScan, for so long as they remain Affiliates, to print Test
Strips.
7.2 LICENSE ON SUPPLY DEFAULT. Selfcare hereby grants to LifeScan a
Self-help License, but LifeScan shall not exercise any right under such license
unless and until Selfcare shall have acknowledged, or an arbitrator pursuant to
Section 6.2 of the Master Agreement, shall have determined (i) that a Supply
Default shall have occurred other than as a result of Force Majeure or (ii) that
the conditions to the exercise by LifeScan of its rights under the Self-help
License pursuant to Section 7.3 or 7.4 have been satisfied.
7.3 COMMUNICATIONS FOLLOWING FORCE MAJEURE. If Selfcare becomes aware that
as a result of Force Majeure, a Supply Default is likely to occur, Selfcare will
give notice to LifeScan indicating the extent to which its capability of
supplying LS Products has been affected, together with an estimate of the time
anticipated for Selfcare to restore its manufacturing capability in order to
meet the applicable Binding Capacity Plan. If such period is less than eight (8)
months from the date of the occurrence of the Force Majeure, Selfcare shall
diligently attempt to restore its production capabilities and LifeScan shall not
be entitled to exercise any of its rights under the Self-help License. If
Selfcare estimates that it will take more than eight (8) months from the date of
the occurrence of the Force Majeure to restore such manufacturing capability,
LifeScan may, if it determines in good faith that it could build an alternative
manufacturing capability for the affected LS Products in a shorter time frame,
give notice (a "Supply Timing Notice") to such effect to Selfcare within thirty
(30) days after receipt of Selfcare's estimate. Within thirty (30) days after
receipt of such notice, Selfcare shall elect whether to reduce its estimate to
the period estimated by LifeScan to build such capability, and failing to give a
notice, shall be deemed to have elected not to alter its estimate.
7.4 RIGHTS FOLLOWING FORCE MAJEURE. If LifeScan has given a Supply Timing
Notice and Selfcare fails to elect to reduce its estimate to the period
estimated by LifeScan to build its own capability, or if following the
occurrence of a Force Majeure affecting the supply of LS Products, Selfcare
fails diligently to attempt to re-establish its supply capabilities, LifeScan
shall be permitted to exercise all of its rights under the Self-help License. If
Selfcare elects to reduce its estimate to meet LifeScan's estimated time to
start a supply of the affected LS Product and thereafter fails within a time
period equal to one hundred and fifteen percent (115%) of the period from the
occurrence of the Force Majeure until the revised estimated date to have
production capability restored, to restore such production capability and resume
supply of LS Products to LifeScan in the Required Amount, then (i) LifeScan
shall be entitled to exercise its rights under the Self-help License, and (ii)
Selfcare will, if it elects to commence resupplying such product, supply without
charge LS Product in an amount equal to the average monthly portion of the
Required Amount of such LS Product in effect during the time Selfcare was
rebuilding its production facilities, multiplied by the number of months which
Selfcare estimated it would take to rebuild.
14
<PAGE> 18
CONFIDENTIAL TREATMENT
7.5 RESTORATION OF SUPPLY BY SELFCARE. If LifeScan is permitted pursuant to
this Article VII to exercise its rights under the Self-help License, Selfcare
shall no longer be required to supply the LS Product with respect to which
LifeScan has become so permitted. Selfcare, however, shall be entitled to
restart supplying such LS Products as provided in this Section 7.5. If after
LifeScan has become entitled to exercise its rights under the Self-help License
pursuant to this Article VII, LifeScan expends funds in order to establish a
production capability as permitted by such license, then, except as provided
below in this Section 7.5, Selfcare must, in order to require LifeScan to
discontinue establishment of or use of such production capability and restart
purchases of the affected LS Products from Selfcare, agree to reimburse LifeScan
with the amount it has expended on equipment, personnel and other out-of-pocket
costs (collectively, "Self-help Costs") in establishing such production
capability, such reimbursement to be in eight (8) equal quarterly payments
commencing three (3) months after Selfcare restarts supplying LifeScan. If
LifeScan has become entitled to exercise its rights under the Self-help License
pursuant to this Article VII and fails to establish a supply capability
sufficient to meet the applicable Required Amount within 115% of the period
specified in LifeScan's Supply Timing Notice, then LifeScan shall not be
entitled to reimbursement of its Self-help Costs if Selfcare elects to restart
supply of the applicable LS Products.
7.6 TERMS, ROYALTIES. Any LS Products produced by LifeScan pursuant to the
Self-help License granted hereby must be sold by it only in the manner provided
for in Section 2.1 hereof and otherwise in accordance with all of the terms of
this Distribution Agreement. LifeScan shall not pay for such LS Products in
accordance with Article VI but rather shall pay a royalty to Selfcare equal to:
(i) with respect to LS Products other than LS Strips, XXX% of LifeScan's gross
sales revenue of such LS Products sold, net of returns, discounts and
allowances, and (ii) with respect to LS Strips, the greater of (x) XXX% of
LifeScan's gross sales revenue of LS Strips sold, net of returns, discounts and
allowances or (y) on a per strip basis, Selfcare's average per strip gross
margin for the calendar year immediately preceding the date on which the
conditions giving rise to LifeScan's right to exercise its Self-help License
occur; provided that, in the event that Selfcare willfully failed to deliver the
requisite amount of LS Strips, then such royalty shall be the amount specified
in clause (x), even if the amount specified in clause (y) is greater.
7.7 COOPERATION. Pursuant to the Self-help License, LifeScan shall have the
right to receive from Selfcare the tangible embodiment of the information and
intellectual property licensed under the Self-help License, including without
limitation copies of all specifications, drawings, notebooks and bills of
materials, such assistance as LifeScan may reasonably require in its exercise of
rights under such Self-help License, including, without limitation, providing
LifeScan with appropriate know-how and training in the manufacture of LS
Products. It is the intention of LifeScan and Selfcare that the Self-help
License constitutes a license of intellectual property as defined in Title 11,
U.S. Code, and that LifeScan receive all of the benefits of Section 365(n) of
the Bankruptcy Code (or successor statute or provision) with respect to such
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
15
<PAGE> 19
license. Further, all rights, powers and remedies of LifeScan provided herein
are in addition to and not in substitution for any and all other rights, powers
and remedies now or hereafter existing at law or in equity (including without
limitation Title 11, U.S. Code) in the event of a filing of a petition for
relief by or with respect to Selfcare under such Title 11 (or successor
statute). LifeScan will reimburse Selfcare's reasonable and necessary
out-of-pocket expenses incurred in connection with such assistance. Such license
and any communications pursuant thereto is subject to the confidentiality
provisions set forth in the Master Agreement. Except as contemplated by the
definition of Self-help License, LifeScan shall not grant sublicenses of the
license granted to it pursuant to this Article VI.
7.8 EXCLUSIVE REMEDY. The exercise by LifeScan of its rights under the
Self-help License shall be the sole and exclusive remedy for failure of Selfcare
to supply LS Product, unless such failure was willful on the part of Selfcare,
in which case LifeScan shall have the benefit of any additional remedy to which
it may be entitled by law.
ARTICLE VIII
CERTAIN COVENANTS
8.1 LIFESCAN COVENANTS. LifeScan agrees that it will:
(a) Keep Selfcare apprised of the development by LifeScan of marketing
plans and strategies for the sale of LS Products and allow Selfcare the
opportunity to comment on same and meet with officers and staff in charge
of such plans and strategies. LifeScan shall report at least quarterly, and
shall report reasonably promptly after request by Selfcare, information
regarding LS Products sales, performance, returns and warranty problems.
(b) Sell LS Products only in compliance with and to the extent
permitted by applicable law and the applicable product specifications.
LifeScan shall communicate to Selfcare information it learns about the
effect of, the introduction of or any amendment or change of interpretation
of any law, statute, regulation, order or ordinance applicable in any
jurisdiction in which LifeScan sells or markets LS Products which may
relate to the manufacturing, labeling or packaging of LS Products.
(c) Not act in any way that would give the impression that it has the
authority to bind Selfcare in any respect whatsoever.
(d) Not make any oral or written representations or claims which are
inconsistent to any material extent with the specifications, operating
instructions, warranties, or representations given or made by Selfcare with
respect to LS Products.
16
<PAGE> 20
(e) Promptly give written notice to Selfcare of any breach of a
provision hereof by LifeScan of which it may become aware or of any sales,
giveaways or presale promotional advertising by LifeScan or, to the extent
that the president of LifeScan becomes aware thereof, any such activities
by an Affiliate of LifeScan, anywhere in the world with respect to any home
use test system not provided by Selfcare which is designed to measure blood
glucose and is based on a technology other than reflectance or
non-electrochemical visually-read techniques.
8.2 SELFCARE COVENANTS. Selfcare agrees that it will:
(a) Comply with the terms of any approval from the FDA which are
required in order to manufacture and sell to LifeScan LS Products. Selfcare
shall communicate to LifeScan information it learns about the effect of,
the introduction of or any amendment or change of interpretation of any
law, statute, regulation, order bearing on the FDA Clearance for LS
Products.
(b) Not act in any way that would give the impression that it has
authority to bind LifeScan in any respect whatsoever.
(c) Except as may be required by applicable law, not make any public
announcements for the purpose of selling LS Products to parties other than
LifeScan stating that LS Products are manufactured by Selfcare or directly
comparing LS Products with other products manufactured by Selfcare.
(d) Promptly give written notice to LifeScan of any breach by Selfcare
hereunder of which it may become aware.
8.3 AUTHORIZATION. Each party hereto represents that it has full power to
execute, deliver and perform this Distribution Agreement and that this
Distribution Agreement has been duly executed and delivered by such party and is
the legal, valid and, assuming due execution by the other parties hereto,
binding obligation of such party, enforceable against such party in accordance
with its terms, subject as to enforcement of remedies to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting creditors'
rights generally. The execution, delivery and performance of this Distribution
Agreement has been duly authorized by all necessary corporate action of such
party.
8.4 INDEMNIFICATION.
(a) Selfcare shall indemnify and hold harmless LifeScan and its
Affiliates and their officers, directors and employees from and against any
and all claims, losses, damages, judgments, costs, awards, expenses
(including reasonable attorneys' fees) and liabilities of every kind
(collectively, "Losses") arising directly out of or resulting
17
<PAGE> 21
directly from any breach by Selfcare of any of its warranties, guarantees,
representations, obligations or covenants contained herein.
(b) LifeScan shall indemnify and hold harmless Selfcare and its
Affiliates and their officers, directors and employees from and against any
and all Losses arising directly out of or resulting directly from any
breach by LifeScan of any of its warranties, guarantees, representations,
obligations or covenants contained herein.
(c) Each indemnified party agrees to give the indemnifying party
proper written notice of any matter upon which such indemnified party
intends to base a claim for indemnification (an "Indemnity Claim") under
Article 8. The indemnifying party shall have the right to participate
jointly with the indemnified party in the indemnified party's defense,
settlement or other disposition of any Indemnity Claim. With respect to any
Indemnity Claim relating solely to the payment of money damages and which
would not result in the indemnified party's becoming subject to injunctive
or other equitable relief or otherwise adversely affect the business of the
indemnified party in any manner, and as to which the indemnified party
shall have acknowledged in writing the obligation to indemnify the
indemnified party hereunder, the indemnifying party shall have the sole
right to defend, settle or otherwise dispose of such Indemnity Claim, on
such terms as the indemnifying party, in its sole discretion, shall deem
appropriate, provided that the indemnifying party shall provide reasonable
evidence of its ability to pay any damages claimed and with respect to any
such settlement shall have obtained the written release of the indemnified
party from the Indemnity Claim. The indemnifying party shall obtain the
written consent of the indemnified party, which shall not be unreasonably
withheld, prior to ceasing to defend, settling or otherwise disposing of
any Indemnity Claim if as a result thereof the indemnified party would
become subject to injunctive or other equitable relief or the business of
the indemnified party would be adversely affected in any manner.
(d) Each party shall maintain comprehensive general liability
insurance in an aggregate amount of at least $20,000,000 with such insurers
and upon such terms as are reasonably acceptable to the other party,
listing such party as a named insured under the policy and requiring that
such party receive thirty (30) days' prior written notice from the insurer
prior to the cancellation or diminution of coverage under such policy.
(e) This Section 8.4 shall survive any termination of this Agreement.
ARTICLE IX
AGREEMENTS REGARDING TECHNOLOGY
9.1 INFRINGEMENT OF SELFCARE'S TECHNOLOGY. LifeScan and Selfcare shall each
notify the other as soon as practicable after it becomes aware of any
infringement by a third party of, or unlawful use by a third party of,
Selfcare's proprietary technology. Either party may
18
<PAGE> 22
prosecute and defend any action or proceeding which it deems necessary in
connection with any infringement by a third party of a patent-protected
technology incorporated in LS Products. Any and all damages recovered in any
such action shall first be applied to pay all costs and expenses of any such
action. Any remaining recovery shall be shared by both parties in accordance
with the damage sustained by each as a result of such infringement. If the
recovery in any such action is not sufficient to pay any and all costs of such
action or proceeding, such costs shall be borne entirely by the parties which
incurred them. In any such case, the party initiating the prosecution shall
afford the other party an opportunity to be involved in all proceedings.
9.2 U.S. AND EUROPEAN PATENT CONVENTION PATENT CONFLICTS. Selfcare agrees
to defend, at its own expense, and to pay all costs and damages awarded against
LifeScan based on, any and all claims by third parties arising from actual or
alleged infringement by LS Products of any U.S. patent or patent issued by a
participant in the European Patent Convention; provided that Selfcare's
obligation to pay such costs and damages under this Section 9.2 shall not apply
to the extent that such actual or alleged infringement arises out of
modifications to LS Products made by LifeScan; and provided that Selfcare's
obligation to pay such costs and damages shall be subject to and limited by the
following provisions of this Section 9.2. In the event that LifeScan receives a
claim or notice of a claim that is or may be subject to indemnification under
this Section 9.2, LifeScan shall (i) give Selfcare prompt written notice of such
claim or notice of claim, (ii) cooperate with Selfcare at Selfcare's expense in
every reasonable manner in the defense of such claim, and (iii) permit Selfcare
to assume and control the defense thereof at Selfcare's cost and expense,
provided that LifeScan shall have the right, at its option and at its expense,
to participate in the defense of such claim through counsel of its own choosing.
If infringement is held to exist, or if either party determines that a finding
of infringement is likely, the parties agree to discuss in good faith
alternative arrangements under which the liability of the parties could be
reduced, including possible revisions to the infringing material so as to make
it non-infringing, or arranging to procure for LifeScan the right to continue
using the infringing material to the extent permitted by this Distribution
Agreement, provided that neither party shall be obligated to agree to any
particular alternative arrangements under this sentence and neither party shall
have any liability for failing to agree upon any such alternative arrangements.
Notwithstanding anything else in this Distribution Agreement, if LifeScan is not
enjoined from selling LS Products as a result of any actual infringement of a
U.S. patent or patent issued by a participant in the European Patent Convention,
Selfcare's liability to LifeScan under this Section 9.2 shall be limited to
future amounts payable by LifeScan to Selfcare hereunder in respect of purchases
of LS Products, and shall be collected by LifeScan solely by set-off against
such amounts as they accrue, provided that if there exist any unpaid amounts due
under this Section 9.2 at the termination of this Distribution Agreement,
Selfcare shall be required to pay such amount in cash up to the amount of its
liability under this Section 9.2 upon such termination.
9.3 PATENT CONFLICTS IN OTHER COUNTRIES. At least sixty (60) days prior to
commencement of the sale of LS Products outside of the United States and
countries which are
19
<PAGE> 23
participants in the European Patent Convention, LifeScan shall give notice to
Selfcare indicating that it plans to commence the sale of LS Products in such a
country. Following such notice, Selfcare will arrange for a search of patent
conflicts in each such country and, after completion of such search, notify
LifeScan whether it is prepared to expand the provisions of Section 9.2 to apply
to such country's patents. If LifeScan gives a notice contemplated by this
Section 9.3 and Selfcare fails thereafter to notify LifeScan that it is prepared
to expand the application of Section 9.2 to apply to the patents of such
country, then LifeScan shall not sell LS Products in such country and the
minimum purchase obligations of LifeScan pursuant to Section 4.4 shall be
equitably adjusted.
9.4 TECHNICAL INFORMATION NECESSARY FOR MARKETING. Selfcare shall furnish
to LifeScan any technical information or instructions necessary for the
marketing of LS Product. LifeScan acknowledges and agrees that all such
technical information communicated by Selfcare to LifeScan shall be the
exclusive property of Selfcare and shall be deemed to be "Confidential
Information" within the meaning of Article V of the Investment Agreement.
LifeScan further acknowledges and recognizes that Selfcare claims exclusive
ownership of its proprietary technology relating to the Glucose System and
further undertakes that it will not represent that it has any title to or right
of ownership in such technology.
ARTICLE X
MISCELLANEOUS
10.1 INVOICING, SHIPPING AND PAYMENT. Selfcare shall advise LifeScan of
relevant addresses for orders. All LS Products supplied are F.O.B. Selfcare's
warehouse facilities as they may be from time to time. LifeScan shall bear all
risk of loss or damage to LS Products after loading on board the carrier at the
F.O.B. point or after delivery to LifeScan at the F.O.B. point. LifeScan shall
be liable for all shipping, air freight, insurance, handling charges and other
transportation fees and tariffs and any other impost imposed by any government
or instrumentality, except for any such measured by the net income of Selfcare.
Except as otherwise provided in Section 6.3, payments for LS Products shall be
made in U.S. Dollars by LifeScan to Selfcare for each shipment of LS Products
not later than thirty (30) days after the date of the invoice therefore which
shall not be earlier than the date of shipping by Selfcare, except that in the
case of purchase prices which cannot be determined until a later date (e.g., the
cost of Instruments based on a GAAP Inventory cost, the cost of LS Strips based
on annual purchases), the parties shall agree on an estimated cost, which
LifeScan shall remit within such 30-day period, and appropriate adjustments
shall be promptly made after determination of the definitive purchase prices.
Payments shall be by check drawn on the regular account of LifeScan.
10.2 PRODUCT WARRANTIES. Selfcare represents and warrants to LifeScan that
all LS Product supplied in connection with this Distribution Agreement shall be
of merchantable quality, fit for the purpose intended by this Distribution
Agreement and free from defects in material and workmanship and shall be
manufactured and provided by Selfcare (i) in
20
<PAGE> 24
CONFIDENTIAL TREATMENT
accordance and conformity with any applicable FDA Clearance, or in the absence
of thereof, in accordance with the definition of the Glucose System and (ii) in
compliance with all applicable federal, state or municipal statutes, laws, rules
or regulations, including those relating to the environment, food or drugs and
occupational health and safety. Without limiting the foregoing, Selfcare
represents and warrants that it shall comply with all present and future
statutes, laws, ordinances and regulations relating to the manufacture, assembly
and supply of LS Products being provided hereunder, including, without
limitation, those enforced by the FDA (including compliance with good
manufacturing practices). In the event that any LS Products, upon delivery, do
not conform as aforesaid, LifeScan's remedy shall be limited to the repair or
replacement (at Selfcare's option) of such nonconforming LS Products within a
reasonable period of time. In no event shall Selfcare be liable for indirect,
consequential or money damages, whether in contract, tort or otherwise. LifeScan
agrees that it will deal directly with its customers concerning warranty matters
relating to LS Products, and Selfcare will not be required to participate in
such dealings.
10.3 AGREEMENT TERM. The term of this Distribution Agreement shall commence
on the date hereof and shall remain in effect through December 31, 2010.
10.4 TERMINATION. This Distribution Agreement shall remain in effect as
stated in Section 10.3, PROVIDED, HOWEVER, that either party may terminate this
Distribution Agreement upon the occurrence of any of the following:
(a) the other party makes a general assignment for the benefit of
creditors, is insolvent, shall have been adjudicated a bankrupt, shall have
filed a voluntary petition for bankruptcy or for reorganization or
effectuated a plan or other similar arrangement with creditors, shall have
filed against it proceedings for an adjudication in bankruptcy or
reorganization, or shall have applied for or permitted the employment of a
receiver or trustee or custodian for any of its property or assets;
(b) there is by the other party a material default, breach or failure
to perform any of the obligations, warranties or representations set forth
in this Distribution Agreement, and such default, breach or failure to
perform shall continue for a period of thirty (30) days after notice
thereof from the other party; or
(c) nonpayment of any sums due from the other party hereunder within
thirty (30) days after such sums become due and payable, after reasonable
means have been employed to collect such sums.
(d) the Yearly Minimum pursuant to Section 4.4 for any full calendar
year after 2001 is less than XXXXXXXXXX Test Strips.
10.5 MISCELLANEOUS. This Distribution Agreement is one of the Transaction
Agreements that are subject to the terms and conditions set forth in the Master
Agreement.
MATERIAL OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
21
<PAGE> 25
IN WITNESS WHEREOF, Selfcare and LifeScan have executed this Distribution
Agreement on the day first above written.
Selfcare, Inc.
By:
--------------------------------
Name:
Title:
LifeScan, Inc.
By:
--------------------------------
Name:
Title:
22
<PAGE> 1
THE SHARES (AS DEFINED BELOW) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. ACCORDINGLY, THE SHARES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
OR TO "U.S. PERSONS," AS DEFINED UNDER REGULATION S UNDER THE SECURITIES ACT OF
1933, UNLESS SUCH SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT OR 1933 OR
ARE EXEMPT FROM SUCH REGISTRATION.
OFFSHORE CONVERTIBLE SECURITIES SUBSCRIPTION AGREEMENT
Selfcare, Inc./ Berkeley Investment Group Ltd.
October 10, 1996
THIS OFFSHORE CONVERTIBLE SECURITIES SUBSCRIPTION AGREEMENT (hereinafter
the "Agreement") has been executed by the undersigned in connection with the
sale of certain shares of A Series Convertible Preferred Stock (hereinafter the
"Preferred Shares"), convertible into shares of common stock (hereinafter the
"Common Shares" and, collectively with the Preferred Shares, the "Shares") of
Selfcare, Inc. (SLF), 200 Prospect Street, Waltham, MA 02154, a corporation
organized under the laws of Delaware (hereinafter "Seller") to Berkeley
Investment Group Ltd., located at 50 Shirley Street, P.O. Box CB 13937, Nassau,
Bahamas, a corporation organized under the laws of the Bahamas (hereinafter
"Buyer"). Seller and Buyer (hereinafter collectively the "parties") each hereby
represents, warrants and agrees as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE
(i) Buyer hereby subscribes for One Thousand (1,000) Preferred Shares, at a
purchase price of One Thousand Dollars ($1,000) U.S. per share, said Preferred
Shares convertible into Common Shares in accordance with the terms set forth in
this Agreement and in the Certificate of Designations attached as Exhibit A to
this Agreement, for an aggregate purchase price of One Million Dollars
($1,000,000) payable in United States Dollars.
(ii) Buyer shall pay the purchase price by delivering same day funds in
United States Dollars to an escrow agent or as otherwise agreed between the
parties, to be delivered to the order of Seller at the time of delivery of the
Preferred Shares.
(iii) This Agreement has been executed in connection with an offering (the
"Offering") by Seller of Preferred Shares convertible into shares of common
stock pursuant to Regulation S ("Regulation S") promulgated under the Securities
Act of 1933, as amended (the "Securities Act"). Buyer will be notified of the
date of the completion of the Offering.
<PAGE> 2
2. BUYER'S REPRESENTATIONS AND COVENANTS
Buyer hereby represents and warrants to Seller as follows:
(i) Buyer is not a "U.S. Person" as defined by Rule 902 of Regulation S,
and, if Buyer is not a natural person, was not organized under the laws of any
U.S. jurisdiction, and was not formed for the purpose of investing in securities
not registered under the Securities Act;
(ii) Buyer is not a dealer, as that term is defined in Section 2(12) of the
Securities Act, and Buyer is not a distributor or an affiliate of a distributor,
as those terms are defined in Regulation S;
(iii) At the time the buy order for this transaction was originated, Buyer
was outside the United States;
(iv) No offer to purchase the Preferred Shares was made in the United
States;
(v) Buyer is either (a) purchasing the Preferred Shares for its own account
for investment purposes and not with a view to, or for sale in connection with,
a distribution of the Shares in the United States or for the account(s) of any
U.S. person, or (b) acting as agent for a principal and is making the
representations, warranties and covenants contained herein on behalf of such
principal;
(vi) All subsequent offers and sales of the Shares will be made (a) outside
the United States in compliance with Regulation S, (b) pursuant to registration
of the Shares under the Securities Act, or (c) pursuant to an exemption from
such registration. Buyer understands the conditions of the exemption from
registration afforded by Section 4(l) of the Securities Act and acknowledges
that there can be no assurance that it will be able to rely on such exemption.
In any case, Buyer will not dispose of the Shares, or any portion thereof or
interest therein, to U.S. Persons or within the United States until after the
end of the forty (40) day period commencing on the date of completion of the
Offering (the "Restricted Period") and unless the intended disposition does not
violate the Securities Act or the rules and regulations thereunder, and the
provisions of any applicable jurisdiction's securities laws and any rules and
regulations thereunder;
(vii) Buyer has no existing short position with respect to the common stock
of Seller and agrees not to enter into any short sales or other hedging
transactions with respect to the common stock of Seller at any time after the
execution of this Agreement by Buyer and prior to the date on which the
Preferred Shares become convertible. Buyer further agrees that, at all times
after the execution of this Agreement by Buyer and prior to the date on which
the Preferred Shares becomes convertible, it will keep its purchase of the
Shares confidential, except as required by law and except as necessary in the
ordinary course of Buyer's business;
2
<PAGE> 3
(viii) Buyer understands that the Preferred Shares have not been registered
under the Securities Act and are being offered and sold to it under Regulation
S, which provides an exemption from registration otherwise required by the
Securities Act, and that Seller is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
Buyer set forth herein in order to determine the applicability of such
provisions. Accordingly, Buyer agrees to fully indemnify, defend and hold
harmless Seller, its management and its affiliates, employees and agents from
any and all claims, actions and causes of action whatsoever which may result
from a breach of the representations, warranties, agreements, acknowledgments
and understandings of Buyer set forth in this Agreement;
(ix) Any offering documents received by Buyer include statements to the
effect that the Shares have not been registered under the Securities Act and
such securities may not be offered or sold in the United States or to U.S.
Persons during the Restricted Period; Buyer acknowledges receipt and review of
the following offering documents: (a) a copy of this Agreement, (b) a
Certificate of Designation of Preferred Stock, (c) Seller's final prospectus
dated August 6, 1996, (d) Seller's Form 10-QSB for the quarterly period ending
June 30, 1996, and (e) a Supplemental Offering Memorandum dated October 2, 1996;
(x) Buyer, in making the decision to purchase the Preferred Shares
subscribed for, has relied upon independent investigations made by it and has
not relied on any information or representations made by third parties;
(xi) In the event of resale of the Shares during the Restricted Period,
Buyer shall provide a written confirmation or other written notice to any
distributor, dealer, or person receiving a selling concession, fee, or other
remuneration in respect of the Shares stating that such purchaser is subject to
the same restrictions on offers and sales that apply to the undersigned, and
shall require that any such purchaser shall provide such written confirmation or
other notice upon resale during the Restricted Period;
(xii) Buyer has not taken any action that would cause Seller to be subject
to any claim for commission or other fee or remuneration by any broker, finder,
or other person and Buyer hereby indemnifies Seller and its directors, officers
and affiliates against any such claim caused by the actions of Buyer or any of
its employees or agents;
(xiii) Buyer acknowledges that the purchase of the Shares is a speculative
investment involving a high degree of risk and any estimates and predictions
that may have been made by the Company merely represent predictions of future
events which may or may not occur and are based on assumptions which may or may
not occur. As a consequence, such predictions may not be relied upon to indicate
the actual results which might be attained. Buyer has carefully read the
Supplemental Offering Memorandum and understands and has evaluated the risks of
a purchase of the Shares. Such risks are set forth in the section entitled "Risk
Factors" of the Company's final prospectus dated August 6, 1996, and are updated
in the Supplemental Offering Memorandum dated October 2, 1996; and
3
<PAGE> 4
(xiv) Buyer represents and warrants that if Buyer is executing this
Agreement in a representative or fiduciary capacity, Buyer has full power and
authority to execute and deliver this Agreement on behalf of the subscribing
corporation, partnership, trust or other entity for whom Buyer is executing this
Agreement, and such corporation, partnership, trust or other entity has full
right and power to enter into and perform this Agreement.
3. SELLER'S REPRESENTATIONS AND COVENANTS
Seller represents and warrants to Buyer as follows:
(i) Each of Seller and its subsidiaries, if any, have been duly
incorporated and are validly existing and in good standing under the laws of
their respective jurisdictions of incorporation. Seller is a "Domestic Issuer"
and a "Reporting Issuer," as such terms are as defined by Rule 902 of Regulation
S. Seller has registered its common stock pursuant to Section 12(b) or (g) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is in full
compliance with all reporting requirements of either Section 13(a) or 15(d) of
the Exchange Act, and Seller's common stock trades on the American Stock
Exchange;
(ii) Seller has furnished Buyer with copies of Seller's Form 10-QSB for the
quarterly period ending June 30, 1996, the final prospectus dated August 6,
1996, and the Supplemental Offering Memorandum dated October 2, 1996. The
aforementioned documents do not, as of the respective date of each, include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements in said documents, in light of the circumstances
under which they were made, not misleading;
(iii) Seller has not offered the Shares to any person in the United States,
any identifiable group of U.S. citizens abroad, or to any U.S. Person in
violation of the Securities Act;
(iv) At the time the buy order was originated, Seller reasonably believed
Buyer was outside the United States and was not a U.S. Person;
(v) Seller and/or its agents reasonably believe that the sale of Preferred
Shares has not been prearranged with a buyer in the United States;
(vi) Seller has not conducted any "directed selling efforts" with respect
to the Preferred Shares;
(vii) The Shares when issued and delivered will be duly and validly
authorized and issued, fully-paid and nonassessable and will not subject the
holders thereof to personal liability by reason of being such holders. There are
no preemptive rights of any shareholder of Seller with respect to the Shares;
4
<PAGE> 5
(viii) This Agreement has been duly authorized, validly executed and
delivered on behalf of Seller and is a valid and binding agreement in accordance
with its terms, subject to general principles of equity and to bankruptcy or
other laws affecting the enforcement of creditors' rights generally;
(ix) The execution and delivery of this Agreement and the consummation of
the issuance of the Shares and the transactions contemplated by this Agreement
do not and will not conflict with or result in a breach by Seller, or any of its
subsidiaries, if any, of any of the terms or provisions of, or constitute a
default under, the Certificate of Incorporation or bylaws of Seller or any of
its subsidiaries, if any, or any indenture, mortgage, deed of trust or other
material agreement or instrument to which Seller or any of its subsidiaries, if
any, is a party or by which it or any of its subsidiaries, if any, any of their
respective properties or assets are bound, or any existing applicable decree,
judgment or order of any court, Federal or State regulatory body, administrative
agency or other governmental body having jurisdiction over Seller or any of its
subsidiaries, if any, or any of their respective properties or assets;
(x) No authorization, approval or consent of any governmental body is
legally required for the issuance and sale of the Shares as contemplated by this
Agreement;
(xi) Seller will issue one or more certificates representing the Preferred
Shares in the name of Buyer in such denominations to be specified by Buyer prior
to closing. Upon conversion of the Preferred Shares, Seller will issue one or
more certificates representing the Common Shares in the name of Buyer without a
restrictive legend and in such denominations to be specified by Buyer prior to
conversion. Seller further warrants that no instructions other than these
instructions, and instructions for a "stop transfer" until the end of the
Restricted Period, have been given to the transfer agent and also warrants that
the Shares shall otherwise be freely transferable by the Buyer on the books and
records of Seller subject to compliance with Federal and State securities laws.
Seller will notify the transfer agent of the date of completion of the Offering
and of the date of expiration of the Restricted Period. Nothing in this section
shall affect in any way Buyer's obligations and agreement to comply with all
applicable securities laws upon resale of the Shares;
(xii) Seller has taken and will take no action that will affect in any way
the running of the Restricted Period or the ability of Buyer to resell the
Shares in accordance with Regulation S;
(xiii) Seller will comply, provided that Buyer's representations herein are
true and correct and Buyer complies with its obligations under this Agreement,
with all applicable securities laws and regulations with respect to the sale of
the Shares, including but not limited to the filing of all reports required to
be filed in connection with the sale of the Preferred Shares pursuant to the
Securities Exchange Act of 1934 with the Securities and Exchange Commission or
any stock exchange or NASDAQ or any other relevant regulatory authority;
5
<PAGE> 6
(xiv) Seller agrees that it will not issue a press release or other
communication to the public containing Buyer's name or other identifying
information without Buyer's written consent unless required by law or the
requirements of the American Stock Exchange to do so; and
(xv) Seller agrees to fully indemnify, defend and hold harmless Buyer, its
management and its affiliates, employees and agents from any and all claims,
actions and causes of action whatsoever which may result from a breach of the
representations, warranties, agreements, acknowledgments and understandings of
Seller set forth herein.
4. REGISTRATION
If upon conversion of the Preferred Shares effected by Buyer pursuant to
the terms of this Agreement and the Certificate of Designation following the
expiration of the Restricted Period, Seller fails to issue certificates for
Common Shares issuable upon such conversion to Buyer bearing no restrictive
legend for any reason other than Seller's reasonable good faith belief that the
representations and warranties made by Buyer in this Agreement were untrue when
made or other than because a legend is appropriate because of a change m
Regulation S, or the written interpretation thereof by the Securities and
Exchange Commission, occurring after the date hereof, then Seller shall be
required, at the written request of the Buyer m prior to the second anniversary
of this Agreement and at Seller's expense, to effect the registration of the
Common Shares issued upon such conversion of the Preferred Shares under the
Securities Act and relevant Blue Sky laws as promptly as is practicable. Upon
receipt of such written notice, Seller shall have the option to (i) register all
Common Shares issuable to Buyer upon conversion of the Preferred Shares, in
which case Seller shall cause the registration statement therefor (which may
include shares of common stock issued or to be issued to other shareholders) to
remain effective for the life of the Preferred Shares, or (ii) register only the
number of Common Shares already issued to Buyer, in which case Seller shall
cause the registration statement therefor to remain effective for sixty (60)
days following the effective date of such registration statement. Seller and the
Buyer shall cooperate in good faith in connection with the furnishing of
information required for such registration and the taking of such other actions
as may be legally or commercially necessary in order to effect such
registration. Seller shall file a registration statement within 40 days of
Buyer's demand therefor and shall use its reasonable best efforts to cause such
registration statement to become effective as soon as practicable thereafter and
in any event within 90 days of the date of the initial filing thereof. Such
efforts shall include, but not be limited to, promptly responding to all
comments received from the staff of the Securities and Exchange Commission
("SEC") and promptly preparing and filing amendments to such registration
statement which are responsive to the comments received from the staff of the
SEC. Once declared effective by the SEC, Seller shall cause such registration
statement to remain effective for the period of time noted above or, if shorter,
until the sale by Buyer of its Common Shares registered thereby. In the event
that Buyer has complied with its obligations hereunder but Seller has not
effected the registration of the Common Shares issuable upon the conversion of
the Preferred Shares under the Act and relevant Blue Sky Laws within ninety (90)
days after the date of filing of the
6
<PAGE> 7
registration statement, Seller shall pay to Buyer by wire transfer, as
liquidated damages for such failure and not, as a penalty, an amount in cash
equal to $100,000; provided, however, that the aggregate amount payable to Buyer
hereunder shall be reduced so that the aggregate amounts payable to Buyer and to
other buyers in the Offering shall not exceed $400,000. Such payment shall be
made to Buyer immediately upon expiration of the 90-day period referenced in the
preceding sentence if the registration of the Common Shares is not effected by
such date; provided, however, that the payment of such liquidated damages shall
not relieve Seller from its obligations to register the Common Shares pursuant
to this Section 4. Seller's obligations under this Section 4 shall terminate
with respect to any Common Shares when and if Seller notifies Buyer that it will
remove any restrictive legend (i.e., a legend restricting transfer) on the
certificates representing such Shares and instructs the transfer agent to do so.
5. CONVERSION
Buyer shall have the right to convert the Preferred Shares into Common
Shares as follows:
(i) The Preferred Shares shall become convertible, without the payment of
any additional consideration therefor, over a 180-day period from the date
hereof in accordance with the following schedule:
No. of Shares Date on Which First Convertible
------------- -------------------------------
20% (the "First Installment") December 14, 1996
40% (the "Second Installment") January 13, 1997
60% (the "Third Installment") February 12, 1997
80% (the "Fourth Installment") March 14, 1997
100% (the "Fifth Installment") April 13, 1997
(ii) The Preferred Shares shall be convertible into that number of Common
Shares as is determined by dividing the sum of (A) the Purchase Price and (B)
any dividends on the Preferred Shares which are accrued but unpaid as of the
date of conversion, by the Conversion Price (determined as hereinafter provided)
in effect on the date of conversion. The "Conversion Price" shall be equal to
eighty-five and one-half percent (85.5%) of the average closing bid price of a
Common Share on the American Stock Exchange (or, in the event that such security
is not traded on the American Stock Exchange, such other national or regional
securities exchange or automated quotation system upon which such security is
listed and principally traded or, if no such price is available, the average per
share market value of such security as determined by a nationally recognized
investment banking firm or other nationally recognized financial adviser
retained by Seller for such purpose) during the five (5) trading days
immediately preceding the date the Conversion Notice (as defined in Section
5(iii) hereof), is received by Seller (such price or market value, the "Closing
Price"); PROVIDED, HOWEVER, that if the Conversion Price is equal to or greater
than $20.00, then the Conversion Price shall be $20.00 and if the Conversion
Price is equal to or less than $12.00, then the
7
<PAGE> 8
Conversion Price shall be equal to the Closing Price; PROVIDED, FURTHER, that
whenever the Conversion Price is less than $8.75, then the Conversion Price
shall be deemed to be $8.75.
(iii) Before Buyer shall be entitled to convert any Preferred Shares into
Common Shares, Buyer shall surrender the certificate or certificates therefor,
duly endorsed, at the office of Seller or of any transfer agent for the
Preferred Shares, and shall give written notice, which may be provided by
facsimile (the "Conversion Notice"), to Seller at such office that Buyer elects
to convert the same and shall state therein the name or names, including of any
of its nominees, in which Buyer wishes the certificate or certificates for
Common Shares to be issued, together with the applicable federal taxpayer
identification number, if any. Such notice shall specify which Installment or
Installments (as defined in Section 5(i) hereof, or portions thereof, are to be
converted. Seller shall, within five (5) business days after Seller's receipt of
the Conversion Notice (the "Deadline"), provided that Seller has received the
certificate or certificates therefor, duly endorsed, at the office of Seller or
of any transfer agent for the Preferred Shares prior to the Deadline, issue and
deliver at such office to Buyer, or to its nominee or nominees, a certificate or
certificates for the number of Common Shares to which Buyer shall be entitled,
together with a certificate or certificates representing any remaining Preferred
Shares which have not yet been converted. Upon the conversion of any Preferred
Shares, such shares shall be restored to the status of authorized but unissued
shares and may be reissued by Seller at any time.
(iv) In the event of (A) any declaration by Seller of a record date for its
common stock for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a stock dividend payable in shares of common
stock or a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, or (B) any capital reorganization of Seller,
any reclassification or recapitalization of the capital stock of Seller, any
merger or consolidation of Seller, and any transfer of all or substantially all
of the assets of Seller to any other corporation, or any other entity or person,
or any voluntary or involuntary dissolution, liquidation or winding up of
Seller, Seller shall mail to Buyer at least 20 days prior to the record date
specified therein, a notice specifying (1) the date on which any such record is
to be declared for the purpose of such dividend or distribution and a
description of such dividend or distribution, (2) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective, and (3) the time, if
any, that is to be fixed, as to when the holders of record of Common Shares (or
other securities) shall be entitled to exchange their Common Shares (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up. In the event of any merger or consolidation of
Seller, or any transfer of all or substantially all of the assets of Seller to
any other corporation, or any other entity or person, Buyer shall,
notwithstanding anything herein to the contrary, from and after the consummation
of such merger, consolidation or transfer, no longer be entitled to convert its
Preferred Shares into Common Shares and shall be entitled to receive only that
amount of consideration which Buyer would have received had it converted its
Preferred Shares into Common Shares immediately prior to such merger,
consolidation or transfer.
8
<PAGE> 9
(v) Seller shall reserve and keep available out of its authorized but
unissued Common Shares such number of Common Shares as shall from time to time
be sufficient to effect conversion of the Preferred Shares.
(vi) Buyer hereby acknowledges and agrees that all certificates
representing Preferred Shares, prior to the date which is forty (40) days after
the issuance date of such Preferred Shares, shall bear the following legend:
The shares of the Issuer represented by this certificate have been
issued pursuant to Regulation S promulgated under the Securities Act
of 1933, as amended ("Act"), and have not been registered under the
Act. These shares may not be offered or sold within the United States
or to or for the account of a "U.S. Person" (as that term is defined
in Regulation S) until after the fortieth (40th) day following
completion of the Regulation S offering of the Issuer pursuant to
which these shares have been issued and only in compliance with the
Act. The Issuer will notify the transfer agent of the date of
completion of such offering.
(vii) Buyer further acknowledges and agrees that, prior to April 14, 1997,
all certificates representing Preferred Shares shall contain a legend stating
that the Preferred Shares represented by such certificates are convertible, and
the specifics with respect thereto.
(viii) Seller shall use its best efforts to issue and deliver to Buyer a
certificate or certificates for the number of Common Shares 'to which Buyer
shall be entitled within seven (7) business days after Buyer has fulfilled all
conditions required for conversion as set forth in this Agreement (the
"Deadline"). Seller understands that a delay in the issuance of the Common
Shares beyond the Deadline could result in economic loss to Buyer. As
compensation to Buyer for such loss, and not as a penalty, Seller agrees to pay
liquidated damages to Buyer for late issuance of Common Shares upon conversion
in the amount of one percent (1%) of the requested conversion amount, per day,
beginning on the eighth (8th) business day from the date of receipt by Seller of
a duly executed notice of conversion, provided that the original Preferred
Shares to be converted have been delivered to Seller within such time period,
all in accordance with this Agreement, the Preferred Shares and the requirements
of Seller's transfer agent. Said liquidated damages shall accrue each day
through the date the Common Shares are issued to Buyer upon conversion, and
shall be paid by wire transfer to an account designated by Buyer upon the
earlier to occur of (i) issuance of the Shares to Buyer, or (ii) each monthly
anniversary of the receipt by Seller of such Buyer's notice of conversion.
Nothing herein shall waive Seller's obligations to deliver Common Shares upon
conversion of the Preferred Shares or limit Buyer's right to pursue actual
damages for Seller's failure to issue and deliver Common Shares to Buyer in
accordance with the terms of this Agreement and the Preferred Shares.
(ix) Seller agrees that, in addition to any other remedies which may be
available to Buyer, in the event Seller fails for any reason to effect delivery
to Buyer of certificates
9
<PAGE> 10
representing Common Shares by the Deadline, Buyer may revoke the notice of
conversion by delivering a notice of such effect to Seller, whereupon Seller and
Buyer shall each be restored to their respective positions immediately prior to
delivery of such notice of conversion.
6. THIRD PARTY BENEFICIARY. The parties acknowledge and agree that Shoreline
Pacific, the Institutional Division of Financial West Group ("Shoreline
Pacific"), shall be deemed a third party beneficiary of Seller's agreements and
representations set forth in this Agreement, entitled to enforce the terms
thereof; provided, however, that Shoreline Pacific's rights hereunder (i) shall
not be greater than the rights Buyer then has, and (ii) shall be subject to the
same defenses and counterclaims as Seller then has against Buyer.
7. CLOSING. Preferred Share certificates shall be delivered to Buyer and the
funds therefor shall be delivered to Seller on October 15, 1996 or at such time
to be mutually agreed.
8. CONDITIONS TO CLOSING
(i) Buyer understands that Seller's obligation to sell the Preferred Shares
is conditioned upon delivery into escrow or otherwise as agreed between Buyer
and Seller by Buyer of the amount set forth in Section 1 hereof, and to the sale
of a minimum of $5,000,000 of Preferred Shares to the undersigned or other
accredited buyers.
(ii) Seller understands that Buyer's obligation to purchase the Preferred
Shares is conditioned upon the sale of a minimum of $5,000,000 of Preferred
Shares to the undersigned or other accredited buyers.
(iii) Seller understands that Buyer's obligation to purchase the Preferred
Shares is conditioned upon delivery of certificate(s) representing the Preferred
Shares as described herein, filing of the Certificate of Designations
substantially in the form of Exhibit A to this Agreement, and provision of an
opinion of counsel confirming the matters set out in Section 3(i), (vii),
(viii), and, to the best of counsel's knowledge, (ix) above.
9. MISCELLANEOUS.
(i) This Agreement shall be governed by and interpreted in accordance with
the laws of the Commonwealth of Massachusetts, without reference to choice of
law principles. Facsimile signatures of this Agreement shall be binding on all
parties hereto. All terms used herein that are defined in Regulation S under the
Securities Act shall have the meanings set forth therein.
(ii) This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
10
<PAGE> 11
IN WITNESS WHEREOF, this Agreement was duly executed on the date first
written above.
Official Signatory of Buyer:
Berkeley Investment Group Ltd.
/s/ Milton Morales
------------------------------
Milton Morales
Director
Official Signatory of Seller:
Selfcare, Inc.
/s/ Kenneth D. Legg
------------------------------
Kenneth D. Legg
Vice President and Secretary
11
<PAGE> 1
Name:
--------------------------------
(please print)
January , 1997
LEHMAN BROTHERS INC.
DILLON, READ & CO. INC.
A.G. EDWARDS & SONS, INC.
ADAMS, HARKNESS & HILL, INC.
c/o LEHMAN BROTHERS INC.
Three World Financial Center
New York, New York 10285
Re: Restriction on Transfers of Securities
Dear Sirs:
Selfcare, Inc., a Delaware corporation (the "Company"), proposes to sell
shares ("Shares") of its common stock, $.001 par value per share (the "Common
Stock"), in a public offering (the "Offering") underwritten by underwriters (the
"Underwriters") for whom Lehman Brothers Inc., Dillon, Read & Co. Inc., A.G.
Edwards & Sons and Adams, Harkness & Hill, Inc. are acting as representatives
(the "Representatives") of the several Underwriters.
The Representatives have indicated that the prospect of sales or other
transfers of Common Stock prior to 120 days after the Offering could undermine
their underwriting effort. Accordingly, the Underwriters have requested that the
undersigned agree not to sell any Common Stock or securities convertible into
or exercisable for Common Stock prior to the expiration of 120 days after the
effective date of the Company's registration statement on Form S-1 (the
"Registration Statement") to be filed by the Company with the Securities and
Exchange Commission in connection with the Offering. The undersigned recognizes
that it is in the best financial interests of the Company and its stockholders
that the Company complete the Offering and that the Underwriters will be
relying on the undersigned's agreement set forth herein.
The undersigned further recognizes that the undersigned's shares of
Common Stock or securities convertible into or exercisable for Common Stock are
or may be subject to certain restrictions on transferability, including those
imposed by the federal securities laws. Notwithstanding these restrictions, the
undersigned has agreed to enter into this Agreement in order to give further
assurance to the Underwriters that the undersigned's Common Stock will not
enter the public market at a time that might impair the underwriting effort.
Therefore, the undersigned agrees that the undersigned will not, without
the prior written consent of Lehman Brothers Inc., directly or indirectly,
offer, sell, contract to sell, hypothecate or otherwise dispose (or enter into
any transaction which is designed to, or could
<PAGE> 2
LEHMAN BROTHERS INC.
January , 1997
Page 2
be expected to, result in the disposition by any person) of any shares of
Common Stock of the Company (including, without limitation, shares which may be
deemed to be beneficially owned by the undersigned in accordance with the Rules
and Regulations of the Securities and Exchange Commission under the Securities
Act of 1933, as amended), or any security convertible into or exercisable for
Common Stock of the Company, or any rights to purchase or acquire, Common Stock
of the Company (other than pursuant to bona fide gifts to persons who agree in
writing to be bound by the provisions of this Agreement), from the date of this
letter until the date 120 days after the effective date of the Registration
Statement.
Very truly yours,
By:_______________________________
Name:_____________________________
(please print)
Title:____________________________
