SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
July 6, 1998
-------------------------------
Date of Report
(Date of earliest event reported)
Electropharmacology, Inc.
-------------------------
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 0-25828 95-4315412
------------------------------ ---------------------- -----------------
(State or other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation) Identification No.)
2301 N.W. 33rd Court, Suite 102
Pompano Beach, Florida 33069
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(954) 975-9818
--------------
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Electropharmacology, Inc. ("EPi") announced on June 18, 1998, that it
had signed a definitive agreement to acquire the assets of Gemini Biotech, L.P.
("Gemini"), a privately held biotechnology company located in Woodlands, Texas.
The acquisition will occur simultaneously with the merger of HealthTech
Development Inc. ("HTD") , another privately held biotechnology company engaged
in the development of proprietary genetic databases, into a subsidiary of EPi,
which was announced on June 11, 1998. Gemini is a leader in the design and
chemical synthesis of therapeutic drugs and diagnostic agents created using
"nucleobases", the building blocks of genes, and has built a library of
proprietary and exclusively licensed compounds for the treatment of cancer and
rheumatoid arthritis. The assets being acquired from Gemini include an inventory
of research reagents for product development and resale, laboratory equipment
and other fixed assets, cash and certain intellectual property rights related to
the design of genetic chemistry products. EPi intends to use the acquired assets
to continue to conduct the business presently conducted by Gemini under the new
name of Gemini Health Technologies.
Under the terms of the agreement, a subsidiary of EPi and Gemini will
form a limited partnership with the EPi subsidiary as the general partner and
Gemini as the limited partner.. The EPi subsidiary and Gemini will each
contribute their assets to the limited partnership. The limited partnership will
issue six million partnership units to Gemini which are exchangeable into six
million shares of newly issued EPi common stock on a one for one basis one year
after the closing of the Gemini acquisition. Upon the consummation of the HTD.
merger and the Gemini acquisition, Gemini will have the right to acquire
approximately one third of the equity ownership of the resulting EPi entity, and
current EPi and HTD shareholders each will have approximately six million common
shares, or approximately one third each of the resulting stockholders' equity in
the combined EPi entity. Gemini will nominate two of seven members of the new
Board of Directors of EPi. The acquisition, which is subject to various
conditions and approvals, is expected to close in the third quarter of 1998.
"This is a major step in EPi's strategy to become a leading
biotechnology company and expedites our ability to generate revenues in the
near-term from the design and supply of molecular diagnostic products and
molecular reagents and services for research as well as commercial markets",
said Dr. Arup Sen, EPi's chairman and chief executive officer. "Gemini brings to
the Company a wealth of drug design technology that complements the platform to
be created from the combination of EPi and HTD. We are now positioned as a well
rounded molecular medicine and drug delivery company with prospects for
partnerships with larger companies that should further increase the Company's
value and facilitate financing", he added.
"We have built an excellent reputation in the biotechnology industry as
a provider of novel molecular products based on sophisticated chemistry and are
working with leading investigators at the Baylor College of Medicine and the MD
Anderson Cancer Center", said Dr. Krishna Jayaraman, Gemini's president, chief
executive officer and controlling partner. "This three-way combination will
expedite our growth in the DNA diagnostics market and exploit therapeutic uses
of our novel chemical compound library and core technology in combination with
EPi's drug delivery program and HTD's genetic database development", he added.
-2-
<PAGE>
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<S> <C>
1. Capital Contribution Agreement between Electropharmacogy, Inc., EPi Health
Technologies Inc., Gemini Biotech L.P., Krishna Jayaraman and Shashikala Jayaraman and
Gemini Biotech Inc. dated June 18, 1998.
2. Audited Financial Statements of Gemini for the year ended December 31, 1997.*
3. Unaudited Financial Statements of Gemini for the quarter ended March 31, 1998.*
4. Pro Forma Combined Balance Sheet and Statements of Operations of EPi and Gemini.*
</TABLE>
- -------------
* It is impracticable to provide these financial statements and pro forma
financial information at this time. The financial statements and pro forma
financial information will be filed as an amendment to this Form 8-K Report as
soon as practicable, but no later than 60 days from the date of the filing of
this Report.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Electropharmacology, Inc.
By: /s/ Arup Sen
-------------------------------------
Arup Sen
President and Chief Executive Officer
July 6, 1998
-3-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<S> <C>
1. Capital Contribution Agreement between Electropharmacogy, Inc., EPi Health
Technologies Inc., Gemini Biotech L.P., Krishna Jayaraman and Shashikala Jayaraman and
Gemini Biotech Inc. dated June 18, 1998.
2. Audited Financial Statements of Gemini for the year ended December 31, 1997.*
3. Unaudited Financial Statements of Gemini for the quarter ended March 31, 1998.*
4. Pro Forma Combined Balance Sheet and Statements of Operations of EPi and Gemini.*
* It is impracticable to provide these financial statements and pro forma
financial information at this time. The financial statements and pro forma
financial information will be filed as an amendment to this Form 8-K Report as
soon as practicable, but no later than 60 days from the date of the filing of
this Report.
</TABLE>
CAPITAL CONTRIBUTION AGREEMENT
------------------------------
THIS CAPITAL CONTRIBUTION AGREEMENT (the "Agreement") is entered into
and effective as of June 18, 1998, by and among Electropharmacology, Inc., a
Delaware corporation ("EPi" or the "Company"), EPi Sub Inc., a Delaware
corporation ("EPi Sub"), Gemini Biotech L.P., a Texas Partnership ("Gemini"),
Krishna Jayaraman and Shashikala Jayaraman (collectively, the "Jayaramans") and
Gemini Biotech Inc., a Texas corporation ("GBI").
WITNESSETH
WHEREAS, EPi is a reporting company under the Exchange Act engaged in
the development of novel medical applications of pulsed electromagnetic signals
and the manufacturing and marketing of pulsed electromagnetic stimulation
devices for the palliation of treatment of pain and edema in superficial soft
tissues;
WHEREAS, Gemini is engaged in the development and commercialization of
biomedical and research technologies, including a novel class of nucleoside
analogs (phosphazoles), novel techniques for altering DNA binding and the
synthesis of novel oligonucleotides, peptides and other biologically important
molecules, and has the capacity to manufacture chemical reagents useful in
research and offers the service of producing reagents for the research market as
well as for fulfilling its own research needs;
WHEREAS, EPi has entered into a certain Asset Purchase Agreement with
ADM Tronics Unlimited, Inc. and AA Northvale Medical Associates, Inc. ("AA
Northvale"), dated May 27, 1998 (the "Asset Purchase Agreement"), pursuant to
which, inter alia, EPi will assign certain of its assets to AA Northvale (the
"Assigned Assets") and AA Northvale will assume certain liabilities of EPi (the
"Assumed Liabilities"), such Assigned Assets and Assumed Liabilities being the
assets and liabilities of EPi relating to the manufacturing and marketing of
electromagnetic stimulation devices for the palliation of treatment of pain and
edema in superficial soft tissues;
WHEREAS, EPi and EPi Sub have entered into a capital contribution
agreement dated June 18, 1998 (the "EPi Sub Capital Contribution Agreement"),
pursuant to which EPi will contribute all of its assets (other than the Assigned
Assets) and all of its liabilities (other than the Assumed Liabilities) to EPi
Sub in exchange for One Hundred shares of common stock, $.01 par value, of EPi
Sub.
WHEREAS, EPi and EPi Sub have entered into an Agreement of Merger and
Plan of Reorganization (the "Merger Agreement") with HealthTech Development
Inc., a Texas corporation ("HTD") date June 11, 1998, pursuant to which HTD will
merge with and into a EPi Sub Inc. and the shareholders of HTD will receive
shares of EPi Common Stock (the "Merger"); and
WHEREAS, EPi Sub and Gemini desire to form a Partnership under the laws
of the State of Delaware to be called Health Technologies L.P. (the
"Partnership") in accordance with the terms and conditions set forth in the
Partnership Agreement and to provide for their respective capital contributions
to the Partnership on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1
<PAGE>
1. DEFINITIONS
1.1. "AA Northvale" has the meaning set forth in the Recitals.
1.2. "Agreement" means this Agreement and the Exhibits and
Schedules hereto and the certificates delivered in connection
herewith, as the same may be amended, modified or restated
from time to time in accordance with the terms hereof.
1.3. "Asset Purchase Agreement" has the meaning set forth in the
Recitals.
1.4. "Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description
(whether real, personal or mixed, whether tangible or
intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including, without
limitation the goodwill related thereto, operated, owned or
leased by or in the possession of such Person, including
without limitation cash, cash equivalents, investment assets,
accounts and notes receivable, chattel paper, documents,
instruments, general intangibles, real estate, equipment,
inventory, goods and Intellectual Property including, without
limitation, the goodwill related thereto.
1.5. "Assigned Assets" has the meaning set forth in the Recitals.
1.6. "Assigned Licenses" means collectively, the Gemini Assigned
Licenses and the EPi Assigned Licenses.
1.7. "Assumed Liabilities" has the meaning set forth in the
Recitals.
1.8. "Books and Records" means all files, documents, instruments,
papers, books and records relating to the Condition of a
Person, including without limitation financial statements, tax
returns and related work papers and letters from accountants
or auditors, budgets, data bases, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock
certificates and books, stock transfer ledgers, Contracts,
Licenses, customer and supplier lists, computer files and
programs (including source codes), retrieval programs,
operating data and plans and environmental studies and plans.
1.9. "Closing" has the meaning set forth in Section 3.1.
1.10. "Closing Date" has the meaning set forth in Section 3.1.
1.11. "Condition" as it relates to any Person or business, means the
condition (financial or otherwise), results of operations,
Assets and Properties and prospects of such Person.
1.12. "Contract" means any agreement, lease, evidence of
indebtedness, mortgage, indenture, security agreement or other
contract (whether written or oral).
1.13. "Contributed Assets" means collectively, the Gemini
Contributed Assets and the EPi Contributed Assets.
1.14. "Contribution" means the contribution of the Gemini
Contributed Assets and the contribution of the EPi Contributed
Assets as provided herein.
2
<PAGE>
1.15. "Earn-Out Partnership Units" has the meaning set forth in
Section 4.1.
1.16. "Employment Agreement" means the employment agreement to be
entered into between Krishna Jayaraman and either the
Partnership, EPi or EPi Sub, in substantially the form of
Exhibit 1.16 hereto.
1.17. "EPi" means Electropharmacology, Inc., a Delaware corporation.
1.18. "EPi Common Stock" means the $.01 par value common stock of
EPi.
1.19. "EPi Contributed Assets" has the meaning set forth in
Section 2.2.
1.20. "EPi Sub" means EPi Sub Inc., a Delaware corporation.
1.21. "EPi Sub Capital Contribution Agreement" has the meaning set
forth in the Recitals.
1.22. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
1.23. "Exchange Agreement" means the Unit Exchange Agreement to be
entered into by Gemini, EPi and the Partnership, substantially
in the form of Exhibit 1.23 hereto.
1.24. "GAAP" means United States generally accepted accounting
principles, consistently applied throughout the specified
period and in the immediately prior comparable period.
1.25. "GBI" means Delargen Corporation, a Texas corporation
doing business as Gemini Biotech Inc.
1.25a. "Gemini Operations" means the continuing business using
the Gemini Contributed Assets contributed pursuant to this
Agreement and operated by the Partnership under the direction
of Dr. Krishna Jayaraman or a qualified successor in
responsibility for the continuation of the business.
1.26. "Gemini" means Gemini Biotech L.P., a Texas Partnership.
1.27. "Gemini Contributed Assets" has the meaning set forth in
Section 2.1.
1.28. "Gemini Partnership Units" means the Initial Gemini
Partnership Units and the Earn-Out Partnership Units.
1.29. "HTD" has the meaning set forth in the Recitals.
1.30. "Initial Gemini Partnership Units" has the meaning set forth
in Section 3.6.
1.31. "Intellectual Property" means, without duplication, all
patents and patent rights, trademarks and trademark rights,
trade names and trade name rights, service marks and service
mark rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and
copyright rights, trade dress, business and product names,
logos, slogans, trade secrets, industrial models, processes,
designs, specifications,
3
<PAGE>
data, technology, methodologies, computer programs (including
all source codes), confidential and proprietary information,
whether or not subject to statutory registration, and all
related technical information, manufacturing, engineering and
technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and
copyrights, including, without limitation, all unregistered
Intellectual Property rights and the right to sue for past
infringement, if any, in connection with any of the foregoing,
and all documents, disks and other media on which any of the
foregoing is stored.
1.32. "Jayaramans" means collectively, Krishna Jayaraman and
Shashikala Jayaraman.
1.33. "Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law
of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision or
of any governmental or regulatory authority.
1.34. "Leases" means collectively, the Gemini Leases and the EPi
Leases.
1.35. "Lender" means Benefit Life Insurance Company.
1.36. "Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations,
franchises and similar consents granted or issued by any
governmental or regulatory authority.
1.37. "Liens" means any mortgage, deed of trust, pledge, assessment,
security interest, lease, lien, adverse claim, levy, charge or
other encumbrance of any kind, or any conditional sale
Contract, title retention Contract or other Contract to give
any of the foregoing.
1.38. "Master Agreement" means the master agreement to be executed
by EPi, EPi Sub, Gemini, GBI, the Jayaramans, certain
stockholders of EPi and certain stockholders of HTD, which
agreement shall be substantially in the form of Exhibit 1.38
hereto.
1.39. "Merger" has the meaning set forth in the Recitals.
1.40. "Merger Agreement" has the meaning set forth in the Recitals.
1.41. "New Sen Employment Agreement" means the employment agreement
between Arup Sen and EPi, substantially in the form of Exhibit
1.41 attached hereto.
1.42. "Note" means the Note dated June 24, 1997 owing by Gemini to
the Lender.
1.43. "Old Sen Employment Agreement" means the employment agreement
between Arup Sen and EPi, a copy of which is attached hereto
as Exhibit 1.43.
1.44. "Order" means any writ, judgment, decree, injunction or
similar order of any governmental or regulatory authority (in
each such case whether preliminary or final).
1.45. "Other Contracts" means collectively, the Other Gemini
Contracts and the Other EPi Contracts.
4
<PAGE>
1.46. "Other Reorganization Transactions" means collectively, the
transactions contemplated by the Asset Purchase Agreement, the
EPi Sub Capital Contribution Agreement and the transactions
contemplated by Sections 4.5 and 4.6.
1.47. "Partnership" has the meaning set forth in the Recitals.
1.48. "Partnership Agreement" means the Agreement of Partnership of
the Partnership, which shall be substantially in the form of
Exhibit 1.48 hereto.
1.49. "Partnership Units" has the meaning set forth in the
Partnership Agreement.
1.50. "Person" means any natural person, corporation, limited
liability company, general partnership, Partnership,
proprietorship, other business organization, trust, union,
association or governmental or regulatory authority. and also
includes a division of any other Person.
1.51. "Permitted Liens" has the meaning set forth in Section __.
1.52. "Registration Rights Agreement" means the Registration Rights
Agreement attached to the Master Agreement as Exhibit __
thereto, which shall be substantially in the form of Exhibit
1.38 hereto.
1.53. "Securities Act" means the Securities Act of 1933, as amended.
1A NOTE.
Notwithstanding anything herein to the contrary, it is the intent of the parties
that they not be bound hereunder until and unless the Lender consents to the
transactions contemplated by this Agreement or substitute financing for the Note
is arranged on terms and conditions satisfactory to the parties acting
reasonably. Furthermore, nothing herein contained shall be construed as the
commission of any act or the creation of any rights that would be deemed to be a
breach or default under the Note.
2. CONTRIBUTION OF ASSETS AND ASSUMPTION OF LIABILITIES
2.1. Subject to and upon the terms and conditions set forth in this
Agreement, Gemini will transfer, convey, assign and deliver to
the Partnership and the Partnership will accept, at the
Closing, all of Gemini's right, title and interest in and to
the following properties (collectively, the "Gemini
Contributed Assets"):
2.1.1. all of the accounts receivable of Gemini as at the
Closing Date (the "Gemini Accounts Receivable");
2.1.2. all of the inventory of finished goods, work in
process, raw materials, and supplies of Gemini as at
the Closing Date (the "Gemini Inventory");
2.1.3. all real property leases to which Gemini is a party
as at the Closing Date (the "Gemini Leases");
5
<PAGE>
2.1.4. all machinery, equipment, furniture, fixtures, tools,
leasehold improvements, telephone systems, computer
systems and other fixed assets that are owned by
Gemini as at the Closing Date (the "Gemini
Equipment");
2.1.5. all vehicles owned by Gemini as at the Closing Date
(the "Gemini Vehicles");
2.1.6. all of the Intellectual Property that is owned or
licensed by Gemini as at the Closing Date (the
"Gemini Intellectual Property");
2.1.7. all customer orders of Gemini as at the Closing Date
(the "Gemini Customer Orders");
2.1.8. all orders for supplies and services of Gemini as at
the Closing Date (the "Gemini Purchase Orders");
2.1.9. all Licenses of Gemini that are assignable to the
Partnership (the "Gemini Assigned Licenses");
2.1.10. all Contracts to which Gemini is a party and not
otherwise described in this Section 2.1 (the "Other
Gemini Contracts");
2.1.11. all Books and Records of Gemini (the "Gemini Books
and Records"); and
2.1.12. all other Assets and Properties of any kind of
Gemini, including without limitation, packing
materials, goodwill, unemployment tax reserves, the
telephone numbers of Gemini, the telecopy numbers of
Gemini, and all rights and claims against third
parties with respect to the Gemini Contributed
Assets, including all rights under warranties.
2.2. Subject to and upon the terms and conditions set forth in this
Agreement, EPi Sub will transfer, convey, assign and deliver
to the Partnership and the Partnership will accept, at the
Closing, all of EPi Sub's right, title and interest in and to
the following properties (collectively, the "EPi Contributed
Assets"):
2.2.1. all of the accounts receivable of EPi Sub as at the
Closing Date (the "EPi Accounts Receivable");
2.2.2. all of the inventory of finished goods, work in
process, raw materials, and supplies of EPi Sub as at
the Closing Date (the "EPi Inventory");
2.2.3. all real property leases to which EPi Sub is a party
as at the Closing Date (the "EPi Leases");
2.2.4. all machinery, equipment, furniture, fixtures, tools,
leasehold improvements, telephone systems, computer
systems and other fixed assets that are owned by EPi
Sub as at the Closing Date (the "EPi Equipment");
2.2.5. all vehicles owned by EPi Sub (the "EPi Vehicles");
6
<PAGE>
2.2.6. all of the Intellectual Property that is owned or
licensed by EPi Sub as at the Closing Date (the "EPi
Intellectual Property");
2.2.7. all customer orders of EPi Sub as at the Closing Date
(the "EPi Customer Orders");
2.2.8. all orders for supplies and services of EPi Sub as at
the Closing Date (the "EPi Purchase Orders");
2.2.9. all Licenses of EPi Sub that are assignable to the
Partnership as at the Closing Date (the "EPi Assigned
Licenses");
2.2.10. all Contracts to which EPi Sub is a party and not
otherwise described in this Section 2.2 (the "Other
EPi Contracts");
2.2.11. all Books and Records of EPi Sub (the "EPi Books and
Records"); and
2.2.12. all other Assets and Properties of any kind of EPi
Sub, including without limitation, packing materials,
goodwill, unemployment tax reserves, the telephone
numbers of EPi Sub, the telecopy numbers of EPi Sub,
and all rights and claims against third parties with
respect to the EPi Contributed Assets, including all
rights under warranties.
2.3. The Contributed Assets shall be conveyed to the Partnership
free and clear of all Liens (other than Permitted Liens) such
that after such conveyance, the Partnership shall have good
and marketable title thereto, free and clear of all Liens
(other than Permitted Liens).
2.4. The Partnership shall assume (i) all of the Liabilities of
Gemini set forth on Schedule 2.4A or otherwise incurred by
Gemini in the ordinary course of business consistent with past
practice and (ii) all of the Liabilities of EPi and EPi Sub
set forth on Schedule 2.4B or otherwise incurred by EPi or EPi
Sub in the ordinary course of business consistent with past
practice.
3. CLOSING
3.1. The closing of the contribution of the Contributed Assets (the
"Closing") shall take place at the offices of the Partnership
promptly after all of the conditions precedent to Closing set
forth in Article VII have been satisfied or have been waived,
provided that it is intended that the certain transactions
contemplated by this Agreement shall be consummated
immediately subsequent to the effectiveness of the Merger as
set out in the Master Agreement. The day on which the Closing
occurs is referred to as the "Closing Date".
3.2. At the Closing, Gemini shall deliver to the Partnership:
3.2.1. a bill of sale in the form of Schedule 3.2.1, duly
executed by Gemini;
3.2.2. title to the Gemini Vehicles, duly endorsed by
Gemini;
7
<PAGE>
3.2.3. a trademark assignment in the form of Schedule 3.2.3,
duly executed by Gemini (the "Gemini Trademark
Assignment");
3.2.4. a patent assignment in the form of Schedule 3.2.4,
duly executed by Gemini (the "Gemini Patent
Assignment");
3.2.5. the Books and Records, which shall be delivered
constructively;
3.2.6. assignments of the Gemini Leases duly executed by
Gemini and the landlords with respect to such Gemini
Leases;
3.2.7. assignments of the Gemini Assigned Licenses and the
Other Gemini Contracts, duly executed by Gemini and
the other parties thereto;
3.2.8. such other good and sufficient instruments of
conveyance, assignment and transfer, in form and
substance satisfactory to the Partnership's counsel,
as shall be required to vest in the Partnership good
and marketable title to the Gemini Contributed Assets
free and clear of all Liens other than the Permitted
Liens.
3.2.9. the Employment Agreement, duly executed by Krishna
Jayaraman;
3.2.10. a closing certificate in the form of Schedule 3.2.10;
3.2.11. a legal opinion of counsel to Gemini in the form of
Schedule 3.2.11; and
3.2.12. all other documents required to be delivered to the
Partnership under the provisions of this Agreement.
3.3. At the Closing, EPi Sub shall deliver to the Partnership:
3.3.1. a bill of sale in the form of Schedule 3.3.1, duly
executed by EPi Sub;
3.3.2. title to the EPi Vehicles, duly endorsed by EPi Sub;
3.3.3. a trademark assignment in the form of Schedule 3.3.3,
duly executed by EPi Sub (the "EPi Trademark
Assignment");
3.3.4. a patent assignment in the form of Schedule 3.3.4,
duly executed by EPi Sub (the "EPi Patent
Assignment");
3.3.5. the EPi Books and Records, which shall be delivered
constructively;
3.3.6. assignments of the EPi Leases duly executed by EPi
and the landlords with respect to such EPi Leases;
3.3.7. assignments of the EPi Assigned Licenses and the
Other EPi Contracts, duly executed by EPi Sub and the
other parties thereto;
8
<PAGE>
3.3.8. such other good and sufficient instruments of
conveyance, assignment and transfer, in form and
substance satisfactory to the Partnership's counsel,
as shall be required to vest in the Partnership good
and marketable title to the EPi Contributed Assets
free and clear of all Liens other than the Permitted
Liens.
3.3.9. a closing certificate in the form of Schedule 3.3.9;
3.3.10. a legal opinion of counsel to EPi Sub in the form of
Schedule 3.3.10; and
3.3.11. all other documents required to be delivered to the
Partnership under the provisions of this Agreement.
3.4. At the Closing, Gemini and EPi Sub shall each execute and
deliver to each other the Partnership Agreement.
3.5. At the Closing, Gemini, EPi, and the Partnership shall each
executed and deliver to each other the Exchange Agreement.
3.6. At the Closing, the Partnership shall deliver to Gemini (i) a
certificate evidencing the ownership of six million
Partnership Units (the "Initial Gemini Partnership Units") and
(ii) the Employment Agreement, duly executed by the
Partnership, EPi Sub or EPi, as applicable;
3.7. At the Closing, the Partnership shall deliver to EPi Sub a
certificate evidencing the ownership of such number of
Partnership Units as is equal to the total number of shares of
EPi Common Stock issued and outstanding on the Closing Date,
including shares of EPi Common Stock issued pursuant to the
Merger and the transactions contemplated by Sections 4.5 and
4.6.
3.8. To the extent that any Lease, Assigned License or Other
Contract is not assignable or transferable without the consent
or waiver of the other party thereto or if such assignment or
transfer or attempted assignment or transfer would constitute
a breach thereof or a violation of any Law or Order, this
Agreement shall not constitute an assignment or transfer, or
an attempted assignment or transfer thereof until such consent
or waiver has been obtained. In such case, Gemini or EPi Sub,
as the case may be, shall use its reasonable efforts, and the
other parties shall reasonably cooperate therewith, to obtain
such consents and waivers. To the extent that any such consent
or waiver is not obtained, Gemini or EPi Sub, as the case may
be, shall (A) provide to the Partnership the benefits of any
such Lease, Assigned License or Other Contract; (B) cooperate
in any reasonable and lawful arrangement requested by the
Partnership designed to provide such benefits to the
Partnership; and (C) at the request of the Partnership,
enforce for the account of the Partnership, at the
Partnership's expense, any right arising from any such Lease,
Assigned License or Other Contract against the other party or
parties thereto (including the right to elect to terminate in
accordance with the terms thereof on the advice of the
Partnership). To the extent that the Partnership is provided
the benefits pursuant to this Section 3.8 of any such Lease,
Assigned License or Other Contract, the Partnership shall
perform for the benefit of the other party or parties thereto,
the obligations of Gemini or EPi Sub, as the case may be,
thereunder or in connection therewith, but only to the extent
that (i) such performance would not result in any default
9
<PAGE>
thereunder or in connection therewith and (ii) such
obligations would have been assumed pursuant to Section 2.4,
but for the nonassignability or nontransferability thereof.
The provisions of this Section 3.8 shall not affect any
party's right not to consummate the transactions contemplated
by this Agreement if the condition to its obligations
hereunder set forth in Article VII has not been fulfilled.
3.9. At any time and from time to time after the Closing, at the
Partnership's request and without further consideration,
Gemini and EPi Sub each will execute and deliver such other
instruments of transfer, conveyance, assignment and
confirmation and take such other actions as the Partnership
may reasonably deem necessary or desirable in order to more
effectively transfer, convey and assign to the Partnership,
and to confirm the Partnership's title to, all of the Gemini
Contributed Assets and EPi Contributed Assets, respectively,
to put the Partnership in actual possession and operating
control thereof and to assist the Partnership in exercising
all rights with respect thereto.
3.10. At the Closing, all documents delivered by Gemini shall be
reasonably satisfactory in form and content to EPi and its
legal counsel and all documents delivered by EPi Sub shall be
reasonably satisfactory, in form and content, to Gemini and
its legal counsel.
4. EARN-OUT PARTNERSHIP UNITS, EXCHANGE AGREEMENT, SECURITIES ACT
PROVISIONS AND ADDITIONAL MATTERS CONCERNING CAPITALIZATION OF EPi
4.1. In addition to the Partnership Units to be issued to Gemini
pursuant to Section 3.6, Gemini shall be entitled to receive
additional Partnership Units as follows (the "Earn-Out
Partnership Units"):
4.1.1 If both (i) the net revenues (gross
revenues from sales to persons and
entities not affiliates of Gemini or the
Gemini Group or their affiliates minus
returns) from Gemini Operations' sales of
oligonucleotides, peptides and other
molecular biology reagents for the 10th,
11th and 12th calendar months commencing
after the Effective Date exceeds one of
the thresholds set forth below; and (ii)
the net pretax profit from such net
revenues exceeds one of the thresholds set
forth below (net revenues and pretax
profit being determined in accordance with
generally accepted accounting principles),
the Gemini Group shall be issued the
number of additional Earn Out Units set
forth below for the highest minimum net
revenues threshold met:
<TABLE>
<CAPTION>
Minimum Minimum Net Number of
Net Revenues Pretax Profit Earn Out Units
------------ ------------- --------------
<S> <C> <C>
$ 750,000 None Required 250,000
1,000,000 5% 250,000
1,250,000 5% 250,000
1,500,000 5% 250,000
----------
1,000,000
</TABLE>
Provided, however, that the number of
additional Earn Out Units shall be
10
<PAGE>
reduced to a number obtained by
multiplying the unit numbers set forth
above by a factor equal to the price of
the Company's Common Stock at the time
when such thresholds are achieved divided
into the price of the Company's Common
Stock on the Closing Date, provided
further that such reduction in the number
of shares of the Company's Common Stock to
be issued will occur if and only if the
Company's Common Stock price is at or
above $1.00 per share at the time when the
additional Earn Out Units are due to be
issued.
4.1.2 250,000 Earn Out Partnership Units (not
subject to reduction by the preceding
formula) upon the execution of a license
agreement by Gemini or the Partnership for
a technology or product developed pursuant
to the agreement between Gemini and the
Shemyakin Institute of Moscow, if such
license agreement is executed within
twelve (12) months from the Closing Date;
and
4.1.3 400,000 Earn Out Units (or 800,000 Earn
Out Units, if both are successful), not
subject to reduction by the preceding
formula, for each of two Phase II SBIR
grants from the U.S. Government for a
current Gemini project if such grant is
awarded on or before December 31, 1999.
4.2. The Gemini Partnership Units shall be exchangeable for EPi
Common Stock in accordance with the terms and conditions of
the Exchange Agreement. All Partnership Units and Earn Out
Units issued pursuant to this Article 4.1 shall be issued to
the Gemini Group, Krishna Jayaraman and Shashikala Jayaraman
as joint tenants with right of survivorship and not as tenants
in common.
4.3. The Gemini Partnership Units shall not be registered under the
Securities Act or any state securities laws and all such
Gemini Partnership Units will be subject to restrictions on
transfer as set forth in the Partnership Agreement and will be
legended as provided on Exhibit 4.3.
4.4. EPi shall use its reasonable best efforts to effect the
registration of the shares of EPi Common Stock into which the
Gemini Partnership Units are exchangeable in accordance with
the terms and conditions of the Registration Rights Agreement.
4.5 As of the Closing Date, (i) the shares of EPi preferred
stock, par value $0.01 per share, of EPi ("EPi Preferred
Stock"), issued and outstanding, and (ii) any and all of
warrants to purchase shares of EPi Common Stock issued to
Norton Herrick and outstanding as of the date hereof (the
"Herrick EPi Warrants"), shall be automatically converted
without further action on the part of the holders thereof
into an aggregate of 1,575,000 shares of EPi Common Stock.
Each outstanding certificate evidencing EPi Preferred Stock
and the Herrick EPi Warrants not surrendered on the effective
date of the Merger will as of the Effective Time of the
Merger be deemed for all purposes to be canceled and no
longer represent shares of EPi Preferred Stock or warrants to
purchase EPi Common Stock, but instead will represent the
right to receive that number of whole shares of EPi Common
Stock into or for which the shares of EPi Preferred Stock and
the Herrick EPi Warrants will be converted pursuant to this
Section 4.5.
11
<PAGE>
4.6 As of the Closing Date, the warrants to purchase shares of
EPi Common Stock identified on Schedule 4.6 hereto (the
"Other EPi Warrants"), shall be automatically converted
without further action on the part of the holders thereof
into an aggregate of 297,000 shares of EPi Common Stock in
the respective aggregate amounts indicated on Schedule 4.6
hereto. Each outstanding certificate evidencing Other EPi
Warrants not surrendered on the effective date of the Merger
will as of the Effective Time of the Merger be deemed for all
purposes to be canceled and no longer represent warrants to
purchase EPi Common Stock, but instead will represent the
right to receive that number of whole shares of EPi Common
Stock into or for which the Other EPi Warrants will be
converted pursuant to this Section 4.6 and as indicated on
Schedule 4.6 hereto.
5. REPRESENTATIONS AND WARRANTIES
5.1. General. The parties make the representations and warranties to
each other which are set forth in this Article 5. No specific representation or
warranty will limit the generality or applicability of a more general
representation or warranty. Except as otherwise indicated, representations and
warranties of the parties are initially made as of the date hereof and will be
true and correct as of the Effective Date.
5.2 Representations and Warranties of EPi and EPi Sub. To induce
Gemini, Jayaramans and GBI (collectively, the "Gemini Group") to enter into this
Agreement and to perform their obligations hereunder, and with full knowledge
that the Gemini Group will rely thereon, each of EPi and EPi Sub represents and
warrants the truth, accuracy, and completeness of the following, subject only to
the exceptions expressly and specifically set forth in the schedules designated
in this Section 5.2 and attached hereto (collectively, the "EPi Disclosure
Schedules") and the Other Reorganization Transactions:
(a) Organization. Each of EPi and EPi Sub is a corporation
duly formed, validly existing and in good standing under the laws of the State
of Delaware.
(b) Power and Authority. Each of EPi and EPi has full
corporate power and authority to execute and deliver this Agreement and the
other agreements referenced herein to which EPi or EPi Sub is a party, and to
consummate this Agreement and the other agreements contemplated hereby and
thereby. The execution and delivery by EPi and EPi Sub of this Agreement and the
other agreements referenced herein to which EPi or EPi Sub is a party, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized and approved by EPi's and EPi Sub's Board of Directors,
and, no other corporate actions on the part of EPi or EPi Sub are required to
authorize the execution and delivery of this Agreement, the other agreements
referenced herein to which EPi or EPi Sub is a party, or the consummation of the
transactions contemplated hereby or thereby.
(c) Enforceability. This Agreement and each of the other
agreements referenced herein to which EPi or EPi Sub is a party have been duly
executed and delivered by EPi and EPi Sub and constitute legal, valid and
binding obligations of EPi or EPi Sub, as the case may be and enforceable
against EPi or EPi Sub in accordance with their respective terms.
(d) EPi's Common Stock. EPi's Common Stock, when issued
pursuant to the Exchange Agreement will be duly authorized, validly issued,
fully paid and non-assessable.
12
<PAGE>
(e) Conflicts; Consents. Except as disclosed in Schedule
5.2(e), neither the execution and delivery by EPi or EPi Sub of this Agreement
or any of the other agreements referenced herein to which EPi or EPi Sub is a
party, nor the approval or consummation of the transactions contemplated hereby
or thereby, nor the issuance and delivery of the EPi Common Stock, will conflict
with, violate or result in a breach of or default under (with or without the
giving of notice or the passage of time, or both) (i) the Certificate of
Incorporation or the By-laws, and any amendment thereto, of EPi or EPi Sub; (ii)
any license, instrument, contract or agreement to which EPi or EPi Sub is a
party or by which EPi or EPi Sub or any of its assets are bound; or (iii) any
law, order, rule, regulation, writ, injunction or decree of any court or other
governmental body that is applicable to EPi or EPi Sub or any of its assets.
Neither the execution and delivery by EPi or EPi Sub of this Agreement or any of
the other agreements referenced herein to which EPi or EPi Sub is a party, nor
the consummation of the transactions contemplated hereby or thereby, will
require any consent, permit, license or approval of (other than by the
respective Board of Directors), or any filing with, any governmental or private
entity, body, or other person, firm or other entity, except for (A) the filing
of the Registration Statement (as defined in the Registration Rights
Agreement)and applicable amendments thereto with the SEC; (B) the filing of
applicable state securities documents; and (C) the eligibility of the EPi Common
Stock for quotation on the Nasdaq Small Cap Market.
(f) Capital Stock. EPi has authorized capital stock
consisting of 40,000,000 shares, of which 30,000,000 shares are common stock,
par value $.01 per share, of which 4,132,493 shares were issued and outstanding
as of April 29, 1998, and 10,000,000 shares are preferred stock, par value $.01
per share, of which 242,950 shares were issued and outstanding as of April 29,
1998. Each outstanding share of the EPi Common Stock has been validly authorized
and issued, is fully paid and non-assessable and is free of preemptive rights of
every nature and type. Except for the securities described on Schedule 5.2(f),
there are no other authorized or outstanding securities of EPi of any class,
kind or character whatsoever.
(g) Commission Filings. EPi has filed and made available to
Gemini all forms, reports and documents filed by EPi with the SEC under the
Exchange Act and the Securities Act during the one year period ending on the
date hereof (collectively the "SEC Reports"). The SEC Reports (i) at the time
filed, complied in all material respects with the applicable requirements of the
Exchange Act, or Securities Act, as applicable, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated in such
SEC Reports or necessary in order to make the statements in such SEC Reports in
the light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of EPi or the Company included
in the SEC Reports (the "EPi Financial Statements") complied when filed as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, and were,
when filed, in accordance with the books and records of EPi or the Company, were
complete and accurate in all material respects, and presented fairly the
consolidated financial position and the consolidated results of operations.
(h) Qualification. EPi and EPi Sub each has qualified as a
foreign corporation, and is in good standing, under the laws of all
jurisdictions where the nature of its business or the nature or location of its
assets requires such qualification (all of such jurisdictions are referred to
herein collectively as the "the EPi Foreign Jurisdictions") or if not so
qualified, the failure to be so qualified will not result in a material adverse
effect on its financial condition, business, operations or prospects. Schedule
5.2(h) hereto contains a list of EPi Foreign Jurisdictions and a list of all
addresses at which EPi or EPi Sub conducts business or owns or holds assets.
13
<PAGE>
(i) Title; Condition and Sufficiency of Assets.
(i) EPi or has good and marketable title to and
rightful possession of all of the assets reflected in the EPi
1997 Balance Sheet, and to all of the assets acquired by
either EPi, since the date of the EPi 1997 Balance Sheet
(other than those assets disposed of after the date of the EPi
1997 Balance Sheet only in the ordinary course of business and
not in violation of this Agreement), free and clear of any and
all mortgages, liens, pledges, privileges, claims, rights,
charges, encumbrances and security interests of whatsoever
type or nature, except: (A) liens for current taxes not yet
delinquent; and (B) liens and liabilities disclosed in
Schedule 5.2(i) hereto. Upon consummation of the EPi
Contribution Agreement, EPi Sub shall have good and marketable
title to and rightful possession of all such assets (other
than the "Assets"). Upon consummation of the Merger, EPi
Sub shall have good and marketable title to and rightful
possession of all of the assets reflected in the HTD 1997
Balance Sheet (as defined in the Merger Agreement) and to all
assets acquired by HTD since the date of the HTD 1997 Balance
Sheet (other than those assets disposed of after the date of
the HTD 1997 Balance Sheet only in the ordinary course of
business and not in violation of the Merger Agreement), free
and clear.
(ii) EPi's computer hardware, equipment and other
tangible personal property and assets are in good condition
and repair, except for ordinary wear and tear, and are useable
in the ordinary course of business. The personal property and
assets shown on the latest balance sheet or acquired after the
latest balance sheet date, the lease rights under the real
property leases and leases of personal property and the
intellectual property owned or used by EPi under valid
license, collectively include all assets necessary to the
conduct of EPi's business as presently conducted or currently
proposed to be conducted (assuming consummation of the Other
Reorganization Transactions). None of the shareholders, other
employees or independent contractors of EPi, EPi Sub or their
respective affiliates own any rights in any assets, real or
personal, which are used by EPi or EPi Sub in its business.
(j) Bank Accounts. Schedule 5.2(j) hereto sets forth the name
and location of each bank in which EPi or EPi Sub has an account, lock box or
safe deposit box, the number of each such account or box, a description of the
contents of each box, the names of all signatories to any account or box and the
persons authorized to draw thereon or have access thereto. No power of attorney
exists from EPi or EPi Sub except as set forth on Schedule 5.2(j).
(k) Real Property; Leases. A true, complete and correct list
of all real property of every kind, and all interests in real property, which is
owned, leased, occupied or used by EPi or EPi Sub is disclosed in Schedule
5.2(k) hereto.
(l) Contracts. Disclosed in Schedule 5.2(l) hereto is a true,
complete and correct list of every (written or oral): (i) union, collective
bargaining or similar agreement, together with all amendments thereto or
interpretations thereof, such as arbitration decisions and the like; (ii) profit
sharing, deferred compensation, bonus, stock option, stock purchase, pension,
retainer, consulting, retirement, welfare (including, without limitation,
retiree welfare benefit) or incentive plan or agreement maintained or sponsored
by EPi or EPi Sub, or to which EPi or EPi Sub contributes; (iii) plan of EPi or
EPi Sub providing for "fringe benefits" to its employees or former employees,
including, but not limited to, vacation, sick leave, severance pay, medical,
hospitalization, life insurance and other plans, or related benefits; (iv)
employment agreement that is not terminable at will and without penalty on
thirty (30) days or less prior written notice or that provides for payments upon
or after termination; (v) agency, sales, brokerage, wholesaling, franchise,
distributorship or similar agreement or contract; (vi) loan agreement or letter
of
14
<PAGE>
credit; (vii) personal property lease; (viii) security or pledge agreement;
(ix) mortgage or deed of trust; (x) purchase commitment to, or contract or
agreement with, any supplier; (xi) contract or agreement relating to research
and development; (xii) license, authority or permit granted by EPi or EPi Sub to
any person or entity; (xiii) contract or agreement to which EPi or EPi Sub is a
party or by which EPi or EPi Sub or any of its assets is bound, which reasonably
may be expected to involve future obligations or benefits in excess of $15,000
in any one calendar year; (xiv) contract or agreement to which EPi or EPi Sub is
a party or by which EPi or EPi Sub or any of its assets is bound, which is
either individually or collectively material to the financial condition, assets,
business or future prospects of EPi or EPi Sub; and (xv) contract or agreement
to which EPi or EPi Sub is a party, or by which EPi or EPi Sub or any of its
assets is bound, regarding or pertaining to the manufacture or supply of any
products or services to any customer of EPi or EPi Sub, whether an individual,
corporation or other business entity. All of the foregoing are referred to in
this Agreement individually as "an EPi Contract" or "an EPi Sub Contract" and
collectively as "the EPi or EPi Sub Contracts." Except where the lack of
effectiveness or enforceability would not result in a material adverse effect on
the financial condition or results of operations of EPi or EPi Sub, each of the
EPi or EPi Sub Contracts is in full force and effect and enforceable in
accordance with its respective terms and conditions, and will continue as such
following the Closing Date and the other transactions contemplated in this
Agreement. Except where such default, termination or waiver would not result in
a material adverse effect on the financial condition or results of operations of
EPi or EPi Sub: (1) there is not existing any default, or event or condition
which, with or without the giving of notice or the passage of time, or both,
would constitute an event of default, by EPi or EPi Sub or any other party
thereto under any of the EPi or EPi Sub Contracts; (2) no party to any of the
EPi or EPi Sub Contracts has a legal obligation (statutory or contractual) to
renegotiate such contract; (3) no party to any of the EPi or EPi Sub Contracts
has given any notice of default or termination, nor does EPi or EPi Sub have any
reason to believe that such notice will be given; and (4) EPi and EPi Sub have
not waived any material right under or with respect to any of the EPi or EPi Sub
Contracts. EPi and EPi Sub do not believe, nor does it have any reason to
believe, that there is a likelihood that any of the customers of or suppliers to
EPi or EPi Sub will terminate its or their business relationship with EPi or EPi
Sub for any reason whatsoever, including, without limitation, by reason of this
Agreement and/or any change in ownership of EPi or EPi Sub. Except as provided
in this Agreement or specifically disclosed on Schedule 5.2(l) hereto, there is
not pending or contemplated any transactions between EPi or EPi Sub and any of
its stockholders, or between EPi or EPi Sub and any of the Stockholder
Affiliates. Correct and complete copies of the general forms of client
engagement and services used by EPi or EPi Sub have been delivered to Gemini,
the Jayaramans and GBI.
(m) Insurance. Schedule 5.2(m) hereto contains a description
(identifying insurer, coverage, premiums, named insured, deductibles and
expiration date) of all policies of fire, liability and other forms of insurance
that currently are, or at any time within the past two years have been,
maintained in force by or for the account of EPi or EPi Sub with respect to its
business and assets (such policies are hereinafter referred to as the "EPi or
EPi Sub Policies"). Each of EPi and EPi Sub has been continuously, and is
presently, insured by insurers unaffiliated with EPi or EPi Sub with respect to
its property and the conduct of its business in such amounts and against such
risks as are adequate to protect its businesses and assets, including, without
limitation, liability insurance. Except as disclosed in Schedule 5.2(m), the
insurance coverage provided by EPi or EPi Sub Policies presently in force will
not in any material respect be affected by, and will not terminate or lapse by
reason of, the transactions contemplated hereby. At no time subsequent to
January 1, 1995 has EPi or EPi Sub been denied insurance or indemnity bond
coverage. At no time subsequent to January 1, 1995 has any insurance carrier
canceled or reduced any insurance coverage for EPi or EPi Sub or given any
notice or other indication of its intention to cancel or reduce any such
coverage.
15
<PAGE>
(n) Intellectual Property. To the knowledge and belief of each
of EPi and EPi Sub, EPi and EPi Sub owns or holds all of the rights to use all
trademarks, trade names, fictitious names, service marks, patents and copyrights
that are necessary for the conduct of its business. Disclosed in Schedule 5.2(n)
hereto is a true, complete and correct list of all registered trademarks,
registered service marks, patents, registered copyrights and all registrations
or applications with respect thereto, and all licenses or rights under the same
which are presently or which have been, during the past two years, owned or used
by EPi and EPi Sub (collectively, the "EPi or EPi Sub Intellectual Property").
To the knowledge and belief of EPi and EPi Sub, none of the matters covered by
the EPi or EPi Sub Intellectual Property nor any of the processes used, the
products made or sold, or the business practices followed by EPi or EPi Sub,
infringes or has infringed upon any trademark, trade name, fictitious name,
service mark, patent or copyright owned by any person or entity (or any
application with respect thereto), or constitutes unfair competition. Except as
disclosed in Schedule 5.2(n) hereto, EPi and EPi Sub are not obligated to pay
any royalty or other payment with respect to any EPi or EPi Sub Intellectual
Property. To the knowledge and belief of EPi and EPi Sub after due inquiry, no
person or entity is producing, providing, selling or using products or services
which would constitute an infringement of any of the EPi or EPi Sub Intellectual
Property.
(o) Licenses and Permits. Schedule 5.2(o) hereto contains a
true, correct and complete list of all licenses, permits, franchises,
certificates, consents, approvals, and authorizations (collectively "EPi or EPi
Sub Licenses") applied for, issued to, or owned, held or used by EPi or EPi Sub
EPi and EPi Sub each has all Licenses necessary for the conduct of its business
and the ownership and use of its assets, properties, the premises occupied by it
and the conduct of its business plans as presently contemplated, except where
the failure to have any such Licenses would not result in a material adverse
effect on the financial condition or results of operations of EPi or EPi Sub,
and such licenses are in full force and effect. Except as disclosed in Schedule
5.2(o), there are no violations by EPi or EPi Sub of, or any claims or
proceedings, pending or, to the knowledge of EPi or EPi Sub, threatened,
challenging the validity of or seeking to discontinue any of the EPi or EPi Sub
licenses.
(p) Taxes. Except as disclosed on Schedule 5.2(p), all
federal, state, county, local, foreign, and other taxes, including, without
limitation, income, excise, payroll, sales, use, unemployment, social security,
occupation, franchise, property, and other taxes, duties or charges
(collectively, "Taxes") levied, assessed, or imposed upon each of EPi and EPi
Sub or its business, assets or properties have been duly and fully paid or have
been adequately provided for on the EPi Financial Statements or EPi or EPi Sub's
Financial Statements. In addition, except as disclosed on Schedule 5.2(p), all
filings, returns and reports with respect to Taxes required by any foreign or
domestic law or regulation to be filed by EPi or EPi Sub on or prior to the date
hereof have been duly and timely filed. Except as disclosed on Schedule 5.2(p),
there are no agreements, waivers or other arrangements (oral or written)
providing for extensions of time with respect to the assessment or collection of
unpaid Taxes, nor are there any actions, suits, proceedings, inquiries,
investigations or claims of any nature or kind whatsoever now pending, or to the
knowledge and belief of EPi and EPi Sub after due inquiry threatened, against
EPi or EPi Sub with respect to any such returns or reports, or any such Taxes,
or any matters under discussion with any federal, state, county, local or other
authority relating to Taxes.
(q) Labor Disputes; Unfair Labor Practices. To the knowledge
of EPi and EPi Sub, no key employee or group of employees has any plans to
terminate their employment with EPi or EPi Sub generally or as a result of the
transactions contemplated hereby or otherwise. EPi or EPi Sub is a party to or
bound by any collective bargaining agreement, and neither EPi nor EPi Sub has
experienced any strikes, grievances, other collective bargaining disputes .
Except as disclosed in Schedule 5.2(q) hereto, there is no pending or, to the
knowledge and belief of EPi or EPi Sub after due inquiry, threatened labor
dispute, grievance, strike or work stoppage involving any of the employees of
EPi or EPi Sub which affects or which
16
<PAGE>
may affect the financial condition or results of operations, assets or prospects
of EPi or EPi Sub. There is no pending or, to the knowledge and belief of EPi or
EPi Sub after due inquiry, threatened charge or complaint against or involving
EPi or EPi Sub or any of its officers or employees by the National Labor
Relations Board, the Occupational Health and Safety Administration, the
Department of Labor, or any similar federal, state or local board or agency, or
any representative thereof. There are no unfair employment or labor practice
charges or complaints presently pending or, to the knowledge and belief of EPi
or EPi Sub after due inquiry, threatened by or on behalf of any employee of EPi
or EPi Sub.
EPi and EPi Sub have materially complied with all applicable laws
relating to labor, including, without limitation, any provisions thereof
relating to wages, termination pay, vacation pay, fringe benefits, collective
bargaining and the payment and/or accrual for the same and all taxes, insurance
and all other costs and expenses applicable thereto, and neither EPi nor EPi Sub
is liable for any arrearage, or any taxes, costs or penalties for failure to
comply with any of the foregoing. Without limiting the generality of the
foregoing, neither EPi or EPi Sub has incurred a violation of Part 6 of Subtitle
B of Title I of ERISA ("COBRA") or other applicable state insurance continuation
law. No material COBRA or other state insurance continuation law violation
exists or will exist with respect to any employees of EPi or EPi Sub prior to
and including the Closing Date, nor will any such violation occur as a result of
the transactions contemplated hereby. As of the Closing Date, EPi and EPi Sub
will not be, nor has EPi or EPi Sub ever been, an enterprise subject to the
Workers Adjustment Retaining and Notification Act ("WARN") and EPi and EPi Sub
have not incur, nor will EPi or EPi Sub ever, material liabilities, penalties or
other charges under WARN.
Except as disclosed in Schedule 5.2(q), neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby shall
cause EPi or EPi Sub to be in breach of any agreement with any employee,
contractor or consultant or cause EPi or EPi Sub to be liable to pay any
severance or other amount to any employee, contract or consultant of EPi or EPi
Sub.
(r) Financial Statements of EPi. EPi has previously delivered
to the Gemini Group true, complete and correct copies of the following financial
statements of EPi (the "EPi Financial Statements"): (i) audited balance sheet as
of December 31, 1996 and related notes thereto (the "EPi 1996 Balance Sheet");
(ii) audited statement of operations for the two years ended December 31, 1996
and 1995, and related notes thereto (the "EPi 1996 P&L"); (iii) audited balance
sheet as of December 31, 1997 (the "EPi 1997 Balance Sheet"); and (iv) audited
statement of operations for the two years ended December 31, 1997 and 1996, and
related notes thereto (the "EPi 1997 P&L"). The EPi Financial Statements have
been prepared from the books and records of EPi in accordance with generally
accepted accounting principles, applied on a basis consistent with prior
periods. Each of the EPi 1997 Balance Sheet and EPi 1996 Balance Sheet fairly
presents the financial condition of EPi as of the respective dates thereof. Each
of the EPi 1997 P&L and EPi 1996 P&L fairly presents the results of the
operations of EPi for the respective periods then ended. The EPi Financial
Statements are attached as Schedule 5.2 (r) hereto.
(s) Books and Records. The books and records of each of EPi
and EPi Sub with respect to its assets, businesses, operations, properties and
prospects have been maintained in accordance with generally accepted accounting
principles and in the usual, regular and ordinary manner, and all entries with
respect thereto have been made and all transactions have been properly accounted
for. All applicable corporate and other laws relating to the maintenance of such
books and records have been complied with by EPi and EPi Sub, except where the
failure to comply with such laws would not result in a material adverse effect
on the financial condition or results of operations of EPi or EPi Sub.
17
<PAGE>
(t) Liabilities. Except as either fully disclosed in Schedule
5.2(t) hereto, or fully and properly reflected on or reserved for in the EPi
1997 Balance Sheet or incurred by EPi or EPi Sub after the date of the EPi 1997
Balance Sheet only in the ordinary course of business, and not in violation of
this Agreement, none of which are either individually or collectively material,
and none of which would require accrual or disclosure under generally accepted
accounting principles, neither EPi nor EPi Sub has any: (i) debts, liabilities
or obligations of a nature required to be reflected or disclosed in financial
statements prepared in accordance with generally accepted accounting principles;
or (ii) other debts, liabilities or obligations, whether accrued, absolute,
contingent or otherwise, whether due or to become due, relating to or arising
out of any act, transaction, circumstance or state of facts which occurred or
existed on or before December 31, 1997. Except as disclosed on Schedule 5.2(t)
hereto, since December 31, 1997, EPi and EPi Sub have not incurred any debts,
liabilities or obligations, whether accrued, absolute, contingent or otherwise,
whether due or to become due, other than debts, liabilities and obligations
incurred in the ordinary course of business of EPi or EPi Sub, none of which are
either individually or collectively material or incurred in violation of this
Agreement and none of which would require accrual or disclosure under generally
accepted accounting principles. Schedule 5.2(t) hereto contains a true, complete
and correct list of all contracts and agreements pursuant to which EPi or EPi
Sub has guaranteed or indemnified any debt, liability and obligation of any
other person or entity, including, without limitation, the stockholders of EPi
or EPi Sub (including, without limitation, the execution of any document
obligating EPi or EPi Sub with respect to any performance or other bond), or
pursuant to which EPi or EPi Sub has pledged or otherwise encumbered any of its
assets (including, without limitation, any document obligating EPi or EPi Sub
with respect to any performance or other bond). Except as disclosed in Schedule
5.2(t) hereto, each of EPi and EPi Sub is not indebted to any of its
stockholders, nor are any of its stockholders indebted to EPi or EPi Sub, in any
amount for any purpose.
All notes and accounts receivable of EPi and EPi Sub are reflected
properly on its books and records, such receivables are valid receivables
subject to no set-offs or counterclaims, are current and collectible in the
aggregate amount shown, and will be collected in accordance with their terms at
their recorded amounts, subject only to the reserve for bad debts set forth on
the face of the latest balance sheet, as adjusted for operations and
transactions through the Effective Date in accordance with the past custom and
practice of EPi or EPi Sub. Since the most recent fiscal year end, there has not
been a material adverse change in the aggregate amount of the accounts
receivable of EPi or EPi Sub or the aging thereof.
(u) Subsequent Events. Except as set forth on Schedule 5.2(u)
hereto or to be taken in connection with the Other Reorganization Transactions,
since December 31, 1997 neither EPi nor EPi Sub has:
(i) created or suffered to exist any material liens
or encumbrances with respect to any of its assets which have
not been discharged, other than liens for nondelinquent taxes;
(ii) sold or transferred any of its assets or
property (including, without limitation, sales and transfers
to any of its stockholders), other than the sale of
inventories of products of EPi or EPi Sub sold in the ordinary
course of the business of EPi or EPi Sub;
(iii) suffered any material loss, or material
interruption in use, of any of its assets or properties
(whether or not covered by insurance), on account of fire,
flood, riot, strike or other hazard or Act of God;
(iv) suffered any material and adverse change in its
business, business activities, business prospects or financial
condition, including the existence or threat of any labor
18
<PAGE>
dispute, or any material adverse change in, or loss of, any
material relationship between EPi or EPi Sub and any of its
customers, suppliers or key employees, or client accounting
for more than 10% of EPi or EPi Sub's revenues in fiscal 1997;
(v) written off any equipment as unusable or obsolete
or for any other reason;
(vi) waived any material rights;
(vii) paid any stockholder of EPi or EPi Sub or any
Stockholder Affiliate, except for wages paid to stockholders
of EPi or EPi Sub who are also employees of EPi or EPi Sub, or
been charged by any stockholder of EPi or EPi Sub or any
Stockholder Affiliate for goods sold or services rendered, or
paid any stockholder of EPi or EPi Sub or any Stockholder
Affiliate or been charged by any stockholder of EPi or EPi Sub
or any Stockholder Affiliate for corporate overhead expenses,
management fees, legal or accounting fees, capital charges, or
similar charges or expenses;
(viii) paid, declared or set aside any dividends or
other distributions on its securities of any class, or
purchased, exchanged or redeemed any of its securities of any
class;
(ix) incurred or committed to incur any individual
capital expenditures in excess of $10,000 or in the aggregate
in excess of $25,000;
(x) incurred any indebtedness for borrowed money;
(xi) paid any compensation or bonus to any
stockholder except in the ordinary course of business or
increased the compensation payable to any employee except in
the ordinary course of business;
(xii) except for fees paid to or incurred with EPi's
or EPi Sub's accountants and attorneys, paid or incurred any
management, consulting or other professional fees;
(xiii) hired any employee for an annual salary in
excess of $35,000 other than employees identified on Schedule
5.2(u) hereto;
(xiv)made any change in its Certificate of
Incorporation or By-laws;
(xv) merged or consolidated or agreed to merge or
consolidate with or into any other Person, other than pursuant
to this Agreement; and
(xvi) without limitation by the enumeration of any of
the foregoing, entered into any material transaction other
than in the usual and ordinary course of business (the
foregoing representation and warranty will not be deemed to be
breached by virtue of the entry by EPi or EPi Sub into this
Agreement or EPi or EPi Sub consummating the Other
Reorganization Transactions).
19
<PAGE>
(v) ERISA. EPi and EPi Sub do not maintain, administer or
contribute to, and did not at any time during the past three years maintain,
administer or contribute to, any (A) employee pension benefit plan (as defined
in Section 3(2) of ERISA, whether or not excluded from coverage under specific
Titles or Subtitles of ERISA); (B) employee welfare benefit plan (as defined in
Section 3(1) of ERISA, whether or not excluded from coverage under specific
Titles or Subtitles of ERISA); or (C) bonus, deferred compensation, stock
purchase, stock option, severance plan, insurance or similar arrangement.
(w) Employees and Consultants. Schedule 5.2(w) hereto contains
a true and complete list of all of the employees of EPi and EPi Sub and such
list correctly reflects their salaries, hourly wages, other compensation (other
than benefits under EPi Employee Benefit Plans, EPi Pension Plans, or EPi
Welfare Plans), dates of employment and titles. Except as disclosed in Schedule
5.2(w) hereto, there are no oral or written agreements or other arrangements
with respect to employees or consultants to which EPi or EPi Sub is a party or
by which EPi or EPi Sub is bound. Except for claims that may arise pursuant to
any law, order, rule, regulation, writ, injunction or decree relating to
discrimination on the basis of age, sex, race, disability or religion, or as
disclosed on Schedule 5.2(w), the employment of each employee of EPi and EPi Sub
is terminable at will, such that EPi and EPi Sub may lawfully terminate their
employment at any time, with or without cause, without creating any material
cause of action against EPi or EPi Sub or otherwise giving rise to any material
liability of the EPi or EPi Sub for wrongful discharge, breach of contract or
tort. Except as disclosed in Schedule 5.2(w) hereto, EPi and EPi Sub do not owe
any past or present employee any sum other than for accrued wages or salaries
for the current payroll period, reimbursable expenses, accrued vacation and
holiday pay and sick leave rights. All of the employees of EPi or EPi Sub are
subject to noncompete/nonsolicitation covenants in favor of EPi. No payments of
either cash or other consideration have been made to any person by EPi or EPi
Sub, or to the knowledge of EPi or EPi Sub, on behalf of EPi or EPi Sub by any
agent, employee, officer, director, stockholders or other person, that were
unlawful under the laws of the United States or any state or any other foreign
or municipal government authority having appropriate jurisdiction over EPi or
EPi Sub.
(x) Litigation. Except as disclosed in Schedule 5.2(x) hereto,
there is no litigation or proceeding, in law or in equity, and there are no
proceedings or investigations or inquiries before any commission or other
governmental or administrative authority, pending or, to the knowledge and
belief of EPi or EPi Sub after due inquiry, threatened, against EPi or EPi Sub
with respect to or affecting the business or financial condition of EPi or EPi
Sub, or the consummation of this Agreement or the other transactions
contemplated herein, or with respect to or affecting the EPi Pension Plans, EPi
Welfare Plans or EPi Employee Benefit Plans, or the use of the assets of EPi or
EPi Sub.
(y) Warranty. All services rendered by EPi and EPi Sub have
been in material conformity with all applicable contractual commitments and all
warranties, and EPi and EPi Sub have no liability (and neither EPi nor EPi Sub
has any knowledge of any basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint ,claims, or demand giving
rise to liability) for damages in connection therewith, subject only to the
accrued warranty expense set forth on the face of the latest balance sheet as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of EPi and EPi Sub.
(z) Brokers' Fees. EPi and EPi Sub have no liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which Gemini
could become liable or otherwise obligated.
(aa) Unasserted Claims. To the knowledge and belief of EPi and
EPi Sub after due inquiry, there are no facts which, if known by a potential
claimant or governmental authority, would give
20
<PAGE>
rise to a claim or proceeding which, if asserted or conducted with results
unfavorable to EPi or EPi Sub, would have a material adverse effect on the
business, business prospects, or financial condition of EPi, EPi Sub, this
Agreement or the other transactions contemplated herein, or the use of the
assets or properties of EPi or EPi Sub after the Closing Date.
(bb) Absence of Judicial Orders. Neither EPi nor EPi Sub is a
party to any decree, order or arbitration award (or agreement entered into in
any administrative, judicial or arbitration proceeding with any governmental
authority) with respect to or affecting its properties, assets, personnel,
business activities or business prospects.
(cc) Compliance with Law. Neither EPi nor EPi Sub is in
violation of, or delinquent in respect to, any decree, order or arbitration,
award or law or regulation of, or agreement with, or any license or permit from,
any governmental authority to which any of its properties, assets, personnel or
business activities are subject, including, without limitation, laws and
regulations and the common law relating to occupational health and safety, equal
employment opportunities, fair employment practices, and sex, race, religion and
age discrimination, and the environment, the delinquency or violation of which
would have a material adverse effect on the financial condition or results of
operations of EPi or EPi Sub. Neither EPi nor EPi Sub has received notice of any
violation of a type referred to in any portion of this Section 5.2(cc).
(dd) Hazardous Materials. Except as disclosed in Schedule
5.2(dd), there has been no storage, treatment, generation, discharge,
transportation or disposal of medical, industrial, toxic or hazardous substances
or solid or hazardous waste (hereinafter, collectively "Hazardous Substances")
by or on behalf of EPi or EPi Sub, in violation of any foreign, Federal, state
or local law, statute, rule or regulation or the common law or any decree,
order, arbitration award or agreement with or any license or permit from any
foreign, Federal, state or local governmental authority. Except as disclosed in
Schedule 5.2(dd), there has been no spill, discharge, leak, emission, injection,
escape, dumping, or release (hereinafter, collectively "Release") of any kind
by, on behalf of or attributable to EPi or EPi Sub into the environment
(including, without limitation, into air, soil, water or ground water) of any
materials including, without limitation, Hazardous Substances, as defined under
any foreign, Federal, state or local law, statute, rule or regulation other than
those Releases permissible under such law, statute, rule or regulation or
allowable under applicable permits. Schedule 5.2(dd) hereto sets forth a
complete list of all aboveground and underground storage tanks, vessels, and
related equipment and containers that are subject to foreign, Federal, state or
local laws, statutes, rules or regulations, and sets forth their present
contents, what the contents have been at any time in the past, and what program
of remediation, if any, is contemplated or has been accomplished with respect
thereto.
(ee) Accuracy of Documents, Representations and Warranties.
The copies of all documents furnished to the Gemini Group or any of its
representatives by or on behalf of EPi or EPi Sub or any of its representatives,
are true, complete and correct. No representation or warranty of EPi or EPi Sub
contained in this Agreement or the other agreements to be executed by EPi or EPi
Sub pursuant hereto, and no statement contained in the exhibits, the schedules
or the other documents delivered by or on behalf of EPi, EPi Sub or its
representatives pursuant to or in connection with this Agreement or the other
agreements to be executed by EPi or EPi Sub pursuant hereto, or any of the
transactions contemplated hereby or thereby, contains any untrue statement of a
material fact, or omits to state any material fact required to be stated herein
or therein in order to make the statements contained herein or therein not
misleading.
(ff) Subsidiaries and Stockholder Affiliates. Except as
disclosed on Schedule 5.3(ff), neither EPi nor EPi Sub has any subsidiaries or
any other equity investment in any entity. Except as
21
<PAGE>
disclosed in Schedule 5.3(ff) hereto, none of the stockholders of EPi or EPi Sub
who are employees of EPi or EPi Sub, has any equity investments in any
"Stockholder Affiliates." For purposes of this Agreement, the term "Stockholder
Affiliates" means all entities in which a stockholder of EPi or EPi Sub is an
officer or director, or in which a stockholder of EPi or EPi Sub, directly or
indirectly, owns or controls 10% or more of the equity securities of the entity,
and which entity is engaged in any aspect of the EPi's or EPi Sub's business.
(gg) Other Reorganization Transactions. A true, complete and
correct copy of all letters of intent, term sheets, agreements and other
documents relating to the Other Reorganization Transactions is set forth in
Schedule 5.2(gg) hereto. Neither EPi nor EPi Sub believes, nor has any reason to
believe, that there is a likelihood that the Other Reorganization Transactions
will not be consummated or will not be consummated substantially on the terms
set forth in Schedule 5.2(gg) hereto.
(hh) EPi Contributed Assets. The EPi Contributed Assets are
all related to and used in connection with the business conducted by EPi Sub. No
person other than EPi Sub owns any of the Assets or Properties used in
connection with the business conducted by EPi Sub. The EPi Contributed Assets
constitute all of the Assets and Properties of EPi Sub used in connection with
the business conducted by EPi Sub. EPi does not have any direct or indirect
interest in any business that directly or indirectly competes with the business
conducted by EPi Sub.
5.3 Representations and Warranties of Gemini, Jayaramans and GBI. To
induce EPi or EPi Sub to enter into this Agreement and to perform its
obligations hereunder, and with full knowledge that EPi or EPi Sub will rely
thereon, each of Gemini, Jayaramans and GBI (collectively, the "Gemini Group")
represents and warrants the truth, accuracy and completeness of the following,
subject only to the exceptions expressly and specifically set forth in the
schedules designated in this Section 5.3 and attached hereto (collectively, the
"Gemini Disclosure Schedules")
(a) Organization-Gemini. Gemini is a Partnership duly
organized, validly existing and in good standing under the laws of the State of
Texas. The copies of the Partnership agreement and all amendments thereto, which
are attached as Schedule 5.3(a)-1 hereto, are true, complete and correct copies
of such documents, as presently in effect. Gemini has delivered to EPi or EPi
Sub true, complete and correct copies of all of the minutes of, or the unanimous
consents in lieu of, the meetings of the partners of Gemini that have been held
to the date hereof, and such minutes and unanimous consents reflect the events
that took place at or in lieu of such meetings.
(b) Organization- GBI. GBI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas. The
copies of the Articles of Incorporation and By-laws of GBI and all amendments
thereto, which are attached as Schedule 5.3(a)-2 hereto, are true, complete and
correct copies of such documents, as presently in effect. GBI has delivered to
EPi or EPi Sub true, complete and correct copies of all of the minutes of, or
the unanimous consents in lieu of, the meetings of the stockholders and/or board
of directors of GBI that have been held to the date hereof, and such minutes and
unanimous consents reflect the events that took place at or in lieu of such
meetings.
(c) Power and Authority. Each of GBI , Jayaramans, and Gemini
has full power and authority, to execute and deliver this Agreement and the
other agreements referenced herein to which GBI, Jayaramans or Gemini is a
party, and to consummate this Agreement and the other transactions contemplated
hereby and thereby. The execution and delivery by the Gemini Group of this
Agreement and the other agreements referenced herein to which GBI, Jayaramans or
Gemini is a party, and the consummation of this Agreement and the other
transactions contemplated hereby and thereby, have been
22
<PAGE>
duly and validly authorized and approved by GBI's and Gemini's Board of
Directors and stockholders or partners, as applicable and no other corporate
actions on the part of GBI or partnership actions on the part of Gemini are
required to authorize the execution and delivery of this Agreement, the other
agreements referenced herein to which GBI, Jayaramans or Gemini is a party, or
the consummation of this Agreement or the other transactions contemplated hereby
or thereby.
(d) Enforceability. This Agreement and each of the other
agreements referenced herein to which any of the Gemini Group is a party have
been duly executed and delivered by each member of the Gemini Group that is a
party thereof and constitute legal, valid and binding obligations of the members
of the Gemini Group.
(e) GBI and Gemini Ownership. Appendix A hereto sets forth
the name and address of each of the shareholders of record of GBI and the
general and limited partners of record of Gemini as of the date hereof.
(f) Conflicts; Consents. Neither the execution and delivery by
any member of the Gemini Group of this Agreement or any of the other agreements
referenced herein to which any such member of the Gemini Group is a party, nor
the approval or consummation of the transactions contemplated hereby or thereby,
will conflict with, violate or result in a breach of or default under (with or
without the giving of notice or the passage of time, or both): (i) the Articles
of Incorporation or the By-laws, and any amendments thereto, of GBI; (ii) the
Limited Partnership Agreement, and any amendments thereto, of Gemini; (iii)any
license, instrument, contract or agreement to which any member of the Gemini
Group is a party or by which any member of the Gemini Group or any of their
assets are bound; or (iv) any law, order, rule, regulation, writ, injunction or
decree of any court or other governmental body that is applicable to any member
of the Gemini Group or any of their assets. Neither the execution and delivery
by any member of the Gemini Group of this Agreement or any of the other
agreements referenced herein to which any member of the Gemini Group is a party,
nor the consummation of the transactions contemplated hereby or thereby, will
result in the creation of any lien, claim, right, charge, encumbrance or
security interest of any nature or type whatsoever with respect to any of the
GBI Common Stock, Gemini Partnership Units or any of the assets of GBI or
Gemini. Neither the execution and delivery by any member of the Gemini Group of
this Agreement or any of the other agreements referenced herein to which any
member of the Gemini Group is a party, nor the consummation of the transactions
contemplated hereby or thereby by any member of the Gemini Group , will require
any consent, permit, license or approval of, or any filing with, any
governmental or private entity, body, or other person, firm or other entity.
(g) Capital Stock; Partnership Units. GBI has authorized
capital stock consisting of 1,000,000 shares, of which 1,000,000 shares are
common stock, par value $.01 per share, of which 200,000 shares were issued and
outstanding as of May 20, 1998. Each outstanding share of GBI Common Stock has
been validly authorized and issued, is fully paid and nonassessable and is free
of preemptive rights of every nature and type. There are no other authorized or
outstanding securities of GBI of any class, kind or character whatsoever,
including, but not limited to, outstanding subscriptions, options, warrants or
other rights, agreements or commitments obligating GBI to issue any additional
shares of capital stock, or any options or rights with respect thereto, or any
securities convertible into or exchangeable for any shares of capital stock.
There are no outstanding obligations of GBI, contractual or otherwise, to
repurchase, redeem or otherwise acquire any outstanding shares of the capital
stock of GBI. Gemini has the following Partnership Units outstanding
__________________________________. There are no other authorized or outstanding
securities of Gemini of any class, kind or character whatsoever.
(h) Subsidiaries and Stockholder Affiliates. Except as
disclosed on Schedule 5.3(h),
23
<PAGE>
Gemini does not have any subsidiaries or any other equity investment in any
entity. None of the partners of Gemini or their affiliates who are employees of
Gemini, and to the knowledge and belief of Gemini, none of the partners of
Gemini of their affiliates who are not employees of Gemini, has any equity
investments in any "Partner Affiliates." For purposes of this Agreement, the
term "Partner Affiliates" means all entities in which a partner of Gemini or its
affiliates is an officer or director, or in which a partner of Gemini or its
affiliates, directly or indirectly, owns or controls 10% or more of the equity
securities of the entity, and which entity is engaged in any aspect of the
Gemini Business.
(i) Qualification. Gemini has qualified as a foreign limited
partnership , and is in good standing, under the laws of all jurisdictions where
the nature of its business or the nature or location of its assets requires such
qualification (all of such jurisdictions are referred to herein collectively as
the " Gemini Foreign Jurisdictions") or if not so qualified, the failure to be
so qualified will not result in a material adverse effect on its financial
condition, business, operations or prospects. Schedule 5.3(i) hereto contains a
list of the Gemini Foreign Jurisdictions and a list of all addresses at which
GBI conducts business or owns or holds assets.
(j) Title; Condition and Sufficiency of Assets.
(i) Gemini has good and marketable title to and
rightful possession of all of the assets
reflected in the Gemini Balance Sheet, and
to all of the assets acquired since the
date of the Gemini 1997 Balance Sheet
(other than those assets disposed of after
the date of the Gemini 1997 Balance Sheet
only in the ordinary course of business and
not in violation of this Agreement), free
and clear of any and all mortgages, liens,
pledges, privileges, claims, rights,
charges, encumbrances and security
interests of whatsoever type or nature,
except: (A) liens for current taxes not yet
delinquent; and (B) liens and liabilities
disclosed in Schedule 5.3(j) hereto.
(ii) Gemini's computer hardware, equipment and
other tangible personal property and assets
are in good condition and repair, except
for ordinary wear and tear, and are useable
in the ordinary course of business. The
personal property and assets shown on the
latest balance sheet or acquired after the
latest balance sheet date, the lease rights
under the real property leases and leases
of personal property and the intellectual
property owned or used by Gemini under
valid license, collectively include all
assets necessary to the conduct of Gemini's
business as presently conducted by Gemini
or currently proposed to be conducted by
the Partnership. None of the partners,
other employees or independent contractors
of Gemini or their respective affiliates
own any rights in any assets, real or
personal, which are used by Gemini in its
business.
(k) Bank Accounts. Schedule 5.3(k) hereto sets forth the name
and location of each bank in which Gemini has an account, lock box or safe
deposit box, the number of each such account or box, a description of the
contents of each box, the names of all signatories to any account or box and the
persons authorized to draw thereon or have access thereto. No power of attorney
exists from Gemini.
(l) Real Property; Leases. Gemini owns no real property.
Gemini has provided EPi or EPi Sub a complete and accurate copy of the lease
(the "Property Lease") of the real estate leased, used or occupied by Gemini and
such Property Lease has not been modified in any respect, except to the extent
24
<PAGE>
that such modifications are disclosed by the copies delivered to EPi or EPi Sub.
The Property Lease is in full force and effect and Gemini holds a valid and
existing leasehold interest under such Property Lease. Gemini is not in default,
and to the knowledge of the Gemini Group no circumstances exist which would
result in such default (including upon the giving of notice or the passage of
time, or both), under the Property Lease, and no other party thereto has the
right to terminate, accelerate performance under or otherwise modify any of such
Property Leases. Gemini has not assigned, transferred, conveyed, subjected to a
security interest, or otherwise encumbered any interest in the Property Lease.
(m) Contracts. Disclosed in Schedule 5.3(m) hereto is a true,
complete and correct list of every (written or oral): (i) union, collective
bargaining or similar agreement, together with all amendments thereto or
interpretations thereof, such as arbitration decisions and the like; (ii) profit
sharing, deferred compensation, bonus, stock option, stock purchase, pension,
retainer, consulting, retirement, welfare (including, without limitation,
retiree welfare benefit) or incentive plan or agreement maintained or sponsored
by Gemini or GBI, or to which Gemini or GBI contributes; (iii) plan of Gemini or
GBI providing for "fringe benefits" to its employees or former employees,
including, but not limited to, vacation, sick leave, severance pay, medical,
hospitalization, life insurance and other plans, or related benefits; (iv)
employment agreement that is not terminable at will and without penalty on
thirty (30) days or less prior written notice or that provides for payments upon
or after termination; (v) agency, sales, brokerage, wholesaling, franchise,
distributorship or similar agreement or contract; (vi) loan agreement or letter
of credit; (vii) personal property lease; (viii) security or pledge agreement;
(ix) mortgage or deed of trust; (x) purchase commitment to, or contract or
agreement with, any supplier; (xi) contract or agreement relating to research
and development; (xii) license, authority or permit granted by Gemini or GBI to
any person or entity; (xiii) contract or agreement to which Gemini or GBI is a
party or by which Gemini or GBI or any of its assets is bound, which reasonably
may be expected to involve future obligations or benefits in excess of $15,000
in any one calendar year; (xiv) contract or agreement to which Gemini or GBI is
a party or by which Gemini or GBI or any of its assets is bound, which is either
individually or collectively material to the financial condition, assets,
business or future prospects of Gemini or GBI; and (xv) contract or agreement to
which Gemini or GBI is a party, or by which Gemini or GBI or any of its assets
is bound, regarding or pertaining to the manufacture or supply of any products
or services to any customer of Gemini or GBI, whether an individual, corporation
or other business entity. All of the foregoing are referred to in this Agreement
individually as a "Gemini Contract" and collectively as the "Gemini Contracts."
Except where the lack of effectiveness or enforceability would not result in a
material adverse effect on the financial condition or results of operations of
Gemini or GBI, each of the Gemini Contracts is in full force and effect and
enforceable in accordance with its respective terms and conditions, and will
continue as such following the Effective Date and the other transactions
contemplated in this Agreement. Except as set forth in Schedule 5.3(m) or where
such default, termination or waiver would not result in a material adverse
effect on the financial condition or results of operations of Gemini or GBI: (1)
there is not existing any default, or event or condition which, with or without
the giving of notice or the passage of time, or both, would constitute an event
of default, by Gemini or GBI or any other party thereto under any of the Gemini
Contracts; (2) no party to any of the Gemini Contracts has a legal obligation
(statutory or contractual) to renegotiate the Gemini Contract; (3) no party to
any of the Gemini Contracts has given any notice of default or termination, nor
does Gemini or GBI have any reason to believe that such notice will be given;
and (4) neither Gemini nor GBI has waived any material right under or with
respect to any of the Gemini Contracts. Neither Gemini nor GBI believes, or has
any reason to believe, that there is a likelihood that any of the customers of
or suppliers to Gemini or GBI will terminate its or their business relationship
with Gemini or GBI for any reason whatsoever, including, without limitation, by
reason of the Contribution and/or any change in ownership of Gemini or GBI.
Except as specifically disclosed on Schedule 5.3(m) hereto, there is not pending
or contemplated any transactions between GBI or Gemini and any of their
25
<PAGE>
stockholders, partners, Stockholder Affiliates or Partner Affiliates. Correct
and complete copies of the general forms of client engagement and services used
by Gemini and GBI have been delivered to EPi or EPi Sub.
(n) Insurance. Schedule 5.3(n) hereto contains a description
(identifying insurer, coverage, premiums, named insured, deductibles and
expiration date) of all policies of fire, liability and other forms of insurance
that currently are, or at any time within the past two years have been,
maintained in force by or for the account of Gemini with respect to its business
and assets (such policies are hereinafter referred to as the "Gemini Policies").
(o) Intellectual Property. Gemini owns or holds all of the
rights to use all trademarks, trade names, fictitious names, service marks,
patents and copyrights that are used in the conduct of its business. Disclosed
in Schedule 5.3(o) hereto, is a true, complete and correct list of all
trademarks, trade names, fictitious names, service marks, patents, copyrights
and all registrations or applications with respect thereto, and all licenses or
rights under the same which are presently or which have been, during the past
two years, owned or used by Gemini or GBI (collectively, the "Gemini
Intellectual Property"). To the knowledge and belief of Gemini or GBI, none of
the matters covered by the Gemini Intellectual Property, nor any of the
processes used, the products made or sold, or the business practices followed by
Gemini or GBI, infringes or has infringed upon any trademark, trade name,
fictitious name, service mark, patent or copyright owned by any person or entity
(or any application with respect thereto), or constitutes unfair competition.
Except as disclosed in Schedule 5.3(o) hereto, neither Gemini nor GBI is
obligated to pay any royalty or other payment with respect to any Gemini or GBI
Intellectual Property. To the knowledge and belief of Gemini and GBI after due
inquiry, no person or entity is producing, providing, selling or using products
or services which would constitute an infringement of any of the Gemini
Intellectual Property.
(p) Licenses and Permits. Schedule 5.3(p) hereto contains a
true, correct and complete list of all licenses, permits, franchises,
certificates, consents, approvals, and authorizations (collectively "Gemini
Licenses") applied for, issued to, or owned, held or used by Gemini or GBI.
Gemini has all Gemini Licenses necessary for the conduct of its business and the
ownership and use of its assets, properties, the premises occupied by it and the
conduct of its business plans as presently contemplated, except where the
failure to have any such Gemini Licenses would not result in a material adverse
effect on the financial condition or results of operations of Gemini or GBI, and
such Gemini licenses are in full force and effect. Except as disclosed in
Schedule 5.2(p), there are no violations by Gemini or GBI of, or any claims or
proceedings, pending or, to the knowledge of Gemini or GBI, threatened,
challenging the validity of or seeking to discontinue any of the Gemini
licenses.
(q) Taxes. All Taxes levied, assessed, or imposed upon Gemini
or GBI or its business, assets or properties have been duly and fully paid or
have been adequately provided for on the Gemini Financial Statements. In
addition, all filings, returns and reports with respect to Taxes required by any
foreign or domestic law or regulation to be filed by Gemini or GBI on or prior
to the date hereof have been duly and timely filed. There are no agreements,
waivers or other arrangements (oral or written) providing for extensions of time
with respect to the assessment or collection of unpaid Taxes, nor are there any
actions, suits, proceedings, inquiries, investigations or claims of any nature
or kind whatsoever now pending, or to the knowledge and belief of Gemini or GBI
after due inquiry threatened, against Gemini or GBI with respect to any such
returns or reports, or any such Taxes, or any matters under discussion with any
federal, state, county, local or other authority relating to Taxes.
(r) Labor Disputes; Unfair Labor Practices. To the knowledge
of Gemini and GBI, no key employee or group of employees has any plans to
terminate their employment with Gemini or GBI
26
<PAGE>
generally or as a result of the transactions contemplated hereby or otherwise.
Neither Gemini nor GBI is a party to or bound by any collective bargaining
agreement, and neither Gemini nor GBI has experienced any strikes, grievances,
other collective bargaining disputes .Except as disclosed in Schedule 5.3(r)
hereto, there is no pending or to the knowledge and belief of Gemini or GBI
after due inquiry, threatened labor dispute, grievance, strike or work stoppage
involving any of the employees of Gemini or GBI which affects or which may
affect the financial condition or results of operations, assets or prospects of
Gemini or GBI. There is no pending or to the knowledge and belief of Gemini or
GBI after due inquiry, threatened charge or complaint against or involving
Gemini or GBI or any of its officers or employees by the National Labor
Relations Board, the Occupational Health and Safety Administration, the
Department of Labor, or any similar federal, state or local board or agency, or
any representative thereof. There are no unfair employment or labor practice
charges or complaints presently pending, or to the knowledge and belief of
Gemini and GBI after due inquiry threatened, by or on behalf of any employee of
Gemini or GBI.
Each of Gemini and GBI has materially complied with all applicable laws
relating to labor, including, without limitation, any provisions thereof
relating to wages, termination pay, vacation pay, fringe benefits, collective
bargaining and the payment and/or accrual for the same and all taxes, insurance
and all other costs and expenses applicable thereto, and Gemini and GBI are not
liable for any arrearage, or any taxes, costs or penalties for failure to comply
with any of the foregoing. Without limiting the generality of the foregoing,
neither Gemini or GBI has incurred a violation of Part 6 of Subtitle B of Title
I of ERISE ("COBRA") or other applicable state insurance continuation law. No
material COBRA or other state insurance continuation law violation exists or
will exist with respect to any employees of Gemini or GBI prior to and including
the Closing Date, nor will any such violation occur as a result of the
transactions contemplated hereby. As of the Closing Date, Gemini or GBI will not
be, nor has Gemini or GBI ever been, an enterprise subject to the Workers
Adjustment Retaining and Notification Act ("WARN") and neither Gemini nor GBI
will incur, or ever has incurred, material liabilities, penalties or other
charges under WARN.
Except as disclosed in Schedule 5.2(r), neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby shall
cause Gemini or GBI to be in breach of any agreement with any employee,
contractor or consultant or cause Gemini or GBI to be liable to pay any
severance or other amount to any employee, contract or consultant of Gemini or
GBI.
(s) Financial Statements of Gemini and GBI. Gemini and GBI
Financial Statements are attached as Schedule 5.3(s) hereto and include (A)
unaudited balance sheet as of December 31, 1996 (the "Gemini 1996 Balance
Sheet"); (B) unaudited statement of operations for the year ended December 31,
1996 (the "Gemini 1996 P&L"); (C) unaudited balance sheet as of December 31,
1997 (the "Gemini 1997 Balance Sheet"); and (D) unaudited statement of
operations for the year ended December 31, 1997 (the "Gemini 1997 P&L"). The
Gemini and GBI 1996 Balance Sheet and the Gemini and GBI 1997 Balance Sheet
fairly present the financial condition of Gemini as of the respective dates
thereof. The Gemini 1996 P&L and the Gemini 1997 P&L fairly present the results
of the operations of Gemini for the respective periods then ended.
(t) Books and Records. The books and records of each of Gemini
and GBI with respect to its assets, businesses, operations, properties and
prospects have been maintained in accordance with reasonable accounting
practices. All applicable corporate and other laws relating to the maintenance
of such books and records have been complied with by Gemini and GBI, except
where the failure to comply with such laws would not result in a material
adverse effect on the financial condition or results of operations of Gemini or
GBI.
27
<PAGE>
(u) Liabilities. Except as either fully disclosed in Schedule
5.3(u) hereto, or fully and properly reflected on or reserved for in the Gemini
or GBI 1997 Balance Sheet or incurred by Gemini or GBI after the date of the
Gemini or GBI 1997 Balance Sheet only in the ordinary course of business, and
not in violation of this Agreement, none of which are either individually or
collectively material, and none of which would require accrual or disclosure
under generally accepted accounting principles, Gemini or GBI has no: (i) debts,
liabilities or obligations of a nature required to be reflected or disclosed in
financial statements prepared in accordance with generally accepted accounting
principles; or (ii) other debts, liabilities or obligations, whether accrued,
absolute, contingent or otherwise, whether due or to become due, relating to or
arising out of any act, transaction, circumstance or state of facts which
occurred or existed on or before December 31, 1997. Except as disclosed on
Scheduled 5.3(u) hereto since December 31, 1997, Gemini or GBI has not incurred
any debts, liabilities or obligations, whether accrued, absolute, contingent or
otherwise, whether due or to become due, other than debts, liabilities and
obligations incurred in the ordinary course of business of Gemini or GBI, none
of which are either individually or collectively material or incurred in
violation of this Agreement and none of which would require accrual or
disclosure under generally accepted accounting principles. Schedule 5.3(u)
hereto, contains a true, complete and correct list of all contracts and
agreements pursuant to which Gemini or GBI has guaranteed or indemnified any
debt, liability and obligation of any other person or entity, including, without
limitation, the partners of Gemini or the stockholders of GBI (including,
without limitation, the execution of any document obligating Gemini with respect
to any performance or other bond), or pursuant to which Gemini has pledged or
otherwise encumbered any of its assets (including, without limitation, any
document obligating Gemini with respect to any performance or other bond).
Except as disclosed in Schedule 5.3(u) hereto, Gemini is not indebted to any of
its partners or their affiliates, nor are any of its partners or their
affiliates indebted to Gemini in any amount for any purpose.
(v) Notes and Accounts Receivable. All notes and accounts
receivable of Gemini are reflected properly on its books and records, such
receivables are valid receivables subject to no set-offs or counterclaims, are
current and collectible in the aggregate amount shown, and will be collected in
accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts set forth on the face of the latest balance sheet, as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of Gemini. Since the most recent fiscal year
end, there has not been a material adverse change in the aggregate amount of the
accounts receivable of Gemini or the aging thereof.
(w) Subsequent Events. Except as set forth on Schedule 5.3(w)
hereto or as taken or to be taken in connection with this Agreement, since
December 31, 1997 neither Gemini nor GBI has:
(i) created or suffered to exist any
material liens or encumbrances with respect to any of its assets which have not
been discharged, other than liens for nondelinquent taxes;
(ii) sold or transferred any of its assets
or property (including, without limitation, sales and transfers to any of its
stockholders), other than the sale of inventories of products of Gemini sold in
the ordinary course of the business of Gemini;
(iii) suffered any material loss, or
material interruption in use, of any of its assets or properties (whether or not
covered by insurance), on account of fire, flood, riot, strike or other hazard
or Act of God;
(iv) suffered any material and adverse
change in its business, business activities, business prospects or financial
condition, including, without limitation, the existence or threat of
28
<PAGE>
any labor dispute, or any material adverse change in, or loss of, any material
relationship between Gemini and any of its customers, suppliers or key
employees, or client accounting for more than 10% of Gemini's revenues in fiscal
1997 or 1998;
(v) written off any equipment as unusable or
obsolete or for any other reason;
(vi) waived any material rights;
(vii) paid any stockholder of GBI or partner
of Gemini or any Stockholder Affiliate, except for wages paid to stockholders of
GBI or partners of Gemini who are also employees of GBI or Gemini, or been
charged by any stockholder of GBI or partner of Gemini or any Stockholder
Affiliate or Partner Affiliate for goods sold or services rendered, or paid any
stockholder of GBI or partner of Gemini or any Stockholder Affiliate or been
charged by any stockholder or partner of GBI or Gemini or any Stockholder
Affiliate for corporate overhead expenses, management fees, legal or accounting
fees, capital charges, or similar charges or expenses;
(viii) paid, declared or set aside any
dividends or other distributions on its securities of any class, or purchased,
exchanged or redeemed any of its securities of any class;
(ix) incurred or committed to incur any
individual capital expenditures in excess of $10,000 or in the aggregate in
excess of $25,000;
(x) incurred any indebtedness for borrowed
money;
(xi) paid any compensation or bonus to any
stockholder or partner except in the ordinary course of business or increased
the compensation payable to any employee except in the ordinary course of
business;
(xii) except for fees paid to or incurred
with Gemini's or GBI's accountants and attorneys, paid or incurred any
management, consulting or other professional fees;
(xiii) hired any employee for an annual
salary in excess of $35,000 other than employees identified on Schedule 5.3(w)
hereto;
(xiv) made any change in its Articles of
Incorporation, By-laws or Limited Partnership Agreement;
(xv) merged or consolidated or agreed to
merge or consolidate with or into any corporation or other entity, other than in
connection with this Agreement;
(xvi) without limitation by the enumeration
of any of the foregoing, entered into any material transaction other than in the
usual and ordinary course of business (the foregoing representation and warranty
will not be deemed to be breached by virtue of the entry by Gemini Group into
this Agreement or the other transactions contemplated hereby).
29
<PAGE>
(x) ERISA. Neither Gemini nor GBI maintains, administers or
contributes to, and did not at any time during the past three years maintain,
administer or contribute to, any (A) employee pension benefit plan (as defined
in Section 3(2) of ERISA, whether or not excluded from coverage under specific
Titles or Subtitles of ERISA); (B) employee welfare benefit plan (as defined in
Section 3(1) of ERISA, whether or not excluded from coverage under specific
Titles or Subtitles of ERISA); or (C) bonus, deferred compensation, stock
purchase, stock option, severance plan, insurance or similar arrangement.
(y) Employees and Consultants. Schedule 5.3(y) hereto contains
a true and complete list of all of the employees of Gemini or GBI and such list
correctly reflects their salaries, hourly wages, other compensation, dates of
employment and titles. Except as disclosed in Schedule 5.3(y) hereto, there are
no oral or written agreements or other arrangements with respect to employees or
consultants to which Gemini or GBI is a party or by which Gemini or GBI is
bound. Except for claims that may arise pursuant to any law, order, rule,
regulation, writ, injunction or decree relating to discrimination on the basis
of age, sex, race, disability or religion, the employment of each employee of
Gemini and GBI is terminable at will, such that Gemini or GBI may lawfully
terminate their employment at any time, with or without cause, without creating
any material cause of action against Gemini or GBI or otherwise giving rise to
any material liability of the Gemini or GBI for wrongful discharge, breach of
contract or tort.. Except as disclosed in Schedule 5.3(y) hereto, neither Gemini
nor GBI owes any past or present employee any sum other than for accrued wages
or salaries for the current payroll period, reimbursable expenses, accrued
vacation and holiday pay and sick leave rights. All of the employees of Gemini
and GBI are subject to noncompete/non-solicitation covenants in favor of Gemini.
No payments of either cash or other consideration have been made to any
person by Gemini or GBI or, to the knowledge of Gemini or GBI, on behalf of
Gemini or GBI by any agent, employee, officer, director, stockholders or other
person, that were unlawful under the laws of the United States or any state or
any other foreign or municipal government authority having appropriate
jurisdiction over Gemini or GBI.
(z) Litigation. Except as disclosed in Schedule 5.3(z) hereto,
there is no litigation or proceeding, in law or in equity, and there are no
proceedings or investigations or inquiries before any commission or other
governmental or administrative authority, pending or, to the knowledge and
belief of Gemini or GBI after due inquiry, threatened, against Gemini or GBI
with respect to or affecting the business or financial condition of Gemini or
GBI, or the consummation of the Contribution or the other transactions
contemplated herein, or the use of the assets of Gemini or GBI (whether by the
Partnership after the Closing Date or by Gemini or GBI prior thereto).
(aa) Warranty; Unbillable Work. All services rendered by
Gemini or GBI have been in material conformity with all applicable contractual
commitments and all warranties, and neither Gemini nor GBI has any liability
(and neither Gemini or GBI nor any member of the Gemini or GBI Group has any
knowledge of any basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint ,claims, or demand giving rise to
liability) for damages in connection therewith, subject only to the reserve for
customer claims set forth on the face of the latest balance sheet as adjusted
for the passage of time through the Effective Date in accordance with the past
custom and practice of Gemini or GBI. No services provided by Gemini or GBI are
subject to any guaranty, warranty, or other indemnity. Gemini or GBI is not
obligated to perform services or client work for which it will not be paid in
order to correct work previously performed that was incorrect or deficient,
complete work in excess of the fixed rate limit with respect to a particular
project or otherwise, other than reasonable and customary efforts to maintain
client satisfaction consistent with the size and scope of a particular project
and consistent with maintaining the reasonable profitability of such project.
30
<PAGE>
(bb) Brokers' Fees. The Gemini Group has no liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which the Gemini
Group, EPi, EPi Sub or the Partnership could become liable or otherwise
obligated
(cc) Unasserted Claims. Except as disclosed in Schedule
5.3(cc) hereto, to the knowledge and belief of each member of the Gemini Group
after due inquiry, there are no facts which, if known by a potential claimant or
governmental authority, would give rise to a claim or proceeding which, if
asserted or conducted with results unfavorable to Gemini or GBI, would have a
material adverse effect on the business, business prospects, or financial
condition of Gemini or GBI, or the other transactions contemplated herein, or
the use of the Assets or Properties of Gemini or GBI after the Closing Date.
(dd) Absence of Judicial Orders. Neither Gemini nor GBI is a
party to any decree, order or arbitration award (or agreement entered into in
any administrative, judicial or arbitration proceeding with any governmental
authority) with respect to or affecting its properties, assets, personnel,
business activities or business prospects.
(ee) Compliance with Law. Neither Gemini nor GBI is, to the
best of its knowledge, in violation of, or delinquent in respect to, any decree,
order or arbitration award or law or regulation of or agreement with, or any
license or permit from, any governmental authority to which any of its
properties, assets, personnel or business activities are subject, including,
without limitation, laws and regulations and the common law relating to
occupational health and safety, equal employment opportunities, fair employment
practices, and sex, race, religion and age discrimination, and the environment,
the delinquency or violation of which would have a material adverse effect on
the financial condition or results of operations of Gemini or GBI. Neither
Gemini nor GBI has received notice of any violation of a type referred to in any
portion of this Section 5.3(ee).
(ff) Hazardous Materials. Except as disclosed in Schedule
5.3(ff), there has been, to the best of its knowledge, no storage, treatment,
generation, discharge, transportation or disposal of Hazardous Substances by or
on behalf of Gemini or GBI, in violation of any foreign, Federal, state or local
law, statute, rule or regulation or the common law or any decree, order,
arbitration award or agreement with or any license or permit from any foreign,
Federal, state or local governmental authority. Except as disclosed in Schedule
5.3(ff), there has been, to the best of its knowledge, no Release of any kind
by, on behalf of or attributable to Gemini or GBI into the environment
(including, without limitation, into air, soil, water or ground water) of any
materials including, without limitation, Hazardous Substances, as defined under
any foreign, Federal, state or local law, statute, rule or regulation other than
those Releases permissible under such law, statute, rule or regulation or
allowable under applicable permits. Schedule 5.3(ff) hereto sets forth a
complete list of all aboveground and underground storage tanks, vessels, and
related equipment and containers that are subject to foreign, Federal, state or
local laws, statutes, rules or regulations, and sets forth their present
contents, what the contents have been at any time in the past, and what program
of remediation, if any, is contemplated or has been accomplished with respect
thereto.
(gg) Accuracy of Documents, Representations and Warranties.
The copies of all documents furnished to EPi or EPi Sub or any of its or their
representatives by or on behalf of the Gemini Group or any of their
representatives are, to the best of its knowledge, true, complete and correct.
To the best of its knowledge, no representation or warranty of the Gemini Group
contained in this Agreement or the other agreements to be executed by any member
of the Gemini Group pursuant hereto, and no statement contained in the exhibits,
the schedules or the other documents delivered by or on behalf of Gemini Group,
or its representatives pursuant to or in connection with this Agreement or the
other agreements to be executed by any member of the Gemini Group pursuant
hereto, or any of the transactions contemplated
31
<PAGE>
hereby or thereby, contains any untrue statement of a material fact, or omits to
state any material fact required to be stated herein or therein in order to make
the statements contained herein or therein not misleading.
(hh) Gemini Contributed Assets. The Gemini Contributed Assets
are all related to and used in connection with the business conducted by Gemini.
No person other than Gemini owns any of the Assets or Properties used in
connection with the business conducted by Gemini. The Gemini Contributed Assets
constitute all of the Assets and Properties of Gemini used in connection with
the business conducted by Gemini. Gemini, GBI and the Jayaramans do not have any
direct or indirect interest in any business that directly or indirectly competes
with the business conducted by Gemini.
ARTICLE VI.
Conduct Prior to the Closing
6.1 Conduct by Gemini, GBI, EPi and EPi Sub. Between the date
hereof and the Closing Date:
(a) Exclusivity. Except in connection with the Other
Reorganization Transactions, Gemini, GBI EPi and EPi Sub shall not and shall
cause their respective directors, officers, employees and advisors not to
initiate, solicit, propose, pursue or enter into any proposals, substantive
discussions, negotiations, letters or statements of intent or agreements
(whether preliminary or definitive) with any person or entity of any nature,
other than as provided herein, at any time prior to September 30, 1998, which
contemplate or provide for any contribution of assets, share exchange,
acquisition or purchase or sale of all or a substantial portion of the assets or
business of, or any business combination of any type involving, Gemini, GBI, EPi
or EPi Sub, as the case may be. Each party hereto shall communicate with the
other parties, within two business days of in hand receipt or actual knowledge
of the substance of communications, by an executive officer of such party, the
material terms of any substantive communication received prior to such date by
such party from a third party concerning any of the aforesaid matters.
(b) Equitable Relief. Gemini, GBI, EPi and EPi Sub acknowledge
that the covenants contained in paragraph (a) of this Section 6.1 are a material
inducement for each to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Accordingly, Gemini, GBI, EPi and EPi Sub each
acknowledge that the restrictions contained in paragraph (a) of this Section 6.1
are reasonable and necessary for the protection of the business of EPi, EPi Sub,
GBI and Gemini, and the future business of the Partnership, and that a breach of
any such restriction could not adequately be compensated by damages in an action
at law. In the event of a breach or threatened breach by any party of any of the
provisions of paragraph (a) of this Section 6.1, the other parties will be
entitled to obtain, without the necessity of posting bond therefor, an
injunction (preliminary or permanent, or a temporary restraining order)
restraining such breaching party from the activity or threatened activity
constituting or which would constitute a breach, as well as damages and an
equitable accounting of all earnings, profits and other benefits arising from a
violation, which right will be cumulative and in addition to any other rights or
remedies to which the non-breaching party may be entitled.
6.2 Joint Obligations of Gemini, GBI, EPi and EPi Sub. Between
the date hereof and the Closing Date:
32
<PAGE>
(a) Access to Records. Gemini, GBI, EPi and EPi Sub
and each of their respective employees, officers, agents, representatives and
accountants will (i) fully cooperate with one another in the conduct of their
due diligence reviews of the other party, (ii) allow the officers, employees,
attorneys, consultants and accountant access during normal business hours to all
of their properties, books, contracts, documents and records, and (iii) furnish
to the other party such information as they may at any time and from time to
time reasonably request.
(b) Business in Ordinary Course. Gemini, GBI, EPi and
EPi Sub will each carry on their businesses and affairs as heretofore carried
on, and except in connection with the Other Reorganization Transactions or as
contemplated by this Agreement or in the usual and ordinary course of their
businesses in accordance with past practices, Gemini, GBI, EPi and EPi Sub will
not order, purchase or lease any products, inventory, equipment, personal
property or other items, or dispose of any of their respective assets or leased
properties, or prepay any of their respective material obligations, incur any
liabilities or obligations, hire or discharge any employee or officer or,
without limitation by specific enumeration of the foregoing, enter into any
other transaction. Without limiting the generality of the foregoing, Gemini,
GBI, EPi and EPi Sub each agrees that except in connection with the Other
Reorganization Transactions or as contemplated by this Agreement, or without the
written consent of the other parties, which consent shall not be unreasonably
withheld, it will not:
(i) create or suffer to exist any liens or
encumbrances with respect to any of its assets or properties which will not be
discharged prior to the Closing Date;
(ii) incur any indebtedness for borrowed
money;
(iii) sell or transfer any material assets
or properties (including, without limitation, sales and transfers to any of its
stockholders), except for sales of inventories of products made in the ordinary
course of the business;
(iv) acquire or enter into any agreement or
understanding (oral or written) to acquire the stock or assets of any other
Person;
(v) make any material change in the conduct
or nature of any aspect of its business, whether in the ordinary course of
business or not, or whether or not the change has or will have a material
adverse affect on its business activities, financial condition, or business
prospects;
(vi) waive any material rights;
(vii) pay any of its stockholders,
Stockholder Affiliates, Partners or Partner Affiliates except for wages paid to
any stockholder or partner who is also an employee, or be charged by any
stockholder, any Stockholder Affiliate, any Partner or any Partner Affiliate for
goods sold or services rendered, or be charged by any stockholder, any
Stockholder Affiliate, any Partner or any Partner Affiliate for corporate
overhead expenses, management fees, legal or accounting fees, capital charges,
or similar charges or expenses;
(viii) incur or commit to incur any
individual capital expenditures in excess of $10,000, or in the aggregate in
excess of $25,000;
(ix) amend employment contracts or the terms
and conditions of employment of any officer, director or employee earning total
annual compensation in excess of $50,000,
33
<PAGE>
other than normal merit and cost of living increases to employees in accordance
with its general prevailing practices existing prior to the date of this
Agreement;
(x) except for fees paid to or incurred with
its accountants and attorneys, pay or incur any management, consulting or other
professional fees;
(xi) hire any employee who will have an
annual salary in excess of $35,000;
(xii) make any change in its Certificate of
Incorporation ; or Articles of Incorporation; By-laws or Partnership Documents;
(xiii) merge or consolidate or agree to
merge or consolidate with or into any Person;
(xiv) make or permit to be made any
distribution to any of its stockholders or partners with respect to stock or
partnership interests or other of its securities, if any; or
(xv) enter into any transaction other than
in the usual and ordinary course of business;
(xvi) make any material Tax elections or
settle or compromise any material Tax liability; or
(c) Consents. Gemini, GBI, EPi and EPi Sub will each use its
commercially reasonable best efforts and make every good faith attempt to obtain
any and all consents and estoppel letters reasonably requested by the other
parties in connection with the assignment of, or alternate arrangements
satisfactory to the other parties with respect to, any contract, lease, license,
permit, agreement, or other instrument, which is to be an asset of the
Partnership, or which may be necessary, appropriate, or required in order to
permit the conduct of the business and operations of the Partnership after the
Closing Date to be in all respects the same as the conduct of the operations of
Gemini, GBI, EPi and EPi Sub prior to the Closing Date.
(d) Notice. Each party will promptly give the other party
written notice of the existence or occurrence of any condition which would make
any representation or warranty of the notifying party untrue or which might
reasonably be expected to prevent the consummation of the Contribution or the
other transactions contemplated herein.
(e) Performance. No party will intentionally perform or omit
to perform any act which, if performed or omitted, would prevent or excuse the
performance of this Agreement by any party hereto or which would result in any
representation or warranty contained herein of that party being untrue in any
material respect as of the date hereof and as if originally made on and as of
the Closing Date.
(f) Adoption of Agreement The parties hereto will take all
actions necessary to submit the issue of the adoption of this Agreement to their
respective directors or partners, as necessary.
(g) Confidentiality. From and after the date of this
Agreement, the parties shall, and shall cause their respective Affiliates
(defined below)
34
<PAGE>
to, treat all Confidential Information (defined below) of the other party as
confidential, and shall, and shall cause their respective Affiliates to, not use
any such Confidential Information for any purpose except in furtherance of the
transactions contemplated hereby. In the event this Agreement is terminated
pursuant to Article XI hereof, each party shall, and shall cause its respective
Affiliates to, promptly return to each other party all documents and work
papers, and all copies thereof, containing any such Confidential Information of
such other party. The covenants of the parties contained in this Section 6.2(g)
are of the essence and shall survive any termination of this Agreement, but
shall terminate as of the Closing. "Confidential Information" of or relating to
a party means any and all information received from or on behalf of such party
or its Affiliates concerning the Contributions, the terms of this Agreement or
the assets, business, operations, or financial condition of such party or its
Affiliates, except that Confidential Information does not include information
that (i) is or becomes generally available to the public other than as a result
of a voluntary disclosure or release by a recipient party on a non-confidential
basis prior to the disclosure in connection with this Agreement or the
transactions contemplated hereby, or (ii) was available to a recipient party on
a non-confidential basis prior to the disclosure in connection with the
transactions contemplated by this Agreement, or (iii) is lawfully obtained by
the recipient party from a third party under no duty of confidentially to the
disclosing party. "Affiliate," for purposes of this Section 6.2(g), means a
director, officer, employee, agent or adviser of such party.
(h) Severability. Each and every provision set forth in each
of Sections 6.1(a) and 6.2(g) is independent and severable from the others, and
no provision will be rendered unenforceable by virtue of the fact that, for any
reason, any other or others of them may be unenforceable in whole or in part.
The parties hereto agree that if any provision of each of Sections 6.1(a) and
6.2(g) will be declared by a court of competent jurisdiction to be unenforceable
for any reason whatsoever, the court may appropriately limit or modify such
provision, and such provision will be given effect to the maximum extent
permitted by applicable Law.
(i) Publicity. Each party agrees not to issue or disseminate
any press releases, written communications to stockholders, and other public
disclosures concerning the Contributions, the status of directors' and partners'
approvals, and other matters relating to this Agreement or the Contributions
without the prior written consent of the other parties hereto, which consent may
not be unreasonably withheld, but may include the right to review and approve
the language of any such press release, written communication to stockholders
and other public disclosure; provided, however, each party may make such
disclosures regarding the terms of this Agreement and the Contributions as
required by applicable Law.
6.3 Financing. Gemini, GBI and EPi or EPi Sub will each use
its commercially reasonable best efforts and make every good faith attempt to
complete a private placement of at least $2,000,000 of equity securities of EPi
with such private placement to close either concurrently with the Closing or as
soon after the Closing as reasonably practicable.
6.4 Master Agreement. Within ten (10) business days of the
execution of this Agreement, the parties shall execute and deliver and shall use
reasonable efforts to cause the other parties thereto to execute and deliver the
Master Agreement.
35
<PAGE>
ARTICLE VII.
Conditions Precedent to Closing
7.1 Conditions Precedent to Gemini's Obligations. The
obligation of Gemini Group to consummate this Agreement and other transactions
contemplated herein is subject to fulfillment by EPi and EPi Sub, or written
waiver by Gemini Group, of each of the following conditions precedent on or
prior to the Closing Date:
(a) Representations and Warranties. Each and every
representation and warranty made by EPi and EPi Sub will be true and correct in
all material respects when made and will be true and correct in all material
respects as if originally made on and as of the Closing Date.
(b) EPi's Obligations Performed. All obligations of EPi to be
performed hereunder, through and including the Closing Date, will have been
performed in all material respects.
(c) Disclosure Schedules. Gemini will have received from EPi
and EPi Sub Disclosure Schedules referred to in Section 5.2 hereof and all
amendments and modifications thereto delivered pursuant to Section 10.1, and
Gemini Group will, in the exercise of its sole discretion, be satisfied with the
nature and extent of the disclosures made therein and the representations and
warranties of EPi and EPi Sub as modified by the disclosures contained in the
EPi and EPi Sub Disclosure Schedules.
(d) Employment Agreement of Arup Sen. The Old Sen Employment
Agreement shall be terminated effective as of the Closing Date without recourse
by Mr. Sen against EPi or EPi Sub or the Partnership for breach of such
agreement. EPi or EPi Sub and Arup Sen will have entered into the New Sen
Employment Agreement.
(e) No Suit, Proceeding or Investigation. No suit, proceeding,
inquiry or investigation will have been commenced or threatened by any
governmental authority or other Person on any grounds to restrain, enjoin or
hinder, or to seek damages on account of, the consummation of the Contribution
or any other transactions contemplated herein.
(f) Tax Advice On or prior to the Closing Date, Gemini Group
will have received an opinion of Gray Jennings, tax counsel to Gemini Group, to
the effect that, based on representation letters and certificates substantially
in the form of Exhibits I and K provided to Gemini Group's tax counsel by
Gemini, EPi or EPi Sub and the shareholders of GBI, and based on the assumptions
and qualifications set forth in that opinion, for federal income tax purposes,
(i) the Gemini Contribution will be treated as a tax free contribution of
capital to a partnership within the meaning of Section ___(a) of the Code, and
(ii) each of Gemini and EPi Sub will be a partner within the meaning of Section
___ of the Code and the transaction will not cause any current year federal
income tax to be due from Gemini or the Jayaramans.
(g) Material Adverse Change. Since December 31, 1997, there
shall not have occurred any material adverse change in the results of
operations, financial condition, properties, or business of EPi or EPi Sub other
than any matter or matters relating to EPi or EPi Sub which have been disclosed
and agreed to by Gemini and other than the Other Reorganization Transactions.
(h) Consents and Approvals EPi or EPi Sub shall have obtained
any and all consents or approvals that may be required under the terms of (i)
any contract, agreement, lease, or other obligation
36
<PAGE>
or commitment, including, but not limited to, the types described in Section
6.2(c) hereof, to which either EPi or EPi Sub is a party or by which either EPi
or EPi Sub or any of their Assets or Properties is bound, or (ii) any license or
permit of EPi or EPi Sub, in order to avoid the occurrence of any breach or
default which may result from the consummation of the Contribution and which, if
not obtained, is reasonably likely to have, individually or in the aggregate, a
material adverse effect on EPi or EPi Sub.
(i) Redemption and Conversion of EPi Preferred Stock, Herrick
EPi Warrants, and Other EPi Warrants. As of the Closing Date, all of the issued
and outstanding shares of EPi Preferred Stock, the Herrick EPi Warrants, and the
Other EPi Warrants, shall be redeemed and exchanged by EPi for shares of EPi
Common Stock pursuant to Article IV above.
(j) The Merger. The Merger will have occurred.
(k) Approval of the Lender. On or prior to Closing, the Lender
shall have approved this Agreement and the Closing or alternate financing has
been committed;
(l) Master Agreement. On or prior to Closing, the Master
Agreement shall have been executed and delivered by all of the parties thereto.
(m) Employment Contract for Dr. Krishna Jayaraman. EPi, EPi
Sub or the Partnership and Krishna Jayaraman shall have entered into the Krishna
Employment Agreement.
(n) Partnership Agreement and Exchange Agreement. The parties
thereto shall have executed the Partnership Agreement and the Exchange
Agreement.
7.2 Conditions Precedent to EPi's and EPi Sub's Obligations
The obligations of EPi and EPi Sub to consummate the transactions contemplated
hereby are subject to the fulfillment by Gemini Group, or written waiver by EPi
and EPi Sub, of each of the following conditions precedent on or prior to the
Closing Date:
(a) Representations and Warranties. Each and every
representation and warranty made by Gemini Group will be true and correct in all
material respects when made and will be true and correct in all material
respects as if originally made on and as of the Closing Date.
(b) Gemini Group's Obligations Performed All obligations of
Gemini Group to be performed hereunder through and including the Closing Date
will have been performed in all respects.
(c) Disclosure Schedules EPi will have received from Gemini
Group the Gemini Disclosure Schedules referred to in Section 5.3 hereof and all
amendments and modifications thereto delivered pursuant to Section 10.1, and EPi
will, in the exercise of its sole discretion, be satisfied with the nature and
extent of the disclosures made therein and the representations and warranties of
Gemini as modified by the disclosures contained in the Gemini Disclosure
Schedules.
(d) No Suit, Proceeding or Investigation. No suit, proceeding,
inquiry or investigation will have been commenced or threatened by any
governmental authority or other Person on any grounds to restrain, enjoin or
hinder, or to seek damages on account of, the consummation of this Agreement or
any other transactions contemplated herein.
37
<PAGE>
(e) Material Adverse Change. Since December 31, 1997, there
shall not have occurred any material adverse change in the results of
operations, financial condition, properties, or business of Gemini other than
any matter or matters relating to GBI which have been disclosed and agreed to by
EPi and other than consummation of the Gemini Reorganization.
(f) Consents and Approvals. Gemini shall have obtained any and
all consents or approvals that may be required under the terms of (i) any
contract, agreement, lease, or other obligation or commitment, including, but
not limited to, the types described in Section 6.2(c) hereof, to which either
Gemini or GBI is a party or by which either Gemini or GBI or any of its Assets
or Properties is bound, or (ii) any license or permit of Gemini or GBI, in order
to avoid the occurrence of any breach or default which may result from the
consummation of the Contribution and which, if not obtained, is reasonably
likely to have, individually or in the aggregate, a material adverse effect on
Gemini.
(g) Employment Agreement of Arup Sen. The Old Sen Employment
Agreement shall be terminated effective as of the Closing Date without recourse
by Mr. Sen against EPi, EPi Sub or the Partnership for breach of such agreement.
EPi or EPi Sub and Arup Sen will have entered into the New Sen Employment
Agreement.
(h) Redemption and Conversion of EPi Preferred Stock, Herrick
EPi Warrants, and Other EPi Warrants. As of the Effective Time, all of the
issued and outstanding shares of EPi Preferred Stock, the Herrick EPi Warrants,
and the Other EPi Warrants, shall be redeemed and exchanged by EPi for shares of
EPi Common Stock pursuant to Article III above.
(i) The parties to the Asset Purchase Agreement are present at
closing an undertake to perform according to the Asset Purchase Agreement.
(j) All parties to the Master Agreement are present or
represented and affirm that they are prepared to execute the closing documents.
ARTICLE VIII.
Closing
8.1 Form of Documents. At the Closing, all documents which
Gemini Group will deliver will be in form and content reasonably satisfactory to
EPi and its legal counsel, and all documents which EPi and EPi Sub will deliver
will be in form and content reasonably satisfactory to Gemini Group and its
legal counsel.
ARTICLE IX.
INTENTIONALLY OMMITTED
ARTICLE X.
Termination
10.1 Right to Terminate. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing:
38
<PAGE>
(a) by the mutual written consent duly authorized by the Board
of Directors of EPi and the Partners of Gemini;
(b) by Gemini Group if there has been a material breach by EPi
or EPi Sub of any of its representations, warranties, covenants or agreements
contained in this Agreement, or any such representation or warranty will have
become untrue in any material respect, such that the conditions set forth in
Section 7.1 are incapable of being satisfied on or before September 30, 1998;
(c) by EPi and EPi Sub if there has been a material breach by
Gemini Group of any of its representations, warranties, covenants or agreements
contained in this Agreement, or any such representation or warranty will have
become untrue in any material respect, such that the conditions set forth in
Section 7.2 are incapable of being satisfied on or before September 30, 1998;
(d) by either EPi, EPi Sub or Gemini Group if any decree,
permanent injunction, order or other action by any court of competent
jurisdiction or any governmental entity preventing or prohibiting consummation
of the Contribution will have become final and nonappealable; or
(e) by either EPi or Gemini if (i) the schedules, together
with the supporting documentation and attachments referred to therein, and
exhibits hereto are not agreed upon by the parties within fifteen (15) business
days of the date hereof (it being understood and agreed that notwithstanding
anything to the contrary contained herein, the schedules and exhibits hereto are
not binding or in final form until agreed upon by the parties in writing within
such fifteen (15) business days period); or (ii) the Closing Date will not have
occurred on or before September 30, 1998, provided, however, that the right to
terminate this Agreement under this Section 10.1 will not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing Date to occur on or before
September 30, 1998.
10.2 Remedies. No party will be limited to the termination
right granted in Section 10.1 hereof, by reason of the nonfulfillment of any
condition precedent to such party's closing obligations or a breach of another
party's representations and warranties, but may, in the alternative, elect to do
one of the following:
(a) Proceed. Proceed to Closing despite the
nonfulfillment of any condition precedent to its obligation to proceed to
Closing, it being understood that consummation of the transactions contemplated
herein will not be deemed a waiver of a breach of any representation, warranty
or covenant or of any party's rights and remedies with respect thereto.
(b) Decline to Proceed. Decline to proceed to
Closing, terminate this Agreement as provided in Section 10.1 hereof, and
thereafter seek damages if, and to the extent permitted in Section 10.3 hereof.
10.3 Right to Damages. If this Agreement is terminated, no
party hereto will have any liability or obligation to the others; provided,
however, that each party hereto will remain liable for any breach of any of that
parties' representations and warranties or the terms of this Agreement, or any
willful failure by the party to perform any of its obligations or agreements
contained in this Agreement, in which case that party will be liable for all of
the other party's out-of-pocket costs and expenses incurred in connection with
the negotiations, due diligence reviews, and preparation of this Agreement, and
all of the other documents related to this transaction, and those costs and
expenses which are incurred by the other parties in pursuing such rights and
remedies (including, without limitation, reasonable attorneys' fees).
39
<PAGE>
ARTICLE XI.
Miscellaneous
11.1 Survival of Representations and Warranties. The
representations and warranties made in this Agreement and in the other
documents, schedules and certificates delivered in connection with this
Agreement shall terminate on April 30, 1999 or such earlier date as may be
agreed upon in writing by Mr. Sen on behalf of EPi and EPi Sub and Mr. Jayaraman
on behalf of Gemini.
11.2 Disclosure Schedules The EPi and EPi Sub Disclosure
Schedules referred to in Section 5.2 and the Gemini Disclosure Schedules
referred to in Section 5.3 of this Agreement as finalized pursuant to Section
10.1(e) of this Agreement reflect information available to each of EPi, EPi Sub
and Gemini as of the date hereof. EPi, EPi Sub and Gemini Group may supplement
or amend their respective Disclosure Schedules from time to time prior to or at
the Closing, by notice in accordance with the terms of this Agreement,
including, without limitation, by delivering one or more supplements or
amendments to correct any matter which would constitute a breach of any
representation or warranty contained herein. No such supplement or amended
Schedule will be deemed to cure any breach for purposes of Section 7.1 or
Section 7.2, as applicable; however, any such supplement or amendment will be
effective to cure and correct for all other purposes any breach of any
representation or warranty which would have existed but for such supplement or
amendment, and all references to any Disclosure Schedule hereto which is
supplemented or amended as provided in this Section 11.2 will, for all purposes,
whether or not the Closing occurs, be deemed to be a reference to such
Disclosure Schedule as so supplemented or amended.
11.3 Fees and Expenses. The parties hereto each represent and
warrant to the other that the respective warrantor has not dealt with and is not
aware of any dealings with any person, firm or corporation who is or may be
entitled to a broker's commission, finder's fee, investment banker's fee or
similar payment from any other party for arranging these transactions or
introducing the parties to each other. Except as set forth in this Section 11.3
and on Schedule 11.3 hereto, all Expenses incurred in connection with this
Agreement, and the Contribution shall be paid by the party incurring such
Expenses, whether or not the Closing occurs. "Expenses" for purposes of this
Section 11.3 shall mean, with respect to any party hereto, all reasonable
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by such party or on its behalf.
11.4 No Employment Agreements. Neither EPi nor the Surviving
Corporation will have any obligation to enter into any employment agreement with
any employees of Gemini or EPi or EPi Sub prior to the Closing or thereafter,
except as provided in Article VII hereof.
11.5 Notices. All notices required or permitted to be given
hereunder will be in writing and will be deemed given when delivered in person,
or three business days after being placed in the hands of a courier service
(e.g., DHL or Federal Express) prepaid or faxed provided that a confirming copy
is delivered forthwith as herein provided, addressed as follows:
If to Gemini or GBI or Jayaramans:
Gemini Biotech Ltd.
3608 Research Forest Drive
The Woodlands, TX 77382
Attention: Krishna Jayaraman, PhD
Fax: (281) 364-0738
40
<PAGE>
If to EPi or EPi Sub:
Electropharmacology, Inc.
2301 NW 33rd Court, Suite 102
Pompano Beach, Florida 33069
Attention: Arup Sen
Fax: (954) 975-4021
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section.
11.6 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and will
be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, successors and permitted assigns. Each
appendix, exhibit and schedule to this Agreement will be considered incorporated
herein. This Agreement supersedes all prior written or oral agreements between
the parties hereto and thereto.
11.7 Waivers. The failure in any one or more instances of a
party to insist upon performance of any of the terms, covenants or conditions of
this Agreement, to exercise any right or privilege conferred in this Agreement
or the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, will not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same will
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver will be effective unless it is in writing and signed by
an authorized representative of the waiving party.
11.8 Severability. The invalidity of any provision of this
Agreement or portion of a provision will not affect the validity of any other
provision of this Agreement or the remaining portion of the applicable
provision.
11.9 Applicable Law. This agreement will be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware without regard to the conflicts of laws principles of such state.
11.10 Construction. Each party has participated in the
drafting of this Agreement and this document has been reviewed by the respective
legal counsel for the parties hereto. The normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party will
not be applied to the interpretation of this Agreement. No inference in favor
of, or against, any party will be drawn from the fact that one party has drafted
any portion hereof.
11.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original, and all such
counterparts will constitute but one instrument.
11.12 Facsimile Execution. This Agreement may be executed by
any party hereto by facsimile, and each such executed counterpart shall be
deemed to be validly executed and enforceable against each such party in
accordance with its terms.
41
<PAGE>
IN WITNESS WHEREOF, the individuals signing below on behalf of EPi, EPi
Sub, Gemini, GBI and Jayaramans are signing in the capacities indicated below as
of the date first above written.
ELECTROPHARMACOLOGY, Inc.
By: /s/ Arup Sen
--------------------------------------
Arup Sen
President and Chief Executive Officer
EPi Sub Inc.
By: /s/ Arup Sen
--------------------------------------
Arup Sen
President and Chief Executive Officer
Gemini Biotech L.P.,
By: Delargen Corporation, General Partner
By: /s/ Krishna Jayaraman
--------------------------------------
Krishna Jayaraman, PhD
President and Chief Executive Officer
By: /s/ Krishna Jayaraman
--------------------------------------
Krishna Jayaraman, PhD
By: /s/ Shashikala Jayaraman
--------------------------------------
Shashikala Jayaraman
Delargen Corporation (Gemini Biotech Inc.)
By: /s/ Krishna Jayaraman
-------------------------------------
Krishna Jayaraman, PhD
President and Chief Executive Officer
42
<PAGE>
EXHIBIT 1.23
UNIT EXCHANGE AGREEMENT
Dated as of June __, 1998
by and between
GEMINI BIOTECH L.P.
ELECTROPHARMACOLOGY, INC.
and
Gemini Health Technologies L.P.
<PAGE>
UNIT EXCHANGE AGREEMENT
This UNIT EXCHANGE AGREEMENT, dated as of June __ , 1998, is made by
and between ELECTROPHARMACOLOGY, INC., a Delaware corporation (the "Company"),
GEMINI BIOTECH LTD., a Texas limited partnership ("Gemini"), and Gemini Health
Technologies L.P., a Delaware limited partnership (the "Partnership").
The parties hereto agree as follows:
ARTICLE I.
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICABILITY
Section 1.1. Definitions. As used in this Agreement, the following
terms have the following respective meanings:
"Agreement" means this Unit Exchange Agreement.
"Business Day" means a day other than a Saturday, Sunday, or a day on
which banks in the State of Florida are authorized or required by law to close.
"Cash Payment" shall have the meaning assigned thereto in Section 2.3.
"Closing" shall have the meaning assigned thereto in Section 2.4.
"Closing Price" means, for each Trading Day, the last reported sale
price regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either case
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading, or, if the Common Stock is not so listed or
admitted to trading on a national securities exchange, on the National Market
System of The Nasdaq Stock Market or, if the Common Stock is not quoted on the
National Market System of The Nasdaq Stock Market, the average of the closing
bid and asked prices in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected from time to time by the Company for that
purpose or, if the Common Stock is not traded in the over-the-counter market,
the fair market value per share of the Common Stock as determined by the Company
Board (whose determination shall be conclusive).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means Common Stock, par value $.01 per share, of the
Company and any stock of any class of the Company that (a) has no preference in
respect of dividends or amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and (b) is not
subject to redemption by the Company. However, shares issuable on exchange of
Partnership Units, shall include only shares of the class designated as Common
Stock of the Company on the date hereof, or shares of any class or classes
resulting from any reclassification thereof that (i) have no preferences in
respect of dividends or amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and (ii) are
not subject to redemption by the Company; provided that, if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable and registerable shall be substantially in the proportion that the
total number of shares of such class resulting
2
<PAGE>
from all such reclassification bears to the total number of shares of all such
classes resulting from all such reclassification.
"Company" shall have the meaning set forth in the preamble and shall
also include the Company's successors.
"Company Board" means the Board of Directors of the Company.
"Company Certificate" shall have the meaning assigned thereto in
Section 5.3.
"Deemed Outstanding Shares" means the sum of (a) all shares of Common
Stock outstanding, plus (b) the aggregate number of shares of Common Stock
issuable under this Agreement in exchange for Partnership Units at the then
applicable Exchange Rate, assuming for this purpose that the Partnership Units
are then exchangeable.
"Effective Date" means the date of this Agreement.
"Exchange Date" shall mean the date one year after the Effective Date.
"Exchange Notice" shall have the meaning assigned thereto in
Section 2.2.
"Exchange Rate" shall have the meaning assigned thereto in Section 2.1.
"Gemini" shall have the meaning set forth in the preamble and shall
also include Gemini's successors.
"Partnership" shall have the meaning set forth in the preamble and
shall also include the Partnership's successors.
"Partnership Agreement" means the Agreement of Limited Partnership of
the Partnership.
"Partnership Units" means Partnership Units of the Partnership as
defined in the Partnership Agreement.
"person" means a natural person, partnership (whether general or
limited), limited liability company, trust, estate, association, corporation,
custodian, nominee or any other individual or entity in its own or any
representative capacity.
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday, other than any day on which securities are not traded on the applicable
exchange or in the applicable market.
Section 1.2. Interpretation. The following provisions shall govern the
interpretation of this Agreement:
(a) The singular form of any word used herein, including the
terms defined in Section 1.1, include the plural, and vice versa,
unless the context otherwise requires. The use herein of a pronoun of
any gender shall include correlative words of the other gender.
3
<PAGE>
(b) Unless otherwise expressly indicated, all references
herein to "Articles," "Sections" and other subdivisions hereof are to
the corresponding Articles, Sections or subdivisions of this Agreement;
and the words "herein," "hereof", "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular Article, Section or subdivision hereof.
(c) The headings or titles of the several Articles and
Sections hereof, and any table of contents appended to copies hereof,
shall be solely for convenience of reference and shall not affect the
meaning, construction or effect of this Agreement.
(d) Each reference herein to any agreement, instrument or
other document shall mean such agreement, instrument or document as
from time to time amended, modified or supplemented in accordance with
the terms hereof and thereof. The term "including" shall be construed
to mean "including but not limited to."
ARTICLE II.
EXCHANGE RIGHTS
Section 2.1. General Rights. Subject to (a) the restrictions on
transfer contained in the Partnership Agreement and (b) Section 2.9, each
Partnership Unit shall be exchangeable, at any time on or after the Exchange
Date, at the option of Gemini for one fully paid and non-assessable share of
Common Stock, subject to adjustment as provided in Article III. The number of
shares of Common Stock to be delivered by the Company pursuant to this Article
II in exchange for one Partnership Unit is hereinafter referred to as the
"Exchange Rate."
Section 2.2. Notice Required for Exercise of Exchange Right. Following
the Exchange Date, if Gemini desires to exchange its Partnership Units for
Common Stock, Gemini shall provide written notice (an "Exchange Notice") to the
Company and the Partnership of its intent to (a) exercise its rights under this
Article II; provided, however, that Gemini shall be entitled to exchange all,
but not less than all, of its Partnership Units.
Section 2.3. Exchange of Partnership Units. At the Closing described in
Section 2.4, the Company shall issue and deliver to Gemini shares of Common
Stock in an amount equal to the Exchange Rate multiplied by the number of
Partnership Units held by Gemini. If at the time the Company receives an
Exchange Notice, the Company has received a distribution from the Partnership in
respect of its Partnership Units and the Company has neither paid as a dividend
to the holders of Common Stock the amount of such distribution (or part thereof)
nor set a record date for declaring a dividend to the holders of Common Stock of
such distribution (or part thereof), then in addition to the Partnership Units,
at the Closing, Gemini shall also deliver to the Partnership an amount of cash
(the "Cash Payment") equal to the number of shares of Common Stock into which
such Partnership Units are exchangeable divided by the Deemed Outstanding Shares
times the amount of the distribution that has neither previously been paid as a
dividend nor with respect to which a record date for a dividend been
established.
Section 2.4. Closing. The closing of the transactions contemplated by
this Article II shall take place at the principal office of the Company (the
"Closing"). At the Closing, Gemini shall deliver to the Company (i) certificates
representing such Partnership Units as are to be exchanged accompanied by such
instruments of transfer as shall reasonably be required by the Company and the
Partnership and (ii) the Cash Payment, if any, and the Company shall deliver to
Gemini shares of Common Stock in an amount determined pursuant
4
<PAGE>
to Section 2.3, registered in the name of Gemini. The Company shall present to
the Partnership such Partnership Units for transfer and the Partnership shall
deliver replacement certificates representing the number of Partnership Units
transferred to the Company in the name of the Company or its designee and the
Partnership shall make corresponding notations in its books and records. In
addition, Gemini shall deliver to the Company and the Partnership a letter of
representation substantially in the form of Exhibit A attached hereto and such
other certificates and documents as may reasonably be requested by the Company
or the Partnership (including evidence of receipt of all required approvals and
consents and compliance with all applicable securities and tax laws).
No fractional interest in a share of Common Stock shall be issued by
the Company upon the exchange of Partnership Units. Any fractional interest in a
share of Common Stock resulting from the exchange of any Partnership Units shall
be paid by the Partnership in cash (computed to the nearest cent) based on the
Closing Price of the Common Stock on the last Trading Day prior to the date on
which such Partnership Units are surrendered for exchange in the manner set
forth above.
Gemini will pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock on exchange of Partnership Units pursuant hereto; and the Company may
withhold delivery until such charge is paid or offset against the number of
shares to be delivered.
Section 2.5. Distributions With Respect to Partnership Units. Any
payment or distribution (for purposes of this Section 2.5, a "distribution")
received by Gemini with respect to Partnership Units exchanged pursuant to this
Article II allocable to any period after the Closing shall be forwarded
immediately by Gemini to the Company. The Partnership is hereby instructed to
and agrees to pay or cause to be paid such portions of any distribution owed to
the Company directly to the Company and thereafter shall be discharged of any
obligation to Gemini with respect to such portion of such distribution.
Section 2.6. Restricted Securities. Any Common Stock issued by the
Company to Gemini prior to the effectiveness of a registration statement filed
with the Commission with respect to such Common Stock shall be "restricted
securities" and Gemini, by execution and delivery of an Exchange Notice shall be
deemed to have agreed that at the time of issuance of such Common Stock it shall
execute and deliver a certificate in the form of Exhibit B attached hereto. The
certificates evidencing such "restricted securities" shall bear a restrictive
legend to the effect that the shares of Common Stock represented thereby have
not been registered under the Securities Act, and may not be offered or sold
except pursuant to an effective registration statement under the Securities Act
or pursuant to an applicable exemption from the registration requirements
thereof. Notwithstanding the foregoing, the Company shall use its reasonable
best efforts to register as promptly as practicable after the Effective Date,
the shares of Common Stock into which the Partnership Units are exchangeable, in
accordance with the Registration Rights Agreement attached as Exhibit A to the
Master Agreement by and among Healthtech Development, Inc., a Texas corporation
("HTD"), Gemini, the Company, EPI Sub Inc., a Delaware corporation, and certain
stockholders of the Company and of HTD and certain partners of Gemini.
Section 2.7. Sale by Gemini. Gemini, by execution and delivery of an
Exchange Notice, shall be deemed to have agreed that it will not, directly or
indirectly, transfer, sell, assign, pledge, hypothecate, encumber or otherwise
dispose of, to any person, in one or a series of transactions, any Common Stock
received pursuant to this Agreement, except pursuant to an effective
registration statement or an applicable exemption from the registration
requirements of the Securities Act.
5
<PAGE>
Section 2.8. Company Covenants. The Company covenants that (a) all
shares of Common Stock which may be issued upon exchange of Partnership Units
will, upon issue, be duly and validly issued, fully paid and non-assessable,
free of all liens and charges and not subject to any preemptive rights and (b)
it will at all times reserve and keep available, free from preemptive rights,
out of the aggregate of its authorized but unissued shares of Common Stock, for
the purpose of effecting the exchange of Partnership Units, the full number of
shares of Common Stock deliverable upon the exchange of all outstanding
Partnership Units not theretofore converted.
Section 2.9. Exchange Deferral Rights. At any time prior to the Closing
either the Partnership or the Company shall have the right to defer an exchange
hereunder for a period of up to 180 days if the Partnership or the Company, as
the case may be, acting in good faith, reasonably determines that such a
deferral is in the best interests of the Partnership or the Company, as the case
may be, in light of possible or pending financing or other transactions. Such a
deferral shall be effected by the furnishing by the Partnership or the Company
to Gemini of a written notice of an executive officer of the Partnership or the
Company, as the case may be, stating that (a) Gemini's right to exchange
Partnership Units for Common Stock pursuant to this Agreement is deferred for a
period of time, (b) the number of days, up to 180, of such deferral and (c) that
such deferral is being implemented pursuant to this Section 2.9. This right may
not be utilized by either the Partnership or the Company more than once in any
twelve month period.
Section 2.10. Call of Partnership Units. At any time commencing two (2)
years after the Effective Date, the Company, by written notice to Gemini (a
"Call Notice"), shall have the option to purchase any or all of Gemini's
Partnership Units for such number of fully paid and non-assessable shares of
Common Stock as is equal to the number of Partnership Units set forth in the
Call Notice multiplied by the Exchange Rate. In addition to the Partnership
Units, Gemini shall also deliver to the Company a Cash Payment (as determined
pursuant to Section 2.3), if applicable. The Closing of the transactions
described in this Section 2.10 shall take place in accordance with Section 2.4.
If the exchange pursuant to this Section 2.10 increases the tax liability of
Gemini over the tax that would have been due had the Call Notice not been given,
then the Company shall pay an amount equal to such increase in tax liability to
Gemini.
ARTICLE III.
EXCHANGE RATE ADJUSTMENTS
Section 3.1. Exchange Rate Adjustments -- Company Actions. The Exchange
Rate shall be adjusted from time to time as follows:
(a) If the Company shall pay or make a dividend or other
distribution on the Common Stock payable in Common Stock, the Exchange
Rate in effect at the opening of business on the day following the date
fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be adjusted by multiplying such
Exchange Rate by a fraction the numerator of which shall be the sum of
the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the total number
of shares of Common Stock constituting such dividend or other
distribution and the denominator of which shall be such number of
shares of Common Stock outstanding at the close of business on the date
fixed for such determination. The adjusted Exchange Rate shall be
effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes of
this subsection (a), the number of shares of Common Stock at any time
outstanding shall not include
6
<PAGE>
shares held in the treasury of the Company. The Company agrees not to
pay any dividend or make any distribution on shares of Common Stock
held in its treasury.
(b) If the Company shall issue rights or warrants to all
holders of Common Stock entitling them to subscribe for, purchase or
acquire shares of Common Stock at a price per share less than the
current market price per share (determined as provided in subsection
(d) below) of the Common Stock on the date fixed for the determination
of stockholders entitled to receive such rights or warrants, the
Exchange Rate in effect at the opening of business on the day following
the date fixed for such determination shall be adjusted by multiplying
such Exchange Rate by a fraction the numerator of which shall be the
number of shares of Common Stock outstanding at the close of business
on the date fixed for such determination plus the number of shares of
Common Stock so offered for subscription, purchase or acquisition, and
the denominator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock that could be
purchased at the current market price with the aggregate offering price
of the total number of shares of Common Stock so offered for
subscription, purchase or acquisition. The adjusted Exchange Rate shall
be effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes of
this subsection (b), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Company.
(c) In case the outstanding shares of Common Stock shall be
subdivided into a greater or smaller number of shares of Common Stock,
the Exchange Rate in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately adjusted. The adjusted Exchange Rate shall be
effective immediately after the opening of business on the day
following the day upon which such subdivision or combination becomes
effective.
(d) For the purpose of any computation under subsection (b)
above, the current market price per share of Common Stock on any day
shall be deemed to be the average of the Closing Prices of the Common
Stock for the 20 consecutive Trading Days selected by the Company Board
commencing no more than 30 Trading Days before and ending no later than
the second Trading Day before the day in question.
(e) No adjustment in the Exchange Rate in respect of this
Section 3.1 shall be required unless such adjustment would require an
increase or decrease of at least 1% in such rate; provided, however,
that any adjustments which by reason of this clause (e) are not
required to be made shall be carried forward and taken into account in
any subsequent adjustment and provided, further, that adjustments shall
be required and made in accordance with the provisions of this Section
3.1 (other than this clause (e)) not later than such time as may be
required in order to preserve the tax free nature of a distribution to
the holders of shares of Common Stock. All calculations under this
clause (e) shall be made to the nearest cent.
(f) Whenever the Exchange Rate is adjusted as provided in this
Section 3.1, the Company shall provide written notice of such
adjustment to the Partnership and Gemini, which notice shall include
the Exchange Rate after such adjustment and shall set forth a brief
statement of the facts requiring such adjustment and the manner of
computing the same.
7
<PAGE>
(g) In case of any consolidation of the Company with, or
merger of the Company into, any other entity, any merger of another
entity into the Company (other than a merger that does not result in
any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock) or any sale or transfer of all or
substantially all of the assets of the Company, Gemini shall have the
right thereafter to exchange Partnership Units only into the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of
shares of Common Stock into which such Partnership Units might have
been exchanged immediately prior to such consolidation, merger, sale or
transfer. If necessary, appropriate adjustment shall be made in the
application of the provisions set forth herein with respect to the
rights and interests thereafter of Gemini, so that the provisions set
forth herein shall thereafter be applicable, as nearly as may
reasonably be practicable, to any shares of stock or other securities
or property thereafter deliverable on the exchange of the Partnership
Units. Any adjustment under this subsection (g) shall be evidenced by
written notice of such adjustment in the manner set forth in subsection
(f). The above provisions shall similarly apply to successive
consolidations, mergers, sales or transfers.
Section 3.2. Exchange Rate Adjustments - Partnership Actions. The
Exchange Rate shall be adjusted from time to time as follows:
(a) If the Partnership shall pay or make a dividend or other
distribution on Partnership Units in Partnership Units, the Exchange
Rate in effect at the opening of business on the day following the date
fixed for the determination of the Partnership partners entitled to
receive such dividend or other distribution shall be adjusted by
multiplying such Exchange Rate by a fraction the denominator of which
shall be the sum of the number of Partnership Units outstanding at the
close of business on the date fixed for such determination plus the
total number of Partnership Units constituting such dividend or other
distribution and the numerator of which shall be such number of
Partnership Units outstanding at the close of business on the date
fixed for such determination. The adjusted Exchange Rate shall be
effective immediately after the opening of business on the day
following the date fixed for such determination.
(b) If the Partnership shall issue rights or warrants to all
holders of Partnership Units entitling them to subscribe for, purchase
or acquire Partnership Units at a price per Partnership Unit less than
the current market price per share (determined as provided in
subsection (d) below) of Common Stock multiplied by the Exchange Rate
on the date fixed for the determination of Partnership Unit holders
entitled to receive such rights or warrants, the Exchange Rate in
effect at the opening of business on the day following the date fixed
for such determination shall be adjusted by multiplying such Exchange
Rate by a fraction the denominator of which shall be the number of
Partnership Units outstanding at the close of business on the date
fixed for such determination plus the number of Partnership Units so
offered for subscription, purchase or acquisition, and the numerator of
which shall be the number of Partnership Units outstanding at the close
of business on the date fixed for such determination plus the number of
Partnership Units which the aggregate of the offering price of the
total number of Partnership Units so offered for subscription, purchase
or acquisition would purchase at a price per Partnership Unit equal to
the market price per share of Common Stock multiplied by the Exchange
Rate in effect at the opening of business on the day following the date
fixed for the determination of Partnership Unit holders entitled to
receive such rights or warrants. The adjusted Exchange Rate shall be
effective immediately after the opening of business on the day
following the date fixed for such determination.
8
<PAGE>
(c) In case the outstanding Partnership Units shall be
subdivided into a greater or smaller number of Partnership Units, the
Exchange Rate in effect at the opening of business on the day following
the day upon which such subdivision becomes effective shall be
proportionately adjusted. The adjusted Exchange Rate shall be effective
immediately after the opening of business on the day following the day
upon which such subdivision or combination becomes effective.
(d) For the purpose of any computation under subsection (b)
above, the current market price per share of Common Stock on any day
shall be deemed to be the average of the Closing Prices of the Common
Stock for the 20 consecutive Trading Days selected by the Company Board
commencing no more than 30 Trading Days before and ending no later than
the second Trading Day before the day in question.
(e) No adjustment in the Exchange Rate in respect of this
Section 3.2 shall be required unless such adjustment would require an
increase or decrease of at least 1% in such rate; provided, however,
that any adjustments that by reason of this clause (e) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment and provided, further, that adjustments shall be
required and made in accordance with the provisions of this Section 3.2
(other than this clause (e)) not later than such time as may be
required in order to preserve the tax free nature of a distribution to
Gemini. All calculations under this clause (e) shall be made to the
nearest cent.
(f) Whenever the Exchange Rate is adjusted as provided in this
Section 3.2 the Partnership shall provide written notice of such
adjustment to the Company and Gemini, which notice shall include the
Exchange Rate after such adjustment and shall set forth a brief
statement of the facts requiring such adjustment and the manner of
computing the same.
Section 3.3. Exchange Rate Adjustments -- General. Anything in this
Article III to the contrary notwithstanding, it is the intent of the parties
that the Exchange Rate be adjusted to reflect events affecting the capital
structure of the Company, including those events described in this Article III,
as necessary or appropriate to place the parties to this Agreement in the same
relative position that they would have been had such events not occurred, and
the parties hereby agree that the Exchange Rate in effect at any time shall
reflect such intent.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of the Company and the
Partnership.
Each of the Company and the Partnership represents and warrants to
Gemini as follows:
(a) The execution, delivery and performance of this Agreement
by the Company or the Partnership, as the case may be, have been duly
authorized by all requisite corporate or partnership action and will
not violate any provisions of law, any order of any court or other
agency of government, its organizational documents or any provision of
any indenture, agreement or other instrument to which it or any of its
properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under
any such indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge or encumbrance of any
9
<PAGE>
nature whatsoever upon any of the properties or assets of the Company
or the Partnership, as the case may be, except where any such
violation, conflict, breach, default or encumbrance will not have a
material adverse effect on the business, prospects, properties,
condition (financial or otherwise), or results of operations of the
Company or the Partnership, as the case may be.
(b) This Agreement has been duly executed and delivered by the
Company or the Partnership, as the case may be, and constitutes the
legal, valid and binding obligation of the Company or the Partnership,
as the case may be, enforceable in accordance with its terms.
Section 4.2. Representations, Warranties and Agreements of Gemini.
Gemini represents, warrants and agrees with each of the Company and the
Partnership as follows:
(a) The performance of this Agreement by Gemini has been duly
authorized by all requisite partnership or similar action and will not
violate any provisions of law (assuming compliance by the Company and
the Partnership with all applicable federal or state securities laws),
any order of any court or other agency of government, the
organizational documents of Gemini or any provision of any indenture,
agreement or other instrument to which it or any of its properties or
assets is bound, conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever
upon any of the properties or assets of Gemini.
(b) This Agreement constitutes the legal, valid and binding
obligation of Gemini, enforceable in accordance with its terms.
ARTICLE V.
ASSIGNABILITY
Gemini shall not, without the prior written consent of the Company and
the Partnership, assign any of its rights under this Agreement.
ARTICLE VI.
MISCELLANEOUS
Section 6.1. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties; provided that this Agreement may not be assigned by any party
hereto other than in compliance with the terms hereof.
Section 6.2. Notices. All notices and other communications provided for
in this Agreement shall be in writing, and shall be sufficiently given if made
(a) by hand delivery or by telecopier and (b) by reputable express courier
service (charges prepaid) or by registered or certified mail (postage prepaid
and return receipt requested) (i) if to the Company, at the following address:
EPi Health Technologies Inc.
2301 NW 33rd Court
Suite 102
Pompano Beach, Florida 33060
10
<PAGE>
Attention: Chief Executive Officer
Facsimile: (954) 975-4021
or if to the Partnership, at the following address:
Gemini Health Technologies L.P.
230l N.W 33rd Court
Suite 102
Pompano Beach, Florida 33060
Attention:General Partner
Facsimile: (954) 975-4021
or if to Gemini, at the following address:
Gemini Biotech Ltd.
3608 Research Forest Drive
The Woodlands, Texas 77382
Attention: Krishna Jayaraman
Facsimile (281) 364-0738
or at such other address as the Company or the Partnership or Gemini shall have
furnished in writing one to the other. All such notices and other communications
shall be deemed to have been duly given and delivered: when delivered whether by
hand, if personally delivered; or when receipt acknowledged, if delivered by
telecopier; or on actual receipt if delivered by other means.
Section 6.3. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
Section 6.4. Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes any prior understanding among such parties.
Section 6.5. Governing Law; Severability. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE DOMESTIC LAWS OF
THE STATE OF DELAWARE.. If it shall be determined by a court of competent
jurisdiction that any provision or wording of this Agreement shall be invalid or
unenforceable under applicable law, such invalidity or unenforceability shall
not invalidate this entire Agreement. In that case, this Agreement shall be
construed so as to limit any term or provision so as to make it enforceable or
valid within the requirements of any applicable law, and, in the event such term
or provision cannot be so limited, this Agreement shall be construed to omit
such invalid or unenforceable provisions.
Section 6.6. Amendments to the Agreement. This Agreement may not be
changed or amended or the observance of any provisions waived without the
written consent of each of the Company, the Partnership and Gemini.
Section 6.7. Dispute Resolution. All disputes, claims or questions that
the parties are unable to resolve after sixty (60) days of good faith
negotiations shall be submitted to arbitration and determined as follows. The
party desiring to arbitrate any such matter shall file a demand for arbitration
with the American
11
<PAGE>
Arbitration Association and with the applicable other parties, such demand to
include a written notice stating and specifying in reasonable detail the
particular matter or matters to be arbitrated. The demand for arbitration will
be filed, if at all, within a reasonable period of time after the expiration of
the sixty (60) day period of good faith negotiations, but in no event later than
one (1) year thereafter, and it is agreed that the matter subject to the
arbitration shall be deemed barred by statute of limitations absent a timely
demand for arbitration made within the aforesaid time period. All arbitration
proceedings will be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, applying the Expedited Procedures
set forth in such Rules then in effect. No arbitration arising out of or
relating to this Agreement shall include, by consolidation, joinder or in any
other manner, any additional person or entity not a party to this Agreement. The
arbitration will take place in Delaware or such other jurisdiction as the
parties may agree upon. The arbitrators will not have authority to award
punitive damages or any other damages not measured by the prevailing party's
actual direct damages. The arbitrators will (i) set forth their award, together
with the facts found and the conclusions reached in writing, and (ii) deliver
one signed copy of their decision to each party to the arbitration. The
foregoing agreement to arbitrate shall be specifically enforceable by any court
of competent jurisdiction, and the arbitrators' decision shall be effective,
final, binding, conclusive and nonappealable and judgment may be entered thereon
by any court of competent jurisdiction, as of the date of its issuance and
delivery. All expenses of arbitration, including the arbitrators' fees, will be
borne equally on a pro rata basis by the parties involved or participating in
the arbitration.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ELECTROPHARMACOLOGY, INC.
By: /s/ Arup Sen
----------------------------------
Name: Arup Sen
Title: Chairman & CEO
Gemini Health Technologies L.P.
By: /s/ Arup Sen
----------------------------------
Name: Arup Sen
Title: President, Gemini Health
Technologies, Inc., General Partner
GEMINI BIOTECH L.P.
By: /s/ Krishna Jayaraman
---------------------------------
Name: Krishna Jayaraman
Title: President/CEO, Delargen Corporation,
General Partner
12
<PAGE>
EXHIBIT A
LETTER OF REPRESENTATIONS
[Company and Partnership]
Ladies and Gentleman:
The undersigned, pursuant the Unit Exchange Agreement (the "Unit
Exchange Agreement"), dated as of June __, 1998, by and among Gemini Health
Technologies L.P. ("the Partnership"), Electropharmacology, Inc., (the
"Company"), and Gemini Biotech L.P. hereby acknowledges, represents, warrants,
and agrees, on behalf of itself and its assigns, that in connection with the
undersigned's exchange of Partnership Units in the Partnership for shares of
Common Stock of the Company (its "Exchange") pursuant to the Unit Exchange
Agreement:
(i) The Exchange does not violate any provisions of law, any
order of any court or other agency of government, the organizational
documents of the undersigned or any provision of any indenture,
agreement or other instrument to which it or any of its properties or
assets is bound, conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever
upon any of the undersigned's properties or assets.
(ii) The undersigned has obtained all consents or approvals
required by governmental entities that are necessary in connection with
the Exchange.
(iii) The Exchange does not violate any laws that pertain to
the offer or sale of securities generally in any jurisdiction to which
the undersigned may be subject or in any jurisdiction which may claim a
right to regulate such offer to, or purchase by, the undersigned (it
being expressly understood that the undersigned is not giving a
representation or warranty as to whether the Company or the Partnership
has complied with the federal or state laws of the United States that
pertain to the offer or sale of securities).
(iv) Neither the Company nor the Partnership has rendered any
investment advice to the undersigned in connection with the Exchange.
The undersigned has had access to such financial and other information
concerning the Company and the Partnership as it has deemed necessary
in connection with its decision to effect the Exchange. In electing to
effect the Exchange, the undersigned has relied only on the advice of
its own advisors.
(v) The certificates representing the shares of Common Stock
of the Company to be received by the undersigned in connection with the
Exchange will bear such legend or legends, consistent with the terms of
the Unit Exchange Agreement as the Company, the Partnership or their
respective legal counsel deems necessary or desirable.
1
<PAGE>
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE.
Date:___________
Very truly yours,
Gemini Biotech L.P.
By: /s/ Krishna Jayaraman
---------------------------------------
Title: President/CEO, Delargen Corporation,
General Partner
2
<PAGE>
EXHIBIT B
RESTRICTED SECURITIES CERTIFICATE
The undersigned, pursuant the Unit Exchange Agreement (the "Unit
Exchange Agreement"), dated as of June __, 1998, by and among Gemini Health
Technologies L.P. ("the Partnership"), Electropharmacology, Inc., (the
"Company"), and Gemini Biotech L.P. hereby acknowledges, represents, warrants,
and agrees, on behalf of itself and its assigns, that:
(a) Any shares of Common Stock of the Company issued to the
undersigned upon exchange of Partnership Units in the Partnership
pursuant to the Unit Exchange Agreement prior to the effectiveness of a
registration statement filed with the Commission with respect to such
Common Stock (i) have not been registered under the Securities Act,
(ii) have been issued in reliance on exemptions from such registration
provided in Section 4(2) of the Securities Act and applicable
exemptions under the state securities laws, and (iii) shall be
"Restricted Securities."
(b) It shall not sell, transfer, assign, pledge or otherwise
encumber or dispose of, directly or indirectly (collectively,
"Transfer") any Restricted Securities prior to the date that is one
year after the later of (1) the date of original issue to the
undersigned or (ii) the last date on which the undersigned was an
affiliate of the Partnership or the Company, unless (A) for so long as
the Restricted Securities are eligible for resale pursuant to Rule 144A
under the Securities Act, the Transfer is made to a person the
undersigned reasonably believes is a "qualified institutional buyer"
(as such term is defined in Rule 144A, a "QIB") that is purchasing for
its own account or the account of a QIB to whom notice is given that
the Transfer is being made in reliance on Rule 144A, (B) the Transfer
is made outside the United States to a person who is not a "U.S.
Person" in a transaction meeting the requirements of Rule 904 under the
Securities Act, (C) the Transfer does not violate any United States
federal or state securities laws or any of the rules and regulations
promulgated thereunder (collectively, the "U.S. Securities Laws") or
the securities laws of any other jurisdiction and, prior to effecting
such Transfer, the undersigned provides an opinion of counsel
satisfactory to each of the Company and the Partnership that such
Transfer is in accordance with the U.S. Securities Laws or (D) the
Transfer is effected in accordance with the terms of the Unit Exchange
Agreement.
(c) It is not acquiring the Restricted Securities with a view
to, or for the offer or sale in connection with, any distribution in
violation of the Securities Act.
(d) It shall provide to any person purchasing any Restricted
Securities from it a notice advising such purchaser that Transfers of
the Restricted Securities are restricted as set forth herein and in the
Unit Exchange Agreement.
(e) The Company, the Partnership and others will rely upon the
undersigned's confirmations, acknowledgments and agreements set for
herein and in the undersigned's Notice of Exchange Authorization, and
the undersigned will notify the Company and the Partnership promptly in
writing if any of its representations or warranties herein or therein
ceases to be accurate and complete.
1
<PAGE>
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF DELAWARE.
Date:___________
GEMINI BIOTECH L.P.
By: /s/ Krishna Jayaraman
---------------------------------------
Title: President/CEO, Delargen Corporation,
General Partner
2
<PAGE>
EXHIBIT 1.38
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of __, 1998, is made by
and between Electropharmacology, Inc., a Delaware corporation (the "Company")
and the Holders (as hereinafter defined).
The parties hereto agree as follows:
0.1. Definitions. As used in this Agreement, the following terms have the
following respective meanings:
"Agreement" means this Registration Rights Agreement.
"Business Day" means a day other than a Saturday, Sunday, or New York
State holiday or other day on which commercial banks in New York City
are authorized or required by law to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means Common Stock, par value $.01 per share, of the
Company.
"Company" shall have the meaning set forth in the preamble and shall
include the Company's successors.
"Company Board" means the Board of Directors of the Company.
"Company Certificate" shall have the meaning assigned thereto in
Section 6.
"Company Indemnitee" shall have the meaning assigned thereto in
Section 11.
"Exchange Act" means the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
"Exchange Act Documents" shall have the meaning assigned thereto in
Section 5.4(a)(vi).
"Holder" means those persons whose names are set forth on Schedule A
hereto.
"Holder Indemnitee" shall have the meaning assigned thereto in
Section 11.
"Indemnified Person" means a Holder Indemnitee or Company Indemnitee.
"Indemnifying Person" shall have the meaning assigned thereto in
Section 12.
"person" means a natural person, partnership (whether general or
limited), limited liability company, trust, estate, association,
corporation, custodian, nominee or any other individual or entity in
its own or any representative capacity.
"Process Agent" shall have the meaning assigned thereto in Section 19.
1
<PAGE>
"Registerable Securities" means those shares of Common Stock set forth
next to the name of each Holder on Schedule A; provided, that if
nationally recognized securities counsel to the Company delivers to the
Company a written legal opinion to the effect that any particular
shares of Common Stock may be disposed of by the Holder thereof in the
manner proposed by such Holder without registration under the
Securities Act, such shares of Common Stock shall not be Registerable
Securities.
"Rule 144" shall have the meaning assigned thereto in Section 9.
"Securities Act" means the Securities Act of 1933, or any successor
thereto, as the same shall be amended from time to time.
"Suspension Notice" shall have the meaning assigned thereto in
Section 4(c).
0.2. Interpretation. The following provisions shall govern the
interpretation of this Agreement:
(a) The singular form of any word used herein, including the terms
defined in Section 1.1, include the plural, and vice versa,
unless the context otherwise requires. The use herein of a
pronoun of any gender shall include correlative words of the
other gender.
(b) Unless otherwise expressly indicated, all references herein to
"Articles," "Sections" and other subdivisions hereof are to
the corresponding Articles, Sections or subdivisions of this
Agreement; and the words "herein," "hereof", "hereunder" and
other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or
subdivision hereof.
(c) The headings or titles of the several Articles and Sections
hereof, and any table of contents appended to copies hereof,
shall be solely for convenience of reference and shall not
affect the meaning, construction or effect of this Agreement.
(d) Each reference herein to any agreement, instrument or other
document shall mean such agreement, instrument or document as
from time to time amended, modified or supplemented in
accordance with the terms hereof and thereof. The term
"including" shall be construed to mean "including but not
limited to."
0.3. Registration. The Company shall (a) file with the Commission as soon as
reasonably practicable a Registration Statement (the "Registration
Statement") on Form S-1 to register the Registerable Securities in
connection with their sale by the Holders and (b) use its reasonable
efforts to have the Registration Statement declared effective by the
Commission and remain continuously effective for a period of not less
than six months or, if earlier, until the date on which all
Registerable Securities covered by such registration have been disposed
of by the Holders either pursuant to the Registration Statement or
otherwise. Such six (6) month period shall be extended by (A) the
period that any Suspension Notice is in effect under Section 4(c) and
(B) the period that any deferral is in effect under Section 6. The
Company further agrees that if permitted by the rules and regulations
of the Commission, the registration contemplated by this Section 3
shall be made pursuant to Rule 415 of the Securities Act. In the event
of an underwritten public offering of the Registerable Securities, if
the underwriters of such offering advise the Company and the Holders in
writing that in their opinion
2
<PAGE>
the amount of the Registrable Securities to be included in such
offering would adversely affect the success of such offering, then the
Company shall include, on behalf of such Holders, only the amount of
Registrable Securities that in the opinion of such underwriters, can be
sold without any such adverse affect, and such securities shall be
allocated pro rata among all such Holders.
0.4. Registration Statement.
(a) In connection with the obligations of the Company under Section 3,
the Company shall:
(i) prepare and file with the Commission such amendments
and supplements to the Registration Statement and the
prospectus as may be necessary to maintain the
effectiveness of the Registration Statement for the
period required by Section 3 and to comply with the
provisions of the Securities Act with respect to the
sale or other disposition of the Registerable
Securities covered by the Registration Statement;
(ii) for a reasonable period prior to the filing of the
Registration Statement, and throughout the period of
effectiveness required by Section 3 upon reasonable
notice, make available for inspection by a
representative of the Holders, any underwriter
participating in any distribution pursuant to the
Registration Statement, and any attorney or
accountant designated by the Holders, at a reasonable
time and in a reasonable manner, financial and other
information and books and records of the Company, and
cause the officers, directors and employees of the
Company to respond to such inquiries and supply
information reasonably requested by any such
representative, underwriter, attorney or accountant
in the course of conducting a reasonable
investigation within the meaning of Section 11(b) of
the Securities Act; provided, however, that such
representatives, attorneys or accountants shall be
acceptable to the Company in its judgment reasonably
exercised and shall agree to enter into written
confidentiality agreements acceptable to the Company
regarding any records, information or documents that
are designated by the Company as confidential unless
such records, information or documents are available
to the public or disclosure of such records,
information or documents is required by court or
administrative order after the exhaustion of appeals
therefrom and to use such information obtained
pursuant to this provision only in connection with
the transaction for which such information was
obtained, and not for any other purpose;
(iii) promptly advise the Holders, and the managing
underwriter or underwriters, if any, and confirm such
advice in writing when, to its knowledge, (A) the
Registerable Securities or supplement or
post-effective amendment has been declared or becomes
effective, (B) the Commission has issued any stop
order suspending the effectiveness of the
Registration Statement or has initiated or threatened
any proceedings for that purpose, (C) the
qualification of the Registerable Securities for sale
in any jurisdiction has been suspended or any
proceeding for such purpose has been initiated or
threatened, or (D) any event has occurred that makes
any statement made in the Registration Statement or
the related prospectus untrue in any material respect
or that requires the making of any changes in the
Registration Statement or prospectus in order to make
the statements therein not misleading;
3
<PAGE>
(iv) upon the occurrence of any event contemplated by
Section 4(a)(iii)(D) hereof, use its reasonable
efforts to prepare a supplement or post-effective
amendment to the Registration Statement or the
prospectus contained therein or any document
incorporated therein by reference or file any other
required document so that, as thereafter delivered to
the purchasers of the Registerable Securities, such
prospectus will not contain any untrue statement of a
material fact or omit to state a material fact
necessary to make the statements therein not
misleading;
(v) use its reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of the
Registration Statement or any post-effective
amendment thereto at the earliest practicable date;
(vi) provide copies of any prospectus, any amendment to
the Registration Statement or amendment or supplement
to any prospectus or any document that is to be
incorporated by reference into the Registration
Statement or any prospectus after initial filing of
the Registration Statement, a reasonable time prior
to the filing of any such prospectus, amendment,
supplement or document, to the Holders and
underwriters, if any, and make the representatives of
the Company available on a reasonable basis if
reasonably requested by the Holders; provided that
the requirements of this paragraph shall not apply to
documents filed pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act (the "Exchange Act
Documents"); and provided further that the Company
shall promptly notify Holders of the filing of any
Exchange Act Documents except for such Exchange Act
Documents specifically related to the offering of
other securities and not to the Registerable
Securities;
(vii) furnish to each Holder and to each underwriter and
selling agent, if any, at the expense of the Holders
as many copies of the prospectus, including each
preliminary prospectus, and any amendment or
supplement thereto and such other documents as such
Holder or managing underwriter may reasonably
request, in order to facilitate the public sale or
other disposition of the Registerable Securities;
(viii) use its reasonable efforts to (A) register or qualify
the Registerable Securities to be included in the
Registration Statement under such securities laws or
blue sky laws of such jurisdictions as any Holders
and each placement or sales agent, if any, therefor
and each underwriter, if any, thereof shall
reasonably request in writing on a timely basis, (B)
take any and all other actions as may be reasonably
necessary or advisable to enable each such holder,
agent if any, and each underwriter, if any, to
consummate the disposition in such jurisdictions of
the Registerable Securities; provided that the
Company shall not be required for any such purpose to
(A) qualify as a foreign corporation or foreign
limited partnership in any jurisdiction wherein it
would not otherwise be required to qualify but for
the requirements of this paragraph 4(a)(viii), (B)
file a general consent to service of process in any
such jurisdiction, (C) subject itself to taxation in
any jurisdiction where it is not already subject to
taxation or (D) make any changes to its Certificate
of Incorporation or Bylaws, or any agreement between
it and its stockholders.
4
<PAGE>
(ix) use its reasonable efforts to obtain the consent or
approval of each governmental agency or authority,
whether federal, state or local that may be required
to effect the registration or the offering or sale in
connection therewith or to enable the Holders to
offer, or to consummate the disposition of, their
Registerable Securities;
(x) furnish to each Holder, without charge, at least one
conformed copy of the Registration Statement and any
post-effective amendment thereto (without documents
incorporated therein by reference or exhibits
thereto, unless requested);
(xi) cooperate with the Holders and the managing
underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing
the Registerable Securities to be sold, which shall
not bear any restrictive legends; and, in the case of
an underwritten offering, enable such Registerable
Securities to be in such denominations and registered
in such names as the managing underwriters may
request at least two Business Days prior to any sale
of the Registerable Securities; and
(xii) enter into and deliver all such customary agreements
(including underwriting or purchase agreements),
documents and take such other actions (including
causing the delivery of opinions of counsel and
"comfort" letters of independent certified public
accountants) as are reasonably requested of the
Company to expedite or facilitate the disposition of
the Registerable Securities.
(b) Each Holder shall provide the Company with all assistance
necessary for the Company to comply with its obligations under
this Agreement. Without limiting the generality of the
foregoing provision, the Holders shall cause any entity that
is controlled by one or more of them, individually or
together, to provide the financial statements and other
information about such entity that is required to be included
in the Registration Statement.
(c) Each Holder, upon receipt of any (i) notice from the Company
of the happening of any event of the kind described in Section
4(a)(iii)(B), (C) or (D), (ii) notice from the Company that it
is in possession of material information that has not been
disclosed to the public and the Company reasonably deems it to
be advisable not to include such information in the
Registration Statement or (iii) notice from the Company that
it is in the process of a registered offering of securities
and the Company reasonably deems it to be advisable to have
Holders temporarily discontinue distribution of the
Registerable Securities pursuant to the Registration Statement
(in each case, such notice being hereinafter referred to as a
"Suspension Notice"), such Holder will forthwith discontinue
distribution of the Registrable Securities pursuant to the
Registration Statement and shall not be entitled to the
benefits provided in this Agreement with respect to any sales
made by it in contravention of this subsection, until such
Holder's receipt of the copies of the supplemented or amended
prospectus or a notice from the Company that any order
suspending the effectiveness of the Registration Statement has
been withdrawn, or, in the case of (ii) or (iii) above, until
further notice from the Company that disposition of
Registerable Securities may resume. Any Suspension Notice must
be based upon a good faith determination of the Company Board
that such Suspension Notice is necessary. In the case of a
Suspension Notice, if so directed by the Company, each Holder
shall deliver to the Company all copies in its possession,
other
5
<PAGE>
than permanent file copies then in such Holder's possession,
of the prospectus covering the offer and sale of the
Registerable Securities that is current at the time of receipt
of such notice. If the Company shall give any such notice to
suspend the distribution of the Registerable Securities
pursuant to any Registration Statement, the Company shall
extend the period during which the Registration Statement
shall be maintained effective pursuant to this Agreement by
the number of days during the period from and including the
date of the giving of such notice to and including the date
when the Holders shall have received copies of the
supplemented or amended prospectus necessary to resume such
dispositions or received notice from the Company that any
order suspending dispositions of the Registerable Securities
has been withdrawn.
(d) Each Holder shall (i) furnish in writing to the Company such
information regarding such Holder and such Holder's intended
method of distribution of its Registerable Securities as the
Company may from time to time reasonably request in writing,
and (ii) enter into and deliver all such customary agreements
(including underwriting or purchase agreements) and documents
(including legal opinions) as are reasonably requested of such
Holder to expedite or facilitate the disposition of its
Registerable Securities. Each such Holder shall notify the
Company as promptly as practicable of any inaccuracy or change
in information previously furnished by such Holder to the
Company or of the occurrence of any event in either case as a
result of which any prospectus relating to such registration
contains or would contain an untrue statement of a material
fact regarding such Holder or such Holder's intended method of
distribution of its Registerable Securities or omits to state
any material fact regarding such Holder or such Holder's
intended method of distribution of its Registerable Securities
required to be stated therein or necessary to make the
statements therein not misleading and promptly to furnish to
the Company any additional information required to correct and
update any previously furnished information or otherwise
required so that such prospectus shall not contain, with
respect to such Holder or the distribution of its Registerable
Securities, 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. Each
such Holder shall comply with the provisions of the Securities
Act and the Exchange Act applicable to such Holder with
respect to the disposition by such Holder of the Registerable
Securities covered by the Registration Statement in accordance
with the intended methods of disposition by such Holder set
forth in the Registration Statement.
0.5. Registration of Additional Securities. The Registration Statement may,
in addition to the Registerable Securities, include other securities
for sale for the Company's own account or for the account of any other
person.
0.6. Registration Deferral Period. If the Company shall furnish to the
Holders a certificate (the "Company Certificate") signed by the Chief
Executive Officer of the Company stating that, in the good faith
judgment of the Company Board, acting reasonably and in the best
interest of the Company, it would be detrimental to the Company and its
stockholders for such Registration Statement to be filed or for the
Holders to sell the Registerable Securities under any such Registration
Statement and it is therefore necessary to defer the filing of the
Registration Statement or suspend the ability of the Holders to sell
the Registerable Securities under the Registration Statement, the
filing of the Registration Statement shall be deferred, or the ability
of such Holder to sell the Registerable Securities shall be suspended,
for a period of not more than an aggregate of
6
<PAGE>
180 days from the date of the Company Certificate; provided however,
that the Company may not utilize this right more than one time in any
twelve-month period. Upon receipt of a Company Certificate, each Holder
shall refrain from disposing of its Registerable Securities during the
above stated 180-day period.
0.7. Expenses. All registration expenses incurred in connection with any
registration, qualification or compliance pursuant to Sections 3 or 4
including all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company and of the Company's
accountants, blue sky fees and expenses and the expenses of any special
audits incident to or required by any such registration, shall be borne
by such Holder pro rata on the basis of the number of shares of the
Registerable Securities of such Holder included in such registration
and such Holder shall pay its own selling expenses. Selling expenses
shall mean all costs and commissions applicable to the sale of the
Registerable Securities and all fees and disbursements of counsel and
other professionals. To the extent that the Company registers a primary
offering of additional securities pursuant to Section 5, the Company
shall bear its pro rata share of the above-referenced registration
expenses and its own selling expenses.
0.8. Listing. The Company shall use its reasonable efforts to list all
Registerable Securities on each securities exchange or automated
quotation system on which any of the Common Stock is then listed unless
the Company Board determines that such listing would not be in the best
interests of the Company.
0.9. Rule 144 Information. With a view to making available to the Holders
the benefits of Rule 144 under the Securities Act ("Rule 144") and any
other rule or regulation of the Commission that may at any time permit
a Holder to sell shares of Common Stock that are restricted securities
to the public without registration, the Company agrees to: (a) make and
keep public information available, as required by Rule 144; (b) use its
reasonable efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the
Securities Act and the Exchange Act; and (c) furnish to any Holder
forthwith upon request (i) a written statement by the Company that it
has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act and (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and
documents so filed by the Company.
0.10. Indemnification. The Company shall indemnify and hold harmless each
Holder, officer or director of any Holder, affiliate of any Holder or
any Person deemed to control any Holder (a "Holder Indemnitee") against
any losses, claims, damages or liabilities, joint or several, to which
such Holder Indemnitee may become subject, under the Securities Act or
otherwise, that directly or indirectly arise out of or are based upon
an untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, the Registration Statement or
the prospectus, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse such Holder
Indemnitee for any legal or other expenses reasonably incurred by such
Holder Indemnitee in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however,
that the Company shall have no liability hereunder to the extent that
any such loss, claim, damage or liability arises out of or is based
upon (a) an untrue statement or alleged untrue statement or omission or
alleged omission made in any preliminary prospectus, the Registration
Statement or the prospectus or any such
7
<PAGE>
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Holder Indemnitee
expressly for use therein, or (b) the failure of a Holder Indemnitee to
deliver the most recent version of the prospectus that is a part of the
Registration Statement.
0.11. Indemnification by Holders. Each Holder shall cause each Holder
Indemnitee to indemnify and hold harmless the Company, the Company's
officers and directors, affiliates of the Company and any Person deemed
to control the Company (a "Company Indemnitee") against any losses,
claims, damages or liabilities to which such Company Indemnitee may
become subject, under the Securities Act or otherwise, that directly or
indirectly arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any
preliminary prospectus, the Registration Statement or the prospectus,
or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading and reimburse each Company Indemnitee for any
legal or other expenses reasonably incurred by such Company Indemnitee
in connection with investigating or defending any such action or claim
as such expenses are incurred, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any preliminary prospectus,
the Registration Statement or the prospectus or any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by such Holder Indemnitee expressly for use
therein.
0.12. Proceedings. Promptly after receipt by an Indemnified Person of notice
of the commencement of any action, suit or proceeding as to which a
claim in respect thereof is to be made under Section 11 the Indemnified
Person shall notify the party against whom the Indemnified Person
intends to assert a claim for indemnification (an "Indemnifying
Person") in writing of the commencement thereof, but the omission so to
notify the Indemnifying Person shall not relieve the Indemnifying
Person from any liability that it may have to any Indemnified Person
except to the extent the Indemnifying Person is prejudiced thereby. In
case any such action shall be brought against any Indemnified Person
and it shall notify the Indemnifying Person of the commencement
thereof, the Indemnifying Person shall be entitled to participate
therein and, to the extent that it shall wish, to assume the defense
thereof, with counsel chosen by the Indemnifying Person, and, after
notice from the Indemnifying Person to such Indemnified Person of its
election so to assume the defense thereof, the Indemnifying Person
shall not be liable to such Indemnified Person under this Section 12
for any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by such Indemnified Person, in connection
with the defense thereof other than reasonable costs of investigation;
provided however, that an Indemnified Party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
Indemnifying Party, if the Indemnified Party reasonably believes based
upon an opinion of counsel that representation of the Indemnified Party
by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between
such Indemnified Party and any other party represented by such counsel
in such proceeding. No Indemnified Person shall effect the settlement
or compromise of, or consent to the entry of any judgement with respect
to, any pending or threatened action or claim in respect of which
indemnification or contribution has been or may be sought hereunder
without the prior written consent of the Indemnifying Person and no
Indemnifying Person shall have any liability whatsoever in connection
with any settlement, compromise or consent entered into without such
prior written consent.
8
<PAGE>
0.13. Contribution. In order to provide for just and equitable contribution
in circumstances in which the indemnity agreement provided for in
Section 11 is for any reason held to be unenforceable by an Indemnified
Person although applicable in accordance with its terms, the
Indemnified Person on the one hand and the Indemnifying Person on the
other hand shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such
indemnity agreement incurred by the Indemnified Person; provided,
however, that 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. As between the Indemnifying Person and each
Indemnified Person, such parties shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement in such proportion as shall be
appropriate to reflect the relative benefits received by the
Indemnifying Person on the one hand and the Indemnified Person on the
other hand, from the offering of the Registrable Securities, the
relative fault of the Indemnifying Person on the one hand and the
Indemnified Person on the other, with respect to the statements or
omissions that resulted in such loss, liability, claim, damage or
expense, or action in respect thereof and any other relevant equitable
considerations. It is agreed that it would not be just and equitable if
contribution pursuant to this Section 13 were to be determined by pro
rata allocation or by any other method of allocation that does not take
into account the relevant equitable considerations. For purposes of
this Section 13, each person, if any, who controls a party shall have
the same rights to contribution as such party.
0.14. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the
parties; provided that this Agreement may not be assigned by any party
hereto other than in compliance with the terms hereof.
0.15. Notices. All notices and other communications provided for in this
Agreement shall be in writing, and shall be sufficiently given if made
(a) by hand delivery or by telecopier and (b) by reputable express
courier service (charges prepaid) or by registered or certified mail
(postage prepaid and return receipt requested) (i) if to the Company,
at the following address:
Electropharmacology, Inc.
2301 NW 33rd Court
Suite 102
Pompano Beach, Florida 33060
Attention: Chief Executive Officer
Phone: (954) 975-9818
Facsimile: (954) 975-4021
or if to a Holder, at the address set forth for such Holder on
Schedule A.
All such notices and other communications shall be deemed to have been
duly given and delivered: when delivered by hand, if personally
delivered; when receipt acknowledged, if delivered by telecopier; two
(2) Business Days after being deposited with a reputable express
courier service (charges prepaid); and five (5) Business Days after
being deposited in the mail, postage prepaid if delivered by United
States mail (registered or certified mail, return receipt requested).
0.16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of
which together shall be considered one and the same agreement.
9
<PAGE>
0.17. Entire Agreement. This Agreement constitutes the entire understanding
of the parties hereto with respect to the subject matter hereof and
supersedes any prior understanding among such parties.
0.18. Governing Law; Severability. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE
STATE OF DELAWARE. If it shall be determined by a court of competent
jurisdiction that any provision or wording of this Agreement shall be
invalid or unenforceable under applicable law, such invalidity or
unenforceability shall not invalidate this entire Agreement. In that
case, this Agreement shall be construed so as to limit any term or
provision so as to make it enforceable or valid within the requirements
of any applicable law, and, in the event such term or provision cannot
be so limited, this Agreement shall be construed to omit such invalid
or unenforceable provisions.
0.19. Jurisdiction and Service of Process. Any suit, action or proceeding
against any party with respect to this Agreement and any Holder or
Holder may be brought in a court of the United States sitting in the
State of Delaware or, if jurisdiction is lacking in such a court, in a
court of record in the State of Delaware, and each party hereto, and
each Holder (a) irrevocably waives, to the fullest extent permitted by
law, any objection that it may have, whether now or in the future, to
the laying of venue in, or to the jurisdiction of, any and each of such
courts for the purpose of any such suit, action, proceeding or judgment
and further waives any claim that any such suit, action, proceeding or
judgment has been brought in an inconvenient forum, and submits to such
jurisdiction, (b) agrees that service of all writs, process and
summonses in any such suit, action or proceeding brought in the State
of Delaware may be made upon The Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware 19801, or such alternate process agent in
the United States designated with respect to the party, or such Holder
in a writing delivered to the Company (the "Process Agent"), (c)
irrevocably appoints the Process Agent in its name, place and stead to
receive and forward such service of any and all such writs, process and
summonses, (d) agrees that the failure of the Process Agent to give any
notice of any such service of process to such party or such Holder or
shall not impair or affect the validity of such service or of any
judgment based thereon and (e) agrees to appoint a substitute process
agent, if the Process Agent is no longer able to so act for any reason
whatsoever, which substitute process agent shall thereafter be deemed
to be the Process Agent hereunder and to give notice of such
appointment to the Company.
10
<PAGE>
EXHIBIT A
MASTER AGREEMENT
THIS MASTER AGREEMENT (this "Agreement") is made as of June __, 1998,
among HEALTHTECH DEVELOPMENT, INC., a Texas corporation ("HTD"), GEMINI BIOTECH
L.P., a Texas limited partnership ("Gemini"), ELECTROPHARMACOLOGY, INC., a
Delaware corporation ("EPi"), EPI SUB INC., a Delaware corporation ("EPi Sub"),
the undersigned stockholders of EPi (the "the Pre-Closing EPi Stockholders"),
the undersigned stockholders of HTD (the "HTD Stockholders") and the undersigned
partners of Gemini (the "Gemini Partners") (the Pre-Closing EPI Stockholders,
the HTD Stockholders and the Gemini Partners are each referred to as an "Equity
Holder," and together, as the "Equity Holders").
Recitals
A. Each Equity Holder owns or has the power to vote the number of
shares of the common stock, $.01 par value, of EPi ("EPi Common Stock") or
common stock, $.01 par value, of HTD ("HTD Common Stock") or partnership
interests of Gemini ("Gemini Interests") set forth next to his, her or its name
on the signature page of this Agreement (together with all shares of such stock
or interests in such partnership that the Equity Holder subsequently acquires or
obtains the power to vote, the "Equity Interests").
B. EPi has entered into a certain Asset Purchase Agreement with ADM
Tronics Unlimited, Inc. and AA Northvale Medical Associates, Inc. ("AA
Northvale"), dated May 27, 1998 (the "Asset Purchase Agreement"), pursuant to
which, inter alia, EPi will assign certain of its assets to AA Northvale (the
"Assigned Assets") and AA Northvale will assume certain liabilities of EPi (the
"Assumed Liabilities").
C. EPi and EPi Sub have entered into a capital contribution agreement
dated June 18, 1998 (the "EPi Sub Capital Contribution Agreement"), pursuant to
which EPi will contribute all of its assets (other than the Assigned Assets) and
all of its liabilities (other than the Assumed Liabilities) to EPi Sub in
exchange for One Hundred shares of common stock, $.01 par value, of EPi Sub (the
"EPi Sub Common Stock").
D. EPi, EPi Sub and HTD have entered into a certain Agreement of Merger
and Plan of Reorganization dated June11, 1998 (the "Merger Agreement"), pursuant
to which HTD will be merged with and into EPi Sub (the "Merger") and the
stockholders of HTD will exchange their shares of HTD Common Stock for shares of
EPi Common Stock in accordance with the terms and conditions of the Merger
Agreement.
E. It is a condition to the obligations of EPi, EPi Sub and HTD under
the Merger Agreement that EPi, as the sole stockholder of EPi Sub, and the HTD
Stockholders shall have agreed to vote their shares of EPi Sub Common Stock and
HTD Common Stock, respectively, in favor of the Merger and the adoption of the
Merger Agreement.
F. EPi, EPi Sub and Gemini have entered into a certain Contribution
Agreement, dated June 18, 1998 (the "Gemini Health Technologies Contribution
Agreement"), pursuant to which EPi Sub and Gemini have agreed to transfer all of
their assets and liabilities to Gemini Health Technologies L.P., a Delaware
limited partnership (the "Partnership") in exchange for Partnership Units in the
Partnership. Pursuant to the
1
<PAGE>
Unit Exchange Agreement to be entered into among EPi, Gemini and the Partnership
(the "Exchange Agreement"), Gemini shall have certain rights to exchange its
Partnership Units (the "Gemini Partnership Units") for shares of EPi Common
Stock.
G. It is a condition to the obligations of EPi Sub and Gemini under the
Gemini Health Technologies Contribution Agreement that EPi, as the sole
stockholder of EPi Sub, and the Gemini Partners shall have agreed to vote their
shares of EPi Sub Common Stock and Gemini Interests, respectively, in favor of
the transactions contemplated by the Gemini Health Technologies Contribution
Agreement.
H. This Agreement sets forth certain agreements of Ei, EPi Sub, HTD,
Gemini and the Equity Holders concerning (i) the approval of the transactions
contemplated by the Asset Purchase Agreement, the EPi Sub Capital Contribution
Agreement, the Merger Agreement and the Gemini Health Technologies Contribution
Agreement (collectively, the "Reorganization Transactions"), (ii) the election
of directors of EPi following the Reorganization Transactions, and (iii) certain
changes to the capitalization of EPi to be effected in connection with the
Reorganization Transactions, as described in Sections 4, 5 and 6 of this
Agreement (collectively, the "Capitalization Changes").
Agreement
Accordingly, the parties agree as follows:
1. Agreements to Vote Regarding the Reorganization Transactions.
a. The Reorganization Transactions and the Capitalization Changes
do not require the approval or ratification of the
shareholders of EPi and it is not intended that the
shareholders of EPi will be asked to approve or ratify the
Reorganization Transactions or the Capitalization Changes.
Nevertheless, if such approval or ratification is at any time
sought by EPi, each Pre-Closing EPi Stockholder irrevocably
agrees to vote his, her or its shares of EPi Common Stock in
favor of the approval or ratification of the Reorganization
Transactions and the Capitalization Changes at any meeting of
the stockholders of EPi at which any or all of the
Reorganization Transactions and/or the Capitalization Changes
are considered, or if applicable, in any consent concerning
the approval or ratification of any or all of the
Reorganization Transactions and/or the Capitalization Changes.
b. EPi and each HTD Stockholder irrevocably agrees to vote his,
her or its shares of EPi Sub Common Stock or HTD Common Stock,
as applicable, in favor of the adoption or ratification of the
Merger Agreement (including without limitation all schedules
and exhibits thereto as finalized pursuant to the provisions
thereof) and the approval or ratification of the Merger at any
meeting of the stockholders of EPi Sub or the stockholders of
HTD, as applicable, at which the Merger Agreement is
considered, or if applicable, in any consent concerning the
Merger Agreement.
c. EPi and each Gemini Partner irrevocably agrees to vote his,
her or its shares of EPi Sub Common Stock or Gemini Interests,
as applicable, in favor of the approval or ratification of the
Gemini Health Technologies Contribution Agreement (including
without limitation all schedules and exhibits thereto as
finalized pursuant to the provisions thereof) at any
2
<PAGE>
meeting of the stockholders of EPi Sub or the partners of
Gemini, as applicable, at which the Gemini Health Technologies
Contribution Agreement is considered, or if applicable, in any
consent concerning the Gemini Health Technologies Contribution
Agreement.
d. Each Equity Holder agrees to vote against the approval or
ratification of any proposal relating to a competing merger or
business combination involving the acquisition of EPi, EPi
Sub, HTD or Gemini, as applicable, or the purchase of all or a
substantial portion of the assets of EPi, EPi Sub, HTD or
Gemini, as applicable, other than as contemplated by the
Reorganization Transactions.
e. EPi, EPi Sub, HTD, Gemini and each Equity Holder agrees to
vote against any transaction that is inconsistent with the
obligations of EPi, EPi Sub, HTD or Gemini, as applicable, to
consummate the Reorganization Transactions and the
Capitalization Changes.
f. It is intended that the Reorganization Transactions shall be
consummated in the following order on the same day (the
"Effective Date"): (1) the transactions contemplated by the
EPi Sub Capital Contribution Agreement shall be consummated,
(2) the transactions contemplated by the Merger Agreement
shall be consummated and the Merger shall become effective,
(3) the transactions contemplated by the Gemini Health
Technologies Contribution Agreement shall be consummated, (4)
the Capitalization Changes shall be consummated and (5) the
transactions contemplated by the Asset Purchase Agreement
shall be consummated; provided, however, that except as
provided in the two immediately subsequent sentences, it shall
be deemed to be a condition subsequent to each Reorganization
Transaction that all subsequent Reorganization Transactions,
if any, are consummated and no Reorganization Transaction
shall be deemed to be consummated unless all of the
Reorganization Transactions have been consummated. If,
pursuant to Section 7(b), this Agreement terminates as to
Gemini and the Gemini Partners, the Reorganization
Transactions (other than those contemplated by the Gemini
Health Technologies Contribution Agreement) shall be
consummated unless either HTD or EPi elects to terminate this
Agreement pursuant to Section 7(b). If, pursuant to Section
7(b), this Agreement terminates as to HTD and the HTD
Stockholders, the Reorganization Transactions (other than
those contemplated by the Merger Agreement) shall be
consummated unless either Gemini or EPi elects to terminate
this Agreement pursuant to Section 7(b).
2. Agreements to Vote Regarding Board of Directors.
a. As of the Effective Date, the Board of Directors of EPi shall
be comprised of seven directors. Of such directors, two
directors shall be nominated (the "EPi Nominees") by a 75%
supermajority vote of Messrs. George Levine, Murray Feldman,
David Saloff and Norton Herrick, based on the number of shares
of EPi held by each (the "EPi Representatives"), two directors
shall be nominated (the "HTD Nominees") by majority vote of
Messrs. Arup Sen, James Kaput and Richard Kneipper, based on
the number of shares of EPi held by each (the "HTD
Representatives"), two directors (the "Gemini Nominees") shall
be nominated by Gemini (the "Gemini Representative"), and the
Chief Executive Officer of EPi shall be nominated as a
Director unless otherwise determined by a majority vote of the
EPi Representatives, the HTD Representatives and the Gemini
Representative;
3
<PAGE>
provided, however, that if the number of members of the Board
of Directors of EPi shall be fixed by the board as a number
other than seven, the number of EPi Nominees, the number of
HTD Nominees and the number of Gemini Nominees shall be
adjusted accordingly. The EPi Representatives hereby nominate
David Saloff and Murray Feldman as the initial EPi Nominees,
the HTD Representatives hereby nominate Bernard Carrico and
Richard Kneipper as the initial HTD Nominees and the Gemini
Representative hereby nominates Dr. Krishna Jayaraman and Dr.
Gary Wilcox as the initial Gemini Nominees.
b. Subject to the provisions of Subsection 2(c) below, each
Pre-Closing EPi Stockholder, HTD Stockholder, and Gemini
(collectively, the "Post-Closing EPi Stockholders") agrees at
all times in any election of directors of EPi, whether at a
meeting of directors or stockholders, by consent or otherwise,
and in any election or action to replace any director or fill
vacancies occurring between annual meetings, to vote the
shares of EPi now or hereafter owned by him, her or it for (i)
the EPi Nominees, the HTD Nominees, and the Gemini Nominees
and (ii) Arup Sen as long as he continues to be the Chief
Executive Officer of EPi (unless otherwise determined by the
EPi Representatives, the HTD Representatives and the Gemini
Representative). All certificates evidencing EPi Common Stock
issued to the Post- Closing EPi Stockholders shall be legended
as follows (the "Legend"): "The Shares of EPi Common Stock
represented by this Certificate are subject to the Master
Agreement dated as of June __, 1998, a copy of which is on
file at the office of the Corporation." Each Post- Closing EPi
Stockholder currently holding certificates representing shares
of EPi Common Stock agrees to promptly exchange such
certificates for new certificates containing the Legend. The
Legend shall remain on such certificates until, pursuant to
Section 2(f) or Section 7 of this Agreement, the Post-Closing
EPi Stockholder is no longer subject to Section 2 of this
Agreement. The provisions of this Section 2(b) shall be
binding upon the successors, assigns, designees and
transferees of each Post-Closing EPi Stockholder as if they
were a signatory hereto.
c. Prior to each nomination of directors, the EPi
Representatives, the HTD Representatives and the Gemini
Representative shall disclose to EPi the identity of the EPi
Nominees, the HTD Nominees and the Gemini Nominees. In the
event that the election of any EPi Nominee, HTD Nominee or
Gemini Nominee to the Board of Directors would reasonably be
expected to have a material adverse effect on the operation,
financial condition, properties or business of EPi in the good
faith judgment (as evidenced by a written summary of the
specific reasons therefor) of the non-nominating EPi
Representatives, HTD Representatives, or Gemini
Representatives, as the case may be, EPi and the Post-Closing
EPi Stockholders shall not be required to comply with their
respective obligations under this Agreement solely with
respect to such EPi Nominee, HTD Nominee, or Gemini Nominee,
as the case may be, and the respective representatives
nominating the EPi Nominee, the HTD Nominee or the Gemini
Nominee, as the case may be, shall be entitled to name a
replacement for such nominee.
d. The EPi Representatives (by a 75% supermajority vote), the HTD
Representatives (by a majority vote) and the Gemini
Representative, as the case may be, may at any time and for
any reason (or for no reason) designate for removal any
individual that is elected as a director of EPi as a result of
the nomination of such individual by such Representatives.
Each Post-Closing EPi Stockholder hereby agrees to vote for or
provide the required consent
4
<PAGE>
to effect a Removal contemplated by the immediately prior
sentence. If at any time a vacancy is created on the Board of
Directors by reason of the death, removal or resignation of a
director, the EPi Representatives, the HTD Representatives or
the Gemini Representatives, as the case may be, that nominated
such director shall be entitled to nominate an individual to
fill such vacancy until his or her successor is elected or
qualified, and the Post-Closing EPi Stockholders shall, as
soon as practicable after the date such vacancy first occurs
and in any event prior to the transaction of any other
business by the Board of Directors, take action to elect such
nominee to fill such vacancy.
e. In order to effectuate the provisions of this Section 2, the
Post-Closing EPi Stockholders hereby agree that when any
action or vote is required to be taken by EPi or the
shareholders of EPi pursuant to this Section 2, the
Post-Closing EPi Stockholders shall each use his, her or its
best efforts to call, or cause the appropriate officers and
directors of EPi to call, a stockholders' meeting or to
execute or cause to be executed a written consent pursuant to
Section 228(a) of the Delaware General Corporation Law to
effectuate such stockholder action.
f. Notwithstanding anything in this Agreement to the contrary,
from and after the date that any EPi Representative, any HTD
Representative or the Gemini Representative beneficially holds
individually less than two percent (2%) of the outstanding
shares of EPi Common Stock (or, in the case of Gemini,
Partnership Units that are exchangeable for such amount of
shares of EPi Common Stock) and is not an officer of EPi, such
individual shall no longer be an EPi Representative, an HTD
Representative or a Gemini Representative entitled to
participate in the selection and nomination of the EPi
Nominees, the HTD Nominees or the Gemini Nominees, as the case
may be, and shall no longer be bound to vote his, her or its
Equity Interests in accordance with this Section 2. If,
pursuant to this Section 2(f), at any time there is no EPi
Representative, no HTD Representative or no Gemini
Representative, then in any such case, the directors nominated
by such Representatives shall complete their term and
thereafter the Board of Directors of EPi shall be reduced by
the number of EPi Nominees, HTD Nominees or Gemini Nominees,
as applicable, and such directors shall no longer have any
right hereunder to be nominated as a director of EPi.
3. Limitation on Voting Power. It is expressly understood and acknowledged
that nothing contained herein is intended to restrict any Post-Closing
EPi Stockholder from voting on any matter (other than the election of
directors of EPi) or otherwise from acting, in the Post-Closing EPi
Stockholder's capacity as a director or officer of EPi, EPi Sub, HTD,
Gemini, or the Partnership with respect to any matter, including but
not limited to, the management or operation of EPi, EPi Sub, HTD,
Gemini, or the Partnership.
4. Certain Agreements with Norton Herrick.
a. As of the Effective Date, that certain Stockholders Agreement,
dated as of November 13, 1995, among EPi, Norton Herrick and
David Saloff and that certain Registration Rights Agreement
dated as of November 13, 1995, between EPi and Norton Herrick
shall each be terminated and of no further force and effect.
5
<PAGE>
b. EPi and Mr. Herrick hereby agree to (i) the redemption of all
of the issued and outstanding shares of EPi Preferred Stock
owned of record by Mr. Herrick, and (ii) the redemption and
cancellation of all warrants to purchase shares of EPi Common
Stock issued and outstanding to Mr. Herrick and which are more
fully described on Schedule A attached hereto (the "Herrick
EPi Warrants"), in exchange for the issuance by EPi of
1,575,000 shares of EPi Common Stock to Mr. Herrick
(collectively, the "Herrick Redemption"). The Herrick
Redemption shall be effective on the Effective Date and at
such time, the shares of EPi Preferred Stock and any and all
of the Herrick EPi Warrants issued and outstanding shall be
automatically redeemed and converted without further action on
the part of the holder thereof into an aggregate of 1,575,000
shares of EPi Common Stock. Each outstanding certificate
evidencing EPi Preferred Stock and the Herrick EPi Warrants
not surrendered on the Effective Date will as of the Effective
Date be deemed for all purposes to be canceled and no longer
represent shares of EPi Preferred Stock or warrants to
purchase EPi Common Stock, but instead will represent the
right to receive that number of whole shares of EPi Common
Stock into or for which the shares of EPi Preferred Stock and
the Herrick EPi Warrants will be converted pursuant to this
Section 4(b).
5. Certain Agreements with Murray Feldman. EPi and Mr. Feldman hereby
agree to the redemption and cancellation of all warrants to purchase
shares of EPi Common Stock issued and outstanding to Mr. Feldman and
which are more fully described on Schedule A attached hereto (the
"Feldman EPi Warrants"), in exchange for the issuance by EPi of 160,000
shares of EPi Common Stock to Mr. Feldman (collectively, the "Feldman
Redemption"). The Feldman Redemption shall be effective on the
Effective Date and at such time, any and all of the Feldman EPi
Warrants issued and outstanding shall be automatically redeemed and
converted without further action on the part of the holder thereof into
an aggregate of 160,000 shares of EPi Common Stock. Each outstanding
certificate evidencing the Feldman EPi Warrants not surrendered on the
Effective Date will as of the Effective Date be deemed for all purposes
to be canceled and no longer represent warrants to purchase EPi Common
Stock, but instead will represent the right to receive that number of
whole shares of EPi Common Stock into or for which the Feldman EPi
Warrants will be converted pursuant to this Section 5.
6. Certain Agreements with George Levine and Paragon Capital Corp. at
Spear, Leeds & Kellogg ("Paragon Capital"). EPi, George Levine, and
Paragon Capital hereby agree to the redemption and cancellation of all
warrants to purchase shares of EPi Common Stock issued and outstanding
to Mr. Levine and/or Paragon Capital and which are more fully described
on Schedule A attached hereto (collectively, the "Paragon EPi
Warrants"), in exchange for the issuance by EPi of an aggregate 90,000
shares of EPi Common Stock to George Levine and Paragon Capital
(collectively, the "Paragon Redemption"). The Paragon Redemption shall
be effective on the Effective Date and at such time, any and all of the
Paragon EPi Warrants issued and outstanding shall be automatically
redeemed and converted without further action on the part of the holder
thereof into an aggregate of 90,000 shares of EPi Common Stock. Each
outstanding certificate evidencing the Paragon EPi Warrants not
surrendered on the Effective Date will as of the Effective Date be
deemed for all purposes to be canceled and no longer represent warrants
to purchase EPi Common Stock, but instead will represent the right to
receive that number of whole shares of EPi Common Stock into or for
which the Paragon EPi Warrants will be converted pursuant to this
Section 6.
6
<PAGE>
7. Termination.
a. Subject to earlier termination as provided in Section 7(b),
this Agreement shall terminate if the Effective Date has not
occurred on or before August 31, 1998.
b. If the Merger Agreement is terminated in accordance with
Article X of the Merger Agreement, this Agreement will
terminate as to HTD and the HTD Stockholders at the time of
such termination (a "Partial Termination") and this Agreement
may be terminated by either EPi or Gemini (a "Complete
Termination"). If the Gemini Health Technologies Contribution
Agreement is terminated in accordance with Article X of the
Gemini Health Technologies Contribution Agreement, this
Agreement will terminate as to Gemini and the Gemini Partners
at the time of such termination (a "Partial Termination") and
this Agreement may be terminated by either HTD or EPi (a
"Complete Termination"). In the event of a Partial Termination
pursuant to this Section 7(b), there shall be five (5)
directors pursuant to Section 2(a) and the parties as to which
this Agreement terminates (and their respective
Representatives) shall not have the right to nominate
directors of EPi.
c. In the event of the termination of this Agreement pursuant to
Section 7(a) or 7(b), Sections 4, 5 and 6 of this Agreement
shall likewise be of no force and effect.
d. From and after the Effective Date, the provisions of this
Agreement (other than Section 1, which shall have expired
pursuant to its terms), shall terminate on the earlier of (a)
two years from the Effective Date, or (b) the date on which
the market capitalization of EPi equals or exceeds Forty
Million Dollars ($40,000,000) for any period of twenty (20)
trading days within any six (6) month period; provided,
however, the provisions of Sections 4, 5 and 6 of this
Agreement shall survive the termination of this Agreement
pursuant to this Section 7(d).
8. Representations, Warranties, and Additional Covenants. Each Equity
Holder and each Post-Closing EPi Stockholder hereby represents and
warrants that such Equity Holder or Post-Closing EPi Stockholder has
the capacity and all necessary power and authority to vote the Equity
Interests or shares of EPi Common Stock owned by it, as applicable, and
that this Agreement constitutes a legal, valid, and binding obligation
of the Equity Holder or Post-Closing EPi Stockholder, enforceable in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, or similar laws affecting enforcement of creditors rights
generally. Each Equity Holder further agrees that from the date hereof
until the Effective Date or until the earlier termination of this
Agreement pursuant to Section 7 of this Agreement, such Equity Holder
will not sell or otherwise voluntarily dispose of any of the Equity
Interests that are owned by such Equity Holder or take any other
voluntary action that (i) would have the effect of removing such Equity
Holder's obligations under this Agreement with respect to such Equity
Holder's Equity Interests or (ii) would be inconsistent with this
Agreement; provided, however, that this sentence of Section 8 shall not
apply to (i) Paragon Capital, (ii) the HTD Stockholders if this
Agreement terminates as to HTD and the HTD Stockholders pursuant to
Section 7(b) or (iii) the Gemini Partners if this Agreement terminates
as to Gemini and the Gemini Partners pursuant to Section 7(b). EPi, EPi
Sub, HTD and Gemini each hereby represents and warrants that it has the
capacity and all necessary power and authority to enter into this
Agreement, that it has taken all necessary action to enter into and
perform its obligations pursuant to this Agreement, and
7
<PAGE>
that this Agreement constitutes its legal, valid, and binding
obligation, enforceable against it in accordance with its terms, except
as may be limited by bankruptcy, insolvency, or similar laws affecting
enforcement of creditors rights generally.
9. Representations, Warranties and Additional Covenants of EPi and the
Post-Closing EPi Stockholders. The shares of EPi Common Stock to be
issued pursuant to Sections 4, 5 and 6 above, when issued, will be duly
authorized, validly issued, fully paid and non-assessable. EPi shall
use its reasonable best efforts to register as promptly as practicable
after the Effective Date, the shares of EPi Common Stock issued
pursuant to the Merger Agreement, the shares of EPi Common Stock into
which the Gemini Partnership Units are exchangeable pursuant to the
Exchange Agreement and the shares of EPi Common Stock issued pursuant
to the Herrick Redemption, the Feldman Redemption, and the Paragon
Redemption, in accordance with the Registration Rights Agreement
attached hereto as Exhibit A. Notwithstanding anything to the contrary
contained in this Section 9, no shares of EPi Common Stock covered by
Section 10 of this Agreement may be offered, sold or otherwise disposed
of (i) in contravention of Section 10 of this Agreement or (ii) unless
the transferee agrees in writing to be bound by the provisions of this
Agreement as if he, she or it were a signatory hereto.
10. Lock-Up of Sale of Equity Interests of EPi Common Stock. Each of the
Post-Closing EPi Stockholders (other than Paragon Capital) hereby
irrevocably agrees that he, she or it will not, directly or indirectly,
without the prior written consent of each of the other Equity Holders
(other than Paragon Capital), for a period of 365 days after the
Effective Date, sell, offer to sell, contract to sell, pledge, grant
any option for the sale of or otherwise transfer or dispose of, or
cause the disposition of (or agree to do any of the foregoing), any
shares of EPi Common Stock (i) received in the Merger, the Herrick
Redemption, the Feldman Redemption or the Paragon Redemption that are
issued to Mr. Levine or (ii) issued pursuant to the Exchange Agreement,
other than any pledge of such shares in connection with a bona fide
loan transaction where the pledgee takes any such shares of EPi Common
Stock subject to this Section 10, except that such shares of EPi Common
Stock may be sold for the account of the Post-Closing EPi Stockholder
if the amount of all shares of EPi Common Stock sold for the account of
such Post-Closing EPi Stockholder within the preceding three months
shall not exceed the greater of
(i) One percent of the shares of EPi Common Stock
outstanding as shown by the most recent report or
statement filed with the Securities and Exchange
Commission by EPi; or
(ii) The average weekly reported volume in trading in such
securities reported through the automated quotation
system of a registered securities association during
the four calendar weeks preceding the date of placing
the order to execute the transaction with the broker
or the date of execution of the transaction directly
with a market maker; or
(iii) The average weekly volume of trading in such
securities reported through the consolidated
transaction reporting system contemplated by Rule
11Aa3-1 under the Securities Exchange Act of 1934
(Section 240.11A3-1) during the four-week period
specified in paragraph (ii) of this Section.
8
<PAGE>
Prior to the expiration of such 365-day period, the undersigned will
not announce or disclose any intention to do anything after the
expiration of such period that the undersigned is prohibited, as
provided in the preceding sentence, from doing during such period
except as required by applicable law.
11. Specific Performance. Each of the undersigned acknowledges that damages
would be an inadequate remedy for any breach of the provisions of this
Agreement and agrees that the obligations of the Equity Holders and
Post-Closing EPi Stockholders hereunder shall be specifically
enforceable and that each party hereto shall be entitled to injunctive
or other equitable relief upon such a breach by any other party hereto
or such party's transferees or assigns. Each Equity Holder and
Post-Closing EPi Stockholder further agrees, on behalf of itself and
its transferees and assigns, to waive any bond in connection with the
obtaining of any such injunctive or equitable relief. This provision is
without prejudice to any other rights that each party hereto may have
against another party hereto for any failure to perform his, her or its
obligations under this Agreement.
12. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware, without regard to
its conflicts of laws principles. Each Equity Holder and each
Post-Closing EPi Stockholder agrees that the provisions of this
Agreement shall be binding also upon the successors, assigns,
transferees, heirs and personal representatives of the such Equity
Holder or Post-Closing EPi Stockholder.
13. Counterpart and Facsimile Signatures. This Agreement may be executed in
multiple counterparts, each of which will be deemed to be an original,
and all such counterparts will constitute but one instrument. This
Agreement may be executed by any party hereto by facsimile, and each
such executed counterpart shall be deemed to be validly executed and
enforceable against each such party in accordance with its terms.
[INTENTIONALLY LEFT BLANK]
9
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Equity Holder
Agreement as of the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
ELECTROPHARMACOLOGY, INC. HEALTHTECH DEVELOPMENT, INC.
By:/s/ Arup Sen By:_________________________________
----------------------------------------- Its: _______________________________
Its: Chairman & CEO
GEMINI BIOTECH L.P. EPI SUB INC.
By: /s/ Krishna Jayaraman By: /s/ Arup Sen
---------------------------------------- ---------------------------------
Its: President/CEO, Gemini Biotech Inc., Its: Chairman & CEO
General Partner
Pre-Closing EPi Stockholders:
By:________________________________________ By:_________________________________
David Saloff George Levine
(259,199 shares of EPi Common Stock) (25,000 shares of EPi Common Stock)
20TH CENTURY ASSOCIATES: PARAGON CAPITAL AT
SPEAR, LEEDS & KELLOGG:
By:________________________________________ By:_________________________________
John Banas, President George Levine, Chairman
(250,000 shares of EPi Common Stock) (604,104 shares of EPi Common Stock)
By:________________________________________ By:_________________________________
Norton Herrick Murray Feldman
(318,950 shares of EPi Common Stock and (692,361 shares of EPi Common Stock)
242,950 shares of EPi Preferred Stock)
HTD Stockholders:
/s/ Arup Sen
- ------------------------------------------ ____________________________________
Arup Sen James Kaput
( shares of HTD Common Stock) ( shares of HTD Common Stock)
__________________________________________
Richard Kneipper
( shares of HTD Common Stock)
Gemini Partners:
/s/ Krishna Jayaraman /s/ Shashikala Jayaraman
- ------------------------------------------ -------------------------------------
Krishna Jayaraman (_% Partnership Interest) Shashikala Jayaraman (_% Partnership Interest)
Gemini Biotech Inc.
By: /s/ Krishna Jayaraman
------------------------
Its:President & CEO
</TABLE>
10
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Outstanding EPi Warrants to be Redeemed and Canceled
- ----------------------------------------------------
=========================================================================================================================
Original Number of
Issue Equity Exercise Expiration
Date Issued To Interests Price Date Registration Rights/Other Terms
(Post-split)
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
08/04/93 M. Feldman 11,622 5.03 08/04/98 Yes (in pre-split agreement only)
- -------------------------------------------------------------------------------------------------------------------------
05/25/94 M. Feldman 38,741 5.03 05/25/99 Yes (in pre-split agreement only)
- -------------------------------------------------------------------------------------------------------------------------
09/20/94 M. Feldman 23,244 5.03 09/20/99 Yes (in pre-split agreement only)
- -------------------------------------------------------------------------------------------------------------------------
05/19/95 Paragon Capital 125,000 7.00 05/12/00 Yes; Section 3.2 - cashless exercise
- -------------------------------------------------------------------------------------------------------------------------
05/19/95 Paragon Capital 62,500 6.00 05/12/00 Yes; Section 3.2 - cashless exercise
- -------------------------------------------------------------------------------------------------------------------------
11/21/95 M. Feldman 300,000 6.25 11/21/00 Yes
- -------------------------------------------------------------------------------------------------------------------------
11/13/95 N. Herrick 800,000 6.00 11/13/05 Yes
- -------------------------------------------------------------------------------------------------------------------------
11/13/95 N. Herrick 250,000 7.50 11/13/05 Yes
- -------------------------------------------------------------------------------------------------------------------------
11/13/95 N. Herrick 250,000 9.00 11/13/05 Yes
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Outstanding EPi Preferred Equity Interests to be Redeemed and Canceled
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
=========================================================================================================================
Original Number of Equity
Issue Issued To Interests (Post-split) Exercise Price Expiration Date
Date
=========================================================================================================================
<S> <C> <C> <C> <C>
11/13/95 N. Herrick 242,950 N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
EXHIBIT 1.48
AGREEMENT OF LIMITED PARTNERSHIP OF
Gemini Health Technologies L.P.
A DELAWARE LIMITED PARTNERSHIP
<PAGE>
THIS AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement") of Gemini Health
Technologies L.P. (the "Partnership") dated as of the ____ day of
______________, 1998 is entered into by and between EPi Health Technologies,
Inc., a Delaware corporation, as general partner (the "Company" or the "General
Partner") and Gemini Biotech L.P., a Texas limited partnership, as limited
partner ("Gemini" or the "Limited Partner" and collectively with the General
Partner, the "Partners").
RECITALS
WHEREAS, the Partners desire to form a limited partnership under the
Act for the purposes and on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions: For purposes of this Agreement, the following capitalized terms
are defined as follows:
1.1.1 "Act" shall mean the Revised Limited Partnership Act of the
State of Delaware, as amended, replaced, modified or
supplemented from time to time.
1.1.2 "Adjusted Capital Account Deficit" shall mean, with respect to
any Partner, the deficit balance, if any, in such Partner's
Capital Account as of the end of the relevant Fiscal Year,
after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such
Partner is obligated to restore or is deemed to be
obligated to restore pursuant to Regulation Section
1.704- 1(b)(2)(ii)(C); and
(ii) Debit to such Capital Account the items described in
Regulation Section 1.704- 1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit
is intended to comply with the provisions of Regulation
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently.
1.1.3 "Affiliate" of a Person shall mean any other Person that
directly or indirectly, through one or more intermediaries,
has control of, is controlled by or is under common control
with, such first Person. For the purpose of this definition,
"control" (including with correlative meanings, the terms
"controlling", "controlled by", and "under common control
with") as applied to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person,
whether through ownership of voting securities or by contract
or otherwise.
1
<PAGE>
1.1.4 "Agreement" shall mean this Agreement of the Limited
Partnership of the Partnership, as it may be amended from time
to time.
1.1.5 "Book Basis" of a Partnership asset shall mean the asset's
adjusted tax basis, as determined for federal income tax
purposes; provided, however, that (i) if Property is
contributed to the Partnership the initial Book Basis of such
Property shall be its fair market value on the date of
contribution; (ii) if the Capital Accounts of the Partnership
are adjusted pursuant to Regulation Section
1.704-1(b)(2)(iv)(f) to reflect the fair market value of the
Partnership's assets, the Book Basis of each such asset shall
be adjusted to equal its fair market value as of the time of
such adjustment in accordance with such Regulation; and (iii)
the Book Basis of all assets shall be adjusted thereafter by
depreciation and amortization as provided in Regulation
Section 1.704-1(b)(2)(iv)(g).
1.1.6 "Business Day" shall mean a day other than a Saturday, Sunday
or day on which banks in the State of Florida are required or
authorized to close.
1.1.7 "Capital Account" for any Partner shall mean such Partner's
capital account determined in accordance with Section 4.1.
1.1.8 "Capital Contributions" for any Partner shall mean the
contribution(s) by such Partner of Property to the capital of
the Partnership.
1.1.9 "Certificate of Limited Partnership" shall mean the
Certificate of Limited Partnership of the Partnership in the
form attached hereto as Exhibit A.
1.1.10 "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
1.1.11 "Commission" shall mean the United States Securities and
Exchange Commission.
1.1.12 "Common Stock" has the meaning set forth in the Exchange
Agreement.
1.1.13 "Contribution Agreement" shall mean the Contribution Agreement
dated as of the Effective Date between the Partnership, the
Limited Partner and the Company in the form attached hereto as
Exhibit B.
1.1.14 "Deemed Value" shall mean as of any date, the total number of
share of Common Stock issued and outstanding as of the close
of business on such date (excluding any treasury shares)
multiplied by the Fair Market Value of a share of Common Stock
on such date divided by the Percentage Interest of the Company
on such date.
1.1.15 "Earn-Outs" shall mean the additional shares of Common Stock
that may be issued pursuant to (i) Section 3.6 of the
Agreement of Merger and Plan of Reorganization among
Electropharmacology, Inc., EPi Sub Inc. and HealthTech
Development Inc. and (ii) Section 4.1 of the Gemini
Contribution Agreement.
1.1.16 "Effective Date" shall mean the date of this Agreement.
2
<PAGE>
1.1.17 "Exchange Agreement" shall mean the Unit Exchange Agreement
dated as of the Effective Date among the Partnership, the
Company and Gemini in the form attached hereto as Exhibit C.
1.1.18 "Fair Market Value" shall mean, with respect to a share of
Common Stock, the average of the daily market price for the
ten (10) consecutive trading days immediately preceding the
valuation date. The market price for each such trading day
shall be: (i) if the Common Stock is listed or admitted to
trading on any securities exchange or the National Market
System of The Nasdaq Stock Market, the closing price, regular
way, on such day, or if no such sale takes place on such day,
the average of the closing bid and asked prices on such day,
(ii) if the Common Stock is not listed or admitted to trading
on any securities exchange or the National Market System of
The Nasdaq Stock Market, the last reported sale price on such
day or, if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a
reliable quotation source designated by the Committee, or
(iii) if the Common Stock is not listed or admitted to trading
on any securities exchange or the National Market System of
The Nasdaq Stock Market and no such last reported sale price
or closing bid and asked prices are available, the average of
the reported high bid and low asked prices on such day, as
reported by a reliable quotation source designated by the
Company, or if there shall be no bid and asked prices on such
day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than 10 days prior
to the date in question) for which prices have been so
reported; provided that if there are no bid and asked prices
reported during the 10 days prior to the date in question, the
Fair Market Value of the Common Stock shall be determined by
the Company acting in good faith on the basis of such
quotations and other information as it considers, in its
reasonable judgment, appropriate and provided further that, in
connection with determining the Deemed Value of the
Partnership Units for purposes of determining the number of
additional Partnership Units issuable upon a Capital
Contribution funded by an offering of Common Stock, then the
Fair Market Value of the Common Stock shall be the offering
price per share of the Common Stock sold.
1.1.19 "Fiscal Year" shall mean the year end of the Partnership as
determined pursuant to Section 9.4.
1.1.20 "Gemini Non-Competition Agreement" shall mean the
Non-Competition Agreement dated as of the Effective Date
between the Partnership, Gemini and certain Affiliates of
Gemini in the form attached hereto as Exhibit D.
1.1.21 "General Partner" shall mean Inc., a Delaware corporation, and
any other Person permitted to act as a general partner from
time to time pursuant to the provisions of this Agreement, for
so long as such Person is a General Partner hereunder.
1.1.22 "IRS" shall mean the U.S. Internal Revenue Service.
1.1.23 "Limited Partner" shall mean Gemini Biotech Ltd., a Texas
limited partnership.
1.1.24 "Net Profits" or "Net Loss" shall mean for each Fiscal Year or
other period, the taxable income or loss of the Partnership
determined in accordance with the accounting methods
3
<PAGE>
used by the Partnership for U.S. federal income tax purposes
with the following adjustments:
(i) all items of income gain, loss or deduction
allocated pursuant to Section 4.4 shall not be taken
into account in computing taxable income or loss;
(ii) any income of the Partnership that is exempt
from U.S. federal income taxation and not otherwise
taken into account in computing Net Profits and Net
Losses shall be added to such taxable income or loss;
(iii) if the book value for Capital Account purposes
of any asset differs from its adjusted basis for U.S.
federal income tax purposes, any gain or loss
resulting from a disposition of such asset shall be
calculated with reference to such book value;
(iv) upon an adjustment to the book value for Capital
Account purposes of any asset, the amount of the
adjustment shall be included as gain or loss in
computing such taxable income or loss;
(v) if the book value for Capital Account purposes of
any asset differs from its adjusted basis for U.S.
federal income tax purposes the amount of
depreciation, amortization or other cost recovery
deductions with respect to such asset shall for
purposes of determining Net Profits and Net Losses be
an amount that bears the same ratio to such book
value for Capital Account purposes as the U.S.
federal income tax depreciation, amortization or
other cost recovery deductions bears to such adjusted
basis; and
(vi) except for items in (i) above, any expenditures
of the Partnership not deductible in computing
taxable income or loss, not properly capitalizable
and not otherwise taken into account in computing Net
Profits and Net Losses pursuant to this definition
shall be treated as deductible items.
1.1.25 "Nonrecourse Deductions" has the meaning given in Regulation
Section 1.704-2(b)(1).
1.1.26 "Nonrecourse Liability" has the meaning given in Regulation
Section 1.752-1(a)(2).
1.1.27 "Option Plan" shall mean the 1993 Stock Option Plan of the
Company, as amended December 13, 1996.
1.1.28 "Partner Minimum Gain" shall mean an amount, with respect to
each Partner Nonrecourse Debt, equal to Partnership Minimum
Gain that would result if such Partner Nonrecourse Debt were
treated as a Nonrecourse Liability, determined in accordance
with Regulations Section 1.740-2(i)(3).
1.1.29 "Partner Nonrecourse Debt" has the meaning given in Regulation
Section 1.704-2(b)(4).
1.1.30 "Partner Nonrecourse Debt Minimum Gain" shall mean an amount,
with respect to each Partner Nonrecourse Debt, equal to the
Partnership Minimum Gain that would result if such
4
<PAGE>
Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Regulation Section
1.704-2(i)(3).
1.1.31 "Partner Nonrecourse Deductions" shall mean the partner
nonrecourse deductions as defined in Regulations Section
1.704-(2)(i)(2).
1.1.32 "Partners" shall mean the General Partner and the Limited
Partner.
1.1.33 "Partnership" shall mean Gemini Health Technologies L.P., a
Delaware limited partnership.
1.1.34 "Partnership Units" shall mean the interest in the Partnership
of a Partner. A Partner's ownership equity interest in the
Partnership is represented by the number of Partnership Units
such Partner holds, as set forth on Schedule E of this
Agreement, which may be modified from time to time when
additional Partnership Units are issued or Partnership Units
are exchanged or assigned.
1.1.35 "Partnership Minimum Gain" has the meaning given in Regulation
Section 1.704-2(b)(2) and 1.704-2(d).
1.1.36 "Percentage Interest" shall mean the ratio, expressed as a
percentage, that the number of Partnership Units held by a
Partner bears to the total number of Partnership Units
outstanding.
1.1.37 "Permitted Transferee" shall mean, (i) in the case of the
Company, any Affiliate of the Company and (ii) in the case of
Gemini, Krishna Jayaraman and Shashikala Jayaraman.
1.1.38 "Person" shall mean an individual, proprietorship, trust,
estate, partnership, joint venture, association, company,
limited liability company, corporation or other entity.
1.1.39 "Property" shall mean all assets and properties of every kind,
nature, character and description (whether real, personal or
mixed, whether tangible or intangible, whether absolute,
accrued, contingent, fixed or otherwise and wherever
situated), including cash, cash equivalents, general
intangibles, real estate, equipment, inventory, goods and
intellectual property.
1.1.40 "Regulations" shall mean the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such
regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
1.1.41 "Securities Act" shall mean the Securities Act of 1933, as
amended and the rules and regulations promulgated thereunder.
1.1.42 "Technology" shall mean all technologies, patented or
unpatented, patentable or unpatentable, developed by or on
behalf of, or assigned or assignable to Company or Gemini.
5
<PAGE>
1.1.43 "Transfer" shall mean any transfer, alienation, sale,
assignment, pledge or other disposition or encumbrance,
whether voluntarily or involuntarily, and shall include any
direct or indirect change in control of a Person.
1.2 Interpretation: The following provisions shall govern the
interpretation of this Agreement:
1.2.1 The singular form of any word used herein, including the terms
defined in Section 1.1., include the plural, and vice versa,
unless the context otherwise requires. The use herein of a
pronoun of any gender shall include correlative words of the
other gender.
1.2.2 Unless otherwise expressly indicated, all references herein to
"Articles", "Sections" and other subdivisions hereof are to
the corresponding Articles, Sections or subdivisions of this
Agreement; and the words "herein", "hereof", "hereunder" and
other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section or
subdivision hereof.
1.2.3 The headings or titles of the several Articles and Sections
hereof, and any table of contents appended to copies hereof,
shall be solely for convenience of reference and shall not
affect the meaning, construction or effect of this Agreement.
1.2.4 Each reference herein to any agreement, instrument or other
document shall mean such agreement, instrument or document as
from time to time amended, modified or supplemented in
accordance with the terms hereof and thereof. The term
"including" shall be construed to mean "including but not
limited to."
ARTICLE 2
ORGANIZATION AND PURPOSE
2.1 Formation: Subject to the provisions of this Agreement, the Partnership
shall be a limited partnership pursuant to the provisions of the Act.
The rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by this Agreement and
the Act.
2.2 Name: The name of the Partnership shall be, and the business of the
Partnership shall be conducted under the name of, "Gemini Health
Technologies L.P." The Partnership's business may be conducted under
any other name or names deemed advisable by the General Partner,
including the name of the General Partner or any Affiliate of the
General Partner.
2.3 Purpose: The purpose and business of the Partnership shall be to,
directly or indirectly:
2.3.1 develop and exploit the Technology in such manner as the
General Partner deems appropriate;
2.3.2 acquire, hold, own, operate, lease, manage, maintain, improve,
repair, replace, reconstruct, sell or otherwise dispose of and
use the Property of the Partnership; and
6
<PAGE>
2.3.3 enter into any lawful transaction and engage in any lawful
activity incidental to or in furtherance of the foregoing
purposes.
2.4 Registered Office and Principal Place of Business: The registered
office of the Partnership in the State of Delaware shall be located at
c/o Corporation Service Company, 1013 Center Road, Wilmington,
Delaware, 19801, and the registered agent for service of process on the
Partnership at such registered office shall be Corporation Service
Company. The principal office of the Partnership shall be 2301 N.W.
33rd Court, Suite 102, Pompano Beach, Florida 33069 or such other place
as the General Partner may from time to time designate.
2.5 Term: The Partnership's term shall commence on the filing of the
Certificate of Limited Partnership with the Secretary of State of the
State of Delaware and shall terminate on December 31, 2047 or as
otherwise provided by this Agreement or by law.
2.6 Documents: The Partnership shall file the documents necessary to comply
with the requirements of the laws of the State of Delaware for the
formation, continuation and operation of a limited partnership. The
General Partner agrees to execute all documents and to undertake all
other acts, as reasonably may be deemed necessary, in order to comply
with the requirements of the laws of the State of Delaware for the
continuation and operation of limited partnerships.
2.7 Title to Partnership Property: All Property owned by the Partnership,
whether real or personal, tangible or intangible, shall be owned by the
Partnership as an entity, and no Partner, individually, shall have any
ownership interest in any such Property.
2.8 Qualifications: The General Partner shall cause the Partnership to
comply with the laws of any jurisdiction where the Partnership engages
in business for the operation of a foreign limited partnership. The
General Partner agrees to execute and deliver all documents and to
undertake all other acts, as reasonably may be deemed necessary, in
order to comply with the requirements of the laws of any other
jurisdiction where the Partnership engages in business for the
formation, con tinuation and operation of a foreign limited
partnership.
ARTICLE 3
CAPITAL CONTRIBUTIONS AND
FINANCIAL OBLIGATIONS OF PARTNERS
3.1 Initial Capital Contributions.: On the Effective Date, (i) the Company
shall make an initial Capital Contribution to the Partnership of the
Company Contributed Property (as defined in the Company Contribution
Agreement) and (ii) Gemini shall make an initial Capital Contribution
to the Partnership of the Gemini Contributed Property (as defined in
the Gemini Contribution Agreement). On the Effective Date, the Company
and Gemini shall each own the number of Partnership Units set forth on
Exhibit E.
3.2 Additional Capital Contributions: No Partner is required to make any
additional Capital Contribution to the Partnership beyond its initial
Capital Contribution, provided that if the Company (i) makes a primary
offering of Common Stock, it shall invest the net proceeds of such
offering in
7
<PAGE>
the Partnership in exchange for a number of Partnership Units
determined as set forth below and (ii) if the Company issues any shares
of Common Stock in exchange for Property, it shall contribute such
Property to the Partnership in exchange for a number of Partnership
Units determined as set forth below. The number of Partnership Units to
be issued pursuant to clauses (i) and (ii) shall be calculated as
follows:
APU = (CC/DV) x TPU
where
APU = number of additional Partnership Units to be issued
CC = in the ease of a contribution of Property other
than cash, the fair value of the Capital
Contribution; in the case of a contribution of cash,
the amount of such cash, provided, however, that in
the case of a contribution by the Company of cash
proceeds from a public or private Common Stock
offering, the amount of cash for this purpose shall
be determined without reduction for expenses of such
offering
DV = Deemed Value of the Partnership Units as of the date
of such Capital Contribution
TPU = total number of Partnership Units outstanding
immediately prior to the Capital Contribution
3.3 Issuance of Common Stock Pursuant to Options: If at any time the
Company issue shares of Common Stock pursuant to the Option Plan, it
will contribute the proceeds therefrom (if any) to the Partnership as
an additional Capital Contribution.
3.4 Issuance of Common Stock Pursuant to Earn-Outs: If at any time the
Company issue shares of Common Stock pursuant to the Earn-Outs, the
Partnership shall issue to the Company additional Partnership Units
equal to the number of shares of Common Stock so issued, it being
agreed that such Partnership Units shall be issued notwithstanding that
no proceeds are received by the Company with respect to such issuance.
The number of shares of Common Stock to be issued pursuant to this
Section 3.4, shall be adjusted in accordance with the provisions of
Article III of the Exchange Agreement, if applicable.
3.5 No Interest on Contributions or Capital Accounts: No Partner shall be
entitled to interest on its Capital Contributions or on balances in its
Capital Account..
3.6 Return of Capital Contributions and Capital Accounts: No Partner shall
be entitled to withdraw any part of its Capital Contribution or its
Capital Account or receive any distribution from the Partnership,
except as specifically provided in this Agreement. Except as otherwise
provided herein, there shall be no obligation to return to any Partner
or withdrawn Partner any part of such Partner's Capital Contribution or
its Capital Account for so long as the Partnership continues in
existence.
3.7 Liability of Limited Partners: Except to the extent provided by
applicable law, no Limited Partner shall be liable for any of the
debts, liabilities, contracts or other obligations of the Partnership.
Except to the extent provided herein and by applicable law, a Limited
Partner shall have no liability
8
<PAGE>
in excess of the amount of its Capital Contributions and its share of
the Partnership's Property and undistributed profits and shall not be
required to repay to the Partnership, to any Partner or to any creditor
of the Partnership any portion or all of any negative balance of its
Capital Account.
3.8 Liability of General Partner: The General Partner is not personally
liable to the Limited Partner for repayment of the Limited Partner's
Capital Contribution. The General Partner shall have unlimited
liability for the debts, liabilities, obligations and losses of the
Partnership.
ARTICLE 4
CAPITAL ACCOUNTS
ALLOCATIONS OF NET PROFITS AND NET LOSSES AND TAX MATTERS
4.1 Capital Accounts: A separate capital account (a "Capital Account")
shall be established and maintained for each Partner. The Capital
Account of each Partner shall be credited with such Partner's Capital
Contributions, all Net Profits allocated to such Partner pursuant to
Section 4.2 including any items of income or gain specially allocated
pursuant to Section 4.3 and the amount of any Partnership liabilities
assumed by such Partner or which are secured by any Property
distributed to such Partner; and shall be debited with all Net Losses
allocated to such Partner pursuant to Section 4.2 including any items
of loss or deduction of the Partnership specially allocated to such
Partner pursuant to Section 4.3, all cash and the fair market value of
any Property (net of liabilities assumed by such Partner and the
liabilities to which such Property is subject) distributed by the
Partnership and the amount of any liabilities of such Partner assumed
by the Partnership or which are secured by any Property contributed by
such Partner to the Partnership. To the extent not provided for in the
preceding sentence, the Capital Accounts of the Partners shall be
adjusted and maintained in accordance with the rules of Regulation
Section 1.704-1(b)(2)(iv), as the same may be amended or revised. Any
references in any Section of this Agreement to the Capital Account of a
Partner shall be deemed to refer to such Capital Account as the same
may be credited or debited from time to time as set forth above. In the
event of any transfer of any Partnership Interest in accordance with
the terms of the Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the transferred
Interest.
4.2 Allocations of Net Profits and Net Losses: Except as otherwise provided
in this Agreement, Net Profits and Net Losses of the Partnership shall
be allocated among the Partners in accordance with their Percentage
Interests.
4.3 Mandatory Allocations:
4.3.1 Minimum Gain Chargeback: Except as otherwise provided in
Regulation Section 1.704- 2(f), notwithstanding any other
provisions of this Article 4, if there is a net decrease in
Partnership Minimum Gain for any Fiscal Year, each Partner
shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an
amount equal to the such Partner's share of the net decrease
in Partnership Minimum Gain, as determined under Regulation
Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts
required to allocated to each Partner pursuant thereto. The
items to be so allocated shall be determined in accordance
with Regulation Sections 1.704-2(f)(6) and 1.704-2(j)(2). This
Section 4.3.1
9
<PAGE>
is intended to comply with the minimum gain chargeback
requirement in such sections of the Regulations and shall be
interpreted consistently therewith.
4.3.2 Partner Minimum Gain Chargeback: Except as otherwise provided
in Section 1.704-2(i)(4) of the Regulations, notwithstanding
any other provision of this Article 4, if there is a net
decrease in Partner Minimum Gain attributable to a Partner
Nonrecourse Debt for any Fiscal Year, each Partner who has a
share of the Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulation
Section 1.704-2(i)(5), shall be specially allocated items of
Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to the such Partner's
share of the net decrease in Partner Minimum Gain attributable
to such Partner Nonrecourse Debt, determined in accordance
with Regulation Section 1.704-2(i)(4). Allocations pursuant to
the previous sentence shall be made in proportion to the
respective amounts required to allocated to each Partner
pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulation Section 1.704-2(i)(4)
and 1.704-2(j)(2). This Section 4.3.2 is intended to comply
with the partner minimum gain chargeback requirement in such
Section of the Regulations and shall be interpreted
consistently therewith.
4.3.3 Qualified Income Offset: In the event any Limited Partner
unexpectedly receives any adjustments, allocations or
distributions described in Regulation Sections 1.704-
1(b)(2)(ii)(d)(4), (5) or (6) that cause or increase an
Adjusted Capital Account Deficit of such Partner, items of
income and gain shall be specially allocated to such Partner
in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible. This Section
4.3.3 is intended to constitute a "Qualified Income Offset"
within the meaning of Regulation Section 1.704-1(b)(2)(ii) and
shall be interpreted consistently therewith.
4.3.4 No Excess Deficit: To the extent that any Partner has or would
have, as a result of any allocation of Partnership loss (or
item thereof), an Adjusted Capital Account Deficit, such
amount of Partnership loss (or item thereof) shall be
allocated to the other Partners in accordance with Section
4.2, but in a manner which will not produce an Adjusted
Capital Account Deficit at to such Partners.
4.3.5 Gross Income Allocation: In the event any Partner has a
deficit Capital Account balance at the end of any Fiscal Year
or other period that is in excess of the Adjusted Capital
Account Deficit for such Partner, then such Partner shall be
specially allocated items of Partnership income and gain in
the amount of such excess as quickly as possible, provided
that an allocation pursuant to this Section 4.3.5 shall be
made only if and to the extent that such Partner would have an
Adjusted Capital Account Deficit after all other allocations
provided for in this Agreement have been tentatively made as
if this Section 4.3.5 were not in this Agreement.
4.3.6 Nonrecourse Deductions: Nonrecourse Deductions for any Fiscal
Year shall be allocated to the Partners in accordance with
their Percentage Interest.
4.3.7 Partner Nonrecourse Deductions: Partner Nonrecourse Deductions
for any Fiscal Year shall be allocated to the Partner who
bears the economic risk of loss with respect to the Partner
10
<PAGE>
Nonrecourse Debt to which such Partner Nonrecourse Deductions
are attributable in accordance with Regulation Section
1.704-2(i)(1).
4.4 Tax and Code Section 704(c) Allocations: For U.S. Federal income tax
purposes only, each item of income, gain, loss and deduction of the
Partnership shall be allocated among the Partners in the same manner as
the corresponding items of Net Profits and Net Losses and specially
allocated items are allocated for Capital Account purposes; provided
that with respect to any Property of the Partnership that has been
reflected in the Partners' Capital Accounts at a value that differs
from the adjusted basis for U.S. Federal income tax purposes of the
Property, items of depreciation, amortization, and gain or loss, as
computed for federal income tax purposes, shall be allocated between
the Partners so as to take account of the variation between the
adjusted basis, for U.S. Federal income tax purposes, of such Property
and the value at which such Property is reflected in the Partners'
Capital Accounts, in accordance with Code Section 704(c) and Regulation
Sections 1.704-1(b)(2)(iv)(g) and 1.704-1(b)(4)(i).
4.5 Reversal of Allocations: Any special allocations of items of income,
gains, losses or deductions pursuant to Section 4.3 shall, to the
extent possible, be reversed in computing subsequent allocations of Net
Profits and Net Loss pursuant to this Article 4, so that the net amount
of any item so allocated and the Net Profits and Net Loss and all other
items allocated to each Partner pursuant to this Article 4 shall, to
the extent possible, equal the net amount that would have been
allocated to each such Partner pursuant to the provisions of this
Article 4 had such special allocations pursuant to Section 4.3 not been
made.
4.6 Revaluation Adjustments: The General Partner, upon advice of the
Partnership's tax counsel that the Partnership is authorized pursuant
to the provisions of Regulation Section 1.704-1(b)(2)(iv)(f), and that
it is in the Partners' interest to do so, shall cause an increase or
decrease in the Partners' Capital Accounts to reflect a revaluation of
Partnership Property (including intangible assets such as goodwill) on
the Partnership books. Any such revaluation shall be made strictly in
compliance with the provisions of Regulation Section
1.704-1(b)(2)(iv)(f).
4.7 Required General Partner Allocation: Notwithstanding anything to the
contrary contained herein, unless otherwise required by Code Section
734(b) or 704(c) or the Regulations applicable thereto, the interest of
the General Partner in each material item of Partnership income, gain,
loss, deduction or credit shall be equal to at least one percent (1%)
at all times during the existence of the Partner ship.
ARTICLE 5
DISTRIBUTIONS
5.1 Distributions: Subject to Section 8.3, the amount and timing of
distributions by the Partnership shall be determined in the discretion
of the General Partner. Subject to Section 8.3, all distributions to
the Partners shall be in proportion to their Partnership Units. For
purposes of this Section 5.1 the Partnership Units of the Partners
shall be determined as of the date of any such distribution.
11
<PAGE>
5.2 Nature of Distributions: Distributions may be made in cash or other
Property, or both, in the discretion of the General Partner.
ARTICLE 6
POWERS AND OBLIGATIONS OF THE PARTNERS
6.1 General Partner to Manage Business: The General Partner shall be
responsible for managing the affairs of the Partnership. The General
Partner shall have complete and exclusive discretion in the management
and control of the affairs and business of the Partnership and shall
possess all powers necessary, convenient or appropriate to carrying out
the purposes and business of the Partnership; provided however, that
the day to day activities of the Partnership shall be managed by the
Partnership's officers, chosen by and subject to the supervision of the
General Partner. The General Partner shall make all Partnership
decisions, and shall specifically have the authority to hire attorneys,
accountants, and any other consultants or employees. The Limited
Partner hereby consents to the exercise by the General Partner of the
powers conferred on it under this Agreement.
6.2 Powers of General Partner: The General Partner shall possess and enjoy,
without the need to obtain the consent of the Limited Partner, all the
rights and powers necessary or desirable to carry out the purposes and
business of the Partnership, and all of the power and authority as may
be specifically stated in this Agreement or as may be otherwise
provided by law, including, but not limited to, the power to:
6.2.1 make all decisions concerning the operational aspects of the
Partnership;
6.2.2 pay from Partnership assets all expenses of organizing and
conducting the business of the Partnership;
6.2.3 make and enter into such contracts and incur expenses on
behalf of the Partnership as the General Partner deems
necessary or appropriate for the efficient conduct and
operation of the Partnership's business;
6.2.4 open bank accounts, savings accounts and other accounts and
designate authorized signatories for such accounts;
6.2.5 compromise, submit to arbitration, sue on or defend all claims
in favor of or against the Partnership; commence or defend
litigation that pertains to the Partnership or any Partnership
Property, and arrange for the settlement of any pending or
threatened litigation, by or against the Partnership, through
compromise, arbitration or otherwise;
6.2.6 do all acts the General Partner deems necessary or appropriate
for the protection and preservation of the Partnership's
Property;
6.2.7 make distributions and allocations to the Partners in
accordance with Article 5 hereof;
12
<PAGE>
6.2.8 designate officers of the Partnership as authorized
signatories with the authority to execute on behalf of the
Partnership any documents or instruments of any kind that the
General Partner may deem appropriate or advisable to carry out
the purposes of the Partnership;
6.2.9 arrange for the preparation, execution and filing of federal,
state and local income tax returns and pay any taxes on behalf
of the Partnership, and contest any determination by the
Internal Revenue Service that the General Partner deems to be
adverse to the best interest of the Partnership;
6.2.10 make all payments required of the Partnership under the terms
of this Agreement, including such payments, fees and
reimbursements as the General Partner, or any of its
Affiliates, may be entitled to receive under the terms of this
Agreement;
6.2.11 invest Partnership funds on a temporary basis pending
distribution, in such investments as the General Partner
determines appropriate;
6.2.12 employ Persons (including any Affiliate of a General Partner)
for the operation and management of the Partnership and engage
such other experts and advisers as the General Partner may
deem necessary or advisable, in each case, on such terms and
for such compensation (including bonuses and benefits) as the
General Partner may determine;
6.2.13 sell, license or otherwise dispose of any or all of the
Property of the Partnership;
6.2.14 enter into business asset or equity acquisitions, joint
ventures and other strategic alliances, including mergers and
consolidations;
6.2.15 enter into financing arrangements or borrow money on behalf of
the Partnership, and secure any such financings or borrowings
by granting security interests and other liens on the
Partnership's Property;
6.2.16 approve the annual business plan for the Partnership,
including the capital and operating budgets for the
Partnership;
6.2.17 take any action for the (A) commencement of a voluntary case
under applicable bankruptcy, insolvency or similar law now or
hereinafter in effect, (B) consent to the entry of any order
for relief in an involuntary case under any such law to the
extent that the giving or withholding of such consent is
within the Partnership's discretion, (C) consent to the
appointment or taking possession of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar
official) of the Partnership or of any substantial part of the
Partnership's Property or (D) making by the Partnership of a
general assignment for the benefit of creditors;
6.2.18 enter into any transaction with an Affiliate of a General
Partner, provided that such transaction is on arms' length
terms and conditions; and
6.2.19 call a meeting of Partners from time to time as the General
Partner deems necessary or advisable.
13
<PAGE>
6.3 Other Interests of Partners: The General Partner shall conduct all of
its business through the Partnership. The Limited Partner and its
Affiliates shall be prohibited from competing with the Partnership to
the extent set forth in the Gemini Non-Competition Agreement.
6.4 Limited Authority of Limited Partners: The Limited Partner shall not:
6.4.1 take part in the control of the business of the Partnership;
6.4.2 execute any document that binds or purports to bind the
Partnership;
6.4.3 hold itself out as having the power or authority to bind the
Partnership;
6.4.4 undertake any obligation or responsibility on behalf of the
Partnership;
6.4.5 bring any action for partition or sale in connection with any
Property of the Partnership, whether real or personal, or
register or permit any lien or charge in respect of such
Property; or
6.4.6 take any action that may jeopardize the status of the
Partnership as a limited partnership for U.S. Federal income
tax purposes.
6.5 Reliance by Third Parties: Notwithstanding any other provision of this
Agreement to the contrary, no lender or purchaser, including any
purchaser of Property from the Partnership or any other Person dealing
with the Partnership, shall be required to look to the application of
proceeds hereunder or to verify any representation by the General
Partner as to the extent of the interest in the Property of the
Partnership that the General Partner is entitled to encumber, sell or
otherwise use, and any such lender or purchaser shall be entitled to
rely exclusively on the representations of the General Partner as to
its authority to enter into such financing or sale arrangements and
shall be entitled to deal with the General Partner as if it was the
sole party in interest therein, both legally and beneficially. In no
event shall any Person dealing with the General Partner or the General
Partner's representatives with respect to any business or Property of
the Partnership be obligated to ascertain that the terms of this
Agreement have been complied with, or be obligated to enquire into the
necessity or expedience of any act or action of the General Partner or
the General Partner's representative; and every contract, agreement,
deed, mortgage, security agreement, promissory note or other instrument
or document executed by the General Partner or the General Partner's
representatives with respect to any business or Property of the
Partnership shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (a) at the time of
the execution and/or delivery thereof this Agreement was in full force
and effect, (b) such instrument or document was duly executed in
accordance with the terms and provisions of this Agreement and is
binding upon the Partnership, and (c) the General Partner or the
General Partner's representatives were duly authorized and empowered to
execute and deliver any and every such instrument or document for and
on behalf of the Partnership.
6.6 Compensation, Expenses and Reimbursement of the General Partner: All
expenses incurred in connection with the organization of the
Partnership shall be borne by the Partnership. The General Partner
shall be reimbursed on a monthly basis for all fair and reasonable
expenses it incurs or makes on behalf of the Partnership (including
amounts paid to any Person to perform services for
14
<PAGE>
the Partnership or the General Partner or who is an employee of the
Partnership or the General Partner). Such reimbursement shall be in
addition to any reimbursement to a General Partner as a result of
indemnification pursuant to Section 6.7 hereof.
6.7 Indemnification of Partners:
6.7.1 The Partnership shall indemnify and hold harmless the
Partners, their respective Affiliates, all of their respective
officers, directors, partners, stockholders, employees, and
agents and all of the officers, employees and agents of the
Partnership (individually, an "Indemnitee"), from and against
any and all losses, claims, demands, costs, damages,
liabilities, and expenses of any nature (including attorneys'
fees and disbursements), judgments, fines, settlements, and
other amounts arising from any and all claims, demands,
actions, suits, or proceedings, civil, criminal,
administrative or investigative, in which an Indemnitee may be
involved, or threatened to be involved, as a party or
otherwise ("Losses"), arising out of or incidental to the
business of the Partnership, regardless of whether an
Indemnitee continues to be a Partner, an Affiliate, or an
officer, director, partner, stockholder, employee, or agent of
a Partner or of an Affiliate at the time any such Loss is paid
or incurred, if the Indemnitee's conduct did not constitute
willful misconduct. The termination of any action, suit, or
proceeding by settlement or upon a plea of nolo contendere, or
its equivalent, shall not, in and of itself, create a
presumption or otherwise constitute evidence that the
Indemnitee's actions constituted willful misconduct.
6.7.2 Expenses (including legal fees and expenses) incurred in
defending any proceeding subject to subsection (a) of this
Section 6.7 shall be paid by the Partnership in advance of the
final disposition of such proceeding upon receipt of an
undertaking (which need not be secured) by or on behalf of the
Indemnitee to repay such amount if it shall ultimately be
determined, by a court of competent jurisdiction or otherwise,
that the Indemnitee is not entitled to be indemnified by the
Partnership as authorized hereunder.
6.7.3 The indemnification provided by this Section 6.7 shall be in
addition to any other rights to which each Indemnitee may be
entitled under any agreement, as a matter of law or otherwise,
both as to action in the Indemnitee's capacity as General
Partner or as a partner, stockholder, officer, director,
employee or agent of a Partner, or as to action in the
Indemnitee's capacity as a Person serving at the request of
the Partnership as set forth above, and shall continue as to
an Indemnitee who has ceased to serve in such capacity and
shall inure to the benefit of the heirs, successors, assigns,
administrators and personal representatives of the Indemnitee.
Such indemnification, however, shall only apply to Losses
incurred by virtue of the Indemnitee's status as General
Partner, Affiliate or officer, director, partner, stockholder,
employee or agent thereof, and not as to Losses incurred in
other capacities (for example, by virtue of otherwise
contracting with the Partnership).
6.7.4 The Partnership may purchase and maintain insurance on behalf
of any one or more Indemnitees and other such Persons as the
Partnership shall determine against any liability that may be
asserted against or expense that may be incurred by such
Person in connection with the Partnership's activities,
whether or not the Partnership would have the power to
indemnify such Person against such liability under the
provisions of this Agreement.
15
<PAGE>
6.7.5 Any indemnification hereunder shall be satisfied only out of
the assets of the Partnership and no Partner shall be subject
to personal liability by reason of these indemnification
provisions.
6.7.6 An Indemnitee shall not be denied indemnification in whole or
in part under this Section 6.7 because the Indemnitee had an
interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise
permitted by the terms of this Agreement.
6.7.7 The provisions of this Section 6.7 are for the benefit of the
Indemnitees and the heirs, successors, assigns, administrators
and personal representatives of the Indemnitees and shall not
be deemed to create any rights for the benefit of any other
Persons.
6.7.8 Any Person that proposes to assert the right to be indemnified
under this Section 6.7 shall, promptly after receipt of notice
of any action that is subject to indemnification hereunder,
notify the Partnership of the commencement of such action,
enclosing a copy of all papers served. The failure so to
notify the Partnership of any such action shall not relieve it
from any liability that it may have to any Indemnitees
hereunder, unless the Partnership is prejudiced thereby. In
case any such action shall be brought and notice given to the
Partnership of the commencement thereof, the Partnership shall
be entitled to participate in, and to assume the defense
thereof, with counsel reasonably satisfactory to the
Indemnitee, and after notice from the Partnership to such
Indemnitee of its election so to assume the defense thereof,
the Partnership shall not be liable to such Indemnitee for any
legal or other expenses, except as provided below and except
for the reasonable costs of investigation subsequently
incurred by such Indemnitee at the request of the Partnership
in connection with the defense thereof. The Indemnitee shall
have the right to employ separate counsel and to participate
in (but not control) any such action,but the fees and expenses
of such counsel shall be the expense of such Indemnitee unless
(i) the employment of counsel by such Indemnitee has been
authorized by the Partnership, (ii) the employment of separate
counsel is necessitated by a conflicting interest among the
Indemnitees or (iii) the Partnership shall not in fact have
employed counsel to assume the defense of such action. In each
such case, the fees and expenses of counsel shall be at the
expense of the Partnership. The Partnership shall not be
liable for any settlement of any action or claims affected
without its written consent unless the Partnership has failed
to assume the defense of any such action or claims.
6.8 Liability of the General Partner: The General Partner and its
Affiliates and all officers, directors, partners, stockholders,
employees and agents of the General Partner and its Affiliates shall
not be liable to the Partnership or to the Limited Partner for any
losses sustained or liabilities incurred as a result of any act or
omission of the General Partner, its Affiliates or any such officers,
directors, partners, stockholders, employees or agents if (i) the
General Partner, such Affiliate, or such officer, director, partner,
stockholder, employee or agent acted in good faith and in a manner it,
he or she reasonable believed to be in, or not opposed to, the best
interests of the Partnership, and (ii) the conduct of the General
Partner, such Affiliate or such officer, director, partner,
stockholder, employee or agent did not constitute willful misconduct.
For purposes of this Agreement, any act or omission, if done or omitted
to be done in reliance upon the advice of legal counsel or accountants
16
<PAGE>
selected with reasonable care, shall be conclusively presumed to have
been done or omitted to be done in good faith and not to constitute
willful misconduct.
6.9 Reliance by General Partner: The General Partner may rely and shall be
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, bond, debenture, or other paper or document believed by
it to be genuine and to have been signed or presented by the proper
party or parties. The General Partner may consult with legal counsel,
and other consultants and advisers selected by it, and any advice of
such Person as to matters which the General Partner believes to be
within such Person's professional experience shall be full and complete
authorization and protection in respect of any action taken or suffered
or omitted by the General Partner hereunder in good faith and in
accordance with such advice.
6.10 Conversion to Corporate Form: If the General Partner shall determine
that it is desirable or helpful for the business of the Partnership to
be conducted in a corporate rather than in a partnership form, the
General Partner may incorporate the Partnership or take such other
action as it may deem advisable in light of such changed conditions,
including, without limitation, dissolving the Partnership, provided
that, the General Partner may not incorporate the Partnership within
two (2) years from the Effective Date without the consent of the
Limited Partner if to do so would have material adverse tax
consequences to the Limited Partner. In connection with any such
incorporation of the Partnership, the Partners shall receive, in
exchange for their Partnership Units, shares of capital stock of such
corporation having the same relative rights and preferences as to
dividends and distributions and the same voting and transfer rights,
subject in each case to any modifications required solely as a result
of the conversion to corporate form (all such rights and preferences
being referred to, collectively, as "Equity Rights"), as are set forth
in this Agreement as among the holders of interests in the Partnership.
ARTICLE 7
TRANSFERS OF PARTNERSHIP UNITS AND WITHDRAWALS OF PARTNERS
7.1 General Restriction on Transfer of Partnership Units: Except as
specifically set forth in this Article 7, neither the General Partner
nor the Limited Partner may Transfer any Partnership Units.
7.2 Transfers Pursuant to Exchange Agreement: Subject to Section 7.4, the
Limited Partner shall be permitted to exchange Partnership Units for
shares of Common Stock pursuant to the terms and conditions set forth
in the Exchange Agreement.
7.3 Assignments to Permitted Transferee: Subject to Section 7.4, the
General Partner may at any time assign its Partnership Units to a
Permitted Transferee and the Limited Partner, with the consent of the
General Partner (such consent not to be unreasonably withheld) may
assign its Partnership Units to a Permitted Transferee; provided that
in all such cases such Partner and its Permitted Transferee complies
with Section 7.5.
7.4 Specific Restrictions on Transfer of Partnership Units:
17
<PAGE>
7.4.1 No exchange or assignment of a Partnership Unit may be made if
such exchange or assignment (i) would violate the then
applicable federal or state securities laws or rules and
regulations of the Commission, state securities commission, or
rules and regulations of any other government agencies with
jurisdiction over such exchange or assignment or (ii) would
affect the Partnership's existence or qualification under the
Act. If an exchange or assignment of a Partnership Unit is
otherwise permitted hereunder, notwithstanding any provision
hereof, no Partner shall exchange or assign all or any portion
of such Partner's Partnership Units unless and until such
Partner, upon the request of the Partnership, delivers to the
Partnership an opinion of counsel, addressed to the
Partnership, reasonably satisfactory to the Partnership, to
the effect that (A) such Partnership Unit has been registered
under the Securities Act and any applicable state securities
laws, or that the proposed transfer of such Partnership Unit
is exempt from any registration requirements imposed by such
laws and that the proposed exchange or assignment does not
violate any other applicable requirements of federal or state
securities laws and (B) that such exchange or assignment shall
not adversely affect the tax status of the Partnership. Such
opinion shall not be deemed delivered until the Partnership
confirms to such Partner that such opinion is acceptable.
7.4.2 Notwithstanding the other provisions of this Agreement, the
General Partner shall monitor the exchange or assignment of
Partnership Units to determine (i) if such Partnership Units
are being traded on an "established securities market" or a
"secondary market (or the substantial equivalent thereof)"
within the meaning of Section 7704 of the Code, and (ii)
whether additional exchanges or assignments of Partnership
Units would result in the Partnership being unable to qualify
for at least one of the "safe harbors" set forth in
Regulations Section 1.7704-1 (or such other guidance
subsequently published by the Internal Revenue Service setting
forth safe harbors under which Partnership Units shall not be
treated as "readily tradable on a secondary market (or the
substantial equivalent thereof)" within the meaning of section
7704 of the Code) (the "Safe Harbors"). The General Partner
shall take (and cause its Affiliates to take) all steps
reasonably necessary or appropriate to prevent any trading of
Partnership Units or any recognition by the Partnership of
exchanges or assignments made on such markets and, except as
otherwise provided herein, to ensure that at least one of the
Safe Harbors is met.
7.5 Requirements for Transfers: Notwithstanding anything to the contrary
contained herein, in order for an assignment to take place pursuant to
Section 7.3:
7.5.1 the assignee must execute a counterpart of this Agreement or
otherwise agree in writing to be bound by its terms;
7.5.2 there shall have been compliance with relevant requirements of
the Act and all other ap plicable legislation, including
securities legislation;
7.5.3 in the case of an assignment to a Permitted Transferee,
evidence reasonably satisfactory to the General Partner must
have been produced to the effect that the assignor is a
Permitted Transferee and that such assignment will not result
in a lien or charge upon or against Partnership assets; and
18
<PAGE>
7.6 the General Partner, acting reasonably, must be satisfied that
(i) the assignment or the assignee will not impair the ability
of the Partnership to be taxed as a partnership for federal
income tax purposes and (ii) the assignment will not cause the
Partnership's tax year to close or the Partnership to
terminate for federal income tax purposes under Section 708 of
the Code.
7.7 Documentation and Costs: Any assignee shall execute any and all
documents reasonably requested by the General Partner and shall pay all
reasonable expenses incurred by the Partnership in connection with the
assignment of Partnership Units, including the cost of the preparation,
filing and publishing of any amendment to this Agreement.
7.8 Withdrawal: No Partner may withdraw from the Partnership without the
prior written consent of the General Partner, which consent shall be
within the absolute discretion of the General Partner.
7.9 Invalid Transfer: Any Transfer of a partnership interest that does not
comply with the provisions of this Agreement shall be invalid and shall
not vest any interest in the assignee.
ARTICLE 8
DISSOLUTION AND LIQUIDATION
8.1 Dissolution: The Partnership shall dissolve on the first to occur of the
following:
8.1.1 The expiration of the term of the Partnership as provided in
Section 2.5;
8.1.2 The sale of all of the assets of the Partnership and the
collection and distribution of all proceeds (including
interest on deferred payments) from such sale;
8.1.3 The exchange pursuant to the Exchange Agreement of all of the
Partnership Units held by the Limited Partner;
8.1.4 At such time as required by the Act; or
8.1.5 The determination of the Partners to dissolve the Partnership.
8.2 Continuation of Partnership: To the extent permitted by the Act, upon
dissolution of the Partnership in accordance with Section 8.1.4 the
remaining Partners may elect to reconstitute the Partnership and
continue its business on the same terms and conditions set forth in
this Agreement if on the affirmative vote of the holders of a majority
of Partnership Units. the Partners agree in writing (a) to continue the
business of the Partnership and (b) to the appointment, if necessary,
of a successor General Partner. Unless such an election is made within
90 days after dissolution, the Partnership shall conduct only
activities necessary to wind up its affairs. If such an election is
made within 90 days after dissolution, then (i) the reconstituted
Partnership shall continue until dissolved in accordance with this
Article 8 and (ii)
19
<PAGE>
all necessary steps shall be taken to cancel this Agreement and the
Certificate of Limited Partnership and to enter into a new partnership
agreement and certificate of limited partnership.
8.3 Winding Up Affairs and Liquidation: Upon the dissolution of the
Partnership, the General Partner or the Persons required or permitted
by law to carry out the winding up of the affairs of the Partnership
(the "Liquidator") shall promptly notify all Partners of such
dissolution, shall proceed to the liquidation of the assets of the
Partnership by converting such assets to cash insofar as deemed
practicable by the General Partner or the Liquidator, shall wind up the
affairs of the Partnership, and, after paying or providing for the
payment of all liabilities and obligations of the Partnership, shall
distribute the proceeds of liquidation and other assets of the
Partnership as provided by law and the terms of this Agreement.
8.4 Distribution on Dissolution: The proceeds of liquidation and other
assets of the Partnership shall be applied and distributed in the
following order of priority:
8.4.1 To the payment of debts and liabilities of the Partnership
(including any loans and advances that may have been made by
any of the Partners, or amounts owing to any of the Partners)
and the expenses of liquidation;
8.4.2 To the setting up of any reserves that the General Partner or
the Liquidator may deem reasonably necessary for any
contingent or unforeseen liabilities or obligations of the
Partnership, which reserves shall be paid over to an escrow
holder approved by the General Partner or the Liquidator to be
held for the purpose of disbursing such reserves in payment of
any of the aforementioned contingencies, and, at the
expiration of such period, as the General Partner or the
Liquidator shall deem advisable, to distribute the balance
thereafter remaining in the manner hereinafter provided; and
8.4.3 Any balance then remaining shall be distributed to the
Partners in accordance with their Capital Accounts. Each
Partner shall look solely to the assets of the Partnership for
the return of its Capital Contribution and shall have no right
or power to demand or receive any specific Property other than
cash from the Partnership. No Partner shall have priority over
any other Partner as to the return of its Capital
Contributions, distributions or allocations.
8.5 Assets Other Than Cash: Assets of the Partnership, with the approval of
the General Partner, may be distributed in kind on the basis of their
then appraised value. For purposes of making such distribution only,
the unrealized profit or loss on any such asset (based on its fair
market value) shall be first allocated among the Partners and the
distribution of the asset shall be treated as a distribution of cash
equal to the fair market value of such asset.
ARTICLE 9
FISCAL MATTERS
9.1 Books and Records: The Partnership shall keep complete and up to date
books and records at its office setting forth a true and accurate
account of all business transactions arising out of and
20
<PAGE>
in connection with the conduct of the Partnership's business. The
Partnership shall also maintain at its office the following:
9.1.1 A current list of each Partner set forth in alphabetical
order, together with each Partner's Capital Contributions and
Partnership Units;
9.1.2 A copy of the certificate of limited partnership of the
Partnership and all certificates of amendment thereto,
together with executed copies of any powers of attorney
pursuant to which any certificate has been executed;
9.1.3 Copies of the Partnership's federal, state and local income
tax or information returns and reports, if any, for the six
(6) most recent Fiscal Years;
9.1.4 Copies of the original of this Agreement and all amendments
thereto;
9.1.5 Financial statements of the Partnership for the six (6) most
recent Fiscal Years; and
9.1.6 The Partnership's books and records for the then current year
and the past three (3) Fiscal Years.
The General Partner shall make available to the Partnership's auditors
or accountants or other duly authorized representatives of the
Partnership such information and material as may be required by such
auditors, accountants or authorized representatives and shall otherwise
give such cooperation as may be reasonably necessary for the auditors,
accountants or authorized representatives to carry out their duties to
the Partnership in accordance with the provisions hereof.
9.2 Access to Books and Records: Upon the reasonable request of the Limited
Partner, the General Partner shall promptly deliver to the Limited
Partner, at the Limited Partner's expense, the current list of
Partners, a copy of the certificate of limited partnership of the
Partnership and all amendments thereto, copies of this Agreement and
all amendments thereto and a copy of any state filings by the
Partnership. A Limited Partner shall have the right on reasonable
request to inspect and copy during normal business hours any of the
Partnership's records required to be maintained pursuant to Section 9.1
(other than those deemed by the General Partner to be confidential) and
to obtain from the General Partner promptly after becoming available, a
copy of the Partnership's federal, state and local income tax or
information returns and reports for each Fiscal Year. The General
Partner shall promptly furnish to a Limited Partner a copy of any
amendment to this Agreement executed by the General Partner pursuant to
a power of attorney from a Limited Partner.
9.3 Tax Returns: The General Partner shall cause the Partnership to file
when due all federal, state and local income tax or information returns
due under laws in force in the United States and to withhold and remit
to the appropriate governmental agencies any amounts required to be
paid under applicable laws.
9.4 Fiscal Year: The "Fiscal Year" of the Partnership shall mean the year
as determined under Code Section 706(b).
21
<PAGE>
9.5 Accounting and Tax Elections: All decisions as to accounting matters
and all elections required or permitted to be made by the Partnership
under the Code, including elections pursuant to Code Sections 732(d)
and 754 (or corresponding provisions of succeeding law or state law)
shall be made by the General Partner.
9.6 Information for the General Partner: The Partnership shall prepare all
such records and information as may be necessary for the General
Partner to use for the proper filing of all documents required to be
filed by the General Partner with the Commission.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Notices: Except as otherwise provided herein, any notice, consent,
waiver, offer, request, or vote, required hereunder shall be in
writing, and shall be deemed to have been validly served, given or
delivered (i) upon delivery thereof if delivered by messenger or
courier service to the Partner to be notified, or (ii) upon
acknowledgment of receipt thereof if transmitted to a valid telecopier
number for the Partner to be notified; in each case the Partner is to
be notified at the address and telecopier numbers on Exhibit E.
10.2 Limited Power of Attorney: The Limited Partner, by the Limited
Partner's execution of this Agreement, irrevocably constitutes and
appoints the General Partner as the Limited Partner's true and lawful
attorney and agent, with full power and authority in the Limited
Partner's name, place and stead to execute, acknowledge and deliver and
to file or record in any appropriate public office:
10.2.1 this Agreement and counterparts thereof;
10.2.2 all instruments that the General Partner deems appropriate to
reflect any amendment, change or modification to the
Partnership or to this Agreement in accordance with the terms
hereof; including, without limitation, any amendment to this
Agreement and/or to any certificate or other instrument that
may be necessary, desirable or appropriate to re flect or
comply with the provisions of Sections 2.1 and 2.8;
10.2.3 all certificates and instruments and amendments thereto that
the General Partner deems necessary or appropriate to form,
qualify or continue the qualification of the Partnership in or
otherwise comply with the laws of any jurisdiction where the
Partnership may do business or own or lease Property in order
to maintain the limited liability of the Limited Partner and
to comply with all applicable laws of such jurisdiction;
10.2.4 all conveyances and instruments that the General Partner deems
appropriate or necessary to reflect the dissolution and
termination of the Partnership pursuant to the terms of this
Agreement;
10.2.5 any and all other certificates and instruments that may be
required to be filed by the Partnership under the laws of the
United States or in any jurisdiction therein; and
22
<PAGE>
10.2.6 all transfers, certificates and other documents and to make
all such statements as may, in the opinion of the General
Partner, be necessary or desirable in order to carry through
to completion any exchange or assignment of a Partnership Unit
pursuant to the terms of this Agreement.
This power of attorney shall be deemed to be coupled with an interest
and shall survive the exchange or assignment by the Limited Partner of
its Partnership Units. Notwithstanding the existence of this power of
attorney, each Limited Partner agrees to join in the execution,
acknowledgement and delivery of the instruments referred to above if
requested to do so by the General Partner. The power of attorney
granted to the General Partner is a limited power of attorney that does
not authorize the General Partner to act on behalf of the Limited
Partner except to execute the documents described in this Section 10.2.
10.3 Integration: This Agreement, the agreements referred to herein and the
agreements referred to therein set forth the entire agreement between
the parties with regard to the subject matter here of. No other
agreements, covenants, representations or warranties, express or
implied, oral or written, have been made by any party to the other with
respect to the subject matter of this Agreement. All prior and
contemporaneous conversations, negotiations, possible and alleged
agreements and representations, covenants, and warranties with respect
to the subject matter hereof are waived, merged herein and therein and
superseded hereby and thereby.
10.4 Applicable Law: This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of Delaware.
10.5 Counterparts: This Agreement may be executed in counterparts and all
counterparts so executed shall constitute one Agreement binding on all
the parties. It shall not be necessary for each party to execute the
same counterparts.
10.6 Severability: In case any one or more of the provisions contained in
this Agreement or any application of the provisions shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions or the remaining
applications shall not in any way be affected or impaired.
10.7 Captions: The captions and headings in this Agreement are for
convenience only and shall not be considered in interpreting any
provision of this Agreement.
10.8 Binding Effect: Except as otherwise provided to the contrary, this
Agreement shall be binding upon, and inure to the benefit of, the
Partners and their respective heirs, executors, administrators,
successors and assigns.
10.9 Gender and Number: Whenever required by the context, the singular shall
be deemed to include the plural, and the plural shall be deemed to
include the singular, and the masculine, fem inine and neuter genders
shall each be deemed to include the other.
10.10 Amendment: Except as otherwise provided, this Agreement may be amended
in whole or in part only by an agreement in writing signed by the
General Partner and all the Limited Partner.
23
<PAGE>
10.11 Exhibits: Exhibits referred to in this Agreement are incorporated by
reference into this Agreement.
10.12 Partnership Tax Audits: The General Partner is designated as the
Partnership's "Tax Matters Partner" (the "TMP") in accordance with the
provisions of Code Section 6231(a)(7). The TMP shall receive no
compensation for its services as the TMP.
10.13 Arbitration: Any controversy or claim arising out of or relating to any
interpretation, breach or dispute concerning any of the terms or
provisions of this Agreement, which is settled in writing within thirty
(30) days after it arises, shall be settled by arbitration in Delaware
or such other jurisdiction as the parties may agree upon, in accordance
with the laws of the State of Delaware and under the rules then
obtaining of the American Arbitration Association (or any successor
thereto), and judgment upon the award rendered in said arbitration
shall be final and may be entered in any court in the State of Texas or
Florida or elsewhere having jurisdiction thereof.
Any party hereto may apply for such arbitration.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
EPi HEALTH TECHNOLOGIES INC.
By: /s/ Arup Sen
---------------------
Arup Sen
GEMINI BIOTECH LTD.
By: /s/ Krishna Jayaraman
----------------------
Krishna Jayaraman
24
