<PAGE>
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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
Commission File No. 0-21721
--------------------
CLINICOR, INC.
(Name of Small Business Issuer as Specified in Its Charter)
NEVADA 88-0309093
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1717 WEST SIXTH STREET, SUITE 400, AUSTIN, TEXAS 78703
(Address of Principal Executive Offices) (Zip Code)
(512) 344-3300
(Issuer's Telephone Number, Including Area Code)
--------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
As of August 13, 1997, 4,086,400 shares of the Issuer's Common Stock, $.001
par value, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
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<PAGE>
TABLE OF CONTENTS
Page
----
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Balance Sheets - June 30, 1997 and December 31, 1996 3
Condensed Statements of Operations - six months ended June 30, 1997
and 1996 4
Condensed Statements of Cash Flows - six months ended June 30, 1997
and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 7
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 16
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Clinicor, Inc.
Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
(uNAUDITED) (NOTE A)
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash, restricted cash and cash equivalents $ 145,808 $ 1,483,974
Accounts receivable 2,222,871 1,489,555
Prepaid and other current assets 88,878 143,992
----------- -----------
Total current assets 2,457,557 3,117,521
Property and equipment, net 1,238,888 1,118,877
Other assets 14,409 39,739
----------- -----------
TOTAL ASSETS $ 3,710,854 $ 4,276,137
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of obligations under capital
leases $ 32,768 $ 11,733
Accounts payable and accrued liabilities 2,142,386 1,088,061
Line of credit - 850,000
Deferred revenue 67,928 35,000
Dividends payable 702 444
Notes payable to shareholders 76,000 181,000
----------- -----------
Total current liabilities 2,319,784 2,166,238
Obligations under capital leases, less current
portion 69,115 16,047
----------- -----------
Total liabilities 2,388,899 2,182,285
----------- -----------
Shareholders' equity:
Common stock, $0.001 par value, 75,000
shares authorized, 4,086,400 shares issued
and outstanding 4,086 4,086
Convertible preferred stock, no par value,
5,181 shares authorized, 3,776 shares issued
and outstanding 3,776,000 3,631,000
Additional paid-in-capital 2,273,658 2,418,915
Deferred compensation (145,846) (224,800)
Accumulated deficit (4,585,943) (3,735,349)
----------- -----------
Total shareholders' equity 1,321,955 2,093,852
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,710,854 $ 4,276,137
=========== ===========
</TABLE>
Note A: The balance sheet at December 31, 1996 has been derived from the
audited financial statements at that date, but does not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CLINICOR, INC.
STATEMENT OF OPERATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- -------------------------
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Service revenue:
Gross revenue $2,850,789 $ 702,876 $5,396,891 $1,557,534
Reimbursable costs 958,609 65,618 2,082,836 322,284
---------- ---------- ---------- ----------
Net service revenue 1,892,180 637,258 3,314,055 1,235,250
---------- ---------- ---------- ----------
Operating costs and expenses:
Direct costs 1,223,686 406,141 2,185,332 812,686
Selling, general and administrative 896,156 310,766 1,724,185 549,997
Depreciation and amortization 125,109 31,333 244,359 51,072
---------- ---------- ---------- ----------
Total operating costs and expenses 2,244,951 748,240 4,153,876 1,413,755
---------- ---------- ---------- ----------
Loss from operations (352,771) (110,982) (839,821) (178,505)
Other income and expenses:
Interest income 9,371 - 20,731 -
Interest expense 13,749 11,893 31,504 18,911
---------- ---------- ---------- ----------
Other income and expenses (4,378) (11,893) (10,773) (18,911)
---------- ---------- ---------- ----------
Net loss $ (357,149) $ (122,875) $ (850,594) $ (197,416)
========== ========== ========== ==========
Net loss $ (357,149) $ (122,875) $ (850,594) $ (197,416)
Preferred stock dividends (72,628) - (145,258) -
---------- ---------- ---------- ----------
Net loss applicable to common stock $ (429,777) $ (122,875) $ (995,852) $ (197,416)
========== ========== ========== ==========
NET LOSS APPLICABLE TO COMMON
STOCK PER SHARE $ (0.11) $ (0.03) $ (0.24) $ (0.05)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES EQUIVALENT OUTSTANDING 4,086,400 4,075,851 4,086,400 4,020,967
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CLINICOR, INC.
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1997 1996
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (850,594) $(197,416)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 244,359 51,072
Noncash stock option compensation expense 78,954 -
Net changes in assets and liabilites:
Account receivable (733,316) 74,053
Prepaid expenses and other assets 80,444 (1,195)
Accounts payable and accrued liabilities 1,054,325 (108,273)
Deferred revenue 32,928 (10,000)
---------- ---------
Net cash used in operating activities (92,900) (191,759)
---------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment (270,525) (128,935)
---------- ---------
FINANCING ACTIVITIES:
Payments on capital leases (9,901) (9,420)
Net proceeds from issuing common stock - 224,810
Payments on shareholder (105,000) -
Proceeds from certificate of deposit 1,000,000 -
Net repayment of line of credit (850,000) -
---------- ---------
Net cash provided by financing activities 35,099 215,390
---------- ---------
Net decrease in unrestricted cash
and cash equivalents (328,326) (105,304)
Unrestricted cash and cash
equivalents at beginning of year 474,134 267,281
---------- ---------
Unrestricted cash and cash
equivalents at end of year $ 145,808 $ 161,977
========== =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 37,710 $ 11,671
========== =========
Non-cash financing activities:
Preferred stock dividends $ 145,000 $ -
========== =========
Capital lease obligations $ 84,005 $ -
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CLINICOR, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instruction to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three- and six-month periods ended June 30, 1997 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on
Form 10-KSB filed on April 15, 1997 for the fiscal year ended December 31, 1996
(Commission File No. 0-21721).
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain amounts related to the prior year have been classified to conform to the
current year presentation.
NOTE 2 - NET INCOME (LOSS) PER SHARE
- ------------------------------------
Net loss applicable to common stock per share has been calculated by dividing
the Company's net loss applicable to common stock by the weighted average number
of shares of the Company's outstanding common stock. Common stock equivalent
shares are not included in the per share calculations where the effect of their
inclusion would be antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share" ("FAS 128") establishing a new methodology for
calculating earnings per share. FAS 128 must be adopted as of December 31, 1997,
and earlier adoption is not permitted. Had net income (loss) applicable to
common stock per share been determined under this new standard, there would have
been no change from amounts reported for the three- and six-month periods ended
June 30, 1997 and 1996.
NOTE 3 - SUBSEQUENT EVENT
- ------------------------
On July 1, 1997, the Company closed a $1,000,000 term loan with Oracle Partners,
L.P., which netted approximately $900,000 after related closing costs. The loan
has a term of six months and an interest rate of 10%. The Company issued a
warrant to purchase 200,000 shares of common stock in conjunction with obtaining
this financing. The terms of the loan require that it be repaid at an earlier
date if the Company completes a private placement of equity securities.
The Company entered into discussions with an institutional investor to sell, in
a private placement transaction, equity securities. The terms of this
transaction are yet to be fully negotiated. There can be no assurance that the
Company will be able to complete such a transaction under acceptable terms.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The information set forth and discussed below for the three and six months
ended June 30, 1997, are derived from the Condensed Financial Statements
included elsewhere herein. The financial information set forth and discussed
below is unaudited but, in the opinion of management, reflects all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
such information. The Company's results of operations for a particular quarter
may not be indicative of results expected during other quarters or for the
entire year.
OVERVIEW
The Company is a contract research organization ("CRO") providing Phase I
through Phase IV clinical trials management, patient recruiting, monitoring,
regulatory consulting, biostatistical and data management services for the
pharmaceutical, biotechnology and medical device industries ("sponsors"). The
Company commenced operations in September 1992 and has achieved its growth
through internal development.
The Company's contracts for services generally vary from a few months to
over one year in duration. A portion of the contract fee is typically required
to be paid when the contract is initiated, with the balance payable in
installments over the contract's duration. The installment payments are either
performance-based, relating payment to previously negotiated events such as
patient enrollment, patient completion or delivery of databases, or periodic,
based on personnel fees and actual expenses, typically billed on a monthly
basis.
In accordance with the terms of the Company's contracts, sponsors may
terminate or delay the performance of a contract, potentially causing the
Company to experience periods of excess capacity and reductions in service
revenue and net income. Trials may be terminated or delayed for a variety of
reasons, including unexpected or undesired results, production problems
resulting in shortages of the product or delays in supplying the product,
adverse patient reaction to the product, or the sponsor's decision to de-
emphasize a particular trial. If a trial is terminated, the contract generally
provides for a short continuation or wind-down period, as the Company manages
required investigator obligations through the termination date. Therefore, the
Company is typically entitled to all amounts owed for work performed through the
notice of termination and all costs associated with termination of the study.
In addition, contracts may require the payment of a separate early termination
fee, the amount of which usually declines as the trial progresses.
7
<PAGE>
Revenue from contracts is recognized as work is performed. Some contracts
contain a fixed price per patient plus either fixed or variable fees for
additional service components such as monitoring, project management,
advertising, travel, data management, consulting and report writing. Other
contracts are time and materials based. Payments received on contracts in
excess of amounts earned are recorded as deferred revenue.
The Company's gross revenue backlog consists of anticipated service revenue
from clinical trials and other services that have not been completed and that
generally specify completion dates within 24 months. To qualify as "backlog"
anticipated projects must be represented by contracts or letter agreements or
must be projects for which the Company has commenced a significant level of
effort based upon sponsor commitment and approval of a written budget. Once
work commences, service revenue is recognized over the life of the contract. At
June 30, 1997, the Company's gross revenue backlog was approximately $18.4
million, as compared with approximately $16.5 million at December 31, 1996. The
Company believes that its backlog at any given date is not necessarily a
meaningful predictor of future results, and no assurances can be given that the
Company will fully realize all of its backlog as service revenue.
Reimbursable costs can include patient and investigator stipends,
Institutional Review Board fees, laboratory and medical supplies, patient
recruitment advertising, travel and consulting fees. Reimbursable costs that
are paid to the Company directly by the client, and for which the Company does
not bear the risk of economic loss, are deducted from gross service revenue in
accordance with standard CRO industry practice.
Direct costs include project personnel costs and related overhead costs
such as rent, supplies, postage, express delivery and telecommunications as well
as study-related costs not reimbursed by clients. Selling, general and
administrative expenses consist primarily of compensation and benefits of
marketing and administrative personnel, professional services, facility costs,
and other overhead items.
8
<PAGE>
RESULTS OF OPERATIONS
Three months ended June 30, 1997 compared with three months ended June 30, 1996
- --------------------------------------------------------------------------------
The following table sets forth, for the periods indicated, certain items
included in the Company's unaudited statement of operations for the three months
ended June 30, 1997 and 1996, and the percentage of net service revenue for each
item. Any results or trends illustrated in the following table may not be
indicative of future results or trends.
<TABLE>
<CAPTION>
For the quarter ended June 30,
------------------------------
1997 1996
---- ----
<S> <C> <C> <C> <C>
Service revenues $ 2,850,789 $702,876
Reimbursable costs 958,609 65,618
----------- --------
Net service revenue 1,892,180 100.0% 637,258 100.0%
Operating costs and expenses:
Direct costs 1,223,686 64.7% 406,141 63.7%
Selling, general and administrative 896,156 47.4% 310,766 48.8%
Depreciation and amortization 125,109 6.6% 31,333 4.9%
----------- --------
Total operating costs and expenses 2,244,951 118.7% 748,240 117.4%
----------- --------
Loss from operations (352,771) -18.6% (110,982) -17.4%
Net interest income (expense) (4,378) - .2% (11,893) -1.9%
----------- --------
Net loss $( 357,149) -18.8% $(122,875) -19.3%
========== =========
</TABLE>
Net service revenues increased approximately $1,255,000, or 197%. The
increase is primarily attributable to an increase in the volume and size of
clinical trials and, to a lesser extent, an increase in data management and
consulting engagements.
Reimbursable costs increased to approximately 34% of gross revenue for the
three months ended June 30, 1997 as compared to 9% of gross revenue for the
same period in 1996. This increase is a direct result of the contract mix for
which revenue was recognized during the respective periods. Revenue during the
second quarter of 1997 contained a higher amount of reimbursable costs as
compared to revenue during the second quarter of 1996. Part of this increase in
the reimbursable cost component resulted from a higher ratio of time and
materials based contracts.
Direct costs increased approximately $817,000, or 201%. The increase in
direct costs is primarily attributable to the increase in project personnel
costs resulting from additional full-time study, patient and data management
staff and the related associated overhead. As a percentage of net service
revenues, direct costs remained constant at approximately 64%.
9
<PAGE>
Selling, general and administrative expenses increased approximately
$585,000 or 188%, primarily due to increased personnel costs resulting from the
additional accounting, information technology, marketing and administrative
employees. During the three months ended June 30, 1997, a noncash charge of
approximately $40,000 for compensation expense was recorded related to certain
performance-based stock options. Professional fees increased due to costs
associated with becoming a public company and general corporate legal matters.
Office expenses, which include rent, supplies, and telecommunication costs,
increased due to the increase in personnel. Selling, general and administrative
expenses were approximately 47% of net service revenue for the three months
ended June 30, 1997, as compared to 49% for the corresponding 1996 period.
Depreciation and amortization expenses increased approximately $94,000 or
300%. This increase is primarily a result of the purchase of approximately $1.2
million in property and equipment during the past 12 months. Included in the
capital purchases were additions to the Company's computer information systems,
facility expansion costs, and office furniture and equipment related to the
Company's growing staff and its move to a new corporate office.
The Company recorded no income tax benefit as a result of the net operating
losses for the three months ended June 30, 1996 and 1997, due to the uncertainty
that the loss carryforwards will be utilized.
Six months ended June 30, 1997 compared with six months ended June 30, 1996
- ----------------------------------------------------------------------------
The following table sets forth, for the periods indicated, certain items
included in the Company's unaudited statement of operations for the six months
ended June 30, 1997 and 1996, and the percentage of net service revenue for each
item. Any results or trends illustrated in the following table may not be
indicative of future results or trends.
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
1997 1996
---- ----
<S> <C> <C> <C> <C>
Service revenues $ 5,396,891 $1,557,534
Reimbursable costs 2,082,836 322,284
----------- ----------
Net service revenue 3,314,055 100.0% 1,235,250 100.0%
Operating costs and expenses:
Direct costs 2,185,332 65.9% 812,686 65.8%
Selling, general and administrative 1,724,185 52.0% 549,997 44.5%
Depreciation and amortization 244,359 7.4% 51,072 4.1%
----------- ----------
Total operating costs and expenses 4,153,876 125.3% 1,413,755 114.4%
----------- ----------
Loss from operations (839,821) -25.3% (178,505) -14.4%
Net interest income (expense) (10,773) - .4% (18,911) -1.5%
----------- ----------
Net loss $ (850,594) -25.7% $ (197,416) -15.9%
=========== ==========
</TABLE>
10
<PAGE>
Net service revenues increased approximately $2,079,000, or 168%. The
increase is primarily attributable to an increase in the volume and size of
clinical trials and, to a lesser extent, an increase in data management and
consulting engagements.
Reimbursable costs increased to approximately 39% of gross revenue for the
six months ended June 30, 1997 as compared to approximately 21% of gross
revenue for the same period in 1996. This increase is a direct result of the
contract mix for which revenue was recognized during the respective periods.
Revenue during the first six months of 1997 contained a higher amount of
reimbursable costs as compared to revenue during the corresponding period in
1996. Part of this increase in the reimbursable cost component resulted from a
higher ratio of time and materials based contracts in 1997.
Direct costs increased approximately $1,373,000, or 169%. The increase in
direct costs is primarily attributable to the increase in project personnel
costs resulting from additional full-time study, patient and data management
staff and related associated overhead. As a percentage of net service revenues,
direct costs remained constant at approximately 66%.
Selling, general and administrative expenses increased approximately
$1,174,000 or 213%. These increased expenses primarily related to the growth in
marketing, accounting, information technology and administrative personnel and
related costs. In addition, legal expenses increased due to the costs of
becoming a public reporting company. During the six months ended June 30, 1997,
a noncash charge of approximately $80,000 for compensation expense was recorded
related to certain performance-based stock options. Office expenses, which
include rent, supplies, and telecommunication costs increased due to the
increase in personnel and the Company's move to larger corporate office
facilities. Selling, general and administrative expenses increased to 52% of
net service revenue from 45% in the prior period. This increase is primarily
attributable to the fact that the growth in personnel exceeded the growth in net
service revenue. Management expects this percentage to decrease should the
growth in net service revenues continue to increase in the future.
Depreciation and amortization expenses increased approximately $193,000 or
378%. This increase is primarily a result of the purchase of approximately $1.2
million in property, plant and equipment during the past 12 months. Included in
the capital purchases were additions to the Company's computer information
systems, facility expansion costs, and office furniture and equipment related to
the Company's growing staff and its move to a new corporate office.
The Company recorded no income tax benefit as a result of the net operating
losses for the six months ended June 30, 1997 and 1996, due to the uncertainty
that the loss carryforwards will be utilized.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow from operating activities improved to $93,000 net cash used
for the six months ended June 30, 1997, from $192,000 net cash used in the
corresponding period in 1996. The improvement was primarily attributable to the
increase in accounts payable exceeding the increase in accounts receivable by
approximately $321,000. Overall there was a decrease of approximately $328,000
in unrestricted cash during the six months ended June 30, 1997 compared to a
decrease of $105,000 in the corresponding period in 1996. The decrease is
primarily attributable to approximately $270,000 of property and equipment
purchases. Cash collections for the six months ended June 30, 1997, totaled
approximately $4,697,000 as compared with $1,622,000 for the corresponding
period in 1996. During the six months ended June 30, 1997, purchases of
property and equipment increased by approximately $226,000 from the same period
in 1996. This increase was primarily related to the additional personnel hired
to support the increase in clinical trials and data management engagements.
Typically, cash flows from contracts include a payment at the time a
contract commences and the balance in installments over the contract's duration,
in some cases on a milestone completion basis. Consequently, cash receipts do
not necessarily correspond to costs incurred and revenue recognized on
contracts. The Company's cash flow is influenced by changes in levels of
accounts receivable. Accounts receivable increased to approximately $2,223,000
at June 30, 1997 from approximately $1,490,000 at December 31, 1996. The
increase of approximately $733,000 is a result of the growth in revenues and the
timing of payments by sponsors.
Since its inception, the Company has financed its operations and growth
with proceeds from private placements of equity securities, advances from
shareholders and borrowing arrangements under capital lease obligations and
lines of credit. Investing activities have consisted of capital expenditures,
primarily for leasehold improvements, information systems, furniture and office
equipment.
The Company has completed three private placements of equity securities in
the past two years, which raised approximately $5,684,000 in gross proceeds and
approximately $5,200,000 in net proceeds. The Company desires to complete a
private placement in 1997. The Company is in discussions with investment
bankers and other interested parties regarding such a transaction. In July
1997, the Company began discussions with an institutional investor regarding
the investor's purchase of equity securities in a private placement transaction.
The parties have agreed in principle as to certain terms of the proposed
transaction, but other terms have yet to be negotiated. There can be no
assurance that the Company will be able to complete a private placement under
acceptable terms.
In September 1996, the Company obtained a $1,000,000 secured line of credit
with an independent financial institution of which $1,000,000 was outstanding as
of March 31, 1997. The line of credit was secured by a $1,000,000 certificate
of deposit. This line was repaid in May 1997 with the proceeds from the
certificate of deposit which secured it.
12
<PAGE>
On July 1, 1997, the Company entered into a six month term loan agreement
with Oracle Partners, L.P. Oracle is the Company's current preferred
stockholder. The term loan is secured by all the assets of the Company and was
put into place to supplement the Company's working capital while the Company
pursued its efforts to complete a private placement of equity securities and a
permanent working capital line of credit.
Based on expected increases in the Company's revenues, receivables and
backlog, the Company will require additional working capital to finance its
business. The Company's principal cash needs on both a short-term and long-term
basis are for the funding of its operations and capital expenditure
requirements. Although accounts receivables have increased, the Company has
limited cash reserves. As a result, the Company is funding its operations with
cash generated from operations, from the increase in accounts payable, from
shareholder and officer loans and from capital lease transactions. To fund its
growing business, the Company requires additional working capital which can be
comprised of a line of credit and/or additional equity capital. The Company is
in discussions with several financial institutions in an effort to obtain such
funding. However, there can be no assurance that the Company will be able to
obtain this funding under acceptable terms.
Management believes that the proceeds from the Oracle term loan and from
the proposed private placement, if obtained, will be sufficient to fund current
operations and the expected continued growth of the backlog. Without additional
funding, the Company will have to rely on internally generated working capital,
which consists primarily of accounts receivable collections and customer advance
contract payments, in order to fund its operations. In addition, either the
private placement or a permanent working capital line of credit will have to be
completed by December 31, 1997, in order for the Company to repay the loan when
due. The term loan can be extended at the lender's option for an additional
three months.
INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
Certain statements made in this Form 10-QSB, in other SEC filings or
written materials, or orally by the Company or its representatives may
constitute "forward-looking" statements within the meaning of the federal
securities laws. The Company notes that a variety of factors could cause the
Company's actual results and experience to differ materially from the
anticipated results expressed in the Company's forward-looking statements. The
risks and uncertainties that may affect the operations, performance, development
and results of the Company's business include the factors discussed on pages 11
through 14 of Management's Discussion and Analysis or Plan of Operation set
forth in the Company's Annual Report on Form 10-KSB for the year ended December
31, 1996.
13
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
In connection with the loan to the Company from Oracle Partners, L.P.
("Oracle") more fully described under Item 5 below, the Company issued to Oracle
a warrant to purchase 200,000 shares of the Company's Common Stock at an
exercise price of $5.50 per share. The warrant is subject to anti-dilution
protection and to other adjustments to the exercise price in certain events.
The warrant was issued in reliance upon exemption pursuant to Section 4(2)
of the Securities Act of 1933, as amended. The investment fund to which the
warrant was issued is an institutional accredited investor. Extensive due
diligence was conducted in connection with the loan transaction of which the
warrant issuance was a part. The warrant is not transferrable except upon
compliance with all applicable securities laws.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Shareholders of the Company was held on May 13,
1997. At the meeting, the holders of the Company's Common Stock and Preferred
Stock elected five directors of the Company. The holders of Common Stock
elected Messrs. Thomas P. O'Donnell, Arthur P. Haag and Robert S. Sammis as
directors, and the holders of Preferred Stock elected Dr. Zola P. Horovitz and
Dr. Stuart T. Weisbrod as directors.
As to the election of the directors by the holders of the Company's Common
Stock, there were 3,428,353 votes for the election of Messrs. Thomas P.
O'Donnell, Arthur P. Haag and Robert S. Sammis as directors, no votes against
any of these nominees and no abstentions or broker non-votes. As to the
election of the directors by the holders of the Company's Preferred Stock, there
were 2,420,666 votes for the election of Dr. Zola P. Horovitz and Dr. Stuart T.
Weisbrod as directors, no votes against either nominee and no abstentions or
broker non-votes.
The only other matter voted on at the meeting was the ratification of the
appointment of Price Waterhouse, L.L.P., independent accountants, as auditors
for the fiscal year ending December 31, 1997. As to this ratification, there
were 5,849,019 votes by the holders of the Common and Preferred Stock for the
ratification, no votes against the ratification and no abstentions or broker
non-votes.
On June 9, 1997, the holders of Preferred Stock acted by a unanimous written
consent to approve the expansion of the Board from five to seven members and to
elect Mr. Joseph L. Dowling to serve as a director of the Company.
ITEM 5. OTHER INFORMATION
Subsequent to the Annual Meeting of Shareholders, on May 13, 1997, the Board
of Directors of the Company voted, contingent upon the approval of the holders
of Preferred Stock, to increase the number of members of the Board of Directors
from five to seven members and to elect Mr. James W. Clark, Jr. as a director of
the Company. As described in Item 4 above, on June 9, 1997, the holders of
Preferred Stock approved the expansion of the Board and elected Mr. Joseph L.
Dowling to occupy the other newly-created Board seat.
On June 24, 1997, Mr. Robert S. Sammis was elected to serve as President of
the Company. Mr. Thomas P. O'Donnell relinquished the title of President and
will continue as Chairman of the Board and Chief Executive Officer of the
Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS.
3(a) Amendments to the Amended and Restated By-Laws of the registrant
adopted by the Board of Directors on June 24, 1997
4(a) Warrant to purchase shares of the registrant's common stock issued to
Oracle Partners, L.P. on July 1, 1997
4(b) Registration Rights Agreement dated as of July 1, 1997 between the
registrant and Oracle Partners, L.P.
14
<PAGE>
10(a) Stock Option Agreement dated May 12, 1997 between the registrant and
James W. Clark, Jr.
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K. During the quarter ended June 30, 1997, the Company
filed the following Current Report on Form 8-K with the Securities and
Exchange Commission. No financial statements were filed with this report.
Date of Event Date of Filing Item Reported and Description
------------- -------------- -----------------------------
May 13, 1997 May 16, 1997 Item 5--press release reporting election of
Board of Directors, preview of first
quarter results and election of Chief
Financial Officer
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CLINICOR, INC.
Date August 13, 1997 By /s/ THOMAS P. O'DONNELL
--------------------- ----------------------------------------------
Thomas P. O'Donnell
Chairman of the Board and Chief Executive
Officer
Date August 13, 1997 By /s/ JAMES W. CLARK, JR.
--------------------- ----------------------------------------------
James W. Clark, Jr.
Vice President and Chief Financial Officer
(Principal Financial Officer)
16
<PAGE>
EXHIBIT 3(a)
Amendments to Amended and Restated By-Laws of Clinicor, Inc. adopted by the
- ---------------------------------------------------------------------------
Board of Directors on June 24, 1997:
- -----------------------------------
RESOLVED, that Sections 3.01, 3.02, 3.03 and 3.04 of the Amended and
Restated By-Laws of the Corporation shall be, and hereby are, amended to read in
their entirety as follows:
Section 3.01 Election. The Board of Directors, at its first meeting
--------
following the annual meeting of shareholders, shall elect a chairman of the
board, president, a secretary and a treasurer to hold office for one (1)
year next coming and until their successors are elected and qualify. Any
person may hold two or more offices. The Board of Directors may, from time
to time, by resolution, appoint one or more vice presidents, assistant
secretaries, assistant treasurers, transfer agents and other officers and
agents of the corporation as it may deem advisable and may prescribe their
duties and fix their compensation.
Section 3.02 Removal; Resignation; Vacancies. Any officer or agent
-------------------------------
elected or appointed by the Board of Directors may be removed by it
whenever, in its judgment, the best interest of the corporation would be
served thereby. Any officer may resign at any time upon written notice to
the corporation without prejudice to the rights, if any, of the corporation
under any contract to which the resigning officer is a party. Any vacancy
in any office because of death, resignation, removal, or otherwise may be
filled by the Board of Directors for the unexpired portion of the term of
such office.
Section 3.03 Chairman of the Board. The chairman of the board shall
---------------------
be the chief executive officer of the corporation and shall have full power
to direct the affairs of the corporation, subject to the supervision and
control of the Board of Directors. The chairman of the board shall preside
at all meetings of the Board of Directors and of the shareholders. The
chairman of the board shall have such other powers and duties as may from
time to time be prescribed by the Board of Directors.
Section 3.04 President. The president shall be the general manager
---------
and chief operating officer of the corporation, subject to the supervision
and control of the chairman of the board (to whom he shall report) and the
Board of Directors, and shall be responsible for managing the day-to-day
affairs of the corporation and implementing the directives of the chairman
of the board and the Board of Directors. The president shall have
<PAGE>
full power to execute all resolutions and orders of the Board of Directors
not especially entrusted to some other officer of the corporation. The
president shall be authorized to sign the certificates of stock issued by
the corporation and shall perform such other duties as may be dictated by
statute or prescribed by the chairman of the board or the Board of
Directors.
The president shall be vested with all the powers and perform all the
duties of the chairman of the board whenever the chairman of the board is
absent or unable to act.
RESOLVED, that Section 8.01 of the By-Laws be amended to add a proviso
thereto, so that the entire Section, as amended, shall read as follows:
Section 8.01 Amendment. Amendments, changes and additions to these
---------
By-Laws may be made at any regular or special meeting of the Board of
Directors by a vote of not less than a majority of the entire Board;
provided, however, if any Section of these By-Laws expressly provides that
an amendment or change thereof requires the vote of more than a majority of
the entire Board, such Section may not be amended or changed absent the
vote specified.
RESOLVED, that there shall be added to the By-Laws a new Section 8.03,
which shall read in its entirety as follows:
Section 8.03 Statute Not Applicable. Sections 78.378 through
----------------------
78.3793, inclusive, of the Nevada Revised Statutes shall not apply to the
corporation. This Section 8.03 may be amended only by a unanimous vote of
the entire Board.
2
<PAGE>
EXHIBIT 4(a)
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.
No. of Shares of Common Stock: 200,000 Warrant No. 1
WARRANT
To Purchase 200,000 Common Stock of
CLINICOR, INC.
THIS IS TO CERTIFY THAT ORACLE PARTNERS, L.P., or registered assigns,
is entitled, at any time prior to the Expiration Date (as hereinafter defined),
to purchase from Clinicor, Inc., a Nevada corporation (the "Company"), 200,000
shares of Common Stock (as hereinafter defined and subject to adjustment as
provided herein), in whole or in part, including fractional parts, at a purchase
price of $5.50 per share, all on the terms and conditions and pursuant to the
provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" means any shares of Common Stock
issued by the Company after the Closing Date other than Warrant Stock.
"Appraised Value" means, in respect of any share of Common Stock on
any date herein specified, the fair saleable value of such share of Common Stock
(determined without giving effect to the discount for (i) a minority interest or
(ii) any lack of liquidity of the Common Stock or to the fact that the Company
may have no class of equity registered under the Exchange Act) as of the last
day of the most recent fiscal month end prior to such date specified, based on
the value of the Company, as determined by an investment banking firm selected
in accordance with the terms of Section 15, divided by the number of Fully
Diluted Outstanding shares of Common Stock.
"Book Value" means, in respect of any share of Common Stock on any
date herein specified, the consolidated book value of the Company as of the last
day of any month immediately preceding such date, divided by the number of Fully
Diluted Outstanding shares of Common Stock as determined in accordance with GAAP
by or any other firm of independent certified public accountants of recognized
national standing selected by the Company and reasonably acceptable to Holder.
<PAGE>
"Business Day" means any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of New York.
"Closing Date" means July 1, 1997.
"Commission" means the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" means (except where the context otherwise indicates)
the Common Stock, $0.001 par value, of the Company as constituted on the Closing
Date, and any capital stock into which such Common Stock may thereafter be
changed, and shall also include (i) capital stock of the Company of any other
class (regardless of how denominated) issued to the Holders of shares of Common
Stock upon any reclassification thereof which is also not preferred as to
dividends or assets on liquidation over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the Holders of
Common Stock of the Company in the circumstances contemplated by Section 4.8.
"Convertible Securities" means evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Current Market Price" means, in respect of any share of Common Stock
on any date herein specified, if there shall not then be a public market for the
Common Stock, the higher of (a) the Book Value per share of Common Stock at such
date, and (b) the Appraised Value per share of Common Stock at such date, or if
there shall then be a public market for the Common Stock, the higher of (x) the
Book Value per share of Common Stock at such date, and (y) the average of the
daily market prices for 30 consecutive Business Days commencing 45 days before
such date. The daily market price for each such Business Day shall be (i) the
last sale price on such day on the principal stock exchange on which such Common
Stock is then listed or admitted to trading, (ii) if no sale takes place on such
day on any such exchange, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange, (iii) if the
common Stock is not then listed or admitted to trading on any stock exchange,
the average of the last reported closing bid and asked prices on such day in the
over-the-counter market, as furnished by the National Association of Securities
Dealers Automatic Quotation System or the National Quotation Bureau, Inc., (iv)
if neither such corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in such business, or
(v) if there is no such firm, as furnished by any member of the NASD selected
mutually by Holder and the Company or, if they cannot agree upon such selection,
as selected by two such members of the NASD, one of which shall be selected by
Holder and one of which shall be selected by the Company.
2
<PAGE>
"Current Warrant Price" means, in respect of a share of Common Stock
at any date herein specified, the price at which a share of Common Stock may be
purchased pursuant to this Warrant on such date. Until the Current Warrant
Price is adjusted pursuant to the terms herein, the initial Current Warrant
Price shall be $5.50 per share.
"Deferral Notice" has the meaning specified in Section 14.1(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Exercise Period" means the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" means the fifth anniversary of the Closing Date or
such later date to which the Expiration Date has been extended pursuant to the
terms hereof.
"Fully Diluted Outstanding" means, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all shares of Common Stock Outstanding at such date and all shares of Common
Stock issuable in respect of the Warrants and other options or warrants to
purchase, or securities convertible into, shares of Common Stock outstanding on
such date which would be deemed outstanding in accordance with GAAP for purposes
of determining book value or net income per share.
"GAAP" means generally accepted accounting principles in the United
States of America as from time to time in effect.
"Holder" means the Person in whose name the Warrant set forth herein
is registered on the books of the Company maintained for such purpose.
"NASD" means the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"Other Property" has the meaning set forth in Section 4.8.
"Outstanding" means, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any subsidiary thereof, and shall include all shares issuable
in respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, incorporated organization, association, corporation,
institution, public benefit
3
<PAGE>
corporation, entity or government (whether federal, state, county, city,
municipal or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
"Repurchase Price" has the meaning specified in Section 14.2.
"Restricted Common Stock" means shares of Common Stock which are, or
which upon their issuance on the exercise of any Warrant would be, evidenced by
a certificate bearing the restrictive legend set forth in Section 3.2.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Transfer" means any disposition of any Warrant or Warrant Stock or of
any interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Transfer Notice" has the meaning specified in Section 3.3.
"Warrants" means this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, any thereof. All Warrants
shall at all times be identical as to terms and conditions and date, except as
to the number of shares of Common Stock for which they may be exercised.
"Warrant Price" means an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of this Warrant pursuant to Section
2.1, multiplied by (ii) the Current Warrant Price.
"Warrant Stock" means the shares of Common Stock purchased by the
Holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. From and after the Closing Date and until
------------------
5:00 P.M., New York time, on the Expiration Date, Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office or at the office or agency
designated by the Company pursuant to Section 12, (i) a written notice of
Holder's election to exercise this Warrant, which notice shall specify the
number of shares of Common Stock to be purchased,
4
<PAGE>
(ii) payment of the Warrant Price certified or official bank check, and (iii)
this Warrant. Such notice shall be substantially in the form of the subscription
form appearing at the end of this Warrant as Exhibit A, duly executed by Holder
or its agent or attorney. Upon receipt thereof, the Company shall, as promptly
as practicable, and in any event within five (5) Business Days thereafter,
execute or cause to be executed and deliver or cause to be delivered to Holder a
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise, together with cash in lieu of any
fraction of a share, as hereinafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as Holder shall request in the notice and shall be registered
in the name of Holder or, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated to be named therein shall be deemed to have become a Holder of
record of such shares for all purposes, as of the date the notice, together with
the cash or check, this Warrant, is received by the Company as described above
and all taxes required to be paid by Holder if any, pursuant to Section 2.2
prior to the issuance of such shares have been paid. If this Warrant shall have
been exercised in part, the Company shall, at the time of delivery of the
certificate or certificates representing Warrant Stock, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant, or at the request of Holder,
appropriate notation may be made on his Warrant and the same returned to Holder.
2.2. Payment of Taxes. All shares of Common Stock issuable upon the
----------------
exercise of this Warrant pursuant to the terms hereof shall be validly issued
and, upon payment of the Warrant Price, fully paid and nonassessable and without
any preemptive rights. The Company shall pay all expenses in connection with,
and all transfer, stamp or similar taxes and other governmental charges that may
be imposed with respect to, the issue or delivery thereof. The Company shall not
be required, however, to pay any or other charge imposed in connection with any
transfer involved in the issue of any certificate for shares of Common Stock
issuable upon exercise of this Warrant in any name other than that of Holder,
and in such case the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it has been
established to the satisfaction of the Company that no such tax or other charge
is due.
2.3. Fractional Shares. The Company shall not be required to issue a
-----------------
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which Holder of one or more Warrants, the rights under which
are exercised in the same transaction, would otherwise be entitled to purchase
upon such exercise, the Company shall pay a cash adjustment in respect of such
final fraction in an amount equal to the Current Market Price per share of
Common Stock on the date of exercise, unless a different cash payment is
required to be made pursuant to Section 78.205 of the Nevada Revised Statutes.
5
<PAGE>
2.4. Continued Validity. A Holder of shares of Common Stock issued
------------------
upon the exercise of this Warrant, in whole or in part (other than a Holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 10 and 13
of this Warrant. The Company will, at the time of each exercise of this Warrant,
in whole or in part, upon the request of the Holder of the shares of Common
Stock issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such Holder, its continuing obligation to afford to
such Holder all such rights; provided, however, that if such Holder shall fail
--------
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such Holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. The Warrants and the Warrant Stock shall be freely
--------
transferable, subject to compliance with all applicable laws, including, but not
limited to the Securities Act. Transfer of this Warrant and all rights
hereunder, in whole or in part, shall be registered on the books of the Company
to be maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company referred to in Section 2.1 or the office or
agency designated by the Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder or its agent or attorney and if such transfer is not to be
made pursuant to Section 14, funds sufficient to pay any transfer taxes payable
upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall, execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. Notwithstanding anything herein to the contrary, this
Warrant may not be transferred or assigned in whole or in part without
compliance with applicable federal and state securities laws. A Warrant may be
exercised by a new Holder for the purchase of shares of Common Stock without
having a new Warrant issued.
3.2. Restrictive Legend. Unless such stock has been registered as
------------------
otherwise provided in the Registration Rights Agreement, each certificate for
Warrant Stock initially issued upon the exercise of this Warrant, and each
certificate for Warrant Stock issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD, ASSIGNED OR OTHERWISE
6
<PAGE>
TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR IN A TRANSACTION EXEMPT
THEREFROM.
3.3. Notice of Proposed Transfers: Requests for Registration. Prior
-------------------------------------------------------
to any Transfer or attempted Transfer of any Warrant or any Restricted Common
Stock, the Holder of such Warrant or Restricted Common Stock shall give 10 days'
prior written notice (a "Transfer Notice") to the Company of such Holder's
intention to effect such Transfer, describing the manner and circumstances of
the proposed Transfer. Thereafter, upon surrender of such Warrant or such
Restricted Common Stock for exchange, properly endorsed on the Assignment Form
attached hereto as Exhibit B and subject to the provisions hereof with respect
to compliance with the Securities Act, the Holder shall thereupon be entitled to
Transfer such Warrant or Restricted Common Stock, in accordance with the terms
of the Transfer Notice. Each certificate, if any, evidencing such shares of
Restricted Common Stock issued upon such Transfer shall bear the restrictive
legend set forth in Section 3.2. The Holder of the Warrant giving the Transfer
Notice shall not be entitled to transfer such Warrant until receipt of notice
from the Company under this Section 3.3.
3.4. Division and Combination. This Warrant may be divided or
------------------------
combined with other Warrants upon presentation hereof at the aforesaid office or
agency of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by Holder or its
agent or attorney. Subject to compliance with Section 3.1, as to any transfer
which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
3.5. Expenses. The Company shall prepare, issue and deliver at its
--------
own expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.6. Maintenance of Books. The Company agrees to maintain, at its
--------------------
aforesaid office or agency, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, and the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 in accordance with
Sections 5.1 and 5.2.
4.1. Stock Dividends. Subdivisions and Combinations. If at any time
----------------------------------------------
the Company shall:
7
<PAGE>
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution
of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares of
Common Stock for which this Warrant is exercisable immediately after such
adjustment.
4.2. Certain Other Distributions. If at any time the Company shall
---------------------------
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(a) cash (other than a cash dividend payable out of earnings or
earned surplus legally available for the payment of dividends under the
laws of the jurisdiction of incorporation of the Company),
(b) any evidences of its indebtedness, any shares of stock of any
class or any other securities or property of any nature whatsoever (other
than cash, Convertible Securities or Additional Shares of Common Stock), or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any
other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock),
then (i) the number of shares of Common Stock for which this
Warrant is exercisable shall be adjusted to equal the product of the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such adjustment by a fraction (A) the numerator
of which shall be the Current Market Price per share of Common Stock
at the date of taking such record and (B) the denominator of which
shall be such Current Market Price per share of
8
<PAGE>
Common Stock minus the amount allocable to one share of Common Stock
of any such cash so distributable and of the fair value (as determined
in good faith by the Board of Directors of the Company and supported
by an opinion from an investment banking firm of recognized national
standing acceptable to Holder) of any and all such evidences of
indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights so distributable,
and (ii) the Current Warrant Price shall be adjusted to equal (A) the
Current Warrant Price multiplied by the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (B) the number of shares of Common Stock for
which this Warrant is exercisable immediately after such adjustment. A
reclassification of the Common Stock (other than a change in par
value, or from par value to no par value or from no par value to par
value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of
its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of
Common Stock shall be changed into a larger or smaller number of
shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of
the outstanding shares of Common Stock within the meaning of Section
4.1.
4.3. Issuance of Additional Shares of Common Stock.
---------------------------------------------
(a) If at any time the Company shall issue or sell any Additional
Shares of Common Stock in exchange for consideration in an amount per
Additional Share of Common Stock less than the Current Warrant Price at the
time the Additional Shares of Common Stock are issued or sold then (i) the
Current Warrant Price as to the number of shares for which this Warrant is
exercisable prior to such adjustment shall be reduced to a price determined
by dividing (A) an amount equal to the sum of (x) the number of shares of
Common Stock Outstanding immediately prior to such issue or sale multiplied
by the then existing Current Warrant Price, plus (y) the consideration, if
any, received by the Company upon such issue or sale, by (B) the total
number of shares of Common Stock Outstanding immediately after such issue
or sale; and (ii) the number of shares of Common Stock for which this
Warrant is exercisable shall be adjusted to equal the product obtained by
multiplying the Current Warrant Price in effect immediately prior to such
issue or sale by the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such issue or sale and dividing
the product thereof by the Current Warrant Price resulting from the
adjustment made pursuant to clause (i).
(b) If at any time the Company shall at any time issue or sell any
Additional Shares of Common Stock in exchange for consideration in an
amount per
9
<PAGE>
Additional Share of Common Stock less than the Current Market Price at the
time the Additional Shares of Common Stock are issued or sold, then (i) the
number of shares of Common Stock for which this Warrant is exercisable
shall be adjusted to equal the product obtained by multiplying the number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to such issue or sale by a fraction (A) the numerator of which shall
be the number of shares of Common Stock Outstanding immediately after such
issue or sale, and (B) the denominator of which shall be the number of
shares of Common Stock Outstanding immediately prior to such issue or sale
plus the number of shares which the aggregate offering price of the total
number of such Additional Shares of Common Stock would purchase at the then
Current Market Price; and (ii) the Current Warrant Price as to the number
of shares for which this Warrant is exercisable prior to such adjustment
shall be adjusted by multiplying such Current Warrant Price by a fraction
(X) the numerator of which shall be the number of shares for which this
Warrant is exercisable immediately prior to such issue or sale; and (Y) the
denominator of which shall be the number of shares of Common Stock
purchasable immediately after such issue or sale.
(c) If at any time the Company shall issue or sell any Additional
Shares of Common Stock in exchange for consideration in an amount per
Additional Shares of Common Stock which is less than the Current Warrant
Price and Current Market Price at the time the Additional Shares of Common
Stock are issued or sold, the adjustment required under Section 4.3 shall
be made in accordance with the formula in paragraph (a) or (b) above which
results in the lower Current Warrant Price following such adjustment. The
provisions of paragraphs (a) and (b) of Section 4.3 shall not apply to any
issuance of Additional Shares of Common Stock for which an adjustment is
provided under Section 4.1 or 4.2. No adjustment of the number of shares of
Common Stock for which this Warrant shall be exercisable shall be made
under paragraph (a) or (b) of Section 4.3 upon the issuance of any
Additional Shares of Common Stock which are issued pursuant to the exercise
of any warrants or other subscription or purchase rights or pursuant to the
exercise of any conversion or exchange rights in any Convertible
Securities, if any such adjustment shall previously have been made upon the
issuance of such warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 4.4 or Section 4.5.
4.4. Issuance of Warrants or Other Rights. If at any time the Company
------------------------------------
shall take a record of the Holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any Additional Shares of Common Stock or any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such warrants or other rights or upon conversion or exchange of such
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Convertible Securities shall be less than the Current Warrant Price or the
Current Market Price in effect immediately prior to the time of such issue or
sale, then the number of shares for which this Warrant is exercisable and the
Current Warrant Price shall be adjusted as provided in Section 4.3 on the basis
that the maximum number of Additional Shares of Common Stock issuable pursuant
to all such warrants or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
and outstanding and the Company shall have received all of the consideration
payable therefor, if any, as of the date of the actual issuance of such warrants
or other rights. No further adjustments of the Current Warrant Price shall be
made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such warrants or other rights or upon the actual
issue of such Common Stock upon such conversion or exchange of such Convertible
Securities.
4.5. Issuance of Convertible Securities. If at any time the Company
----------------------------------
shall take a record of the Holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price or Current Market Price in
effect immediately prior to the time of such issue or sale, then the number of
shares of Common Stock for which this Warrant is exercisable and the Current
Warrant Price shall be adjusted as provided in Section 4.3 on the basis that the
maximum number of Additional Shares of Common Stock necessary to effect the
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued and outstanding and the Company shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such Convertible Securities. No further adjustment of the number of shares of
Common Stock for which this Warrant is exercisable and the Current Warrant Price
shall be made under this Section 4.5 upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to Section 4.4. No further adjustments of the number of shares of
Common Stock for which this Warrant is exercisable and the Current Warrant Price
shall be made upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.
4.6. Superseding Adjustment. (a) If, at any time after any
----------------------
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price shall have been made pursuant to
Section 4.4 or Section 4.5 as the result of any issuance of warrants, other
rights or Convertible Securities, then (i) such warrants or other rights, or the
right of conversion or exchange in such other Convertible Securities, shall
expire, and all or a portion of such warrants or other rights, or the right of
conversion or exchange with respect to all or a portion of such other
Convertible Securities,
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<PAGE>
as the case may be shall not have been exercised, or (ii) the consideration per
share for which shares of Common Stock are issuable pursuant to such warrants or
other rights, or the terms of such other Convertible Securities, shall be
increased solely by virtue of provisions therein contained for an automatic
increase in such consideration per share upon the occurrence of a specified date
or event, then for each outstanding Warrant such previous adjustment shall be
rescinded and annulled and the Additional Shares of Common Stock which were
deemed to have been issued by virtue of the computation made in connection with
the adjustment so rescinded and annulled shall no longer be deemed to have been
issued by virtue of such computation.
(b) Upon the occurrence of an event set forth in 4.6(a) above there
shall be, a recomputation made of the effect of such warrants, other rights
or options or other Convertible Securities on the basis of: (i) treating
the number of Additional Shares of Common Stock or other property, if any,
theretofore actually issued or issuable pursuant to the previous exercise
of any such warrants or other rights or any such right of conversion or
exchange, as having been issued on the date or dates of any such exercise
and for the consideration actually received and receivable therefor, and
(ii) treating any such warrants or other rights or any such other
Convertible Securities which then remain outstanding as having been granted
or issued immediately after the time of such increase of the consideration
per share for which shares of Common Stock or other property are issuable
under such warrants or other rights or other Convertible Securities;
whereupon a new adjustment of the number of shares of Common Stock for
which this Warrant is exercisable and the Current Warrant Price shall be
made, which new adjustment shall supersede the previous adjustment so
rescinded and annulled.
4.7. Other Provisions applicable to Adjustments under this Section.
-------------------------------------------------------------
The following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price provided for in this Section 4:
(a) Computation of Consideration. To the extent that any Additional
----------------------------
Shares of Common Stock or any Convertible Securities or any warrants or
other rights to subscribe for or purchase any Additional Shares of Common
Stock or any Convertible Securities shall be issued for cash consideration,
the consideration received by the Company therefor shall be the amount of
the cash received by the Company therefor, or, if such Additional Shares of
Common Stock or Convertible Securities are offered by the Company for
subscription, the subscription price, or, if such Additional Shares of
Common Stock or Convertible Securities are sold to underwriters or dealers
for public offering without a subscription offering, the initial public
offering price (in any such case subtracting any amounts paid or receivable
for accrued interest or accrued dividends and without taking into account
any compensation, discounts or expenses paid or incurred by the Company for
and in the
12
<PAGE>
underwriting of, or otherwise in connection with, the issuance thereof). To
the extent that such issuance shall be for a consideration other than cash,
then, except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of
Directors of the Company. In case any Additional Shares of Common Stock or
any Convertible Securities or any warrants or other rights to subscribe for
or purchase such Additional Shares of Common Stock or Convertible
Securities shall be issued in connection with any merger in which the
Company issues any securities, the amount of consideration therefor shall
be deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company, of such portion of the assets and business of the
nonsurviving corporation as such Board in good faith shall determine to be
attributable to such Additional Shares of Common Stock, Convertible
Securities, warrants or other rights, as the case may be. The consideration
for any Additional Shares of Common Stock issuable pursuant to any warrants
or other rights to subscribe for or purchase the same shall be the
consideration received by the Company for issuing such warrants or other
rights plus the additional consideration payable to the Company upon
exercise of such warrants or other rights. The consideration for any
Additional Shares of Common Stock issuable pursuant to the terms of any
Convertible Securities shall be the consideration received by the Company
for issuing warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the
Company in respect of the subscription for or purchase of such Convertible
Securities, plus the additional consideration, if any, payable to the
Company upon the exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time of any
Additional Shares of Common Stock or Convertible Securities in payment or
satisfaction of any dividends upon any class of stock other than Common
Stock, the Company shall be deemed to have received for such Additional
Shares of Common Stock or Convertible Securities a consideration equal to
the amount of such dividend so paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by this
---------------------------
Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the
number of shares of Common Stock for which this Warrant is exercisable that
would otherwise be required may be postponed (except in the case of a
subdivision or combination of shares of the Common Stock, as provided for
in Section 4.1) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made
adds or subtracts less than 1% of the shares of Common Stock for which this
Warrant is exercisable immediately prior to the making of such adjustment.
Any adjustment representing a change of less than such minimum amount
(except as aforesaid) which is postponed shall be carried forward and made
as soon as such adjustment, together with other adjustments required by
this Section 4 and not previously made, would result in a minimum
adjustment or on the date of exercise.
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<PAGE>
For the purpose of any adjustment, any specified event shall be deemed to
have occurred at the close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this
--------------------
Section 4, fractional interests in Common Stock shall be taken into account
to the nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall take a record
----------------------------
of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and
shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property becomes
-----------------------
distributable pursuant to this Section 4 by reason of the taking of any
record of the holders of Common Stock, but prior to the occurrence of the
event for which such record is taken, and Holder exercises this Warrant,
any shares of Common Stock issuable upon exercise by reason of such
adjustment shall be deemed the last shares of Common Stock for which this
Warrant is exercised (notwithstanding any other provision to the contrary
herein) and such shares or other property shall be held in escrow for
Holder by the Company to be issued to Holder upon and to the extent that
the event actually takes place, upon payment of the Current Warrant Price.
Notwithstanding any other provision to the contrary herein, if the event
for which such record was taken fails to occur or is rescinded, then such
escrowed shares shall be cancelled by the Company and escrowed property
returned.
(f) Challenge to Good Faith Determination. Whenever the Board of
-------------------------------------
Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such
determination may be challenged by Holder, and any dispute shall be
resolved by an investment banking or accounting firm of recognized national
standing selected by the Holder and reasonably acceptable to the Company in
a manner customary for such evaluations and no arbitration or similar
hearings shall be conducted in connection therewith.
4.8. Reorganization, Reclassification, Merger, Consolidation or
----------------------------------------------------------
Disposition of Assets. In case the Company shall reorganize its capital,
- ---------------------
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of
14
<PAGE>
common stock of the successor or acquiring corporation, or any cash, shares of
stock or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring corporation ("Other Property"), are
to be received by or distributed to the holders of Common Stock of the Company,
then Holder shall have the right thereafter to receive, upon exercise of this
Warrant, the number of shares of common stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for adjustments of shares of the Common Stock
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.8 common stock of the successor or acquiring corporation shall
include stock of such corporation of any class which is not preferred as to
dividends or assets on liquidation over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 4.8 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4.9. Other Action Affecting Common Stock. In case at any time or from
-----------------------------------
time to time the Company shall take any action in respect of its Common Stock,
other than the payment of dividends permitted by Section 4.2(a) or any other
action described in this Section 4, then, unless such action will not have a
materially adverse effect upon the rights of Holder, the number of shares of
Common Stock or other stock for which this Warrant is exercisable and/or the
purchase price thereof shall be adjusted in such manner as may be equitable in
the circumstances.
4.10. Certain Limitations. Notwithstanding anything herein to the
-------------------
contrary, the Company agrees not to enter into any transaction which, by reason
of any adjustment hereunder, would cause the Current Warrant Price to be less
than the par value per share of Common Stock.
4.11. Excluded Transactions. Notwithstanding anything herein to the
---------------------
contrary, no adjustment pursuant to this Section 4 shall be made by reason of
the issuance of
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<PAGE>
any additional shares of Common Stock upon (i) the exercise or conversion of
currently outstanding options, warrants or sales agent warrants or preferred
stock (including the issuance and conversion of preferred stock issued as
dividends on currently outstanding preferred stock or on preferred stock so
issued as dividends) to purchase Common Stock, (ii) the issuance or exercise of
options, to purchase up to an aggregate of 2,000,000 shares of Common Stock,
granted on or after the date hereof pursuant to the company's 1995 Employee and
Consultant Stock Option Plan or any similar plan or arrangement hereafter
adopted for the benefit of the Company's employees, consultants or directors,
(iii) or in connection with the private placement by the Borrower of up to
1,500,000 shares of Common Stock or securities convertible into or exercisable
for such number of shares of Common Stock, for a purchase price of $4.00 per
share or more.
5. NOTICES TO WARRANT HOLDERS
5.1. Notice of Adjustments. Whenever the number of shares of Common
---------------------
Stock for which this Warrant is exercisable, or whenever the price at which a
share of such Common Stock may be purchased upon exercise of this Warrant, shall
be adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated (including a description of the basis on
which the Board of Directors of the Company determined the fair value of any
evidences of indebtedness, shares of stock, other securities or property or
warrants or other subscription or purchase rights referred to in Section 4.2 or
4.7(a)), specifying the number of shares of Common Stock for which this Warrant
is exercisable and (if such adjustment was made pursuant to Section 4.8 or 4.9)
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall promptly cause a signed copy of such certificate to be delivered to Holder
in accordance with Section 17.2. The Company shall keep at its office or agency
designated pursuant to Section 12 copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by Holder or any prospective purchaser of this Warrant designated by Holder.
5.2. Notice of Corporate Action. If at any time:
--------------------------
(a) the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend (other than a cash
dividend payable out of earnings or earned surplus legally available for
the payment of dividends under the laws of the jurisdiction of
incorporation of the Company) or other distribution, or any right to
subscribe for or purchase any evidences of its indebtedness, any shares of
stock of any class or any other securities or property, or to receive any
other right, or
16
<PAGE>
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or
other disposition of all or substantially all the property, assets or
business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in any one or more of such
cases, the Company shall give to Holder (i) at least 30 days' prior written
notice of the date on which a record date shall be selected for such
dividend, distribution or right or for determining rights to vote in
respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or
winding up, and (ii) in the case of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, at least 30 days' prior written
notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (i) the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall
be entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if
any such time is to be fixed, as of which the holders of Common Stock shall
be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution,
liquidation or winding up. Each such written notice shall be sufficiently
given if addressed to Holder at the last address of Holder appearing on the
books of the Company and delivered in accordance with Section 17.2.
5.3. Notice to Stockholders. The Holder shall be entitled to the same
----------------------
rights to receive notice of corporate action as any holder of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such
17
<PAGE>
increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(c) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the period this
Warrant is outstanding acknowledge in writing, in form satisfactory to Holder,
the continuing validity of this Warrant and the obligations of the Company
hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK:
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. All shares of Common
Stock which shall be so issuable, when issued upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and nonassessable, and not subject to preemptive
rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law before such shares may be
so issued, the Company will in good faith and as expeditiously as possible and
at its expense endeavor to cause such shares to be duly registered.
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<PAGE>
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the Holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such Holders, the Company will in each such
case take such a record and will take such record as of the close of business on
a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
9. REGISTRATION RIGHTS
The Holder of this Warrant shall have certain registration rights as
set forth in a Registration Rights Agreement, dated as of the date hereof,
between Oracle Partners, L.P. and the Company.
10. SUPPLYING INFORMATION
The Company shall cooperate with Holder and each Holder of Restricted
Common Stock in supplying such information as may be reasonably necessary for
such Holder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Warrant or Restricted
Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of the original Holder shall be sufficient
indemnity) and in case of mutilation upon surrender and cancellation hereof, the
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
Holder; provided, however, that in the case of mutilation, no indemnity shall be
-------- -------
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
19
<PAGE>
13. FINANCIAL AND BUSINESS INFORMATION
13.1. Quarterly Information. The Company will deliver to Holder, as
---------------------
soon as available and in any event within 45 days after the end of each of the
first three quarters of each fiscal year of the Company, one copy of an
unaudited consolidated balance sheets of the Company and its subsidiaries as at
the end of such quarter, and the related unaudited consolidated statements of
income, retained earnings and cash flow of the Company and its subsidiaries for
such quarter and, in the case of the second and third quarters, for the portion
of the fiscal year ending with such quarter, setting forth in each case in
comparative form the figures for the corresponding periods in the previous
fiscal year. Such financial statements shall be prepared by the Company in
accordance with GAAP and accompanied by the certification of the Company's chief
executive officer or chief financial officer that such financial statements
present fairly the consolidated financial position, results of operations and
cash flow of the Company and its subsidiaries as at the end of such quarter and
for such year-to-date period, as the case may be.
13.2. Annual Information. The Company will deliver to Holder as soon
------------------
as available and in any event within 90 days after the end of each fiscal year
of the Company, one copy of an audited consolidated balance sheet of the Company
and its subsidiaries as at the end of such year, and audited consolidated
statements of income, retained earnings and cash flow of the Company and its
subsidiaries for such year; setting forth in each case in comparative form the
figures for the corresponding periods in the previous fiscal year; all prepared
in accordance with GAAP, and which audited financial statements shall be
accompanied by (i) an opinion thereon of the independent certified public
accountants regularly retained by the Company, or any other firm of independent
certified public accountants of recognized national standing selected by the
Company and (ii) a report of such independent certified public accountants
confirming any adjustment made pursuant to Section 4 during such year.
13.3. Filings. The Company will file on or before the required date
-------
all regular or periodic reports (pursuant to the Exchange Act) with the
Commission and will deliver to Holder promptly upon their becoming available one
copy of each report, notice or proxy statement sent by the Company to its
stockholders generally, and of each regular or periodic report (pursuant to the
Exchange Act) and any registration statement, prospectus or written
communication (other than transmittal letters) (pursuant to the Securities Act),
filed by the Company with (i) the Commission or (ii) any securities exchange on
which shares of Common Stock are listed.
13.4. Access. At any reasonable time and at reasonable intervals,
------
the Company shall permit any holder of Warrants or Warrant Stock and any
authorized agent or representative thereof to (a) visit the properties of the
Company and any of its subsidiaries and (b) discuss the affairs, finances and
accounts of the Company and any of its subsidiaries with any of their respective
officers or directors.
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14. APPRAISAL
The determination of the Appraised Value per share of Common Stock
shall be made by an investment banking firm of nationally recognized standing
selected by the Holder and reasonably acceptable to the Company. If the
investment banking firm selected by the Holder is not acceptable to the Company
and the Company and Holder cannot agree on a mutually acceptable investment
banking firm, then Holder and the Company shall each choose one such investment
banking firm and the respective chosen shall agree on another investment banking
firm which shall make the determination. The Company shall retain, at its sole
cost, such investment banking firm as may be necessary for the determination of
Appraised Value required by the terms of this Warrant. Such determination shall
be made in a manner customary for such evaluations and no arbitration or similar
hearings shall be conducted in connection therewith.
15. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
16. MISCELLANEOUS
16.1. Nonwaiver and Expenses. No course of dealing or any delay or
----------------------
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies.
If the Company fails to make, when due, any payments provided for hereunder, or
fails to comply with any other provision of this Warrant, the Company shall pay
to Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
16.2. Notice Generally. All notices, requests, demands or other
----------------
communications provided for herein shall be in writing and shall be deemed to
have been given three days after being sent by registered or certified mail,
return receipt requested, or when personally delivered, or successfully sent by
facsimile transmission as evidenced by a fax machine confirmation report
thereof, addressed, as the case may be, to the Holder at 712 Fifth Avenue, New
York, New York 10019, Attention: Mr. Larry Feinberg, Facsimile No. (212) 688-
7847; with a copy to Kane Kessler, P.C., 1350 Avenue of the Americas, New York,
New York 10019, Attention: Robert L. Lawrence, Esq., Facsimile No. (212) 245-
3009; or to the Company at Clinicor, Inc., 1717 West Sixth Street, Suite 400,
Austin, Texas 78703 Attention: Robert Sammis, Facsimile No. (512) 477-0027; with
a copy to Graves,
21
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Dougherty, Hearon & Moody, 515 Congress Avenue, Suite 2300, Austin, Texas,
Attention: Karen Bartoletti, Esq., Facsimile No. (512) 478-1976, or to such
other person or address as either party shall designate to the other from time
to time in writing forwarded in like manner.
16.3. Indemnification. The Company agrees to indemnify and hold
---------------
harmless Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of (i) Holder's exercise
of this Warrant and/or ownership of any shares of Warrant Stock issued in
consequence thereof, or (ii) any litigation to which Holder is made a party in
its capacity as a stockholder of the Company; provided, however, that the
-------- -------
Company will not be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses or disbursements are found in a final non-
appealable judgment by a court to have resulted from Holder's gross negligence,
bad faith or willful misconduct in its capacity as a stockholder or warrant
Holder of the Company.
16.4. Successors and Assigns. Subject to compliance with the
----------------------
provisions of Section 3.1, this Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors of the Company and
the successors and assigns of Holder. The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant,
and shall be enforceable by any such Holder.
16.5. Amendment. This Warrant may be modified or amended or the
---------
provisions of this Warrant waived with the written consent of the Company and
Holder.
17.6. Severability. Wherever possible, each provision of this
------------
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be modified to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
16.7. Headings. The headings used in this Warrant are for the
--------
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
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16.8. Governing Law. This Warrant and the transactions contemplate
-------------
hereby shall be deemed to be consummated in the State of Nevada and shall be
governed by and interpreted in accordance with the local laws of the State of
Nevada without regard to the provisions thereof relating to conflict of laws.
The Company hereby irrevocably consents to the jurisdiction of the United States
District Court located in New York City, New York in connection with any action
or proceeding arising out of or relating to this Warrant. In any such
litigation the Company waives personal service of any summons, complaint or
other process and agrees that the service thereof may be made by certified or
registered mail directed to the Company at its address set forth in (S) 17.2.
Within 30 days after such mailing, the Company so served shall appear or answer
to such summons, complaint or other process. Should the Company so served fail
to appear or answer within said 30-day period, the Company shall be deemed in
default and judgment may be entered by the Holder against the Borrower for the
amount as demanded in any summons, complaint or other process so served.
IN WITNESS WHEREOF, Clinicor, Inc. has caused this Warrant to be
executed by its duly authorized officer and attested by its Secretary.
Dated: July 1, 1997
CLINICOR, INC.
By: /s/ James W. Clark, Jr.
------------------------------------
Name: James W. Clark, Jr.
Title: CFO
Attest:
By: /s/ Robert S. Sammis
----------------------------
Name: Robert S. Sammis
Title: Secretary
23
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of shares of Common Stock of , and herewith makes
payment therefor, all at the price and on the terms and conditions specified in
this Warrant and requests that certificates for the shares of Common Stock
hereby purchased (and any securities or other-property issuable upon such
exercise) be issued in the name of and delivered to whose address is . and, if
such shares of Common Stock shall not include all of the shares of Common Stock
issuable as provided in this Warrant,. that a new Warrant of like tenor and date
for the balance of the shares of Common Stock issuable hereunder be delivered to
the undersigned.
-----------------------------------
(Name of Registered Owner)
-----------------------------------
(Signature of Registered Owner)
-----------------------------------
(Street Address)
-----------------------------------
(State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the Warrant in every particular, without
alteration or enlargement or any change whatsoever.
24
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
common Stock set forth below:
Name and Address of Assignee No. of Shares of
Common Stock and does hereby irrevocably constitute and appoint attorney-in-fact
to register such transfer on the books of . , maintained for the purpose, with
full power of substitution in the premises.
Dated: Print Name:
Signature:
Witness:
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the Warrant in every particular, without alteration or
enlargement or any change whatsoever.
<PAGE>
EXHIBIT 4(b)
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of July 1, 1997, between Clinicor,
Inc., a Nevada corporation (the "Company") and Oracle Partners, L.P. a Delaware
limited partnership ("Oracle"). Capitalized terms used herein not defined shall
have the meanings ascribed to them in the Warrant (as hereafter defined).
WHEREAS, the Company and Oracle are entering into, a Loan Agreement of even
date (the "Loan Agreement") pursuant to which the Company has agreed to (i)
issue to Oracle, and its designated assigns (the "Holder") a Warrant (the
"Warrant") to purchase certain shares of Common Stock, and (ii) grant certain
registration rights to the Holder as more fully set forth below.
NOW, THEREFORE, the parties hereto, for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, hereby agree as
follows:
1. Covenant to Register. As soon as the Company is eligible to do
--------------------
so, but in no event later than 13 months following the date that the Company has
been subject to the requirements of Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided, however, that such 13-month
period may be extended by the Holder in its sole and absolute discretion,
Company shall file a registration statement with the Securities and Exchange
Commission (the "Commission") to register the Warrant Stock issuable upon the
exercise of the Warrant for an offering to be made on a continuous or delayed
basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the
"Securities Act"), covering all of the Warrant Stock. Such registration
statement shall be on Form S-3 under the Securities Act, if such Form is then
available for use by the Company, or another appropriate form that is available
to the Company permitting registration of such Warrant Stock for resale by the
Holder in the manner or manners reasonably designated by the Holder (including,
without limitation, one or more underwritten offerings). The Company shall use
its best efforts to prosecute the registration (the "Registration") of the
Warrant Stock pursuant to the Securities Act. The Company shall use its best
efforts to cause the Warrant Stock to be registered as soon as practicable after
the filing of the registration statement relating to such Warrant Stock, but in
no event later than 180 days after the filing of such registration statement.
The Holder shall cooperate with the Company to provide all such necessary
information as shall be required by the Company to file the registration
statement relating to the Registration. In addition, Company shall use its best
efforts to list, the Warrant Stock on NASDAQ or on such other securities
exchange as the shares of Warrant Stock may then be listed. Company shall
maintain the prospectus relating to the Warrant Stock effective for so long as
the Holder desires to dispose of the Warrant Stock, not to exceed a period of
five years from the date that the registration statement was declared effective
by the Commission.
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<PAGE>
2. Demand and "Piggyback" Registration Rights.
------------------------------------------
(a) If at any time after the date hereof during which there is no
effective registration statement relating to the Warrant Stock, Company shall be
requested in writing by the Holder, or if more than one Holder, by the Holder
holding at least a majority of the Warrant Stock to effect the registration
under the Securities Act of the Warrant Stock, the Company shall, as
expeditiously as possible, use its best efforts to effect the registration, on a
form of general use under the Securities Act, of all Warrant Stock which the
Company has been requested to register. The Company shall not be obligated to
cause to become effective more than two registration statements pursuant to
which Warrant Stock are registered under this Section 2(a). Notwithstanding the
foregoing, if the Company shall furnish to the Holder in response to a request
for registration under this Section 2(a) a certificate signed by the Chief
Executive Officer of the Company stating that in the good faith judgment of the
Board of Directors of the Company it would be detrimental to the Company and its
shareholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the Company shall
have the right to defer taking action with respect to such filing for a period
of not more than 90 days after receipt of the request by the Holder; provided,
however, that the Company may not utilize this right more than once in any 12-
month period. In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 2(a):
(A) During the period starting with the date 30 days prior to the
Company's good faith estimate of the date of filing of, and ending on a date 120
days after the effective date of, a registration subject to Section 2(b) hereto;
provided that the Company is actively employing in good faith its best efforts
to cause such registration statement to be filed and thereafter to become
effective; or
(B) With respect to Warrant Stock in a Registration that may be
immediately registered or that are registered on Form S-3 pursuant to a request
made pursuant to Section 1 above.
(b) At any time after the Closing Date, the Company shall, at least
thirty (30) days prior to the filing of any registration statement under the
Securities Act (other than a registration statement on Form S-8 or Form S-4 or
any successor forms) relating to the public offering of its Common Stock by the
Company or any of its security holders, give written notice of such proposed
filing and of the proposed date thereof to the Holder, and if, on or before the
twentieth (20th) day following the date on which such notice is given, the
Company shall receive a written request from a Holder requesting that the
Company include among the securities covered by such registration statement some
or all of the Common Shares held by or to be held after exercise of this Warrant
by such Holder, the Company shall, include such Common Shares in such
registration statement, if filed, so as to permit such Common Shares to be sold
or disposed of in the manner and on the terms of the offering thereof set forth
in such request.
2
<PAGE>
3. Terms and Conditions of Registration. Except as otherwise
------------------------------------
provided herein, in connection with any registration statement filed pursuant to
Sections 1 or 2 herein, the following provisions shall apply:
(a) If such registration statement shall be filed pursuant to Section
2(b) hereof and if the managing underwriter advises the Company in writing that
the inclusion in such registration of some or all of the Common Shares sought to
be registered by the Holder creates a substantial risk that the proceeds or
price per share that will be derived from such registration will be reduced or
that the number of shares to be registered at the insistence of the Holder, plus
the number of shares of Common Stock sought to be registered by the Company and
any other stockholders of the Company is too large a number to be reasonably
sold, then, in such event, the number of shares sought to be registered for the
Company and the other stockholders of the Company having registration rights, as
applicable, shall be reduced, pro rata in proportion to the number of shares
--- ----
sought to be registered to the number of shares recommended be sold by the
managing underwriter.
(b) If requested by the Holder in connection with a registration
statement filed pursuant to Section 1 or Section 2(a), the Company will enter
into an underwriting agreement with the underwriters for such offering, such
agreement to be reasonably satisfactory in form and substance to the Company,
the Holder and the underwriters, and to contain such representations, warranties
and covenants by the Company and such other terms as are customarily contained
in such agreements used by the managing underwriter, including, without
limitation, restrictions of sales of Warrant Stock or other securities by the
Company as may be reasonably agreed to between the Company and such
underwriters, and indemnities and rights to contributions to the effect and to
the extent provided in Sections 4 and 5 hereof. The Holder shall be a party to
any underwriting agreement relating to an underwritten sale of its Common Shares
and may, at its option, require that any or all of the representations,
warranties and covenants of the Company to or for the benefit of such
underwriters, shall also be made to and for the benefit of the Holder. All
representations and warranties of the Holder shall be made to or for the benefit
of the Company.
(c) The Company shall provide a transfer agent and registrar (which
may be the same entity) for the Common Shares, not later than the effective date
of such registration.
(d) All expenses in connection with the preparation and filing of a
registration statement filed pursuant to Sections 1, 2(a) or 2(b) shall be borne
solely by the Company, except for any transfer taxes payable with respect to
the disposition of such Common Shares, and any underwriting discounts and
selling commissions applicable solely to such sales of Common Shares, which
shall be paid by the Holder of the Warrant Stock being registered.
(e) The Company shall use its best efforts to cause all of the shares
covered by such registration statement to be listed on NASDAQ or on such other
securities exchange as
3
<PAGE>
such shares may then be listed, on which similar shares are listed for trading,
if the listing of such registered shares is permitted by such exchange.
(f) Following the effective date of such registration statement, the
Company shall, upon the request of the Holder, forthwith supply such number of
prospectuses (including exhibits thereto and preliminary prospectuses and
amendments and supplements thereto) meeting the requirements of the Securities
Act and such other documents as are referred to in the prospectus as shall be
reasonably requested by the Holder to permit the Holder to make a public
distribution of its Common Shares.
(g) (A) Each Holder agrees that it will not effect any sales of
Common Shares pursuant to a Registration described in Section 1 after such
Holder has received notice from the Company to suspend sales as a result of the
occurrence or existence of any Suspension Event (as defined in Section 3(g)(B)
below) until the Company provides notice to such Holder that all Suspension
Events have ceased to exist. In addition, each Holder agrees that it will not
effect any sales of Common Shares pursuant to the Registration described in
Section 1 after such Holder has received notice from the Company to suspend
sales because the registration statement pursuant to which such sale is to be
effected, and the related prospectus or any supplement thereto contains an
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, until the Company notifies such Holder
that the misstatement or omission has been corrected. The Company hereby
covenants and agrees that it will use its best efforts to promptly correct any
such misstatement or omission, or to cure any Suspension Event, and that it will
give immediate notice to the Holder of such correction or cure.
(B) Notwithstanding anything to the contrary set forth in this
Agreement, the Company's obligation to file a registration statement pursuant to
Section 1 hereof and make any filings with any state securities authority, to
use its best efforts to cause a registration statement or any state securities
filings to become effective, or to amend or supplement such a registration
statement or any state securities filings shall be temporarily suspended in the
event of and during a Suspension Event. A "Suspension Event" shall exist at such
times that (i) the Company is not eligible to use Form S-3 for the registration
contemplated by Section 1 hereof, or (ii) the Company is conducting an
underwritten primary offering and is advised by the underwriters therein that
sale of Warrant Stock under the registration statement filed pursuant to Section
1 hereof would have a material adverse effect on the Company's offering, or
(iii) negotiations and/or consummation are pending relating to a transaction or
the occurrence of some other event (x) where any of the foregoing would require
disclosure under applicable securities laws of material information in a
registration statement (or any other document incorporated into a registration
statement by reference) or such state securities filings and (y) as to which the
Company has a bona fide business purpose, as determined in good faith by its
Board of Directors, for preserving confidentiality or which renders the Company
unable to comply with the Commission's requirements. Suspension of the Company's
obligations pursuant to this Section 3(g)(B) shall continue only for so long as
a Suspension Event is
4
<PAGE>
continuing. The Company shall notify each Holder immediately after any
Suspension Event occurs or ceases to exist.
(h) The Holder may select the underwriter or underwriters, if any, who
are to undertake any offering and distribution of the Warrant Stock to be
included in a registration statement filed under the provisions of Section 1 or
2(a) hereof, subject to the Company's prior approval of the underwriter, which
approval shall not be unreasonably withheld.
(i) The Company shall use its best efforts to register the Warrant
Stock covered by any such registration statements filed pursuant to Section 1 or
2 under such securities or Blue Sky laws in addition to those in which the
Company would otherwise sell shares, as the Holder shall request, except that
neither the Company nor the Holder shall for any such purpose be required to
execute a general consent to service of process or to qualify to do business as
a foreign corporation in any jurisdiction where it is not so qualified. The
fees and expenses incurred in connection with such registration shall be borne
by the Company.
(j) The Holder shall cooperate fully with the Company and provide the
Company with all information reasonably requested by the Company for inclusion
in the registration statement or as necessary to comply with the Securities Act.
The Company shall cooperate fully with any underwriters selected by the Holder
and counsel to such underwriters, and shall provide reasonable and customary
access to the Company's books and records (upon receipt from such underwriters
of customary confidentiality agreements) in order to facilitate such
underwriters' review and examination of the Company in connection with such
underwriting.
(k) The Company shall notify the Holder, at any time after
effectiveness when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of circumstances then existing (and upon receipt of such
notice and until a supplemented or amended prospectus as set forth below is
available, the Holder shall not offer or sell any securities covered by such
registration statement and shall return all copies of such prospectus to the
Company if requested to do so by it), and at the request of the Holder prepare
and furnish the Holder as promptly as practicable, but in any event within 90
days, a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include 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 in light of
the circumstances then existing.
(l) The Company shall furnish to the Holder at the time of the
disposition of the Warrant Stock, a signed copy of an opinion of the Company's
regular in-house or outside
5
<PAGE>
general counsel, or other counsel of the Company's selection reasonably
acceptable to, and which opinion shall be reasonably satisfactory in form and
substance to, the Holder to the effect that: (a) a registration statement
covering such Warrant Stock has been filed with the Commission under the
Securities Act and has been declared effective by order of the Commission, (b)
said registration statement and prospectus contained therein comply as to form
in all material respects with the requirements of the Securities Act, and
nothing has come to such counsel's attention (after due inquiry) which would
cause such counsel to believe that either said registration statement or such
prospectus (other than the financial statements contained therein, as to which
such counsel need not express any opinion) contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of such prospectus, in
light of the circumstances under which they were made) not misleading, (c) after
due inquiry such counsel knows of no legal or governmental proceedings required
to be described in such registration statement or prospectus which are not
described as required, or of any contracts or documents of a character required
to be described in such registration statement or such prospectus to be filed as
an exhibit to such registration statement or to be incorporated by reference
therein which are not described and filed as required and (d) to such counsel's
knowledge, no stop order has been issued by the Commission suspending the
effectiveness of such registration statement; it being understood that such
opinion may contain such qualifications and assumptions as are customary in the
rendering of similar opinions, and that such counsel may rely, as to all factual
matters treated therein, on certificates of the Company (copies of which shall
be delivered to the Holder).
(m) The Company will use its best efforts to comply with the reporting
requirements of Sections 13 and 15(d) of the Exchange Act, to the extent it
shall be required to do so pursuant to such sections, and at all times while so
required shall use its best efforts to comply with all other public information
reporting requirements of the Commission (including reporting requirements which
serve as a condition to utilization of Rule 144 promulgated by the Commission
under the Securities Act) from time to time in effect and relating to the
availability of an exemption from the Securities Act for the sale of any of the
Company's Warrant Stock held by the Holder. The Company will also cooperate
with the Holder in supplying such information and documentation as may be
necessary for the Holder to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any of the
Company's Warrant Stock held by the Holder.
4. Indemnification.
---------------
(a) In the event of the registration of any Warrant Stock by the
Company under the Securities Act pursuant to the provisions of Sections 1 or 2,
the Company agrees to indemnify and hold harmless the Holder of such Warrant
Stock, each underwriter, broker or dealer, if any, and their respective
directors, officers and employees, and each other person, if any, who controls
the holders of the Shares or the Warrant Stock (or a permitted assignee
thereof), such underwriter, broker or dealer within the meaning of the
Securities Act, from and
6
<PAGE>
against any and all losses, claims, damages or liabilities (or actions in
respect thereof), joint or several, to which the Holder (and as applicable) its
directors, officers or employees, or such underwriter, broker or dealer or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such Warrant Stock were registered under the Securities Act, any
preliminary prospectus or final prospectus relating to such Warrant Stock, 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, or
any violation by the Company of any rule or regulation under the Securities Act
applicable to the Company or relating to any action or inaction required by the
Company in connection with any such registration and will reimburse the Holder,
each such underwriter, broker or dealer and controlling person, and their
respective directors, officers or employees, for any legal or other expenses
reasonably incurred by the Holder or such underwriter, broker or dealer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
such preliminary prospectus, such final prospectus or such amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by the Holder and as applicable, such Holder'
directors, officers or employees, or such underwriter, broker, dealer or
controlling person designated in writing for use in the preparation thereof.
Such indemnity shall remain in full effect irrespective of any investigation by
any person indemnified above.
(b) In the event of the registration of any Warrant Stock of the
Holder under the Securities Act for sale pursuant to the provisions of this
Agreement, the Holder agree to indemnify and hold harmless the Company, its
directors, officers and employees, from and against any losses, claims, damages
or liabilities, joint or several, to which the Company, its directors, officers
or employees, may become subject under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
Warrant Stock were registered under the Securities Act, any preliminary
prospectus or final prospectus relating to such Warrant Stock, or any amendment
or supplement thereto, or arise out of or are based upon omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which untrue statement
or alleged untrue statement or omission or alleged omission was made therein in
reliance upon and in conformity with written information furnished to the
Company by the Holder and designated in writing for use in the preparation
thereof. Such indemnity shall remain in full effect irrespective of any
investigation by any person indemnified above.
7
<PAGE>
(c) Promptly after receipt by a person entitled to indemnification
under this Section 4 (for purposes of this Section 4, an "Indemnified Party") of
notice of the commencement of any action or claim relating to any registration
statement filed under Sections 1 or 2 or as to which indemnity may be sought
hereunder, such Indemnified Party will, if a claim for indemnification hereunder
in respect thereof is to be made against any other party hereto (for purposes of
this Section 4, an "Indemnifying Party"), give written notice to such
Indemnifying Party of the commencement of such action or claim, but the failure
to so notify the Indemnifying Party will not relieve it from any liability which
it may have to any Indemnifying Party otherwise than pursuant to the provisions
of this Section 4 and shall also not relieve the Indemnifying Party of its
obligations under this Section 4, except to the extent that the Indemnifying
Party is damaged solely as a result of the failure to give timely notice. In
case any such action is brought against an Indemnified Party, and it notifies an
Indemnifying Party of the commencement thereof, the Indemnifying Party will be
entitled (at its own expense) to participate in and, to the extent that it may
wish, jointly with any other Indemnifying Party similarly notified, to assume
the defense with counsel satisfactory to such Indemnified Party, of such action
and/or to settle such action and, after notice from the Indemnifying Party to
such Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party will not be liable to such Indemnified Party for any legal or
other expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof, other than the reasonable cost of investigation;
provided, however, that no Indemnifying Party and no Indemnified Party shall
enter into any settlement agreement which would impose any liability on such
other party or parties without the prior written consent of such other party or
parties.
5. Contribution. If the indemnification provided for in Section 4
------------
hereof is unavailable to the Indemnified Party in respect of any losses, claims,
damages or liabilities referred to herein, then each such Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party as a result of such losses, claims, damages
or liabilities (i) as between the Company and the Holder on the one hand and the
underwriters on the other, in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Holder on the one hand and the
underwriters on the other from the offering of the Warrant Stock, or if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Holder on the one hand and of the underwriters on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations and (ii) as between the Company on the one hand and each Holder
on the other, in such proportion as is appropriate to reflect the relative fault
of the Company and of each Holder in connection with such statements or
omissions, as well as any other relevant equitable considerations.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 5 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 4 hereof had been available under the
circumstances.
8
<PAGE>
The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages and liabilities referred to in the next preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5, no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of a Holder, the net proceeds received by such Holder from the sale of
Warrant Stock or (ii) in the case of an underwriter, the total price at which
the Warrant Stock purchased by it and distributed to the public were offered to
the public exceeds, in any such case, the amount of any damages that such Holder
or underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
6. Survival. The indemnity and contribution agreements contained
--------
herein shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement or any underwriting agreement, (ii) any
investigation made by or on behalf of any Indemnified Party or by or on behalf
of the Company and (iii) the consummation of the sale or successive resales of
the Warrant Stock.
7. Remedies. Holder and each Holder of Warrant Stock, in addition
--------
to being entitled to exercise all rights hereto and all other rights granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under Agreement. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
8. Future Registration Rights. Until such time as the Registration
--------------------------
has been declared effective by the Commission, the Company shall not grant to
any third party any registration rights equal to or more favorable than those
contained herein; provided, however, that the foregoing prohibition shall not
prevent the Company from granting to a third party specific registration rights
that are equal to those contained herein, as long as all of the registration
rights granted to such third party, taken as a whole, are less favorable to the
third party that those granted to the Holder herein. In the event that the
Registration shall fail to remain effective (or a stop order shall be entered
with respect thereto) while any of the Warrant Stock remain unsold, the
provisions of this Section 8 shall become applicable once again.
9. Modification and Waiver. No modification or waiver of any
-----------------------
provision of this Agreement and no consent by the Holder to any departure
therefrom by the Company shall be effective unless such modification or waiver
shall be in writing and signed by a duly authorized officer of the Holder, and
the same shall then be effective only for the period and on the conditions and
for the specific instances and purposes specified in such writing. No notice to
9
<PAGE>
or demand on the Company in any case shall entitle the Company to any other or
further notice or demand in similar or other circumstances.
10. Governing Law. This Agreement and the transactions contemplate
-------------
hereby shall be deemed to be consummated in the State of Nevada and shall be
governed by and interpreted in accordance with the local laws of the State of
Nevada without regard to the provisions thereof relating to conflict of laws.
11. Notices. All notices, requests, demands or other communications
-------
provided for herein shall be in writing and shall be deemed to have been given
three days after being sent by registered or certified mail, return receipt
requested, or when personally delivered, or successfully sent by facsimile
transmission as evidenced by a fax machine generated confirmation report
thereof, addressed as the case may be, to the Holder at Oracle Partners, L.P.,
712 Fifth Avenue, 45th Floor, New York, New York 10019, Attention: Larry
Feinberg, Facsimile No. (212) 459-0863; with a copy to Kane Kessler, P.C., 1350
Avenue of the Americas, New York, New York 10019; Attention Robert L. Lawrence,
Esq., Facsimile No. (212) 245-3009; or the Company at Clinicor, Inc., 1717 West
Sixth Street, Suite 400, Austin, Texas 78703, Attention: Robert Sammis,
Facsimile No. (512) 477-0027; with a copy to Graves, Dougherty, Hearon & Moody,
515 Congress Avenue, Suite 2300, Austin, Texas, Attention: Karen Bartoletti,
Esq., Facsimile No. (512) 478-1976, or to such other person or address as either
party shall designate to the other from time to time in writing forwarded in
like manner.
12. Stamp or Other Tax. Should any stamp or excise tax become
------------------
payable in respect of this Agreement, or any modification hereof, the Company
shall pay the same (including interest and penalties, if any) and shall hold the
Holder harmless with respect thereto.
13. Waiver of Jury Trial and Setoff. The Company hereby waives trial
-------------------------------
by jury in any litigation in any court with respect to, in connection with, or
arising out of this Agreement, or any instrument or document delivered pursuant
to this Agreement; and the Company hereby waives the right to interpose any
setoff or noncompulsory counterclaim or cross-claim in connection with any such
litigation, irrespective of the nature of such setoff, counterclaim or cross-
claim.
14. Service of Process. The Company hereby irrevocably consents to
------------------
the jurisdiction of the United States District Court located in New York City,
New York in connection with any action or proceeding arising out of or relating
to this Agreement. In any such litigation the Company waives personal service
of any summons, complaint or other process and agrees that the service thereof
may be made certified or registered mail directed to the Company at its address
set forth in Section 11. Within 30 days after such mailing, the Company so
served shall appear or answer to such summons, complaint or other process.
Should the Company so served fail to appear or answer within said 30-day period,
the Company shall be deemed in default and judgment may be entered by the Holder
against the Company for the amount as demanded in any summons, complaint or
other process so served.
10
<PAGE>
15. Benefit of Agreement. This Agreement shall be binding upon and
--------------------
inure to the benefit of the Company and Oracle and their respective successors
and assigns.
16. Counterparts. This Agreement may be executed by the parties
------------
hereto in one or more counterparts, each of which shall be an original and all
of which shall together constitute one and the same agreement.
17. Severability. Wherever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be modified to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the Company and the Holder have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
CLINICOR, INC.
By: /s/ James W. Clark, Jr.
-----------------------------
Name: James W. Clark, Jr.
Title: VP Finance, Treasurer
& CFO
ORACLE PARTNERS, L.P.
By: /s/ Larry Feinberg
-----------------------------
Name: Larry Feinberg
Title: Managing General Partner
11
<PAGE>
EXHIBIT 10(a)
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAW,
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS (A) THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR LAWS COVERING SUCH
SECURITIES, OR (B) THE HOLDER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF
THE SECURITIES SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND THE QUALIFICATION REQUIREMENTS
UNDER APPLICABLE STATE LAW.
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Option Agreement") by and between Clinicor,
Inc., formerly known as Pegasus Tax and Financial Planning Services, Inc., a
Nevada corporation (hereinafter referred to as the "Company"), and the
"Optionee" identified below. The terms and conditions of this Option Agreement
are subject to the terms, definitions and provisions of the 1995 Pegasus
Employee and Consultant Stock Option Plan (the "Plan") adopted by the Company.
The Plan is hereby incorporated by reference and attached hereto as Exhibit 1,
as may be amended from time to time in accordance with the provisions of the
Plan.
1. PRINCIPAL TERMS. The principal terms and conditions of this Option
---------------
Agreement are summarized below, subject to the more detailed provisions set
forth elsewhere in this Option Agreement:
A. GRANT DATE. The "Grant Date" is May 12, 1997.
----------
B. OPTIONEE. The "Optionee" is JAMES W. CLARK, JR.
--------
C. OPTION SHARES. The Company hereby grants to Optionee an Option to
-------------
purchase Three Hundred Thousand (300,000) shares of Common Stock (the
"Shares"), subject to the terms and conditions of this Option Agreement and
the Plan.
D. EXERCISE PRICE. The exercise price is $4.675 for each share of Common
--------------
Stock.
E. TERM/AMENDMENT. The term of this Option commences on the Grant Date
--------------
and shall terminate on the seventh (7th) anniversary date of the Grant
Date.
F. VESTING/EXERCISE.
----------------
(i) "Vested" shares are the only Shares that Optionee may purchase
hereunder. As of the Grant Date, no Shares are Vested Shares. The Shares
shall vest
<PAGE>
as follows: Sixty Thousand (60,000) shares will vest on May 12, 1998;
Sixty Thousand (60,000) shares will vest on May 12, 1999; Sixty Thousand
(60,000) shares will vest on May 12, 2000; Sixty Thousand (60,000) shares
will vest on May 12, 2001; and Sixty Thousand (60,000) shares will vest on
May 12, 2002. The Option shall be exercised pursuant to the terms of
Section 3 below only as to whole shares; no fractional shares may be
purchased.
(ii) Notwithstanding subparagraph (i) above, in the event that the
Company closes a sale of its equity securities and the gross proceeds of
such sale are $10,000,000 or more ("Qualified Equity Sale"), then 120,000
Shares immediately vest. In the event of accelerated vesting under this
subparagraph (ii), the number of Shares that have vested by virtue of this
subparagraph (ii) shall be credited against the latest vesting Shares under
subparagraph (i) above. In no event shall more than a total of 300,000
Shares become Vested Shares under this Agreement.
(iii) In the event of Optionee's termination, disability or death,
the exercise rights of Optionee are also subject to Section 7
(termination), Section 8 (disability) and Section 9 (death).
(iv) In no event may this Option as an Incentive Stock Option become
exercisable at a time or times which, when this Option is aggregated with
all other incentive stock options granted to Optionee by the Company or any
Parent or Subsidiary, would result in Shares having an aggregate fair
market value (determined for each Share as of the date of grant of the
option covering such share) in excess of $100,000 becoming first available
for purchase upon exercise of one or more incentive stock options during
any calendar year. All such shares in excess of the $100,000 limit shall
automatically become Shares covered by non-statutory stock options.
2. NATURE OF THE OPTION. If Optionee is an Employee of the Company, this
--------------------
Option is, to the maximum extent permitted by law, intended to qualify as
an Incentive Stock Option. If Optionee is a Consultant of the Company or
the provisions of this Option Agreement or the Plan fail to qualify for
Incentive Stock Option treatment under the Code, this Option shall be
deemed a Nonstatutory Stock Option. It is the intention of the Company,
however, that the provisions of this Option Agreement and the Plan qualify
for Incentive Stock Option treatment under the Code with respect to
Optionees who are employees of the Company.
3. METHOD OF EXERCISE. This Option shall be exercisable by written notice in
------------------
the form attached as Exhibit 2. The Notice of Exercise shall state the
election to exercise the Option, the number of Shares in respect of which
the Option is being exercised, and such other representations and
agreements as to the holder's investment intent with respect to
2
<PAGE>
such Shares as may be required by the Company pursuant to the provisions of
the Plan. Such written notice shall be signed by Optionee and shall be
delivered in person or by certified mail to the President or Executive Vice
President of the Company. The written notice shall be accompanied by
payment of the exercise price. This Option shall be deemed to be exercised
upon receipt by the Company of such written notice accompanied by the
exercise price. Until the issuance (as evidenced by the appropriate entry
on the books of the Company or a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option.
No shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then
be listed.
4. INVESTMENT REPRESENTATIONS; RESTRICTIONS ON TRANSFER. By receipt of this
----------------------------------------------------
Option, by its execution, and by its exercise in whole or in part, Optionee
represents to the Company the following:
A. Optionee understands that this Option and any Shares purchased upon its
exercise are securities, the issuance of which requires compliance with
federal and state securities laws.
B. Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Optionee is acquiring these securities for investment for Optionee's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
C. Optionee acknowledges and understands that the securities constitute
"restricted securities" under the Securities Act and must be held
indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to
register the securities. Optionee understands that the certificate
evidencing the securities will be imprinted with a legend which prohibits
the transfer of the securities unless they are registered or such
registration is not required in the opinion of counsel satisfactory to the
Company, and any other legend required under applicable state securities
laws.
3
<PAGE>
D. Optionee is familiar with the provisions of Rule 144, promulgated under
the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 144 requires among other things: (i) the availability of
certain public information about the Company; (ii) the resale occurring not
less than one (1) year after the party has purchased, and made full payment
for, within the meaning of Rule 144, the securities to be sold; and (iii)
in the case of an affiliate, or of a non-affiliate who has held the
securities less than two (2) years, the sale being made through a broker in
an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of
1934) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein, if applicable.
E. In connection with the Company's subsequent underwritten public
offering of the Company's securities, Optionee agrees: (i) not to sell,
make short sale of, loan, grant any options for the purchase of, or
otherwise dispose of any shares of Common Stock of the Company held by
Optionee (except traded shares Optionee purchased in the open market and
those shares included in the registration) without the prior written
consent of the Company or the underwriters managing such underwritten
public offering of the Company's securities for one hundred eighty (180)
days from the effective date of such registration, and (ii) to execute any
agreement reflecting Section 4(E)(i) above as may be requested by the
underwriters at the time of the public offering.
5. METHOD OF PAYMENT. Payment of the purchase price shall be made by cash.
-----------------
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the issuance
------------------------
of such Shares upon such exercise or the method of payment of consideration
for such shares would constitute a violation of any applicable federal or
state securities or other law or regulation, including any rule under Part
207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise
of this Option, the Company may require Optionee to make any representation
and warranty to the Company as may be required by any applicable law or
regulation.
7. TERMINATION OF STATUS AS AN EMPLOYEE. In the event of termination of
------------------------------------
Optionee's Continuous Status as an employee, Optionee shall have only three
(3) months after such termination date (but not later than expiration of
the option term) to exercise this Option and then the exercise can be only
to the extent that Optionee was entitled to exercise it at the date of such
termination (i.e. vested Options). To the extent that Optionee was not
entitled to exercise this Option at the date of such termination, this
Option shall terminate as to those "non-vested" Shares and the non-vested
Shares, if any, shall be forfeited to
4
<PAGE>
the Plan. To the extent Optionee does not exercise this Option timely,
then any unexercised option shares, if any, shall be forfeited to the Plan.
8. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 7 above,
----------------------
in the event of termination of Optionee's Continuous Status as an Employee
or Consultant as a result of Optionee's permanent and total disability (as
defined in Section 22(e) (3) of the Code), Optionee may, but only within
twelve (12) months from the date of termination of employment or consulting
relationship (but in no event later than the date of expiration of the Term
of this Option as set forth in Section 1(E) hereof, exercise this Option to
the extent Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise this
Option at the date of termination, or if Optionee does not exercise such
Option (which Optionee was entitled to exercise) within the time specified
herein, this Option shall terminate and all unexercised option shares, if
any, shall be forfeited to the Plan.
9. DEATH OF OPTIONEE. In the event of the death of Optionee:
-----------------
A. During the term of this Option while an Employee or Consultant of the
Company and having been in Continuous Status as an Employee or Consultant
since the Grant Date of this Option, this Option may be exercised, at any
time within twelve (12) months following the date of death (but in no event
later than the date of expiration of the term of this Option as set forth
in Section 11 below), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that would have accrued had Optionee
continued living and remained in Continuous Status as an Employee or
Consultant twelve (12) months after the date of death.
B. Within three (3) months after the termination of Optionee's Continuous
Status as an employee or consultant, this Option may be exercised, at any
time within twelve (12) months following the date of death (but in no event
later than the date of expiration of the term of this Option as set forth
in Section 1(E) hereof), by Optionee's estate or by a person who acquired
the right to exercise this Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of
termination.
10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any
-----------------------------
manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The
terms of this Option shall be binding upon the executors, administrators,
heirs, successors and assigns of Optionee.
11. EARLY DISPOSITION OF STOCK. If Optionee is an employee, Optionee
--------------------------
understands that, if Optionee disposes of any Shares received under this
Option within two (2) years after the
5
<PAGE>
date of this Agreement or within one (1) year after such Shares were
transferred to Optionee, Optionee will be treated for federal income tax
purposes as having received ordinary income at the time of such disposition
in an amount generally measured as the excess of (i) the lower of the fair
market value of the Shares at the date of disposition or the fair market
value of the Shares at the Grant Date over (ii) the price paid for the
Shares. The amount of such ordinary income may be measured differently if
Optionee is an officer, director or ten percent (10%) control person
(defined in Section 2(E) hereof) or if the Shares were subject to a
substantial risk of forfeiture at the time they were transferred. Any gain
recognized on such a premature sale of the Shares in excess of the amount
treated as ordinary income will be characterized as capital gain. Optionee
--------
hereby agrees to notify the Company in writing within thirty (30) days
----------------------------------------------------------------------
after the date of any such disposition. Optionee understands that if
--------------------------------------
Optionee disposes of such Shares at any time after the expiration of such
two-year and one-year holding periods, any gain on such sale will generally
be treated as long-term capital gain.
12. TAXATION UPON EXERCISE OF OPTION: Optionee understands that, upon exercise
--------------------------------
of this Option or any portion thereof that is a nonstatutory option,
Optionee will generally recognize income for tax purposes in an amount
equal to the excess of the then fair market value of the Shares over the
exercise price. Optionee understands that, upon exercise of this Option or
any portion thereof that is an Incentive Stock Option, Optionee will
generally recognize income for purposes of the alterative minimum tax in
amount equal to the excess of the then fair market value of the Shares over
the exercise price.
13. TAX CONSEQUENCES. The Optionee understands that any of the foregoing
----------------
references to taxation are based on federal income tax laws and regulations
now in effect. The Optionee has reviewed with the Optionee's own tax
advisors the federal, state, local and foreign tax consequences of the
transactions contemplated by this Agreement. The Optionee is relying
solely on such advisors and not on any statements or representations of the
Company or any of its agents. The Optionee understands that the Optionee
(and not the Company) shall be responsible for the Optionee's own tax
liability that may arise as a result of the transactions contemplated by
this Agreement. The Optionee hereby authorizes the company to make
appropriate arrangements for any withholding of tax liability which may be
required under applicable law in connection with the grant or exercise of
this Option.
14. PARTIES' SIGNATURES - DUPLICATE ORIGINALS: This Option Agreement between
-----------------------------------------
the parties identified in Section 1 hereof shall be signed in two (2)
duplicate originals as follows:
A. The Company shall sign two (2) duplicate originals of the "Company's
Signature Page" for this Option Agreement.
6
<PAGE>
B. The Optionee shall sign two (2) duplicate originals of the "Optionee's
Signature Page" for this Option Agreement together, where applicable, with
Optionee's spouse.
C. One complete duplicate original of this Option Agreement, (complete
with one company signature page and one Optionee signature page) will be
given to the Company and the other to Optionee.
Executed on behalf of the Company to be effective on the date first set forth
above.
CLINICOR, INC.
By /s/ ROBERT SAMMIS
---------------------------
(Signature)
Robert Sammis, Executive Vice President
- ---------------------------------------
(Print Name & Title)
LIST OF EXHIBITS:
1. Copy of 1995 Stock Option Plan
2. Form of Notice of Exercise
7
<PAGE>
ACKNOWLEDGEMENT BY OPTIONEE
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION
1(F) HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT THIS OPTION, THE COMPANY'S PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE,
THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH
HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT
AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL,
AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan (a copy of which is annexed
hereto as Exhibit 1) represents that Optionee is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee has reviewed the Plan and this Option
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Option and fully understands all provisions of
the Option. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Board or of the Committee upon any
questions arising under the Plan. Optionee further agrees to notify the Company
upon any change in the residence address indicated below.
This Acknowledgement is executed by Optionee as of May 12, 1997, to be
considered effective as of the Grant Date of the Option.
OPTIONEE Residence:
/s/ JAMES W. CLARK, JR. 9108 Canberley Drive
- ---------------------------------- ---------------------------------------
(Signature) (Street)
James W. Clark, Jr. Tampa, FL 33647
- ---------------------------------- ---------------------------------------
(Print Name) (City, State, Zip)
Please also complete the following (if applicable):
The undersigned, being the spouse of the above-named Optionee, does hereby
acknowledge that the undersigned has read and is familiar with the provisions of
the Option Agreement (including
8
<PAGE>
this page), and the undersigned hereby agrees thereto and joins therein to the
extent, if any, that the agreement and joiner of the undersigned may be
necessary.
OPTIONEE'S SPOUSE
/s/ SUSANNE M. CLARK Susanne M. Clark
- ---------------------------------- -----------------------------------------
Signature Print Name
9
<PAGE>
EXHIBIT 1
1995 EMPLOYEE AND CONSULTANT STOCK OPTION PLAN
<PAGE>
CLINICOR, INC.
1995 EMPLOYEE AND CONSULTANT STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are:
--------------------
. to attract and retain the best available personnel for positions of
substantial responsibility;
. to provide additional incentive to Employees and Consultants to remain
with the Company; and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant.
2. DEFINITIONS. As used herein, the following definitions shall apply:
-----------
A. "ADMINISTRATOR" means the Board or any of its Committees as shall
-------------
be administering the Plan, in accordance with Section 4 of the Plan.
B. "APPLICABLE LAWS" means the legal requirements relating to the
---------------
administration of stock option plans under state corporate and securities laws
and the Code.
C. "BOARD" means the Board of Directors of the Company.
-----
D. "CODE" means the Internal Revenue Code of 1986, as amended.
----
E. "COMMITTEE" means a Committee appointed by the Board in
---------
accordance with Section 4 of the Plan.
F. "COMMON STOCK" means the Common Stock of the Company.
------------
G. "COMPANY" means CLINICOR, INC., a Nevada corporation, formerly
-------
Pegasus Tax and Financial Planning Services, Inc., a Nevada corporation.
H. "CONSULTANT" means any person, including an advisor, engaged by
----------
the Company or a Parent or Subsidiary to render services, and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company, or who are not
compensated by the Company for their services as Directors.
I. "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means that the
----------------------------------------------
employment or consulting relationship is not interrupted or terminated by the
Company, any Parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Company, including sick leave, military leave, or any
other personal leave; provided, however, that for purposes of Incentive Stock
Options, no such leave may exceed ninety (90) days, unless re-employment upon
the expiration of such leave is guaranteed by contract (including certain
Company policies) or statute; provided, further, that on the ninety-first (91st)
day of any such leave (where re-employment is not guaranteed by contract or
statute) the Optionee's Incentive Stock Option shall automatically convert to a
Nonstatutory Stock Option; or (ii) transfers between locations of the Company or
between the Company, its Parent, its Subsidiaries, or its successor.
<PAGE>
J. "DIRECTOR" means a member of the Board.
--------
K. "DISABILITY" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
L. "EMPLOYEE" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a Director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
M. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
------------
amended.
N. "FAIR MARKET VALUE" means, as of any date, the value of Common
-----------------
Stock determined as follows:
I) If the Common Stock is listed on any established
stock exchange or a national market system, including, without limitation, the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no shares were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the last market
trading day prior to the date of determination, as reported in The Wall Street
---------------
Journal, or such other source as the Administrator deems reliable;
- -------
II) If the Common Stock is quoted on the NASDAQ System
(but not on the National Market System thereof), or is regularly quoted by a
recognized securities dealer, but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal, or such
-----------------------
other source as the Administrator deems reliable;
III) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
O. "INCENTIVE STOCK OPTION" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
P. "NONSTATUTORY STOCK OPTION" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
Q. "NOTICE OF GRANT" means a written notice evidencing certain terms
---------------
and conditions of an individual Option grant. The Notice of Grant is part of
the Option Agreement.
R. "OFFICER" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated there under.
S. "OPTION" means a stock option granted pursuant to the Plan.
------
-2-
<PAGE>
T. "OPTION AGREEMENT" means a written agreement between the Company
----------------
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
U. "OPTION EXCHANGE PROGRAM" means a program whereby outstanding
-----------------------
options are surrendered in exchange for options with a lower exercise price.
V. "OPTIONED STOCK" means the Common Stock subject to an Option.
--------------
W. "OPTIONEE" means an Employee or Consultant who holds an
--------
outstanding Option.
X. "PARENT" shall mean a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
Y. "PLAN" shall mean this 1995 Employee and Consultant Stock Option
----
Plan.
Z. "RULE 16B-3" means Rule 16b-3 of the Exchange Act, or any
----------
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
AA. "SHARE" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 of the Plan.
BB. "SUBSIDIARY" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 2,000,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock. However, should the Company reacquire Shares which
were issued pursuant to the exercise of an Option, such Shares shall not become
available for future grant under the Plan.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has been terminated); provided,
--------
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. ADMINISTRATION OF THE PLAN.
--------------------------
A. PROCEDURE.
---------
I) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule 16b-3,
------------------------------
the Plan may be administered by different bodies with respect to Directors,
Officers who are not Directors, and Employees who are neither Directors nor
Officers.
II) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS
-----------------------------------------------------
SUBJECT TO SECTION 16(b). With respect to Option grants made to Employees who
- ------------------------
are also Officers or Directors subject to Section 16(b) of the Exchange Act, the
Plan shall be administered by (A) the Board, if the Board may administer the
Plan in compliance with the rules governing a plan intended to qualify as a
discretionary plan under Rule 16b-3, or (B) a committee designated by the Board
to administer the Plan, which committee shall be constituted to comply with the
rules
-3-
<PAGE>
governing a plan intended to qualify as a discretionary plan under Rule 16b-3.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time, the Board
may increase the size of the Committee and appoint additional members, remove
members (with or without cause) and substitute new members, fill vacancies
(however caused), and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by the rules governing
a plan intended to qualify as a discretionary plan under Rule 16b-3;
III) ADMINISTRATION WITH RESPECT TO OTHER PERSONS. With respect
--------------------------------------------
to Option grants made to Employees or Consultants who are neither Directors nor
Officers of the Company, the Plan shall be administered by (A) the Board; or (B)
a committee designated by the Board, which committee shall be constituted to
satisfy Applicable Laws. Once appointed, such Committee shall serve in its
designated capacity and otherwise directed by the Board. The Board may increase
the size of the new Committee and appoint additional members, remove members
(with or without cause), and substitute new members, fill vacancies (however
caused), and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by Applicable Laws.
B. POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
I) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;
II) to select the Consultants and Employees to whom Options may
be granted hereunder;
III) to determine whether and to what extent Options are granted
hereunder;
IV) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
V) to approve forms of agreement for use under the Plan;
VI) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
VII) to reduce the exercise price of any Option to the then-
current Fair Market Value, if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
VIII) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
IX) to prescribe, amend and rescind rules and regulations
relating to the Plan;
-4-
<PAGE>
X) to modify or amend each Option (subject to Section 16 of
the Plan);
XI) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option previously granted by
the Administrator;
XII) to institute an Option Exchange Program;
XIII) to determine the terms and restrictions applicable to
Options; and
XIV) to make all other determinations deemed necessary or
advisable for administering the Plan.
C. EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's
----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
5. ELIGIBILITY. Nonstatutory Stock Options may be granted to Employees
-----------
and Consultants. Incentive Stock Options may be granted only to Employees. If
otherwise eligible, an Employee or Consultant who has been granted an Option may
be granted additional Options.
6. LIMITATIONS.
-----------
A. Each Option shall be designated in the Notice of Grant as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Shares subject to an Optionee's incentive stock options granted by the
Company, any Parent or Subsidiary, which become exercisable for the first time
during any calendar year (under all plans of the Company, or any Parent or
Subsidiary), exceeds $100,000, such excess Options shall be treated as Non
statutory Stock Options. For purposes of this Section 6.a., Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the time of grant.
B. Neither the Plan nor any Option shall confer upon an Optionee any
right with respect to continuing the Optionee's employment or consulting
relationship with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.
7. TERM OF PLAN. Subject to Section 16 of the Plan, the Plan shall
------------
become effective upon the earlier to occur of its adoption by the Board, or its
approval by the stockholders of the Company as described in Section 18 of the
Plan. It shall continue in effect for a term of ten (10) years, (unless
terminated earlier) under Section 14 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the Notice
--------------
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company, or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant or
such shorter term as may be provided in the Notice of Grant.
-5-
<PAGE>
9. OPTION EXERCISE PRICE AND CONSIDERATION.
---------------------------------------
A. EXERCISE PRICE. The per Share exercise price for the Shares to
--------------
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
I) In the case of an Incentive Stock Option:
A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company, or any Parent or
Subsidiary, the per Share exercise price shall be no less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant.
B) granted to any Employee, the per Share exercise price
shall be no less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant.
II) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator.
B. WAITING PERIOD AND EXERCISE DATES. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
C. FORM OF CONSIDERATION. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist of:
I) cash;
II) check;
III) promissory note;
IV) other Shares which (a) in the case of Shares acquired upon
exercise of an Option, have been owned by the Optionee for more than six (6)
months on the date of surrender; and (b) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
V) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
VI) any combination of the foregoing methods of payment; or
VII) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
-6-
<PAGE>
10. EXERCISE OF OPTION.
------------------
A. PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan, and
at such times and under such conditions as determined by the Administrator and
set forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when the Company receives:
(I) written notice of exercise, together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an exercise
of the Option (all in accordance with the Option Agreement) from the person
entitled to exercise the Option, and (II) full payment for the Shares with
respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
Stockholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 of the
Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
B. TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. Upon
----------------------------------------------------
termination of an Optionee's Continuous Status as an Employee or Consultant,
other than upon the Optionee's death or Disability, the Optionee may exercise
his or her Option, but only within such period of time as is determined by the
Administrator, and only to the extent that the Optionee was entitled to exercise
it at the date of such termination (but in no event later than the expiration of
the term of such Option as set forth in the Notice of Grant). In the case of an
Incentive Stock Option, the Administrator shall determine such period of time
(in no event to exceed ninety (90) days from the date of termination) when the
Option is granted. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
C. DISABILITY OF OPTIONEE. In the event that an Optionee's
----------------------
Continuous Status as an Employee or Consultant terminates as a result of
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination, but only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). If, at the date of termination,
the Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
-7-
<PAGE>
D. DEATH OF OPTIONEE. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate and the Shares covered by such Option shall
revert to the Plan.
E. RULE 16b-3. Options granted to individuals subject to Section 16
----------
of the Exchange Act ("Insiders"), must comply with the applicable provisions of
Rule 16b-3 and shall contain such additional conditions or restrictions as may
be required thereunder to qualify for the maximum exemption from Section 16 of
the Exchange Act with respect to Plan transactions.
11. NONTRANSFERABILITY OF OPTIONS. An Option may not be sold, pledged,
-----------------------------
assigned, hypothecated, transferred, or disposed of in any manner, other than by
Will or by the laws of descent or distribution, and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER, ASSET
----------------------------------------------------------------------
SALE OR CHANGE OF CONTROL.
-------------------------
A. CHANGES IN CAPITALIZATION. Subject to any required action by the
-------------------------
Stockholders of the Company, the number of Shares of Common Stock covered by
each outstanding Option, and the number of Shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per Share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued Shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Shares of Common Stock subject to an Option.
B. DISSOLUTION OR LIQUIDATION. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate as of
a date fixed by the Board and give each Optionee the right to exercise his or
her Option as to all or any part of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable.
-8-
<PAGE>
C. MERGER OR ASSET SALE. Subject to the provisions of paragraph (d)
--------------------
hereof, in the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option shall be assumed or an equivalent option or right shall be
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation does not
agree to assume the Option or to substitute an equivalent option, the
Administrator shall, in lieu of such assumption or substitution, provide for the
Optionee to have the right to exercise the Option as to all or a portion of the
Optioned Stock, including Shares as to which it would not otherwise be
exercisable. If the Administrator makes an Option exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee that the Option shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option will terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option confers the right to purchase, for each
Share of Optioned Stock subject to the Option immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per-share consideration received by
holders of Common Stock in the merger or sale of assets.
D. CHANGE IN CONTROL. In the event of a "Change of Control" of the
-----------------
Company, as defined in paragraph (e) below, then the following acceleration and
valuation provisions shall apply:
I) Except as otherwise determined by the Board, in its
discretion, in the event of an anticipated Change in Control, any Options
outstanding on the date such Change in Control is determined to have occurred
that are not yet exercisable and vested on such date shall become fully
exercisable and vested;
II) Except as otherwise determined by the Board, in its
discretion, in the event of an anticipated Change in Control, all outstanding
Options, to the extent they are exercisable and vested (including Options that
shall become exercisable and vested pursuant to subparagraph i) above), shall be
terminated in exchange for a cash payment equal to the Change in Control Price
(reduced by the exercise price applicable to such Options). These cash proceeds
shall be paid to the Optionee or, in the event of death of an Optionee, prior to
payment, to the estate of the Optionee or a person who acquired the right to
exercise the Option by bequest or inheritance.
III) Any payment made pursuant to this paragraph (d) shall not
exceed the maximum amount which could be paid to an Optionee without having the
payment treated as an "excess parachute payment" within the meaning of (S)280G
of the Code.
E. DEFINITION OF "CHANGE IN CONTROL". For purposes of this Section
---------------------------------
12, a "Change in Control" means the happening of any of the following:
-9-
<PAGE>
I) When any "person," as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than the Company, a Subsidiary or a Company
employee benefit plan, including any trustee of such plan acting as trustee), is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing more
than twenty-five percent (25%) of the combined voting power of the Company's
then-outstanding securities entitled to vote generally in the election of
directors; or
II) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least seventy-five percent
(75%) of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve an agreement for the
sale or disposition by the Company of all or substantially all the Company's
assets; or
III) A change in the composition of the Board of Directors of the
Company occurring within a two (2) year period, as a result of which fewer than
a majority of the directors are Incumbent Directors. "Incumbent Directors" shall
mean directors who either (A) are directors of the Company as of the date the
Plan is approved by the stockholders; or (B) are elected, or nominated for
election, to the Board of Directors of the Company with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company).
F. CHANGE IN CONTROL PRICE. For purposes of this Section 12,
-----------------------
"Change in Control Price" shall be, as determined by the Board: (i) the highest
Fair Market Value of a Share within the 60-day period immediately preceding the
date of determination of the Change of Control Price by the Board (the "60-Day
Period"); or (ii) the highest price paid or offered per Share, as determined by
the Board, in any bona fide transaction or bona fide offer related to the Change
in Control of the Company, at any time within the 60-Day Period; or (iii) some
lower price as the Board, in its discretion, determines to be a reasonable
estimate of the fair market value of a Share.
13. DATE OF GRANT. The date of grant of an Option shall be, for all
-------------
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
-------------------------------------
A. AMENDMENT AND TERMINATION. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
B. STOCKHOLDER APPROVAL. The Company shall obtain Stockholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such Stockholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.
-10-
<PAGE>
C. EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
15. CONDITIONS UPON ISSUANCE OF SHARES.
----------------------------------
A. LEGAL COMPLIANCE. Shares shall not be issued pursuant to the
----------------
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, Applicable Laws,
and the requirements of any stock exchange or quotation system upon which the
Shares may then be listed or quoted, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
B. INVESTMENT REPRESENTATION. As a condition to the exercise of an
-------------------------
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares, if, in the opinion of counsel for the Company, such a representation is
required.
16. LIABILITY OF COMPANY.
--------------------
A. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to
-----------------------------
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
B. GRANTS EXCEEDING ALLOTTED SHARES. If the Option Stock covered by
--------------------------------
an Option exceeds, as of the date of grant, the number of Shares which may be
issued under the Plan without additional Stockholder approval, such Option shall
be void with respect to such excess Optioned Stock, unless Stockholder approval
of an amendment sufficiently increasing the number of Shares subject to the Plan
is timely obtained in accordance with Section 14.b. of the Plan.
17. RESERVATION OF SHARES. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
--------------------
approval by the Stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such Stockholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
-11-
<PAGE>
EXHIBIT 2
FORM OF NOTICE OF EXERCISE OF
STOCK OPTION
DATE:
--------------------------------
TO:
--------------------------------
FROM:
--------------------------------
("Optionee")
RE: Exercise of Stock Option By Optionee Named Above
In accordance with the terms of my Stock Option Agreement dated _______________,
19___, I hereby exercise my option to purchase _______ Shares at $ ___________
per share (total exercise price of $ _____________), effective today. The
option price and vested amount is in accordance with the provisions of my
aforementioned Stock Option Agreement.
Unless a different form of payment is agreed to by the parties, attached is a
check payable to __________________________ for the total exercise price of the
Shares being purchased. The undersigned confirms the representations made in
Section 4 of the Stock Option Agreement.
Please prepare the stock certificate in the following name(s). (Note, if the
stock is to be registered in a name other than Optionee's name, the Company's
approval for said other person's ownership is required.)
----------------------------------------
----------------------------------------
----------------------------------------
Sincerely,
- ----------------------------------
(Signature)
- ----------------------------------
(Print or Type Name)
Letter and consideration received by Company on _______________, 19____.
By:
------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CLINICOR,
INC. FINANCIAL STATEMENTS AS OF JUNE 30, 1997, AND FOR THE 3- AND 6-MONTH
PERIODS ENDED JUNE 30, 1997, AND THE ACCOMPANYING NOTES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 145,808 145,808
<SECURITIES> 0 0
<RECEIVABLES> 2,222,871 2,222,871
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,457,557 2,457,557
<PP&E> 1,709,928 1,709,928
<DEPRECIATION> 471,040 471,040
<TOTAL-ASSETS> 3,710,854 3,710,854
<CURRENT-LIABILITIES> 2,319,784 2,319,784
<BONDS> 69,115<F1> 69,115<F1>
0 0
3,776,000 3,776,000
<COMMON> 4,086 4,086
<OTHER-SE> (2,458,131) (2,458,131)
<TOTAL-LIABILITY-AND-EQUITY> 3,710,854 3,710,854
<SALES> 2,850,789 5,396,891
<TOTAL-REVENUES> 2,850,789 5,396,891
<CGS> 2,182,295 4,268,168
<TOTAL-COSTS> 3,203,560 6,236,712
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,378<F2> 10,773<F2>
<INCOME-PRETAX> (357,149) (850,594)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (357,149) (850,594)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (357,149) (850,594)
<EPS-PRIMARY> (0.11) (0.24)
<EPS-DILUTED> (0.11) (0.24)
<FN>
<F1>CONSISTS OF CAPITALIZED LEASE OBLIGATIONS, EXCLUDING CURRENT PORTIONS.
<F2>NET INTEREST EXPENSE IS NET OF INTEREST REVENUE.
</FN>
</TABLE>
