US-based eClinical specialist Datatrak International has settled a lawsuit for alleged breaches of contract against former shareholders of ClickFind, the integrated technology company acquired by Datatrak in February 2006.

Under the settlement, the defendants have agreed to “discharge, waive and release” their rights to payment of both the remaining US$3.0 million principal balance and of accrued interest on promissory notes issued to the defendants in relation to the ClickFund acquisition.

This is in return for, among other things, “the parties' mutual agreement to release each other from any and all claims they may have against each other arising out of or relating to any conduct pre-dating the effective date of the Settlement Agreement, except for certain ongoing rights and obligations specified in the settlement agreement”, Datatrak stated.

One such obligation is that Datatrak will make periodic payments totalling US$140,000 to Jim Bob Ward, former president and chief executive officer of ClickFind as well as vice-president of eClinical development at Datatrak up until September 2008, during a one-year period extending from 1 November 2008 to 31 October 2009.

Datatrak paid US$18 million for ClickFind, a privately held company based in Bryan, Texas. At the time, Datatrak said taking on board ClickFind’s integrated software architecture, and combining it with its own core electronic data capture (EDC) resources to form the Datatrak eClinical product suite, immediately fulfilled the company’s strategy of “being able to provide its customers with the broadest multi-component eClinical capability in the clinical trials market”.

But the last couple of years have failed to deliver on that promise. Instead, Datatrak has been forced by mounting losses to cut its costs and launch a strategic review to consider options for maximising shareholder value, including a possible sale or merger. There were some signs of improvement in the third quarter, though, with operating losses shrinking by 55.2% against the same period of 2007, on an 11.8% increase in revenues.

Datatrak had already been negotiating with ClickFind noteholders in a failed attempt to restructure the repayment terms for the US$3.0 million balloon payment due on 1 February 2009 under the terms of the acquisition agreement. Last December, Datatrak said it was unlikely to be able to meet this obligation unless it could renegotiate the ClickFind notes or raise additional capital.

The lawsuit filed against Ward and seven other former ClickFind shareholders referred to “numerous breaches of the warranties and representations” made by ClickFind in its merger agreement with Datatrak. The latter was seeking compensatory and punitive damages of US$5 million from the defendants, as well as a “reformation” of the February 2006 merger agreement, “such that the US$18 million purchase price is adjusted to reflect what Datatrak would have paid for ClickFind had ClickFind disclosed the subject material information”.

Dr Jeffrey Green, chief executive officer of Datatrak, commented: “This settlement is in the best interests of all parties and relieves the Company of a significant liability”. Coupled with the company’s new selling initiatives and streamlined expense base, the agreement “will further strengthen our balance sheet allowing Datatrak to better promote, sell and deliver our superior Datatrak eClinical technology platform”, he added.